Member Info for Okehurst1

Just on Ingenuity

If it raises just £300M via a direct listing and had the £700M below the business enjoys
8 years worth of cash for capex …. Day 1

It would take till 2031 on a like for like basis for Ingenuity to enjoy the same investment in the current structure - am just going with £120M a year capex as pencilled in next 2 years.

The point is, THG on a £700M m/cap doesn’t have the balance sheet to grow all 3 businesses, it has to make a choice if they want to have a chance, otherwise someone will come for the lot and restructure to add value

Could it look like this; up for debate

We know they have now split up each division into its own separate limited company

THG Beauty & Nutrition enter 5 year contracts with Ingenuity and pay the going rate for that service, whatever Nestle pay or a tad lower due to maybe £2.3B of sales volume, but either way they pay as others do
Ingenuity then has say £2.5B of sales

For the example, they sell/ receive £3B for Nutrition, repay debt at group level and put £700M into Ingenuity, spin this off into a SPAC on Nasdaq - it won’t have the longevity of accounts for its own quote, maybe it raises a few quid same time?
£2.5B of Rev (Ingenuity )
£700M of cash on balance sheet / no debt
Has to be worth something vs Zero in current structure and no cash to grow vs £700M
Any investors don’t like they can sell or visa versa they hold

THG shares holders get same weighting of shares in this Co as they have in THG before they raise more capital vis the SPAC - it’s not complicated

There may be a tax bill on disposal of a division but before tax THG has £2B

Beauty gets £1B cash has forward sales £1.5B of sales on 10% EBITA
no debt
In affect this is what’s left of THG, we know ULTA pro rata has THG at £2.5B m/cap
we should be at least this figure, the £1B gives this company the capital to grow

£1B special dividend / share buy backs

So we end up with equity in Ingenuity, equity Beauty plus the dividend value, each business can then max its opportunity

Swop Nutrition for Beauty being sold but you get the drift whichever way it’s done

As it stands it’s a slog and half, the balance sheet is shot to pieces, we have negative FCF at present, £300M of debt and if Whey prices reversed upwards we have a serious problem if that margin goes back to 3.5% which is where it was H1 2022

Bit of fun whilst we await update but not out of the question, if the BoD are planning a restructure

Think if we had a choice the majority on the BB would take a sale of Beauty over Nutrition to fund the growth of the latter, repay £300M debt and fund/ spin off ingenuity ? Maybe a special dividend on top

But what value ?

It’s not inconceivable Nutrition hits £750M pro rata sales next year, assume 15% EBITA

IF ( big if ) THG a got offered £3B which is around what they discussed on the conf call - 4X sales - would shareholders be happy ?

On my side I would be very happy, that’s 27X forward EBITA.

If Moulding pulls a big rabbit out of the hat - say a disposal, full restructure - this will rocket

Amazing it was driven down to near 40p just over a week ago, it’s so cheap at £700M m/cap and maybe 4X EBITA 2023

Market Makers have orders in, yesterday was pause / reload on the cheap

Pull in the punters who bought low 40’s a week before / take profit

Go again …. A lot of shorts to close out here

.. away we go as they sell on to their broker chums and we gap up towards the £1

On Twitter …

Nb If any poster can explain how it would work commercially ?

The poster who peddled this one was just playing a Grift

Brew
Just can’t see how this structure would work commercially?

How could Boots justify buying 10% of a subsidiary of a PlC that had a floating charge on group assets ?

Intellectually Boots just couldn’t do that structure, Walmart ain’t that dumb and THG lead banks won’t be letting THG do a dividend whilst they are owed £300M from a line of credit of £660M

Put aside all the spare change from THG Beauty goes into the black hole of Ingenuity -add to the fact Boots now have 23% sales on line competing head to head with THG

There is close to zero chance a deal like that could come off, how would it work ?

Yes

Moni

Ratner knocked his actual product, it’s not like for like to THG today

Moulding sold £600M of new THG shares to SoftBank, enjoyed the benefit of the cash within the business and then with Qatar nicked them back for themselves for a fraction SoftBank paid - win win for Moulding

THG the business benefited from that transaction - let’s be honest it was smart trade

I do agree the £1.70 non bid off his bestie was shambolic but again this put pressure on SoftBank when there was no other Bids

Moulding has gamed this out, all his various options, we just need to sit back and ride the roller coaster as he executes the next stage, not worth stressing if you can

Hi Moni

Don’t think any of us disagree with the gist of your post below, however I think the majority take the view Moulding / Chairman have an agenda they are playing out

My opinion, they were comfortable letting the share price fall as they wanted to push SoftBank to sell, this of course worked a treat - remember the Doom and Gloom September statement / update and Softboys bailed just after

They then had to switch the story a wee bit to get their £660M funding sorted and just weeks later with SoftBank out the way we get a different vibe

Moulding then hoped to nick on the cheap with Qatars help but the big II’s knocked them back

So here we sit today, Moulding either pivots by reining in capex for ingenuity or he does a corporate deal /restructuring and his GS a is on countdown

Either way we will see the £m/cap increase as it now suits Moulding / Allen

Us little PI’s are just going along for the ride at the moment, it’s not worth getting annoyed about their game plan, just hold on for it to play out and make few £quid

Spot on post OhhAhh

Let’s hope it’s Beauty IF they are going to raise $

Flip side … pulling all these deals in for Nutrition makes the business attractive, would they take a 4 or 5 X Rev offer or maybe higher ?

Say it was £3B for nutrition - they indicated on conf call it was worth more but go with that £number

Hard to turn down when £Mcap is £700M and you still have Beauty which based on the same matrix as ULTA is worth £2.5B like for like

Ingenuity … no idea on £value

No need to Crystal Ball

No red dot profit warning

I can’t see any other way Steve, THG balance has no leverage left other than a disposal

No one is going to JV with Nutrition or Beauty - equity wise
all the FCF money from these divisions is going into Ingenuity - every penny at the moment, it’s a block hole
You’re not going to invest $$ and then the return on that $$ goes into a completely separate entity that you don’t own ?
Can’t see there being another mug like SoftBank, the world has changed ?

It’s now down to how they fund Ingenuity as the market demands FCF positive

Look at Boots results last week
‘ fragrance & Beauty’ Plus online sales as high as 23% of total sales

It makes commercial sense for both Beauty/Nutrition to enter into separate / independent supply contracts with Ingenuity and for the latter to be spun out / or whichever way the business can be funded adequately, be that a full disposal or funded by using some capital from a disposal

This then allows Beauty/ Nutrition to enjoy their FCF which would be considerable vs the current m/cap - could be £175M this year at the minimum 2023, remove funding the losses at Ingenuity and it could be £200M + put aside capex

THG Nutrition is worthy of the opportunity to become a giant, it’s earned it’s strips to enjoy its free cash profit and expand

Hopefully it’s Beauty getting sold if that is their game plan, however there may be a big offer on the table for Nutrition - the size of one they discussed on last conf call and they can’t refuse it, they laboured this point

Something afoot, we all know THG is massively undervalued

Bulldog ….superb Wit :-)

Hosia
The directors have fiduciary duties which are above shareholders - they touched on this on conf call

Plus why would Mouldy take the risk ? He gets nothing out of it, the PE boys would have a floating charge on the assets, was never going to happen

Nb The THG balance sheet couldn’t afford to service the debt and have adequate working capital