Member Info for Okehurst1

Re the £1B
It’s not do much the margin on its own it’s the fact they have increased the revenue of this division by 600% pro rata

The market can then make the call what’s the value of Ingenuity vs say Ocado as an example

THG could argue they can get to £12B GMv within say 3 years to 5 years as an example as long as they continue to invest capex at 5% of total turnover - that’s what they told us

On £12B GMV they can pay the £20M rent and continue investing in capex, just like Ocado

It’s a compelling argument but suggest Ingenuity requires a different route to nicking Nutrition / Beauty FCF

Hi S/broker

THG has invested close on £2B of shareholder funds into capex/ websites, as a result they can write down the value as per the policy - what’s agreed with the auditors

It’s why we can only work off EBITA and net operating cash
Hence the market wants to see FCF +

Whoever can unlock the value - spin away Ingenuity have it self funded by which ever means - can then enjoy the cash generated by Nutrition and Beauty and offset the tax losses against the profits of same

Notice Lotus reversing into a SPAC via Nasdaq
Raising $288M and $5.4B valuation

Suggest this would be a good route for Ingenuity to raise funds and decouple from
core ?

Sound familiar ?

‘The Nasdaq shell into which Lotus is reversing was formed by L Catterton, the private equity fund firm backed by Bernard Arnault, purportedly the world’s richest man. Catterton’s previous launches have included the Peloton exercise bike brand and Kettle crisps’

https://www.thetimes.co.uk/article/1caeccc4-9777-11ed-a130-baced48eb788?shareToken=285bce6772f848b1d4e9b1c6e863a225

It wasn’t to be communicating with us PI’s , it was part of the process alongside the mediation process - THG would improve their communication with II’s

John was ideal candidate, knows the market , well connected

Take the info on board or dismiss but it’s been common knowledge in the City for a while, same guy.
He then went onto to set up his vehicle as announced yesterday

Onsolid, agree and no issues with anyone trading a penny here and there or even shorting, each to their own.

Moulding kidded the market with a forecast he didn’t deliver on, he made a rod for his own back as Kelso must have been in the wings ready for formation - equity draw down from the 25 so to speak - Moulding must have known £20M loss from On Demand 6 weeks before Xmas ?

We know the numbers from the core business / margin range/ capex in cash terms for Ingenuity and of course GMV margin and the Golden Share is going this year

Ditto John Goold has raised £5B in the past plus he was head of IR for 6 months last year

Sitting tight and riding this one

Thanks Newuncle

Understand your position, thought as much there is game plan that can’t be disclosed in full, interesting - and helpful

It could be a £2.50 offer - as a figure
Would they get that over the line

Sell Beauty that will repay a good chunk of debt

Maybe maybe spin off Ingenuity if they have a few £B of revenue that is?
Possibly on Nasdaq, ideal SPAC material

Work Nutrition tax losses as below

Trying to fathom why the gap on their share price / NAV
their only asset is THG shares? Has to be a bit more to it ?

Newuncle

Do you feel comfortable giving us any clues on how Kelso will play it - over and above what they tell us via their RNS

What’s the game plan to justify the increase in share price to NAV ?

…. Any shareholders who are off shore enjoy the gross cash profits tax free via a dividend

The company has the reserves to legally pay the dividend
Ditto the tax losses to not pay Corporation tax

Once soaked up - £2B tax losses - sell the business, no CGT

Just putting some thoughts as to why these high profile investors would ‘join ‘ and invest £150K each - that’s a proper agreement getting a load of ego’s to agree to be equal

Trying to work through their logic, a vehicle to buy THG makes sense, they are all Capital Allocators who have experience / contacts

Forgot to add

Kelso then have £2B of tax losses as well, plus the reserves on the balance sheet

The rump left over becomes a cash cow, Kelso pays no tax on its profits on same till the £2B soaked up

Putting into prospective today … we have a £865M m/cap and in affect £2B of tax losses to be worked through worth £520M be that goodwill or capex written off over X amount of years

It’s a non cash item of course but a big relevant print

Stockbroker

We do report GMV as revenue , it’s there in the top revenue box
that’s how they report Ingenuity, we make 1% EBITA
Last year £2M EBITA
Less rent £20M

You could argue the 2 core business’s should pay Ingenuity same rate as 3rd parties and it’s then enjoying a further £20M EBITA - rent covered
Even another £1B is only £10M EBITA

Then we are back to the old chestnut, Ingenuity requires £100M a year capex so they tell us, where does that come from ? It’s the £2B profitable side and they lose the benefit of growing their divisions.

Putting all this into context , On Demand /other is losing £20M a year,
sorting that out is worth £2B of extra revenue in Ingenuity and it costs no capex

To go from £200M revenue to £1.2B that’s some big contract wins
There will have to be an RNS along the way
600% growth is massive increase, problem is the margin and knock in affect on Capex

It’s arguable if it’s good news or bad at 1% GMV and ROI on the capex to deliver - £100M this year alone

Pearls
Could Kelso be the vehicle to make an offer to take private ?

It raises the Bridge ( loan ) buys THG via a hostile takeover
Morrison style - but not friendly

Sells Beauty or Nutrition post the transaction to pay off a good chunk of debt
Beauty may fetch £2B plus vs peer businesses

Spin out Ingenuity if they feel it’s has value, if not shut it down
With just £200M revenue and no whales on board suggest it would be the latter

They retain Nutrition which is the gem in the crown

It’s a smart bit of business

Stockbroker

That’s one of the many issue's with governance at THG and dealing with the market

A £1B contract (s) is price sensitive, they are obliged to tell the market, it’s a 50% increase in revenue.
It shouldn’t be down to an employee be that THG or their client putting out a random post on linked, it’s price sensitive information

Within an RNS we are told £1B business in pipe line

That’s a big claim, the way THG report that’s 50% increase in revenue
That’s RNS worthy at that level

They will RNS if they get a sign off

Pressure on Moulding

Still no RNS on the £1B whale landing/ or an equity deal although that’s a long shot

Has to be a reason for the delay - no idea what other than it’s a shareholders agreement issue if they we are selling a stake in Beauty

All info that we have to hand and on balance, it’s a tricky one to be out and trade, wouldnt put it past Moulding to do an intra day RNS if the contract is signed off within normal working hours

Hi Bull

Think we all know ex Ingenuity THG is a decent business
£2B @ maybe 8% EBITA

Throw in £2B of tax losses - worth £500M cash terms

But to unlock the tax losses Ingenuity has to binned or Moulding pulls the £1B in a firm contract at a decent margin and maybe even equity deal thrown, can’t see him getting the BoD to sanction the £100M a year into Ingenuity SaaS

We just sit back let the big boys at Moulding now

Do agree Ingenuity at 1% GMV margin is what you call it
They need big £B’s of revenue to make it viable

Take the rent at £20M a year
Then capex at £100M that’s every year for years
they actually say 5% of revenue

Even with the £1B of whale on £1.2B of Rev we earn £12M EBITA that’s it

Less £120M !!

The ROI is shockingly bad

Hi Oculus
It will be top of the list to satisfy the II’s as they organise themselves and set out terms to the BoD

It takes 6 months once THG press the button

The market will move /position in advance of THG entering the FTSE 350

Agree on the £B whale but again Moulding is going to have to justify nicking a £100M a year for Ingenuity SaaS when it’s only a 1% return on GMV

As Capital Allocators the Activists will be looking at alternative ways to fund Ingenuity
it will interesting to see how they play this particular point

Commercially Ingenuity has not worked, cap the spend - stop digging the hole - absorb into the Core £2B business’s making good profit and grow them - they are starved of investment and it shows in their growth numbers

It’s going to have to be some deal / whales GMV and maybe equity to win over the activists

Put aside Moulding gets £20M a year from Ingenuity rent as their landlord

We were 43p just a month ago, could hit 60p today

Be Long or Short you don’t make a profit until you take it

The tide has turned for the Shorts, they need to take that profit before the full listing announcement - put aside Moulding pulling a rabbit out the Hat/ Activist II’s blocking Ingenuity nicking the FCF

That one simple RNS - full listing - and we have 70M shares on the offer from index funds

Citadel are smart boys, they have jumped first.