Member Info for Okehurst1

Fair doos Steve, hope you didn’t lose too much $

Am sitting tight - back under water was 50p plus average

They might surprise us with a positive early RNS - no idea with THG communication

Will be a nice short squeeze if THG deliver on forecasts , guide higher for 2023, cut capex / FCF positive 2023 - big II must be putting them under pressure

Ovs…. MBO or material disposal and all bets off

Ste , I don’t think that’s causing the sell off - agree thin trade but no insurance issues, they have £660M cash at hand
We are in the cycle of volatility, good for traders mind
LTH it’s a frustration but this could turn on next RNS

Plus side … no profit warning and a week to go to year end
forecast in the bag

A/S that’s my call as well

Let’s see at next update but pretty much most quoted companies are cutting back their capex spend to preserve cash

Steve,
Only if they keep the level of capex - it’s all about the capex for 2023/4
£260M , cut that and we are away we don’t need £250M EBITA

Point of bringing this up is the BoD know this, there has to be pressure on Mouldy and he needs a ‘ result ‘ for reasons mentioned below

What would it for the share price if they slashed capex by £200M, cut costs by 10% and hit £100M EBITA 2022 and forecast £150M 2023
we get a decent rerate

A/S agree but we are where we are in a different environment, I do think MM is a quality entrepreneur and pull rabbits out the hat but the clock is ticking

M/man , it’s good to forward run THG’s numbers and see how it looks
- am long here btw

Posters can then challenge / add their own research like Golden did yesterday and we all get a better picture / learn

We don’t hear a dicky bird off our Chairman - Nada
and no analyst call after last update, it’s difficult to evaluate, hence I prefer to see ideas / research shared,we get the best out the BB then

If there is a ramp at that point it’s a valid one, helps us all

Hi Steve
Thought that maybe rent free periods ending ?
Mouldy getting rent increases ? Not too sure but suggest it’s establishment costs in the increase?

I’ve with their reported cost base but tweaked back their margins / sales growth numbers

We get £20M FCF 2024

Cut capex by £100M a year - why wouldn’t they ? - and they generate £220M Free cash minimum as I have been very conservative with growth

That a game changer for THG

Ste
Put 10% growth on the top line
Push out 24 months and just straight line everything else and the max is £20M 2024

He either pushes margins and risks growth or runs 5.75% and this is the result
Ok he may get a better margin from Nutrition because of Whey prices but we don’t know the effects of the recession once it bites / sales

Unless he mothballs capex, this turns on a sixpence to generating £200M of cash in the period - say it’s cut to £35M a year capex - with margins that are not a heroes budget - sub 6% EBITA

Hi Ste

It’s Ingenuity the problem child, customers may like it but not enough of them to generate big Rev - £200M this year that’s it … maybe £12M contribution vs £200M capex

THG this year and the next 24 months will have spent £450M on Capex, relative wise it’s a phenomenal sum of money vs a Mcap today of what
£690M ?

We all know the maths for a trade sale of Nutrition & Beauty /SOTP
get what you can for Ingenuity

Someone will make move with that valuation disparity

Tax losses have no influence over the timing of an MBO ?

The Company structure won’t change tax wise, management or their partners buys our shares, no different to us selling our shares via a platform / our broker
Don’t forget this would be an equity ‘ event ‘not via debt if it happens

Agree Mouldy needs to act before expiry but unless Qatar pay well
above market price I can’t see it happening - THG can’t carry the debt it already has £300M of the stuff
So we either get a bumper offer to pacify the big II’s or Mouldy has that door closed on him

He then has to pull a serious deal out of his locker to boost the share price but that’s restricted as well with his £m/cap down 95% so he can’t issue shares and he’s saddled the Co with £300M of debt to boot and at best he generates £20M of free cash between now and January 2025

He could hang on and hope to ride it but someone somewhere - if we are stuck at 50p to £1.20 - is going to make a play for this and break it up for SOTP and he risks being on the hook for the real estate as new owners test the legitimacy of the leases and structure the Top Co to be nothing more than a shell - Thinking more how the new owners break up the assets and wriggle out of the liabilities / rent of Ingenuity IF they can’t find a buyer

He won’t be skint as he will have had a pay out but it’s a headache for him
there will be a lot of debt behind those buildings

Qatar stump up
Dispose of Nutrition or Beauty , create shareholder value
Cuts Capex to the bone,( pivots ) rides his luck, generates cash

Take your pick but he has nowhere to hide once the GS is up and he has limited options to choose from

Weirdly this pain is good - perverse way

It heaps more pressure on Mouldy to bring a rabbit out of the Hat

No red dot profit warning, as long as we don’t get that we have no worries
- doesn’t look like it’s happening

Whey price dropping, £100M + EBITA , MBO or divisional sale
Golden Share expiring, sit back and chill at this level (£700M)

May have been better if Sir Tom would have kept his trap shut

Looks like Whey is heading to €770 mean average

Lowest price since December 2020 as well

Nutrition heading to be a $1B a year Rev business on 15% EBITA

Jewel in the crown

THG valued at £700M + is nuts

Thanks for input Golden
Will revisit / tweak

What’s your thoughts on the concept of below ?

With £300M of debt at group level - £660M facility secured by top Co
- I can’t see the Banks giving up their charge on Nutrition assets and giving comfort to Nestle / others to purchase equity in Nutrition when Ingenuity is burning cash ? Intellectually would the banks do that ?
Plus Moulding likes control , he then has Nestle who have no interest in Beauty / Ingenuity dictating what THG do with the free cash from Nutrition

Put aside what would Nestle shareholders think of Co buying a stake in Nutrition, what would they pay and for what stake ? Considering THG group is only valued at £750M

Nb had an afterthought this is close to Cityspy £2.95
Withdrawn Twitter post - probably no connection

For debate

Nutrition could arguably do £750M Rev next year @ 15% EBITA
and justify a £1.7B valuation on 15X
Put aside tax on disposal - assume THG can mitigate/ another debate

With the £1.7B ;
Pay off debt £300M
Ingenuity investment £350M - capex for 3 years
Beauty investment £300M
Special dividend £750M 25p a share

Spin out Beauty generating £1.25B Rev on 10% EBITA
has to be worth £2B on 15X plus £300M cash no debt
stacks to peers in USA

Spin out Ingenuity, contracts with Beauty and Nutrition
£3B gross @ 5% EBITA - dropped from 6% but may be lower from Nutrition /Beauty

Ingenuity has £15B capacity, £3B revenue 2023/4
£150M EBITA no debt and £350M for capex
£2.3B M/cap ?

We enjoy
25p special dividend
£1.40p Beauty
£1.60p Ingenuity

The market would like this deal, there are caveats around the Ingenuity EBITA margin but assume price rises cover the gap if Ingenuity has to charge more

Any thoughts / comments ?

Gist / pasted

Sir Tom Hunter, the billionaire investor and philanthropist, has reaffirmed his commitment to THG, insisting that Matt Moulding’s struggling beauty-to-nutrition retailer has been a “a real success story” (Greig Cameron writes).

Hunter told The Times: “Matt we have backed since 2009 — and we are still delighted to back Matt today.

“There are not many people who start from nothing and grow probably one of the world’s biggest online beauty platforms. It is a real success story, but it has not been a stock market success story.”

https://www.thetimes.co.uk/article/6ac5bdda-8176-11ed-933d-2ad94f4b2285?shareToken=9cd6266ae0fc9101a0c37fa8ba504a1f

Ingenuity as a business isn’t performing in terms of return on capital employed
£200M Rev @ 6% margin is what the accounts say, not even an ardent long can say it’s been a commercial success up to now vs capital invested

The market won’t hand over more of its cash with the ease of the IPO / SoftBank, THG won’t find another easy £Billion

At best we have FCF of just £20M in 2024 with the planned £250M capex

The borrowed money will run out before serious revenue from Ingenuity that’s why the market values Ingenuity at zero

It will be the market that brings Moulding to heel not us little PI’s

If they could secure 15X EBITA for Nutrition alongside a 15% Margin on £750M Rev 2023 - am being generous

So £1.7B they may squeeze to the 2 ?