Member Info for Okehurst1

IF Jupiter are out we could see another TR1 today?
Possible ?

You could be correct Sham, Jupiter could be out
TR1 Monday

55p

Where the market priced this one before the RNS

Previous posts on this one off various posters on this BB

IF net value is £100M and m cap today £44M then arguably we could see 30p very soon

Then we have the value on the £200M revenue and the value of the going concern producing £18M EBITA
that has to be X 5 , say £90M of value ?

And we are then back to were we where 14 days ago

Nb directors can’t buy as yet , still in closed period

Can imagine some legal backlash on a 15p take private route considering they have stipulated they have enough cash ?

So take private at £40 m/cap against maybe £100M net assets and £200M revenue with Zeus their Nomad still forecasting £18M EBITA ? With 30% the BoD wouldn’t get it passed plus the legal ramifications on the directors would be huge, especially if USA investors have bought in

Suggest so ….. makes sense from a fiduciary point of view
especially after reiterating they are ok for cash, that’s a big statement for plc directors to make in an RNS, arguably they are on the hook if they are over trading from this point

Personal view, they will sort out the cash issue and maintain independence and that’s their main priority/ goal in the short term

Agree

The Directors may be having talks with would be suitors to cover themselves but if they are correct as per guidance within the RNS then that has to be their 2nd preference? Plus considering the BoD control 30% equity they would want to see this through to achieve their personal career goals? - reading interviews the appear very ambitious

Zeus being their Nomad are reiterating what the Company is saying, we can assume as the Nomad they are close to the situation

The Nomad is an important advisor to AIM directors as is the company lawyer, both would have advised the directors regarding the forward looking statements in the recent RNS’s, ditto the business has enough cash

IF we do have £100M of inventory plus the debtors ledger let’s say 60 days as average £30M, throw in the equity to purchase the manufacturing plant £10M tops

That’s £140M of assets vs £21M of Debt today

Chemicals are not like clothing or perishables, there shouldn’t be a serious write down that is material to the balance sheet?

But let’s say it’s a £20M write down and we have £100M of assets on a £33M m/cap today ?

Throw in £200M of annual sales, THG / ELF and others must be looking at this one and thinking can they nick it?

However looking at the back of the fag paper calculation above you can see why the BoD added this to the RNS yesterday ?

‘It should be noted the potential changes to the results for FY22 do not impact the net debt position previously notified of £21.2m as at 31 July 2022 and management reiterate they believe that the Group's £40m revolving credit facility provides sufficient liquidity for the future. Management also confirm that guidance for the year ending 28 February 2023, as set out in the announcement on 2 August 2022 remains unchanged’

Suggest we have two scenarios ;

The BoD satisfy the auditors with a mixture of increased invoice discounting, working through the £100M of inventory and possibly a floating charge on this asset class and the manufacturing plant, to raise £finance and we should have more than enough head room

If the BoD can’t satisfy the Auditors - although I think they will- it’s a sale of the companies shares and we get taken out
at a higher m/cap than today

Either way £50m to £33M m/cap is dirt cheap, appreciate risk but a decent punt

Paul thinks £100M inventory at last count
Plus the value invested in the manufacturing Division
Ditto Debtors ledger ?
Less £20M debt
Going Concern generating £200M Rev , 50% RoW

What do we think the m/cap value could be on a take over IF the BoD feel it’s the only way forward from a fiduciary point of view?

Back of the fag paper £120M min?

3 X tonite m/cap ?

Any views ?

For the BoD to say the audit situation is not effecting cash ditto they infer they don’t require more cash then it has to be they have a stock write down situation

It’s either the bulk chemical materiel cost has dropped since purchase or the auditors want protection with a mark down?

If the inventory is £100M and it could well be as Paul says - think I mentioned £60M to £80M was my estimate the other day -and Tom does a deal on his stage payments …. Plus they they have expanded the invoice discounting with the RBS and the £40m facility is in place then we have no worries it’s just a £number for the stock right down

We could have a situation where the inventory is higher than the current market cap ?

Appreciate lots of IF’s and Buts

Good post OSG

Was thinking why would the BoD issue the RNS today, they must have known the auditor issues re inventory / bad debt

This paragraph of todays RNS is baffling

‘It should be noted the potential changes to the results for FY22 do not impact the net debt position previously notified of £21.2m as at 31 July 2022 and management reiterate they believe that the Group's £40m revolving credit facility provides sufficient liquidity for the future. Management also confirm that guidance for the year ending 28 February 2023, as set out in the announcement on 2 August 2022 remains unchanged’

I can’t make out why they would issue that statement unless they genuinely believed it to be true or they are being being Walter Mitty esq

The company lawyers and NOMAD would have stressed there was no need for that paragraph.

As the days pass - feels like weeks since RNS last week - suggest the BoD IF they are lying will have to take the best Bid they can muster to cover their fiduciary position

I am long here and no idea which way this is going to go but at £35M £mcap it looks too cheap and the risk / reward is well balanced

They just have to …

£220M of sales
£27M factory less £16M cash over 4 years
£Inventory must be decent
£debtors ledger same
70% sales to global retailers
30% sales online

Value there for a business with cash

Bob

I don’t think we can look at that way , I posted this earlier
the factory is defo ring fenced as Tom still owned £16M

‘Assume the Factory is ring fenced as an asset - first charge via Tom and he accepts a payment plan

Then we are down to the going concern itself

Inventory / debtors ledger Vs invoice finance from RBS, last known figure is £11M , could that be £21M now ? And secured against the debtors ledger ? Am guessing but there is a fair chance that’s the debt

So they are left with inventory vs the £40M credit facility unless the RBS is their debt facility secured against the debtors and inventory ? No explanation at the moment

So IF the RBS is just the debtors ledger and the inventory is security on the £40M then they don’t need cash as they say
but that would mean the inventory is pretty high, like 3X plus current m/cap’

Deal to be done but can the BoD raise the ££ to satisfy the Auditors or do they take best Bid for the group ?

Pretty binary I think

The directors have fiduciary duties

They will be under pressure to juggle the balance sheet to satisfy the auditors OR take the best Bid

THG / ELF and others must be all over this

What a deal for Superdrug, they get their supplier and a factory

Loads out there at this level would take Rev B

Yeah must be manic at Plc head office

Assume the Factory is ring fenced as an asset - first charge via Tom and he accepts a payment plan

Then we are down to the going concern itself

Inventory / debtors ledger Vs invoice finance from RBS, last known figure is £11M , could that be £21M now ? And secured against the debtors ledger ? Am guessing but there is a fair chance that’s the debt

So they are left with inventory vs the £40M credit facility unless the RBS is their debt facility secured against the debtors and inventory ? No explanation at the moment

So IF the RBS is just the debtors ledger and the inventory is security on the £40M then they don’t need cash as they say
but that would mean the inventory is pretty high, like 3X plus current m/cap

I am long Rev B

They ‘ paid ‘ £27M for the manufacturing plant but it’s instalments, my ready reckoner says they still have £4M a year to pay for the next few years

The ‘ owner ‘ Tom is on the BoD and is a major shareholder, hopefully he will take a payment plan.

The way it’s looking I feel someone will take out Rev B, there is no chance of a raise, there will be a floating charge on the £40M facility ex the factory which will have a separate single charge via Tom

The BoD will have their fiduciary duties to consider, it’s just at what price can they get as a going concern IF a they can’t finance ?

Although the RNS does say;

‘It should be noted the potential changes to the results for FY22 do not impact the net debt position previously notified of £21.2m as at 31 July 2022 and management reiterate they believe that the Group's £40m revolving credit facility provides sufficient liquidity for the future. Management also confirm that guidance for the year ending 28 February 2023, as set out in the announcement on 2 August 2022 remains unchanged’

Ubik … agree