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Extract from FT an hour ago

Indian prime minister Narendra Modi has told Russian president Vladimir Putin that now is “not an era of war”, in some of his most pointed public remarks yet about Russia’s invasion of Ukraine.

At a meeting between the Indian and Russian leaders in Uzbekistan on Friday, Putin publicly acknowledged New Delhi’s “concerns” about the conflict for the first time — a day after doing the same thing during an encounter with Chinese president Xi Jinping.

The exchanges at the Shanghai Cooperation Organisation gathering in Samarkand are Russia’s most public recognitions yet of the disquiet in Beijing and New Delhi about the implications of the Ukraine invasion.

Though Xi and Modi have both attempted to remain neutral on Ukraine, their strong ties with Russia are crucial to Putin’s attempt to show Moscow remains a major player on the world stage.

Putin’s new deference to Modi and Xi’s concerns about the war in Ukraine highlight how Moscow has become increasingly dependent on their willingness to buy its exports after western nations imposed sanctions on Russia.

“I know today’s era is not an era of war and we have talked to you many times over the phone on the subject,” Modi told Putin in remarks published by India’s foreign ministry. India’s prime minister added that democracy, diplomacy and dialogue kept the world together.

“I know your position on the conflict in Ukraine, your concerns that you constantly express,” said Putin, according to a Kremlin transcript. “We will do our best to stop this as soon as possible.”

India apparently on Putins case now - after China

https://on.ft.com/3qIhVOm

That’s the gamechanger Goldy

Tech companies don’t do Capex they do R&D
R&D credits are audited by HMRC - touched base this morning and whilst handy they work out at 14% of a Tech salary
THG don’t own the bulk of their real estate - they lease
no capex there
Stock - is not Capex
The don’t own the robotics element - which would be R&D
they will just lease this item from Ocado

Other than racking for the distribution units I can’t think of any other major Capex they would have? Not £210M worth

The analyst’s can see what we see hence the downgrade there is no transparency - put aside divisional performance

Ingenuity is in at £zero, it’s not a standalone going concern it’s just THG selling space and delivering goods for 3rd parties

Can they split away nutrition if they have a buyer ? Jury is out on that one, no idea

The punt has to be they get a buyer for the infrastructure / Beauty / Nutrition and the price works for Moulding, it’s been serious money putting this all together

Nb reckon loads of fat in there that an experienced operator would take out … plus the Spa :-)

THG PLC (LSE:THG) has had its rating downgraded by Liberum Capital to 'hold' from 'buy' after its analysts slashed their target price to 45p from 380p reflecting a moving away from a SOTP (sum of the parts) to the traditional DCF and RoCE/WACC methodologies to value the group.

The Liberum analysts noted that THG's interim results brought another round of downgrades as sales and profitability were both below market expectations.

They said the company, parent of online retailer The Hut Group, also failed to deliver the promised divisional breakdown of profitability and cash flow, which it now expects to provide in 2023.

Capex plans have been cut, and focus has moved to restoring profitability and generating FCF at a time when capital is difficult to raise, and the group has over £200mln of net debt, the analysts noted.

"We have clearly gotten this call wrong ... as although the shares are down 94% yoy, we struggle to see upside in the near term as there remain downside risks to 2022E guidance, outlook for next year is clouded and the group is now back in debt," the Liberum analysts concluded.

Not an exact science but …

If 80% are repeat customers ?

200k total - got carried away

400,000 new downloads globally August alone ?

https://app.sensortower.com/android/publisher/thg-the-hut-group/THG%2B(The%2BHut%2BGroup)

Steve

80% sticky

There is definitely value at current levels on a risk / reward basis for a takeover but from an operational point of view the share price is going nowhere next few months/ until next update, we need a deal of sorts to budge this higher, the market has digested the conf call and is not giving Matt/ John the benefit of the doubt until it understands THG running costs

But that’s the point Golden, it’s not capex , these guys are not a tech company , they ain’t building Robotics they have bought in as a case in point, having web designers making web sites for clients is not R&D and so on …

A good indicator is the lack of R&D tax credit, the HRMC are pretty firm on what you can /can’t claim, THG are not an R&D Tech business, they have just been getting away with Capitalising everything they can but the Market has cottoned on to that fact, the auditors will be next…

They need to recognise what’s the cost for THG to do business? Until then the market can’t value the operational side at the share price will stay low

Nb just on the R&D tax credit it’s normally works out at 14% of the cost of the Dev , almost like getting your NI back from your employee us how I measure it

That’s the smoke and mirrors Golden, unless they keep opening new distribution centres then its not capex - they are trying to kid the market ( again )

Stock is not capex

There is no way without new warehouses they can lose Opex into Capex

It’s a cost to do business not a balance sheet item, same goes for extraordinary costs - they love that line of cost as well

The market won’t except this opaque reporting hence we sit at 40p

Poker, hard to argue against
Am Long at 50p ish ai under water.

Sitting tight for a deal, it will happen it’s just when - the more I think about it the more it’s a big beast buying THG lock stock and barrel, cutting costs , getting rid of the vanity projects and utilising the spare capacity alongside bolting the Beauty/ Nutrition to its own operations.

It may be a USA / Far East Company ?

Golden it’s not capex at that point unless they are opening more big sheds, it’s operational costs, they won’t be able to sink big single ££ into capex

The market won’t give them the ££ to fund more capex

Back to splitting off Nutrition and selling this division, is that possible? IF not it’s a sale of the lot and Ingenuity gets lost in the mix

We are definitely worth more than £500M plus debt, it would cost £2B to £3B plus to put THG together

Golden, good debate.

Think your spot on re capacity, without doubt THG have built in massive capacity - too much

Taking the view Ingenuity is smoke and mirrors as a going concern anyone buying the rump would have to be a major player who wanted to bolt their beauty / health, well being products on to their own and utilise the manufacturing capacity of Bentley / My Protein

There is value there for someone - alongside the £2.5B revenue this year - who can utilise the spare space.

On a positive note, we don’t need anymore Distribution centres , THG a just won’t be able to raise the cash to fund - not with a £500M m/cap - so no more capex of note after the £130M

We are then down to the cost of the empty space, gut feel someone somewhere will rent the space and THG will deliver their goods and then squeeze the assets for cash, Moulding is not the man for that job, he knows that, he needs a deal with someone or he gets booted out in 2023

That leads on to can THG sell Nutrition as a standalone business if it to is sharing real estate / infrastructure ?

One side of me says it’s too messy and the other side says where there is a will there is a way

Two sides to the discussion ‘ they can / can’t ‘

IF both sides have the Will then Nutrition goes and logistics get ironed out it’s that or a buyer for the rump, one or the other and ingenuity gets lost within the structure of the latter

Apologies ‘ sub lets ‘

Ingenuity - it’s worthless as a going concern in its own right
It uses THG distribution centres and THG automation - robots are leased from Ocado
THG basically sub let space to other companies via Ingenuity predominately same sector clients / makes sense as they know how to store same and THG deliver their goods and 3rd party goods same time
Ingenuity owns nothing but operational Skills which are basically what THG does
It doesn’t own the real estate, robotics, nada … it’s sub keys from its 100% shareholder and puts a badge / interface over the top

That’s it !

Alongside We Works SoftBank got suckered into valuing this at £5B plus but that £800M has been very handy for THG so a smart deal

HH
Am not too sure THG could disclose bid enquiries ?

Both sides would have NDA’s , the enquirer may well be a quoted business and would not want the market to know of each discussion

Unless it’s a joker like the Candyman who just wants the attention, be that around Chelsea / THG or whoever but don’t have the $$ to conclude a deal - only debt for the target post the deal

Agree on us being told of negotiations Golden

Think we now know 100% this is the ‘ Matt Moulding ‘ show after yesterdays nugget where he said ‘ expire ‘ the Golden Share

It’s all about him - and I think he has concerns for his staff - but mainly what’s in it for him, of course that’s fair enough.

He ain’t trading THG out of this one over the next 6 to 9 months to get the share price anywhere near where it needs to be satisfy the II’s, he knows he needs to do a deal, that’s the takeaway for me yesterday

It’s when not IF