Member Info for Okehurst1

Nb work on the £2.2B reve then add your margin
less how many months to get dump the loss making arms

Tbh It’s easier

B/fern

The margin on the £2.2B could be 6.5% to 7%
Not 9%

Work on that for your calculations for EBITA

But that’s before shutting down / selling the divisions losing £20M a year that they say are up for review

Rock - fair points

Tbh I just didn’t see On demand / other losing £20M
The 3 main divisions came in bottom of range - ex SaaS

It’s a disingenuous of the BoD to say £100M EBITA
Then to say we will hit target ( even today )but then say only when we’ve build in £20M losses from the loss making business that we are shutting down and adding back

Hi HH

Retained stake

Just on the economic value, we can measure the tangible value … it’s £20M
( £2B beauty / Nutrition )

There is no commercial logic for Beauty/ Nutrition to pay more than their competitors who may use Ingenuity and also use their FCF on top and not be allowed to max their own business’s growth potential

It’s not doom and gloom - although it feels like it

Debt £160M - coming down

£150M EBITA this year - I’ve gone with 7% margin

And maybe month in month pro rata £12M EBITA annualised Ingenuity - the £1B ain’t today

All the vanity projects going - we have all wanted this for a while
we are up a whopping £20M extra profit

We make more not having those business’s than Ingenuity doing nearly £2B GMV
It’s a win win , no brainer

Then we have the cost savings £130M over 2 years although we didn’t feel that £100M and the elephant in the room
slash that £250M planned capex spend next 24 months

All has to happen

We have to forget the margin on the GMV itself
Look at the income statement and see the £46M
We know it’s 4% of that figure - however that’s derived

With sunken fixed costs there is no Opex of note on the £1.2B it’s a service fee

SB that’s all it is

4% of £46M in 2022 - it’s not 4% of £200M

Why the market didn’t get excited about the £1B

On £1.2B over 12 months they earn £12M EBITA that’s it
that’s with the £1B

However create long term contracts with Beauty/ Nutrition for their £2B of revenue and you have £32M EBITA - spin it out it’s got a value, raise it’s own equity
we get shares in that business

Ingenuity then has maybe £14B GMV to go at, will take donkeys years to get there mind without serious investment

This has been my point for a while, THG have to sell something to fund Ingenuity or month ball capex or spin off

Give Beauty and Nutrition a chance

That’s all it is Hosia - it’s the accounts but you have to work it back

4% of the 25% of the 100% GMV

Currently Ingenuity is contributing £2M (ish ) EBITA from £200M GMV
Actually 4% of £46M

Net debt down to £160M - one positive today

Bin the capex / bin the £200M loss making divisions

Boom ! No debt and serious FCF positive

The market is calling for it .. THG do acknowledge

Hosia, it’s the margin on Ingenuity

Even on £1B we make EBITA £10M that’s it - if you break down the accounts
ok there is no stock to purchase as it’s clients GMV

They just need to stop the capex , bare minimum stuff
it’s a long haul to £14B GMV

I would prefer the FCF invested into the 2 profitable business’s

No idea if there is any value in the £200M Rev loss making divisions - but just shut them down tonight and we are up £20M ex costs to exit

Use the planned £capex for 2023 and buy back company shares instead
that’s a better return for shareholders than the sinking into the black hole of ingenuity

That would do it ….

Open for debate below but it’s based on £numbers today and last set of accounts
I don’t think am far away

You have to where do you think the margin will be?
If it’s 6% then it’s £130M ish EBITA - of course capex cuts at that point for FCF neutral that’s separate debate

Summary

On Demand / Other … all go

Ingenuity, spin it off, provide like for like market rate contracts with Beauty /Nutrition

Split up beauty / nutrition , ideally sell Beauty
Pay off debt £160M ( it’s coming down )
Fund ingenuity - it’s a slow slow burn
Fund Nutrition spin off
Special divided

Apologies for long blurb, tried to condense, as I say up for debate / test the numbers

Contd

Just on Ingenuity, assume it’s producing £12M EBITA which it could , then it has a value, if they added the £2.2B from the Beauty /Nutrition then in theory Ingenuity standalone would have £34M plus of EBITA

It then has £14B of GMV capacity
Work the numbers back that’s £140M EBITA max with current infrastructure
fully loaded as a rule of thumb

My take - looking forward via information we know

At last they are getting rid of the ‘ other ‘ part of the income statement and On demand - £200M of total Rev and the lot together are losing at least £20M p/a
If it took a £20M loss to finally bin Zavvi & co it’s a pity this wasn’t done sooner but at least it’s all going, that’s a positive

With 10% growth the balance of the business does £2.25B, looks about right

Then it’s all about the margin, if you take 7% not’ medium term ‘9%
that’s £160M EBITA - it could be 6.5% but with Whey we could see 7% - fair comment I think

Then it’s down to capex, know it’s been my pet hate alongside Ingenuity itself but they have to slash by a decent chunk to get to FCF neutral, with the £40M from the disposal it looks like capex is £65M for 2023 to hit FCF target - positive direction

Cost cutting, they have stripped out £100M of cost 2022 and £30M this year which includes 20% of the workforce have gone - again positive stuff

So turn onto Ingenuity, £1B GMV they will do £1.2B total and Ingenuity commerce Rev will be 25% of that - that’s what they tell us today pro rata
Again using last years numbers it looks ingenuity make 4% tops of the 25%

So best case it’s 4% EBITA of £300M best case , £12M towards EBITA from Ingenuity

Beauty and Nutrition come in with £148M plus the £12M Ingenuity all after getting rid of the loss making £200M

I don’t think am far away with the £numbers above, you make your call on the margin up or down to above ditto capex but to be FCF neutral it has to happen ( the cut)

Hi Golden

Like the debate

£130M cost cutting 2022/3 including 20% cut in head count
Binning the loss making divisions - at last
Looks like capex is getting trimmed - need a ££number mind

I worked on 10% growth - as you know, didn’t expect 15% Growth
Ditto 2023 sticking with 10%!

Ingenuity - let’s hope they spin this off and Beauty /Nutrition pay the going rate plus they enjoy the £1B of GMV on top of the current 3rd party Rev

FCF neutral 2023 , it’s a start

Margin - it has to improve due to whey priced, they say medium term 9% am looking at 7%

So on £2.5B Rev 2023 @ 7% we have £200M EBITA

I don’t think that looks too far out - look if it’s 6.75% it’s £175M

Spin out Ingenuity - however they do it
Sell Beauty - can they get £2B + maybe
Retain Nutrition

Risk reward decent

… these guy are working a game plan

Something on the go, all points to April for the big reveal

The II Shorts are no mugs

They can see what we can see

At last the non core loss making bits are getting binned

£130M costs saving including 2023

2000 staff gone

FCF positive H2 to the tune of £50M that was a big surprise

Whey has dropped close to 50% from high

£1B Ingenuity GMV growth 2023

It’s how they get out with their profits intact, that’s their problem
we Longs sit tight

FCF positive

£130M cost savings

£1B GMV Ingenuity growth 2023

Time for the exit

£100M EBITA from core divisions

Binning loss making non core - at last looks like vanity stuff going

It appears Capex to be trimmed