Member Info for MrMaggoo

Notice he never answered the question "what happens if you can't sell the airline".

When you see that interview and compare him to Harriet it is really staggering that he replaced her.

Also "we have a problem with debt and interest payments so we need to sell the airline to pay this off". Yeah but why have you got so much debt? Because you can't run a profitable business. Idiot

They're still seeking too much margin - just take a glance at any european package holiday and you will find them more expensive. I always try and book with them but last year they were about £1k more on a holiday for 2 adults and a child in the same hotel at the same time. I went with TUI instead. And the year before that they were even further off and I went with Jet2. Jet2 far superior to both in my opinion for value and aircraft. Both were like for like bookings to compare - identical days and hotels. Theyre loading margin to cover costs - which now include huge (and growing) interest payments

£600m to buy a market Cap of £300m and £1.2bn of debt? Dream on.

They will take the MIke Ashley approach - wait for administration and try to influence by being a major shareholder

How much is the airline worth? Having the market know that you have to sell an asset for your ongoing liquidity is just about the worst selling position you could ever be in. Unless there is a bidding war it's going to be a fire sale.

Yes - i used to be one too. Not a lot being said, I think some i know are slightly deluded in that they feel that they have seen this before as in back in 2010/11 when the original debt issue hit and it turned around. You don't get told a lot as an employee anyway. BIG mistake on Harriet - wouldn't be in this position if they had kept her, plus CEO is a numpty which also doesnt help. How long til he departs I wonder?

For me, you can do your own simple analysis - a retail business with 500+ shops to service, selling a product that you can buy more easily online that is highly discretionary, in the backdrop of brexit. It's no real surprise. Name me one UK retailer with 500 stores that is in a strong position? Should have 200 at most IMO

The best that they can hope for in terms of trading is that it pees it down all summer - that could really shift the dial.

Can someone clarify for me how they came up with the Debt ask of £400m?

Am I missing something here or if debt has risen by £361m since this time last year, won't that position worsen through the year to come, so £400m would perhaps not be enough? Surely you would ask for way more than you need - but if the position is already nearly at £400m they are likely to need double that by December?? It looks to me like another error by the board

Feel free to read my previous posts - they are borrowing money to keep it afloat clearly. BTW I don't hold any shares, I'm not shorting and I'm not a disgruntled former employee. I just have a few mates who work there who are on the wrong end of this car crash

I think he's a drunk so probably in a coma after today

I'm not angry, I'm pretty happy. But then I'm not sitting on a big loss so why would I care.

They've been reshaping for the last 15 years hence the exceptional costs in every P&L. It's going to take some pretty artistic shaping the pay off a £750m debt pile. But what do I know, I would be CEO if I really knew what I was on about wouldn't i. I'm not sure how I am out of touch when I know a load of senior people in the business still. But maybe I'm a secret shorter talking it down for profit and you're the real expert.

Please continue taking your philosophy rom Roy Chubby Brown and I will disappear

I'm not sure what you mean "reply from PF"

I haven't worked there for 10 years but it hasn't really changed since then. They had a decent CEO in Harriet (from what I could tell) but the same old forces pushed her out from within because she was trying to move them to places they didn't like.

Profitability is also ong way off. You have leases, redundancy payments etc. You can put those to exceptional costs on the P&L but the cash will still need to be spent to fund it.

The major issue I see at the company isn't necessarily even having too many stores. It is the confused trading strategy. They have the scale of a volume player but they charge the margins of margin player. If you have the overheads they have you have to cut margins and sell as much as possible to justify having the scale.

And talk of profitable parts of the business is cheap - they all underpin each other and are linked so you need to scale the machine back for profitability. For example, you might take a particular brand and say "oh it makes money on its own" but then you are probably not considering that it needs parts of the business that "lose m on net on their own" in order to function.

Btw I'm not a disgruntled employee, my career has rocketed since I left, it was the best thing I ever did. I'm just frustrated that it was savable and it had continued to have been run into the ground by the same sort of numpties who were there 10 years ago. Investors and employees deserve better. All it would have taken to avoid this is a bit of common sense as TUI have proven.

Yes they will lend more because it's either that or lose way more when TC defaults later this year.

It's a bet that they can turn it around versus losing their investment. This isn't window dressing to make the market happy, they need that extension.

The big question is whether management can turn it around - as far as I can see the current CEO is presiding over it getting worse.

And what's a string turn around plan? Closing 21 stores and hoping it's not too hot in the UK? Offloading the airline so that the Chinese can come in and gut the business?

Blind optimism from some on the request for debt extensions. You can read between the lines and take a good guess at how trading is going. Between sep 2017 and sep 2018 net debt worsened by 349m to a negative position. September is the month where they have the most cash in hand but were still negative (ie borrowing money to prop up the business).

To now look to extend by another 400m to me means that performance is at best flat to last year as they are moving by another 400m negatively. And given they they are supposed to be cutting cost and managing debt, it probably means that trading is worsening.

Business needs gutting. Getting the bunting out for closing 21 stores - what a joke - that number needed a zero on the end of it.

Talking about going for greater margin but has a business built for volume. Another joke.

The way it is going I can't see anything other than some sort of administration and carve up within 2 year. Mismanagement and worse still arrogance of senior managers over the past few years.

To analyse history is to ignore the current issues that are facing the business. For example, the march towards online has decimated high street over the period you are analysing and it's pretty well known that the business has not exactly geared itself accordingly. If you were to analyse Debenhams performance over the past 10 years it probably says they are due a recovery but we all know that's unlikely. Agree that brexit weighs heavy on tcg but it's far from a cure for all the cash issues.

you seem to have missed out the trend from 2010 to 2012 when the price crashed - surely that period is the one to look at as most similar to now?

Looks like a fun trip

https://www.linkedin.com/feed/update/urn:li:activity:6476779732342960128

If you look at the link to the broker breakdown you will see that most of the sentiment driving "strong buy" is from 2017. Probably not a good idea to base your share dealing on that website

Ask yourself why would they? To sell their internet driven business on the dying high street? To buy an airlline that they don't need?Makes no sense. Best hope for a resurrection of this is a Mike Ashley style retail buyer after administration. Nobody is going to fork out on a takeover whilst the family silver is still worth less than the market cap. As a few people have pointed out... take away the intangibles from the Balance Sheet and there isnt much to it

There are parts of the business that both TUI or Jet2 might want but they are likely to be probably 100 or so good money making shops, the airline and the brand values. The rest of it isn't worth a bean. Why would 2 more successful business look to take on that level of debt - they might be circling but if it all lands jam side down it could be in administration within a year so you could pick and choose without taking the debt at that point...

Love this letter - if only you could get a sensible response.

That £8.3k is a disgrace - what is that guy actually going to bring to the table and adjust? The board clearly don't want to change much, the believe the weather is the problem! Let's hope his house has Aircon for that amount of money

Fag packet maths (I like a challenge)....

Total stores 600 (?)
Fully costed (ie including allocation of head office overheads etc) they all lose money
Marginally costed (ie only in store costs vs revenue generated) - estimate 30% loss making (probably conservative based on these results) = 180 loss making -assuming that they have got rid of those with no lease and hold only those with lease terms remaining - estimate av term remaining to be 3 years

Average rent £200k - assuming average 3 years left on lease = £600k
Rates £100k = 3 yrs £300k
Service Charge =£50k = 3yrs £150k
Staff Costs £300k - redeploy 20% = £240k - redundancy cost estimated £50k
Dilapidations = £100k
Total cost per closure = £1.2m over 3 years = Y1 = £500k, Y2/3 = £350k pa

£500k x 180 stores = £90m Year 1 cost of closing 180 stores plus ongoing costs of £63m pa

Assumes no subletting and 3 year lease term average per closed store which might be "toppy"! It's still in the tens of millions however you look at it - all goes to exceptionals so it's fine right?!

Basically this will never happen anyway. If you cut your main distribution arm by 1/3 you need to adjust all of your cost base by the same and they aren't geared to do that. So they leave themselves with Airline, hotels, back office functions built with higher turnover/volumes in mind. It's like Tesco - if they closed a lot of their larger shops they would probably make more profit but lose the scale they are built to service.

Sheer lunacy - when you consider the demographic in Birmingham it's actually a really low demand area. So I'm not sure who you would actually think you are advertising to!

I'm sure the boards of Debenhams, Evans Cycles, House of Fraser, Maplin, Toys R Us etc etc were also retail-centric and that worked out pretty well... To be honest it might take a Debenhams style administration to sort the cost base and get out of some of the liabilities.... won't help the SP much though!

A bit of a simplification on shop closures. Taking each element:

Staff Costs - yes there can be some redeployments but you can't move the entire staff of one shop to another. It's all about number of desks in a store vs footfall. Just because you close a shop on one side of town doesnt mean all customers will travel to the other so there is no need for it. You probably retain 20-30% at most, the rest either go to geographically closer stores of competitors or just shop online. Plus they already rationalised a lot of duplicates over the past 10 years.
Rents - a number of the stores have long leases - co-op liked to sign 20 year ones, so if you close it, you pay rent til you sub lease it. This is hard to do nowadays as nobody other than charity shops are opening stores, and they can't pay full rent so you end up paying for empty shops.
Rates - 50% if empty, 100% saving if disposed of store back to landlord
Dilapidations - minimum £100k average per closure
Service Charge - same as rent

All of the above costs go to exceptionals by the way.

Another fascinating fact for you - every store in big shopping centres loses money. there is a sweet spot of square footage vs rent vs desks. The big ones cost too much rent vs the money you can make per desk. Bullring used to lose £400k per year for example but they wouldn't close for years it because it sold a lot of holidays propping up the scale of the whole business - and people wonder why it's failing....