Member Info for Okehurst1

Golden is correct re Ingenuity

Took me a while to get my head around the numbers, suggest it’s only been after the post update conversations with the Brokers that the market has understood what’s going on, think the new FD should be applauded for this.

Suggest 2 main camps of thought over THG as an investment

- It’s a capital event play, no chance of FCF + of note for years under current business model due to intangible capex expenditure ( my take)

- 3 years of pumping the cash from Nutrition / Beauty into Ingenuity platform
and hoping the model works, back Mouldings vision on this latest pivot

Think most of us think Capital event is where we make our return, Lord Allen removes Iain Mc and takes even more control of the BoD and of course we have a proper public company FD for the first time, the golden share expires and before that point we enjoy Bids for parts of the business

Steve
It’s rent & finance combined - if that helps ?

Both Beauty and Nutrition are good businesses generating cash, we all
we all know where the problem is.

sorry for confusion was lumping in Ingenuity to get to £400M

Guidance is £90M capex includes maintenance, £80M plus of which is for Ingenuity platform Development - intangible capex

FCF is minus £10M to neutral

Finance cost is fixed so £60M

Key numbers my opinion

EBITA Nutrition is close to 15%
Beauty. 7%

It appears the core EBITA is heading towards £180M which is very good
They may discount nutrition Q4 to gain market share as the margin is so high

Deduct £80M rent/ finance

Your left with £100M

Less restructuring / loss making divisions £20M pencilled in

Leaves them £80M for the intangible Capex and we are back to minus £10M FCF
- I would keep the property disposals separate for your calculations )

Steve, good post agree on the gist .
Nice find on the rent reduced to £16M

Let’s assume the £400M of sales from On Demand /Other that lost £20M is being dealt with but it will again raise an ‘ adjusted EBITA ‘ number in 2023 as restructuring is undertaken

The crux of the problem with FCF is intangible capex, if we look
2021 accounts it’s £78M which is for platform development costs - which is from the part of the business I have discussed last few weeks

2023 will be £100M and so on 2024 etc

You won’t sort FCF / repay debt until this issue is sorted - not from operating cash

Having zero debt adds a whopping £60M to the bottom line

HH makes a fair point regarding waiting for a capital event - my position- but at same time Rock/ Others trading the stock make valid points regarding Moulding / City

The new CFO has been updating the II investors and building bridges, everything is on the table as far as THG BoD are concerned.

Personal opinion.

Am going for a Kelso Bid for Nutrition only , they go public, the THG Bod will find it difficult to turn down, it puts Nutrition in play and others may come out the woodwork to counter Bid, maybe large Trade Co, can’t see exclusivity being granted by the BoD

…..Or Moulding pulls off the Beauty equity deal

We are at an inpasse and a catalyst event is highly probable due the the balance sheet and Moulding plans/ GS expiring ,you take the chance as HH says that you may miss out

Sorry for long reply

just an example of how Kelsa could unlock value and Moulding thinks that works for me ?

Hi Brewman
Just sharing ideas / musings, suggest below has merit and it could work

So Kelso pay £cash to THG and also issue Kelso shares as part of the consideration -put aside discussing the £quantum in detail but say £750M cash £750M paper as an example

THG then distribute the shares pro rata to THG share holders via a dividend in species, this gives everyone in THG a carry in the newco that is just focused on Nutrition

Moving forward Kelsa would enjoy roughly £110M cash before paying Ingenuity which would be a Operating cost, they may get to £100M cash

They put a pref coupon on the £750M , 7% ?

‘They’ Nutrition are then knocking out £50M FCF net net , that would well
justify the m/cap and more ….plus we have cash to grow this business

They utilise some tax losses as part of the deal if possible

Suggest the above could satisfy all parties

It could be argued they wouldn’t need to sell a piece of Beauty, repay debt, fund Ingenuity - ideally spin it out, again dividend in species to THG share holders
Control both entities

Beauty is doing 7% EBITA before paying Ingenuity, with no debt ( on paper ) the EBITA is FCF

What’s in the pot for THG shareholders at this point ?

A piece of Nutrition pro rata 50% less than we have now but maybe the same £value as THG shares that we have now ? Maybe higher value

No debt - eventually saving £60M a year cash, it’s a big number

Beauty, gets a war chest to grow, we retain 100%

Ingenuity gets funded Moulding has the funds to develop the SaaS platform
we retain 100% / spin off Ocado style

Few thoughts re Kelso.

Because they mention Nutrition in their RNS are they targeting a Bid for this division?

It’s a big IF but if Boots did take a stake in Beauty and Moulding gets his cash for Ingenuity , repays debt , these 2 corporate transactions change everything

THG investors could enjoy cash plus share offer from Kelso so enjoy a carry in the new shell ?

Nb 5.5% was at group level

Steve, for balance.

Not sure that’s a correct number, to make an extra £50M cash EBITA we would have had to increase sales in nutrition by in excess of £500M + Nutrition gross was horrible H1 overall margin was 3.5% , improved H2 to 5.5%

My view they played it right, we are now hitting 60% gross and 15% EBITA in Nutrition plus we retained customers, important considering we only grew by 4% in the full year

Nutrition is a gem of a business

:-)

Having got together 25 high net worth individuals to all agree to put £150k into a shell co and in effect IPO maybe at a cost of £200,000 on the LSE with the sole intention of pushing for change at THG I can’t see they are bothered on short term movements in the share, the share price going backwards probably helps their case

Looks like we have fully decoupled from ASOS - they are up 71% YTD
BOO up 33% YTD

I was just responding to other posters 1 pencil

Agree enough said about the matter

Their net debt is £200M

Just on Ocado, they raised £700M plus on their last raise
In total they have raised some serious $$ in their time, SaaS platforms cost a fortune to build out to the level Ingenuity clients require

Personally I think the Ingenuity model has legs as a punt as the real estate infrastructure in place but don’t gamble everything on it just case - Whey price moves against

I am long here, only sharing information to help the BB, understand if some holders don’t want to hear / see the situation as it’s not comfortable if your long but I don’t think it’s bad news, it’s actually good news as this comes to a head now,Moulding finds the ££ and the share price goes up or he is mortally wounded and gets pushed out by the BoD in advance of the Golden Share going and the share price goes up

Sit tight

Hi Hosia
They don’t have the headroom as the £500M plus Bond has to be repaid within 36 months

They owe £200M now, the gamble would be spending the £100M for 3 years and because the EBITA margin is 1% GMV they could run out of runway IF say sales where £3B in 3 years - that’s £1B a year growth
They won’t have the cash to repay the £560M

I agree the point on Ocado but don’t bet ranch so to speak self fund Ingenuity and spin away

This is the crux 1 pencil - btw was just sharing the info to help this BB and to see if anyone had any a contra view on how Moulding could fund it?

Moulding has gone out on a limb - we now know he’s got form - one of his besties was the CFO and didn’t challenge him or either didn’t know himself on the FCF / capex position

Moulding brings up the £1B in an RNS but the new CFO who must have been getting briefed and finding his way into the Job realises the situation and they start debriefing the Brokers / insiders on the EBITA / £80M to £100M Capex for the SaaS platform and so on …

Moulding couldn’t sign off the £1B as he ain’t got the £funds to commit to the platform

We are where we so to speak, he is on the ropes and has to pull something out the hat, just can’t see how it gets out of this one otherwise.

So it’s a win win for us shareholders, Ingenuity folds as a 3rd party service or he sells equity / spins off

1 pencil, I wish I had made it up

Just sharing what the choice brokers know re the numbers / £80M to £100M / EBITA forecast and FCF

I won’t mention again