Member Info for Okehurst1

Fair to say there is risk with most shares and generally

PI’s can tend to buy at the Top and II’s try to buy at the bottom

The £numbers this week and follow on Analyst Call has instigated Brokers to review the risk / reward for their client

Reckon BOO are now are the bottom - 38p to 45p range

Rev B acquisition will see BOO rerate if they pull it off at the right price - sub 30p - as the market digests the tie up with Debenhams

This will spark further brokers to upgrade as BOO then have north of £350M a year in Beauty sales and they can manufacture to boot

I think that’s a key moment for the Shorts alongside the recent cash / FCF update, think us Longs can make a few quid here

With £4B capacity being put in place - capex sunk

Including USA fulfilment centre

Debenhams with REV B targeting beauty

BOO have plenty to go at, would argue Beauty at 13.1% EBITA and the mean at 10% looks on the money and conservative

Hi Smyths

Personal view

John is doing interviews that infer BOO are working close with REV B and they sit just under 27%

If we take the view the BOD / BOO own 62% is REV B coming back to the market ? It may do but it would need a fund raise / working Capital before the AIM Team let it relist, we can guess it would be heavily discounted if they did?

BOO a make an offer and with management they only need 13.1% and they nick REV B - mop up the balance with a scheme of arrangement

They could offer 25p to 30p a share and they may get over the line ?

It’s a big deal if BOO pull it off

What’s the do

I like FCF but I understand the market needs a metric for growing business’s and EBITA ticks the box to an extent

The market can then in theory measure ROI on the FCF be that tangible / non tangible capex

Usuallybvery little tax is paid but often interest

U.K. retail as group is averaging 9.63 X a EBITA

Same for Beauty product averaging a wee bit more

Hence my 10X

Re BOO, it doesn’t have fixed debt but a RCF facility

no need to reiterate how that works but on the Conf call they talked of £11M interest this year

Last year was £9M and they ended £30M FCF positive after £91M capex / £15M Rev B

Take a view on those numbers do they really think they will end 2023 year with net debt ?

I think they know they can squeeze a material figure out of the £170M of extra over Covid transport costs that ain’t there

in 2023

As I say, they forward guide to £2B with Rev B, the 6% looks doable then they should be close to the 10X based on market valuations and we are now starting to see broker upgrades

On conf call

85% of all premium beauty product on the platform

Add Rev B to this and it could be argued it’s worth the

£m/cap on its own today - close to

Guess we have to look at EBITA margin ?

The BoD are saying 6% to 8% medium term

Personally I think 6% especially into H2

IF they bag Rev B then forward revenue could be £2B @ 6%

a conservative 10X on that and no debt, you can see why the broker has upgraded to 70p

The analysts call was pivotal this week.

Summary

Headwinds are now tailwinds - potential £170M difference / saving on cost of transport as we return to Pre Covid costs

Cotton down 25%

Debenhams in profit and focus on growth in Beauty

Rev B - fair chance BOO will pick up the balance they don’t own for a song, they then enjoy a specialist chemical manufacturing plant and £200M plus of sales same time and access to Walmart in USA

Sheffield automated and up and running

USA soft launch

Guatemalan / Mexico manufacturing for USA

FCF positive £30M that’s after £91M capex £15M Rev B

No debt

The shorts carry out water now, they will need to exit

Forward 6% on £2B with REV B

10X is my number 80p to £1 - could be higher but as Hexam says the world has changed

Think we have a reasonable chance over next 12 months

In the meantime the Shorts carry the water for us as we head back up

Hi Hexam

Think the £80M capex this year coupled with £95M last year is justified and will eventually help increase the margin - its worth the cash spend but we won’t feel the margin benefit till next year on the back of this hefty relative investment

Transport alone will boost the EBITA, that’s what they are inferring to alongside automation

But they have to spend this £80M plus Capex to complete USA roll out and Sheffield phase 2

Need to see the Debenhams slide and try work in the affect of the £200M plus from Rev B

Beauty in general tends to run at slightly higher margin than 6% EBITA looking at Rev B’s peers

Think 6% looks doable, not banking on 8%

£2B with Rev B @ 6% it’s decent post heavy capex this year

II’s Shorts are usually pretty savvy, they have to be, their upside is max 1X and the downside can be brutal

Plus they will pay 4% to borrow the stock

They will have have digested the numbers alongside the conf call and ran their models ? How much more can they make from 40p vs the risk BOO pull all this together and bag Rev B same time ?

Risk / reward is slanted against them and in favour of Longs following the results this week, as we can see from the share price action

I am focusing on FCF

Agree I can’t see marginal upside on the inventory cash wise

although they say there is more to be had

Transport is the biggie, 23% cost of all sales is just nuts for 2022, they stressed on the conf call this will fall and quoted the £15k a container to £1500 due to Covid

2019 Pre Covid was 13% transport, even 18% which almost looks too high @ 5% generates £80M plus, looks doable to me and it could even be better than that and we have capex covered by default

Admin will be trimmed, will it be material like above ? Not sure but every little helps

Then we have Cotton, this is moving nice for us now, 25% down

People and ‘others costs ‘ slashed by £50M was a big number

they say more to come with automation

I’ve reached out to a couple of brokers to access the slides from the conf call which go into each of the main web sites in more detail

Debenhams & Karen M are of particular interest to me

Shorts certainly have a problem here, suggest the market has digested the analyst conference call and II’s are on the Offer - it’s not us little PI’s who are pushing the price higher

Can see a decent short squeeze building up here especially if THG nick Rev B, that could come out of the blue anytime

Been a good week

Think so Terry, they have a lot of profit on the table here, especially after the update this week

BOO & Management owning 62% of Rev B lines then up to be in prime position to nick this one

13.1% and they have it, mop up the rest via scheme of arrangement and Rev B doesn’t come back to the market

- John is talking as if it’s deal done

It would be a steal and fills in the gaps on how they grow beauty which they infer to on the conf call

They pull this one off and it should go down well, feels a short squeeze is coming here

I agree with Hexam, personally I don’t have a problem with other peoples view, keep it civil mind

Look you make your call, the BoD managed a difficult year quite well cash wise

I agree btw on inventory not being repeated on a material basis but 23% transport vs 13% is low hanging fruit and they made a play on that on the conf call

There may be a wee bit on Admin to be had, 5% washes it’s face on cash with £30M to spare

Then it’s Rev B … @ 30p they need £40M ish to complete the purchase

I think it’s doable, not without risk but with no debt at the moment it’s punt am happy to take at 40p especially on a heavily shorted share

PP , you make your call

I’ve gone Long, more scope to go to 50p than 30p when I bought in this week

Let’s see how it goes

Transport 23% vs 13% Pre Covid

Admin 13% vs 10%

Suggest the market is taking a view they will make a saving

as they discussed on conf call

Rev B the dark horse - and a punt they take control

Risk / reward decent punt for Longs

If I was being cynical ….

Someone somewhere took a punt on a quick Short on THG knowing the FT non article was coming to press and it’s beck fired on them