Member Info for Okehurst1

Hi Pearl

Yes, aware.

The issue is the capex funding for the SaaS platform upgrade (£100M a year / 5% turnover they say )

That removes cash/ investment from the profitable divisions - all the group net operating cash is going into SaaS to generate 1% on GMV

There has to be another way to fund - that’s the problem to solve

Ste
Been a good debate as usual

Difference now is the II’s have their activist
Moulding can’t get away with funding Ingenuity from FCF anymore, been a good pivotal week for us Longs

Tbf he is a top entrepreneur big respect to him for that, he’s working something to generate the £P’s to find a solution

Interesting to see how he gets on, I just wouldn’t bet against the guy he always pull something out the hat ( deal wise )

Agree Ste

Nb it’s going to report losses for years it’s got £2B of tax losses
but that’s not cash … it’s generating cash, it’s just going into yet more capex for Ingenuity or it was

Smartpee

Go from what we know -audited accounts, gross margins etc
FCF etc with respect what they pay a person is not relevant to the debate
We know the revenue, we know the margin, ditto input costs (whey )
They have £660M cash on hand net debt £160M( on disposal of property )

The issue is what they do with the FCF , in effect the net operating cash position

Ste.. good and agree

Just be careful on Short side Ste, trend is up for all the reasons below and macro - in spite of moulding

Smart pee

Cash wise / margin
Blended 8% EBITA it’s decent on £2B, it could well be 9%

Nutrition gross is 60% due to whey price halving it’s churning cash
EBITA 15%
Beauty 7% EBITA

As I say decent cash generated, it’s just what they do with it

Ste

Put the name of the Whale to one side, suggest for the debate it’s a side issue , they have said £1B but it’s incremental and a 1% GMV
At best Ingenuity has £1.2B , £12M EBITA that’s it
Takeaway £20M rent to Moulding but in theory the £2B from the core should top up another £20M EBITA to Ingenuity pro rata on an internal basis

Moulding needs the big cash to fund the SaaS, he can’t do a raise,he wants to punt all the FCF and he is struggling to get this past the BoD as much due now to II pressure

As such he needs another solution

Mentioned this last week at 52p it’s win win for us PI’s, sit back, hold , chill, watch it play out, the game changed this week

Ste

None of us Longs defend the miss - it was yet again Moulding getting his communication side wrong and that’s the kindest words I could say

But things have moved on, we have an angle on the FCF, we know they want to punt £100M a year for years to produce the son of Ocado and there may be merits in that?

And against that background the II’s are saying no and John is the conduit of their views, they want value from the core business’s which are doing relatively well
Nb everyone has excepted On Demand is going

Think we can all agree be it long or short this looks highly likely ( above )

As such it’s changed for us PI’s this week, 180 degree stuff, we just sit back and let the II’s/John do their stuff and in the background Moulding as the top entrepreneur he is, will be working a solution, it won’t be taking THG private it will be selling something of note to fund Ingenuity

Hands up from me, I didn’t think Moulding would miss again, I got that wrong and lesson learnt

On a positive note it’s spurned the Activists - serious capital allocators on that list - and they have a game plan with the II’s

Agree Board Changes are coming fast, Iain Mc has a target on his Board Seat, he had to go

As a shareholder it’s a fine line landing the £1B whales

One hand the Ocado comparison will add value but it’s going cost £100M a year for years - Tbf they have told us that

That means Nutrition and Beauty suffer as they produce all the FCF but can retain it

The Activists coming out this week has changed the game, II’s won’t have the FCF being gambled on a long term bet

There has to be another solution

Ste
Am long ,your Short - at times - but we are not far away with the £numbers

I don’t disagree with you points below - my posts say similar

The difference now is we have an Activist group -who will have II’s behind them - pressurising Allen for clarity on the £100M Capex, that’s a big print as it’s year in year out once they commit to the Whales

There lays Mouldings problem and the delay, he could be working a trade here to raise capital, he’s a good entrepreneur, it’s what he does best, selling a stake in Beauty

Am long no margin so am in for the ride but the trend is your friend and it’s changed this week for THG shares, Moulding brought it on himself not delivering the October Guidance and that was the final straw for the II’s who are down serious $$ and John is now acting for this group

If they can locate him suggest will they go through Lord Lucan Allen

It’s a tricky call S/B
Professionals/II may make a few pennies but they have the 3:1 to cover their Short on an RNS popping up, plain PI’s could get well caught out here

Plus we have the activists group who we can guess will picking up stock privately
they have an agenda - changed the game this week

Upside a couple of pence downside could hurt

Moulding has a vision for Ingenuity, if he can demonstrate £3.2B ( effective ) GMV at 1% and maybe £14B of capacity on top then he can try and promote a pro rata valuation to Ocado on like for like GMV - their GMV margin is very low as well

There is no Opex cost with either model,it’s someone else goods , Ingenuity has the real estate it appears it needs to invest in its SaaS platform to satisfy the so called Whales - the small guys making up the current £200M of GMV are ok with the current platform but it won’t wash with big Whales high volume

Assume On Demand /other (£400M Rev losing £20M)
This all gets sorted, shut down / sell loss making within … give away for a £1 whatever
retain profitable bits

It’s then down to what to do with the £100M capex budget this year and foreseeable future, find a way to make the investment but not out of FCF and we unlock serious value for the shareholders

Ste

Fully agree the gist Ingenuity SaaS dropping £100M at the expense of the core business’s

It’s why I think the delay is equity, he needs ££ this can’t be funded by FCF, it’s not just £100M this year it’s on going, if he can sell a stake in Beauty he self funds and same time gets a market to market price on this particular platform ( Beauty )

He can then indicate something planned for Nutrition same route and the market can value SOTP

Moulding has form for everything - good or bad in our eyes - there is a chance the delay is the Shareholder Agreement Terms, he’s got form for pulling these type of deals off.

Very risky trading a Short in this one unless an II on short /long strategy

It’s just Market Makers picking up loose stock, nice margin for them, sell on a few pence more, good chance it will be blue finish today (again)

Trend has turned for THG, Moulding brought the activists on himself at same time as the Macro is turning in our favour put aside the Micro - Whey prices

Suggest they are running a 3:1 book
Long /Short

It’s normal practise with II’s

PI traders may do similar, not my game but good luck to them

Hope your not down too much Prof, that was a bad time to buy

Hopefully this turns for you

I guess you have a 6 pack ?