Member Info for Okehurst1

Hi Crowman

Tbh am not a trader ,tbh am unsure of the swings penny wise, point being you could be out of this one and an equity RNS changes everything

I do think the market is starting to get its head around the situation and realising THG need an equity deal of sorts

Sell ‘something ‘from the family silver to fund Ingenuity GMV

Or that doesn’t happen and we generate a relatively serious amount of FCF ,invest in
the 2 core businesses and repay debt - latter is a massive £60M extra profit 36 months out, zero risk and no tax for years

When you sit back and weigh up the £2B tax losses to be utilised and we could be generating £160M a year pure cash with no debt - based on 8% from core
Post On Demand gone, less £20M to Moulding, it’s a bargain at 55p if you take a view

It’s all about the intangible capex £80M a year … on going

Chicken and Egg stuff , we can’t commit to the £80M a year without big contracts, serious players won’t sign a long term contract with a stretched balance sheet
Ingenuity Commerce is over as a growth play, Ingenuity Auto Store API is next to nothing capex wise but it’s low volume high margin

Unless trading, sit tight as a PI , something has to give - equity wise

Maybe a few £M on top but not much - relative wise

Steve, fully agree £1.5B minimum, a bidding war could see us head above this ?

A thought process regarding a long term Whale deal.

They are going to want to see a strong balance sheet before signing off what would be a serious commitment, THG has a stretched balance sheet ,selling Nutrition allows Moulding to fulfil his ambitions with Ingenuity, if it was cash /paper we could enjoy a carry in Nutrition
or of course a Whale buys into Nutrition or Beauty

Steve,

My opinion, am not too sure we will see an RNS about a Whale deal ingenuity deal, we only get an announcement if an equity / funding deal was signed off .

Touched base on this yesterday, it’s actually not a problem if we don’t get the Whale deals, re pay debt / invest in Core, it’s a no brainer

Worth considering not 1 of the multiple brokers that have been briefed by THG had us down for £3.2B revenue - the way THG report at the moment GMV is in top line

Again this is just opinion, we have just as much chance of an RNS for a Bid from Kelso for Nutrition

This would put Nutrition in play and we could see counter offers from trade

S/B the brokers get to enjoy a private guidance by the Company, ditto the II’s

It’s how it works, the company then lists brokers / ranges

Ste, am not sure on that one.

He’s a top entrepreneur and it was worth a go - he nicked almost £2B for THG on the story and we have £2B Rev from two decent business

Ingenuity Commerce is dead in water

Ingenuity GMV model could well pull in a whale / funding raised

Ingenuity SaaS model could work, low revenue high margin and I guess limited capex for this one

The CFO has guided on numbers it’s now on THG website

The market has worked out our balance sheet won’t support annual £80M Intangible Capex and is now waiting on an ‘ event ‘ to rectify

Not an issue if your not trading

Steve
The market is waiting on news/direction from the BoD

Decent risk/ reward play for us non traders.

Ste
I think your looking to negatively at THG

New directors / golden share gone / full listing / Index funds buying in / shorts closing on the back of / Kelso kicking tyres / Moulding needs a deal, we will see a deal happen somewhere within the group .

On the micro side we have a core business doing £160M EBITA cash and we have £160M debt.( post disposal , post On Demand restructuring )

Ste

Your gist is fair

However no Whale no intangible capex and as earlier post we could drop the debt down by £65M including property sale

We would sit at £135M net debt, market will like that.

My take for the past few weeks is our balance sheet won’t support 3 main businesses, THG confirming the broker guidance indicates the same

If it’s not a Boots equity deal then it could be Kelso making a bid for Nutrition, all cards are on the table now, Moulding needs a deal from somewhere, only 26 weeks to go next month and the Golden Share is dust

It’s pretty much all intangible capex going forward
£80M plus maintenance of few £M

Hence my thoughts it’s no bad thing if we don’t bag a whale - nice if do one hand and we grab equity but flip side it’s one big punt

As you can see from THG numbers on their web site they are now as I mentioned a few weeks ago, the 1% GMV will be next via the new model

Ingenuity Commerce hasn’t worked , they have 2 pivots , GMV and pure SaaS

My take on the latter is we become an API platform to link between Autostore and 3rd parties, that’s not high dev and there won’t be serious capex, it’s all about sales with this division, £ARR based model
Low revenue high margin

It’s the whale GMV a model that they need the £80M a year for - IF they land

Ste

£60M finance
£20M rent (top end )

Work on that

We were starting from a low point , the other guy was out of his depth as public co CFO

New CFO is communicating with brokers / investors which is a marked improvement

Ste,
£120M EBITA is average (ish) as mentioned a few weeks ago but THG now publishing

£140M top end IF they can control losses in On Demand / restructuring costs

If you go with top end £140M less £80M finance /rent add back £80M intangible capex and your on minus £20M FCF
Add back cost savings - don’t use full £30M take £10M net net

Bingo you hit their minus £10M FCF

Like the feedback on the new CFO btw

Hi Ste

Just looking at cash only /straight line stuff

8% on the Core £2B - 15% Nutrition, 7% Beauty then I discounted back

Restructuring costs thats the unknown, the new CFO guiding to minus £10M FCF after capex and building head room with Whey prices/ restructuring costs

I went with straight line losses £5M On demand taking the view it may take time to see the big one off costs cone through

Am discounting Ingenuity to zero EBITA below

Know this is a contra view but if there is no Boots esq deal then it’s arguable our FCF could arguably be very decent Q1 2023

Reason being I don’t think THG will commit the intangible capex (£80M)without a big Whale bagged

Q1 helicopter view could look like this,:

£40M EBITA profit - working on plus 8% margin
£40M disposals

Less

£15M finance
£5M rent
£5M loss On Demand

FCF £65M, could be higher with a percentage of cost cutting £7.5M

Market will like that, silver linings and all that …

Ovs an equity deal / Whale deal is preferred but the downside is limited if no Whales come through from an FCF point of view
Ideally drop the full £65M to debt get us down to £135M to go and one eye on debt free we save a whopping £60M a year in finance costs, it’s relatively big number for THG

Could THG just be hosting the servers for these other brands ?

We have 31 data centres that we rent rack space /CPU and install our own servers then offer hosting services

Kelso borrows the £750M not the individuals below

The £100M FCF from Nutrition funds the coupon and there is £50M FCF to boot

We all get a piece of renamed My Protein

As I say if you like THG beauty and Ingenuity you have shares / or you sell, individual choice

The current THG balance sheet just doesn’t work from a finance point of view - never mind shareholder