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Old news churned up again today by Sunday Times

Labour-run Warrington is under fire for racking up £1.8 billion of debt from investments funded by the Public Works Loan Board. It had a 50 per cent stake in Together Energy, owner of Bristol Energy, which failed in 2022. It also owns 33 per cent of Redwood Bank, a lender to SMEs, co-founded by Jonathan Rowland, a friend of Prince Andrew. Auditors criticised the investment in Redwood 2021; the bank said it turned a profit last year.

Most eye-catching, however, was Warrington’s £202 million loan to Matt Moulding, founder of THG, in 2020. A council document obtained by the Financial Times hailed THG for having a “proven business model centred around recession-proof products”. Alas, THG’s stock has lost most of its value since its float. A Warrington spokesman said “a large part of the loan has been repaid”.

https://www.thetimes.co.uk/article/five-councils-that-dabbled-in-business-and-regretted-it-dgflg5jvr

SteveinHull

Good post

Good luck Steve
All here to make money :-)

Steve
Just giving you the heads up if you haven’t paid for broker reports, it’s worth the investment/ read ,if your going short it’s going to be be painful / hard to make money below these levels, full listing is happening, changing of the guard underway at THG the smart money is positioned to unlock the value here.

Steve

The new CFO is building bridges with II/ Brokers, the response has been welcomed, he is getting the message across of under promise / over deliver

Expect full listing to commence in April ,that’s a major turning point to coincide with Mouldings Golden Share expiring, the index funds will have to buy in, it’s going to be a bloodbath for the shorts, we don’t have the free float as they need 5%, Mouldings Golden share has just 26 weeks to go

Re Kelso forget how many shares they have , it’s irrelevant, they are in the wings and have their agenda, we have no idea how many shares the 25 investors have bought privately, we won’t know that until they show their hand

Our FCF this Q1 will be relatively decent, its was £50M Q4 ,touched on the amount this week without the Whale deals no need to gamble the £80M intangible capex, cash is no problem without this £80M getting spent, we could generate up to £65M this quarter if the property sale concludes and no whale sign up

In a few weeks time we get the itemised accounts for each division and we get to see their performance, the market can then evaluate the value (or not) of Ingenuity and what is the ROI of the proposed £80M a year on SaaS, we are guessing until then.

Kelso will then make their move or not depends if THG announces to deliver what they are saying they will do ( full listing ) and how Ingenuity looks after charging the market rate to Nutrition /Beauty and Ingenuity is a sustainable business, we will find this all out in just a few weeks time

If we sign off a whale deal / equity sale in the meantime that’s good but the market has been guided away from the £1B happening as can been seen from the long list of broker forecasts on the THG web site, not one is showing £3.4B revenue after speaking to the CFO

Risk / reward at 55p is a decent punt for us private investors as the big boys battle it out for control of THG and unlock the value that we all know is multiples of the current £M/cap

Not long to go now.

Pearl,
Agree

Ste
What’s sunk is sunk for 2022
The CFO has guided to £70M lowest so we could come in at £80M
who cares at this point ?

Anything on the balance sheet is non cash - you mention Cult etc
that’s not an issue

Can see how the broker came up with the £150M EBITA they have gone for 9% on the £2B core ( blended )
less rent less On Demand add back cost savings on the £30M

Cash itself is not an issue, neither audits, it’s all about we do with the FCF

Once we see the Ingenuity numbers in isolation we can evaluate the ROI pumping £80M a year into intangible SaaS

Mentioned last couple of weeks the new CFO is coming across well

Under promising over delivering is his mantra - rather than the muppet we had beforehand who let the market down multiple times

Expect the full listing to be announced, takes 6 months so we should align with the expiry of the Golden shares

Come April we will see the split accounts for the first time

Nutrition & Beauty will ‘ pay ‘ Ingenuity ‘ for their service - in effect

It will be interesting to see the EBITA margin for both at this point
Suggest we may drop 2% from a blended 8% as it’s a gross cost

Ingenuity then enjoys £40M of cash plus the margin on the £200M 3rd party
it pays the rent (£20M) plus operational costs, finance and we see the £80M p/a for Intangible capex , the numbers won’t be pretty in this division

Point being the market can evaluate the value of Beauty/Nutrition independently for the first time and measure the cash burn in Ingenuity and it’s ROI a on the £80M a year for SaaS

Going back to Nutrition, if we go for 15% top end margin less 2% we have 13%, on £700M revenue being £90M EBITA
Nutrition doesn’t pay big rent out but contributes to finance costs

Same applies to Beauty of course, maybe 7% less the 2%

Nb Shopify charge their clients less than 1% of revenue for the same service as posted last week

If Nutrition forward EBITA after costs to Ingenuity could be shown to be £100M suggest
15X to 20X EBITA would be the take out price rather than X revenue model

Not long to wait now, we can say next month give or take and 26 weeks left on the Golden share

Top post Crafty - well structured

Nb forget the volume of shares they own - know it’s hard to but it doesn’t matter

It means nothing , they either bid for nutrition or bid for the lot
100% paper deal

Hi Moody/ Sharefall

He’s defo not in with Kelso, know it’s difficult to trust anonymous posters but I can say he’s not in partnership with them

Kelso are serious players, here to make money nothing else

If your not Trading look through the negative noise

For peace of mind - believe or not
Feedback from the brokers via new CFO meetings ,City liking the new guy, he is saying the right things, he has stopped THG over promising / under delivering, but not committing on Ingenuity which is interesting

Margins and cash from £2B core is decent as guided

Is it enough to save Moulding ? Personally I don’t think so.

If we go back to the intangible £80M capex, it’s everything now, the Whales as promised they have to come through but can the business command a margin better than Shopify & Co ? It’s anyone’s guess ? These guys are less than 1% GMV ?

I just can’t see big whales signing up to Ingenuity and risking their business with out balance sheet not without an equity injection

If we look at the THG web site and take the medium broker forecast of £120M EBITA
Deduct £80M rent / Finance
Deduct £20M for losses restructuring On demand
Deduct £80M Intangible capex

We have negative FCF of £60M from trading based on THG web site average - not mine
our debt would be back over £210M post disposal or £250M IF we don’t complete the sale

Kelso are being presented with an open goal opportunity to Bid for the whole group here , 100% paper offer and the market votes to stick with Moulding betting the ranch or transfer to Kelso with their experience unlocking shareholder value

Not sure how it would go but it’s going to be close either way

Ideally … the pressure makes the BoD vote Moulding off the board as a compromise
Iain Mc goes same time, take the ex CFO as well

Straight offer

1.4B Kelso shares for 1.4B THG shares

All the operating business’s are separated anyway, it’s actually quite easy to manage
THG plc is a holding company

Kelso - renamed whatever apply for a full listing, they can sell anything they want at that point but it’s kind of irrelevant aas the Golden Share is gone in 26 weeks

Ste

You’re missing this one …. They offer 100% Kelso paper

Think about it ?

Would the BoD throw Moulding under the bus before the offer was made ? If they saw the planned Offer details from Kelso in advance ?

We all know what needs to be done here from a shareholder point of view, Kelso/ City are in tune, Kelso tap into that

Ste,

Kelso will have a game plan, we have to wait and see how it plays out.

For debate

Bid for Nutrition, cash and paper

Or

The jugular approach, outright Bid for THG paper for paper - just shift the lot to Kelso and list on full market, let Mouldings golden share expire, index funds by in, Kelso restructure, sell whatever their plan is ? Guess we would know at the time of their offer ?

Shareholders have a choice at that point ? Shut up or Put Up
It’s super aggressive, cost diddly squat from Kelso point of view

Kelso only need 50.1% and can go over the BoD head

The comprise may be they withdraw the Bid if Moulding steps down or they get the 50.1% and he’s finished

50.1% ? Moulding could lose or the BoD vote him off the Board as per terms with Kelso?

Has to be one or other option for Kelso ?

Spread beating Co’s normally try to avoid bridging 3% or they would be issuing RNS’s continually

I guess it’s why IG etc are not taking THG on margin ?Close only ?

The Kelso list are in the main professional traders, smart way for them to trade shares?

# Top of my head