Member Info for Okehurst1

Hi Carefree, been watching for a while, was waiting for todays update

Yes, now Long in Boo

I was impressed with cash generation, Boo ain’t going to £raise cash via a placing ,they can fund capex and if the price is right pick up Rev B and still be on the right side cash wise

If we just focus on £FCF and incorporating capex Boo have set themselves up to self finance their growth

No rent of note to pay on their real estate and tax losses to utilise, their EBITA profit -and for next few years moving forward- is cash

Rev B investment is the dark horse, with almost 27% equity plus the management stake they could make a move to buy the balance of 40% and fund from cash reserves - Ovs depends on the outcome of Bob Holts review but we can take some comfort they haven’t wrote down the £15M @ 19p a share so we can guess it’s probably ok in there now

Buy Rev B and enjoy your own chemical manufacturing plant same time

Boo invested £106M across ;

£15M invested in Rev B

£91B Capex

Even after above they generated £30M of FCF

They expect another £80M plus in capex 2023

With margins improving / tailwinds of distribution costs dropping / including cotton and the USA fulfilment centre fully opened, it’s pretty obvious BOO is coming off the bottom and won’t be requiring a £fund raise

So what’s the upside for Shorts here?

I don’t think there is a meaningful one after today’s update based on the numbers presented

That’s the figure they told us Ste on the conf call £135M

6% to 5% of T/O

Some thoughts on this one

Tbf to MM he’s laid out his position clearly - Linked in post last week

‘PE firms usually want majority ownership. We’ve been clear: don’t bid if you want 51%, plan to use debt to leverage up, or won’t allow existing shareholders to stay invested. This rebuffs most PE firms’

So if a PE firm wants to have a recommendation - from the THG BoD - to the 35% that the offer works for them PE knows they can’t have preference shares that rank higher than existing and they can’t control the BoD and they can’t load with debt

So at £2 a share that’s £1B of investment by PE but not control

I can’t see how any PE would put invest that sum of money on the terms above? PE like control and squeeze costs to get their targeted 20% p/a

I fully understand the THG BoD position btw, why should they carry the risk of losing control so the 35% get their £cash

So unless Qatar crew play ball then PE looks unlikely to Bid for the quoted shares

We then go back to Ingenuity which requires the £135M intangible capex a year, spinning this off and selling 50% to fund and they can get £1B valuation then why not , de risk keep control of the PLC, invest and grow Beauty / Nutrition, repay the existing debt, save £60M a year all at the same time, works for everyone ,seems logical to me

It’s becoming like the Millwall song

‘ everyone hates us but we don’t care ‘

Just focus on the business and deliver your targets, let the £numbers speak for themselves.

Was thinking …

If we don’t get an RNS saying it’s full steam ahead with a premium listing - which takes up to 26 weeks to complete - is that a signal MM is going to find another solution to go private and that’s his game plan however it’s done ?

If he wanted to get the share price up tracker funds buying 70M shares would certainly help? He may be thinking a dispersed group of PI’s won’t have the same clout as a further block of 5% II’s who could cause him a problem - taking the vote he needs 75.1% every little helps get there ?

So until we see a premium listing RNS it’s plan A ?

Premium listing would do it rather than less shares

Trackers would need 70M shares

Agree, it’s a stop in the road

Look at the cash burn statement in the accounts just published - their numbers not mine

‘The total cash outflow for the year was £63m (2021: £237m).

THG doesn’t generate enough cash to pump £135M a year for years into Ingenuity SaaS

Capital event has to happen

Hi Holy

As the group assets ( entities ) are now legally separated and assume Ingenuity is self funded - however that is done be it an equity sale ?

Then the 2 core businesses being Nutrition/ Beauty generate £130M based on numbers disclosed (6.5% blended )

There is no rent to pay of note, we would have £60M interest to pay but we should with U.K. interest rates enjoy income to offset with our cash pile - if that makes sense ? As our net debt is currently £180M

THG are targeting 9% EBITA, it’s a big jump from 6.5% currently, I would work on 7% being at best time being ?

THG uncoupled from funding Ingenuity and we churn a decent chunk of cash and especially £180M debt repaid and we save £60M a year on top

Frustration came out in MM’s linked in post

I think a deal of sorts will happen - just have to have patience

Cong,

Before the DD commenced they would agreed HOTs/ SA - it’s standard practise

IF Apollo would have stuck to these agreements the deal would have signed off

Apollo chipped on price ( to the HOTs) the BoD didn’t blink

Apollo then moved on price - we can guess as good or better than the HOT’s but they moved the goalposts on control ( SA)

The Bod didn’t blink (again)

Apollo didn’t improve their revised offer

Looking at it from the Bod/ rolling II’s, Apollo trying it on spooked them - debt being added 11th hour would have been a deal breaker as well

A deal has to happen, we don’t have the cash to fund Ingenuity

We said last weekend this was a 40p risk and £1 to £1.50 upside - short term Rick reward

We all know what happened but it’s not played out yet

THG and Apollo would have signed off Heads of Terms and a Shareholder Agreement before the DD commenced

This would have included a £price per share

On the 11th hour Apollo chipped THG on £price

THG stood firm

Apollo matched

Apollo changed the terms to the shareholder agreement

THG stood firm

We don’t know the full terms but MM alluded to debt ?

PE like to load up with debt as we know

Being fair to MM/BoD the deal may not have been acceptable to the rolling investors

THG ‘ only ‘ has £140M of debt when the property is finally sold, they ‘ paid down’ £70M of debt last 7 months

Apollo chipping the BoD would have spooked them

Hi Polish

It’s pure SaaS , hence they could cut this £figure as they said

I paid for broker reports in January

Anyone remembers i got vocal about the intangible capex

However the more you look at this sector ( Ingenuity ) and take Ocado they will spend some crazy figure like £1.75B on intangible capex next 5 years, it’s the nature of the beast

A JV with Apollo works I think, everyone wins

For what’s it worth, I think Rock is spot on.

Moulding needs a deal somewhere, he could borrow the money to fund ingenuity but it’s a good chunk of change and a big bet

If Apollo think Ingenuity is worth £1B sell them 50%

and JV the venture - day 1 our stake is worth £750M on paper

£500M plus £250M of the cash

Not far away from our current m/cap

Nutrition and Beauty is pure bunce

The THG model works cash wise when you spin out and fund Ingenuity independently

All the others £numbers are then as below

Hope this helps

This is on line what they told the Brokers privately back in January this year

The combined margin - it’s in the recent update

Finance charge is £60M

Rent £20M ish - maybe a tad lower

Add on £135M intangible capex / maintenance

Let’s assume the £30M cost savings match the On Demand restructuring

We can play around with the growth and say Iceland stores and other stuff for nutrition but the end cash doesn’t change that much - materially