Member Info for Okehurst1

Good points Hex

In isolation unencumbered property / Rev B they have £160M

M/cap around £370M

The collection of web sites generating £1.5B maybe £50M to £70M profit being valued at around £200M including stock

Hi Hex

FCF ‘ £12M minus

Gross margin for last year was overall 50% to 53% now

Capex down to £75M from £85M

£70M now top end guidance vs £78M as you say

We now see if MA/ EBT / Kamanis add

Let’s see what they say on conf call and will they give the market some specific news on the brands?

As a bit of fun

T4 g had 4.5% and £FCF think plus £3M

I was 5% + and FCF Neutral to minus £10M

Hex, was if I remember 3.9% to FCF Minus £50M

Mixed bag of guesses :-)

## FCF outflow £12m apologies

Adjusted EBITDA of £31.3 million. Adjusted EBITDA margin of 4.3%, up 30bps year on year reflecting improvements in gross margin, distribution cost efficiencies from automation and overhead cost reduction

· £36.3 million of capital expenditure as we build the infrastructure for future growth, including capacity expansion as part of the Sheffield automation project and US distribution centre ahead of its launch

· Free cash outflow of £12.9 million, reflecting capital expenditure in strategic projects. Balance sheet strength maintained with £290 million of liquidity headroom on the Group's £325 million Revolving Credit Facility

Hi T4G

Will they guide on Debenhams revenue for this year ?

Gut feel I think they might - let’s see tomorrow

For me short term about the EBITDA margin and FCF on the numbers tomorrow and will they highlight Debenhams growing revenue?

I think Debenhams as a brand is becoming a valuable asset within the group ( of brands ) it doesn’t require the USA / U.K. fulfilment centres nor capex as such and is a well thought of brand in MENA, 23 stores and growing across multiple countries

Not saying this will happen tomorrow but a corporate event to spin off Debenhams with a UAE listing could well have merit down the road as an Idea? - pure speculation btw but makes sense if this brand is performing and we know it’s profitable, maybe the Alshaya Group could buy in ?

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Hi Hex

Fair post / comments, agree with your gist.

I could be out with the 5% + FCF minus £10M to Neutral, would settle for 4.75% if we can FCF neutral and from a market point of view that would be a decent result.

Anything around last years 3.5% and £50M negative and the share price takes a knock unless EBT /MA / Kamani’s step in, hence I can’t see us holding the 22p(£275M m/cap ) being muted.

Let’s see tomorrow

Fair comment Bon

IF and it’s a big if as don’t know as yet

If Boo are close to 5% and FCF neutral and that’s after spending maybe £5M on Rev B shares/ legals and £40M capex plus £12M opening the USA fulfilment Centre, then the Shorts have to think how much more to go for them for the risk /reward ? They have called it spot on to 31/32p is there more in the tank ? Am not sure there is?

Boo EBT & MA/ Kamani’s may add, the former will, it’s been their MO recently but we don’t know about the others?

Thanks Brass

Posted -the last 2 weeks- a few of the Q&A with Stevenson and the BoD, he does his homework

Jeffries are singing off the same hymn sheet

4.75% looking like the possible margin, am still holding out for a 5 but appreciate non of the brokers think same

Cutting inventory is key to getting that FCF as close to neutral as possible

It looks highly likely we will see the 10% to 15% reduction in pure apparel sales but we may see a marked increase in Debenhams revenue which is a market place / no stock of note

I can’t see PP Pedro posts - the same person - as the poster offers nothing and it’s pointless reading their unintelligent garbage so I can’t respond to the message

CBA debating with PP who is not invested and looks to many of us they are mentally unwell

Re the 22p being muted, who knows, it would have to be pretty bad to get us down to £275M

We have £135M property no charge and maybe £24M Rev B stake

22p would be valuing the rest of the business at £116M ?

Including stock and the brands below

PLT does £750M making £75M profit

Karen Millen

Debenhams - we know it’s making a profit

Put aside the Boo EBT will be buying shares as they do and then it’s a toss up with MA buy more at this level or Kamanis

Suggest it why we have not seen a big increase by Shorts

Stand corrected if anyone can show how we get to £275M?

One more trading day to go and find out how the turnaround plan is going

For balance

Peel Hunt have us in for 4.75% and £775M call it £35M?

Capex on a straight line £42M but could higher as H1? Annual is £85M

Exceptional’s £12M for USA ?

Finance / legals £8M minimum

£62M less the £35M profit we would have a negative FCF of £27M

Again on a straight line bases to last years accounts the reduction in inventory could be £12M plus whatever else they squeeze out but vs this we have had to stock USA however small ?

Then we have a potential cut to marketing which would feed to EBITDA, that’s the big guess, did they cut or not ?

Even £10M from the budget helps gets them to 5% plus and they are 50% in the bag of the top end EBITDA guidance of £78M for this year

There is a fair chance they are pretty close to FCF Neutral IF they have managed inventory to bring the overall working cap days down again

Let’s see on Tuesday

We know Boo had just 200 staff July /August in USA

Then early August started recruitment for 400 staff - start September? DHL told us

Full automation will be phase 2 2024 - they told analysts in May

We know they told the analysts back in May next 4 months in affect USA will be supplied via Sheffield and steady build up in USA and stepping up September

I could be wrong but I wonder if supplier consignments are billed 1st September? Could be ?

Explains marketing presence so low H1 but increased H2?

I think it’s pointing to a surprise on inventory, they even told analysts in May that April was better with more to come ?

Lots of If’s and Buts but pointing to Inventory being tightly controlled H1

Tuesday going to be interesting

Thanks for sharing West - wasn’t expecting to comment this weekend as not much to talk about, interesting post

So Peel at 4.75% EBITDA if we have the full 15% Rev reduction

Let’s hope Boo pull a rabbit out the hat and get us a 5 in front of it, all about capturing deflation not headline revenue at this stage

Minus £15M FCF to Neutral IF they can squeeze working cap

Reckon it’s worth a recap on the CFO’s comments below

In affect Covid for all the reasons explained by the BoD slashed 6.4% off the EBITDA and Boo are focused on capturing deflation, think we will all be disappointed if they don’t improve after the statement below

Just on our forecast - for a bit of fun

Hex suggests 3.5% to 4% , FCF negative £50M +

T4G. 4.1% positive £3M

Oke 1.9% increase to 5.5% FCF Neutral to negative £10M

One more trading day until we find out

Have a good weekend all, logging off

‘Question

Adam Cochrane (Analysts)

And so to get to that number, you're saying it could be some gross margin increase, but it could not be. It could be some OpEx increase as a percentage of sales. Is it sales really the driver here of that margin recovery?

Answer

Shaun McCabe (Executives)

No. The key driver -- so sales volume obviously helps. I'll take it. But the key driver is the capturing of the deflation because that was a -- if you look at the -- if you think about the bridge that took us from FY '21, shaving the 10% EBITDA margin to 3.6% EBITDA margin for FY '23. If you look at that bridge, the biggest component of that bridge was a gross margin headwind as we saw those cost prices go up. What we could have done is we could have taken those cost price increases that we got and we could have pushed them all through to retail prices, and we didn't want to do that, right? We wanted to stay as competitive as we could on retail prices. And so we took that haircut on margin as a result’

Smeg must be happy with Debenhams?

https://www.instagram.com/reel/CxxManzI6r1/?igshid=MTc4MmM1YmI2Ng==

In effect the 6.4% difference in margin from 21 to 23 is due to Boo taking on board the inflation and not passing it on ?

But now the head winds become tail winds how much of that 6.4% do they capture if anything ?

We find out Tuesday

Question

Adam Cochrane (Analysts)

And so to get to that number, you're saying it could be some gross margin increase, but it could not be. It could be some OpEx increase as a percentage of sales. Is it sales really the driver here of that margin recovery?

Answer

Shaun McCabe (Executives)

No. The key driver -- so sales volume obviously helps. I'll take it. But the key driver is the capturing of the deflation because that was a -- if you look at the -- if you think about the bridge that took us from FY '21, shaving the 10% EBITDA margin to 3.6% EBITDA margin for FY '23. If you look at that bridge, the biggest component of that bridge was a gross margin headwind as we saw those cost prices go up. What we could have done is we could have taken those cost price increases that we got and we could have pushed them all through to retail prices, and we didn't want to do that, right? We wanted to stay as competitive as we could on retail prices. And so we took that haircut on margin as a result.

And also, there was investment in making sure we came out with clean inventory, and so we were marking down product to come out clean. I think it's important that we're in a position that once demand starts to turn, and it will, that we are able to pivot straight back to growth. And so it's that agility, I think, is important.

And so it's a particular focus for us to make sure that our inventory position is clean, that we're able to bring product in. Our lead times are shorter. We're able to bring product in faster. We're able to repeat the winners, all of those things that make our model a great model that we're able to operate those effectively as we segue into this financial year into the second half, in particular.