Member Info for Okehurst1

Steve

Am long and I want to be challenged on the numbers
Be that you , Crowman, the Ste’s , Golden, whoever

I got excited about the £1B growth of Ingenuity but it can’t happen without us raising big $ plus I find out it’s 1% GMV and we need an upgraded platform that will cost £80M to £100M capex for the next few years

As such I’ve been looking for the answer to how do we do it ?

There are only 2 ways , sell a piece of Nutrition or Beauty or spin off Ingenuity and self fund

Moulding posting about The Studio is a distraction, he’s gone out on a limb (RNS)over the £1B and can’t sign off as the new CFO will be saying ‘ we don’t have the cash’

I was using the example below on the £30M to £60M miss
that at best case the postal strike was £5.6M of that miss

I can’t weigh up was Moulding delusional on his guidance 7 weeks before Xmas or was he misrepresenting the facts?

He’s done the same on the £1B, it’s one or the other

That’s a no then !

Canary

Show us where the £100M capex is for the SaaS platform ?
It’s just not there, demonstrate how it’s funded ?

I don’t think it bad news that it can’t be funded

It brings Ingenuity to a head, either raise the cash to fund the business, be that equity in Nutrition or Beauty or shut it down as a business to 3rd parties and use the current platform that is working perfectly well - for both core business’s

His parachute is spinning out Ingenuity and raising the $ as an independent business

Moulding is either delusional on the numbers or is misrepresenting facts

Take your pick, but it’s one or the other? He’s a trained accountant if that helps

The BoD have not given guidance to the wider market for 2023 only to chosen brokers / big II insiders, they have indicated £120M EBITA but as demonstrated yesterday that produces just £20M at very best FCF for 2023 before capex - at best

Moulding needs £80M to £100M for SaaS Capex and THG just doesn’t have it the cash as such no RNS on the £1B Ingenuity contracts

He either sells a piece of something to fund - which to be fair he could do, he’s a good entrepreneur he will find a solution but he’s got to pass DD for that

If he doesn’t he loses the floor so to speak and it’s the final straw for the long suffering institutional shareholders , Ingenuity won’t be able to sign the £1B contracts

Pearls, with respect

You have to work back the EBITA margin

Am being generous on 7% , H1 was 3.5% and full year 4.5%
these numbers are fact

So to hit £130M as forecast THG would have had to generate £700M of extra sales in 8 weeks !

Beauty missed by £80M so let’s say that’s all down to Postal strike … every penny it’s £5.6M EBITA

We were still £620M sales away from hitting target to forecast - that’s at 7% if you use 5.5% which was our H2 gross EBITA margin it’s even worse

The trading update in January preceded the CFO getting the chop

This RNS also announced the £1B increase in contract wins for Ingenuity (600% jump)

I go back to again, we have £20M net operating cash for 2023 after using the £40M
from the sale of properties (used to pay down debt to £160M they say )

We don’t have the £100M for capex for the SaaS platform

For us PI’s that’s what we need to consider, we don’t have the cash - we just don’t -
they would have had to increase sales by £700M in 8 weeks as below, it’s a pattern within THG and poor controls/ internal reporting or misrepresentation, make the call yourselves what you think it is?

On a positive note, unless Moulding sells a piece of something he won’t be punting another £100M a year capex for years to come, we just don’t have the £P’s and the clock ticks down his golden share

It’s a corporate vehicle Brewman, nothing more or less

An entity to carry out the plans of its shareholders.

Last rant about Moulding and trading updates - hands up I got well mugged

To have hit £130M which he told us he may hit, based on 7% EBITA we would have had to done a whopping extra £700M in sales in 7 weeks to hit the £130M - that’s working on £80M EBITA

You can see why the CFO at the time and Jack of all trades had to move to one side last month

If you work the margin on the £80M miss it’s £5.6M EBITA

He forecast £100M to £130M, if he had come in at £94M the market would have accepted the reasoning

Btw EBITA could be £70M they say

Moulding knew 7 weeks before Xmas , he didn’t know about the the postal strike would cost £5.6M - a few quid but not potentially £30M worse case

Pearls

Moulding could have flagged the £20M loss from On Demand, surely they would have known when they issued guidance 7 weeks before Xmas ?
It was quite material, first with the loss and the restructuring costs on top

Either they knew or they didn’t, either way it’s not a good look

Decent results

‘ Beauty and wellbeing sales grew by 7.7 per cent, personal care by 9.1 per cent, nutrition by 10.1 per cent and ice cream by 2.9 per cent.’

https://www.lse.co.uk/rns/ULVR/final-results-0hk7eo129d5pxaf.html

Whilst we wait …bit of musing

As John Goold was employed by THG to deal with their institutional investors for
6 months in 2022, especially around the time of their arbitration with the same ,
I wonder what skeletons he knows are hiding within THG?

The fact he’s gamekeeper turned poacher and managed to get 25 high net worth investors ( egos’)to all invest the exact same amount, then list same on the market they must have a road map and he must have had a compelling story to convince them?

In fact we now know some of them think the gains warrant sitting within spreadbetters and pay the interest charge whilst they wait, why go to that trouble on £150k ?

Plus they had the cost of having a quote on AIM( Nomad etc ) put aside the listing fees and the additional regulatory requirements, why bother?
They can raise money going forward without a quote

I just wonder if they will use Kelso RNS’s as their outlet to go above the THG BoD if they don’t / can’t get agreement on unlocking value?
Of course they could just have a web site and say same but it doesn’t quite have the Gravitas as that of publicly listed vehicle

THG are not obliged to tell us they have had bids, however Kelso could say they are obliged to tell their shareholders they have Bid for ‘ something ‘

As I say just few thoughts whilst wait but something is going kick off here, as Boom says this ain’t a growth stock it’s a capital play

It’s interesting re Tax losses as THG has embedded gross losses of £2B plus , via writing down the value of web sites like Cult Beauty to racking for warehouses , massive capex etc

We can assume whoever buys the shares in THG or a subsidiary would buy the shares, stamp duty is .5% vs 5% on an asset purchase
Plus they would want to continue the Trade and utilise the associated tax losses

From THG point of view they wouldn’t really want to sell shares of a subsidiary if it creates a capital gain as they won’t be able to offset the CGT against Trade losses
although I guess the trade losses form part of the negotiations of the purchase price

Net effect we have £500M plus of net losses to utilise / work through, when we measure this against the m/cap of £850M, it’s actually a valuable and tangible asset to whoever can enjoy the profits from Nutrition / Beauty and it has a value to THG

Where would the price be now without them after the January update we dropped 30% into late 40’s ? touched 62p today ?

Kelso £12M m/cap

THG shares their only asset £4M

Agree it doesn’t stack

IG on the list as well? According to Bloomberg
Another client converted ?

1 pencil

Think your thesis makes sense

They acquired the shares on the 24/01/23 so Pre IPO according to Bloomberg

Chunky holding, wonder what they only announced today ?

Why not just buy THG shares ? Why buy 8% of a company whose sole assets are THG shares ?

This is what they are telling the Brokers /II’s they have briefed
£80M to £100M a year to build out

They told us last September they need to spend 5% Rev on capex for years to come
(£100M)

Look at the accounts, under IFRS they would be able to show a ‘ tangible value ‘ of the platform, it’s not there ,no sign of R&D credits either ?

They have big plans for Ingenuity, it is exciting , let’s see how they raise the $$ to fund

Agree Canary

We have the infrastructure and the capacity - 85% not utilised based on their numbers?

It could be an equity deal on Beauty, has to be something to raise big $ to build the software solution

As you say we should soon find out