Member Info for sageoflondon

Steph - I am asking you as you will likely have a handle on this. What is the headroom - i.e. committed funds & available capital - previously a lot of the commitments would have been funded from realisations - either sales, partial sales, IPOs etc. Given there are unlikely to be any of these in the next 6-18 months, do we have enough headroom to fund current committed capital etc?

I agree that Freetrade are likely going to struggle. Basically they avoided a new valuation by using an alternative way to raise capital. Grow took part by purchasing convertibles I believe. They also did crowdfunders from their customers. I think they rode the wave of investing by individuals that came at the start of Covid and managed to grow strongly, but let's see how that continues. Even with the growth however the losses are huge. That type of business has a lot of incumbents with really deep pockets (and already highly profitable businesses). Very difficult to break into. We will know whether they will become the next mega unicorn or (as I believe) whether they struggle and get sold off or shut down for a lot less than £700m within the next 6-24 months, possibly sooner.

interesting article in the Telegraph at the weekend on Freetrade. Article says it is considering a sale as fintech valuations tumble. Freetrade's valuation per that article is absurd, a significant multiple of revenue, bordering on plain stupid. £12.7m of revenues, losses of £18.2m, valuation somewhere around £650m to £700m!! Likely not worth more than £50m to £100m and I think that's generous. It's losses are bigger than the revenues - to Sept 2021......

ps Steph - very pleased your average buy in is now looking a fair bit better than it was. Good news. I still don't agree that we'll be back to NAV anytime soon and think we'll have a rocky ride for the next couple of years, but last week or so things have gone positive, which is good. Glad I picked up a few again.

I have long thought inflation will eventually subside / stabilise. As a result I have picked up some additional fixed income plays along the way in the region of 6-8%, most around 7-7.5%. Given where I think interest rates will end up, I think those will turn out to be astute purchases, particularly in tax wrappers. Those will look good if rates end up stabilising and inflation comes back under control. If it goes higher still then sure I might lose some capital in the interim, but eventually they will come back and I can collect the coupons during that time.

That's because the US has gone faster and harder on rates - along with the fact that energy isn't as much of a driver as it is in the UK / Europe. Good news though.

Strong set of results. Margins will recover once inflation has stabilised and some of the food business price increases feed through. Alongside that Primark should be able to build on its value proposition and hopefully take some market share. I think the growth opportunity in the US looks promising. Along with the dividend and 5% buyback I think this represents great value at present. Very happy to hold and may well increase my weighting a little.

EUR 60m of outflows due to currency hedging contracts is unforgivable. That's more than 10% of the current market cap - last time I looked we weren't an FX trading operation, rather a PE Group that owned real businesses with tangible value. I also agree that nothing is said about whether further outflows could occur, presumably there is therefore the potential for this. Given the dollar has strengthened considerably against the Euro and £, these were likely designed to hedge disposals / dividends received in dollars that were potentially worth less due to dollar depreciation against Euros mainly - but management must have had an approximate idea of how much they needed to hedge - that is an awful lot of outflow due to currency contract exposure, given the size of the portfolio to me.

The problem will be refilling after winter - not now. Not about the spot price in reality. A lot more about what futures price is saying. Unless the Ukraine position is resolved, gas is a problem. Even if the conflict is resolved, the sanctions will be around for years, meaning energy - i.e. gas will be an issue.

Revolut will not be floating anytime soon. Liquidity in debt markets is also reducing the frequency of buyouts etc - that will reduce PE available dry powder. The way he phrases things in that article are almost like a veiled sales pitch - we don't need to raise further...........i.e. we don't just yet but we will do if the price is ok.....in the hope that someone offers cash at the same valuation as before. As I said, lets see the accounts, we don't need to guess at numbers. There is no rush. Let's also see where they are in 18-26 months in terms of scale.

Executives say a lot of things. I will wait for the numbers, if he meant net profit, that's really straightforward to clarify. Cazoo said they were going to conquer Europe 18 months ago, now they are retreating at rapid pace to become one of many UK used car dealers (without anywhere near the asset backing that a lot of the incumbents have in terms of freehold property) to support the share price. Personally (working in a heavily regulated sector, in a senior role) I don't see how a large financial services organisation can be net profitable / cashflow positive at that size (presumably nowhere near scale) given the regulatory costs - if they get a banking license that burden will take a significant step up. Most banks / insurance cos etc. unless niche can make losses for a number of years until they reach an appropriate scale. That's precisely why it has been very difficult for even Marcus (GS) to shake up retail banking. I know Revolut are different etc, but they will still have an ever increasing regulatory burden - that will be the price of a banking license and they will be coming for more capital.

Let's see how that looks - the profitability. As you say, there is no indication whatsoever that he is referring to net profit and they haven't filed the accounts yet - 'profit' lacks definition and can have multiple different meanings. Sure they can raise cash if they want to - I bet it isn't at $33bn though. Nearer $5-$10bn if they are lucky. Let's see the numbers.....

Great that they are giving away free meals - no way my kids would eat them however - not when they realised there was no proper bolognese or chicken etc. They still pick any vegetable out that they can identify - unless it's completely blended in or happens to be one they like and on it's own!! Good marketing though.

A resilient performance in challenging times. Impressive. Important to recognise that a number of the directors cannot purchase more shares - they already own a significant stake in the business. Lots of skin in the game. As an investor it looks like UPGS look after their employees - retention is key at present, so this bodes well. Petra has made a promising start in the German market with fantastic potential. I continue to hold, having purchased a few more a couple of weeks back.

I very much doubt it - anyone can put money anywhere. I don't think Cazoo will be here in a couple of years and it would be madness to put more money in. It's already failed to deliver on its European ambitions - we aren't in the putting more money into listed investments space as far as I am aware - we should have run away faster than we did.

Cazoo 33 cents a share!!

If rates don't increase as the market expects there will be equally as much pain! Pound suffers again which brings more inflation with it. Self defeating given the amount we import - that and the fact gilts will take another beating as US and other markets become comparably more attractive again. Sounds like BOE bottling it yet again. This isn't something that BOE can control - International rate rises will eventually guide their hand.

As I said already on board early - that doesn't help us with our mid / late stage stuff. Those sorts of deals don't scratch the surface as weightings don't really move the dial as such. Big tech buying on the cheap for an add on service / business line etc.

Big tech are only going to look at deals like that when they see a clear path to profitability - and it isn't dilutive - they have shareholders to please. Big tech are profit making machines and are (in most instances) careful to avoid loss making deals, unless it's very short term. That's why we haven't had many of those deals. Big tech would have been better off waiting to buy the recent IPOs post their IPO that's for sure. Big tech also have their own incubation and investments, they are VCs themselves. If they are on the ball they will already be onboard with the really good ideas - not all of course and these deals will happen from time to time.

Grow won't be immune - I think that is wishful thinking. Most of the portfolio doesn't have revenues that exceed total costs at present. So if both increase by a similar percentage then the cost inflation will have a negative impact (as more totals costs than revenue - these are loss making companies on the whole at the net level, that have not reached scale (or potentially don't have the ability to be profitable which will be the case in some instances - more now than before as a higher hurdle to profitability for some) - until that balance changes the increase in costs are likely to exceed the former. There is the potential that what was a good idea at 0.25% interest rates, with inflation at 2% isn't such a good idea with rates at circa 4-5% and inflation running at 10%.