Member Info for Senator1

There is loads of stock available in last few days so one of the big boys is selling. As currently structured this is a tight rope to whether another fund raise is needed. They are trying to change the landscape on a very small budget and they are dealing with an industry that adopts new things at a glacial pace.

Poor management practise was stamped out by the institutions (my bet M&G) having a strong word about issuing options at 13-14p after a fund raise at 24p. That was monumentally stupid and occured earlier this year. Having said all that I do like the new Chairman, he comes across as a staight shooter, no nonsense type, but he did sign off on this options package, so thats one strike against.

It's already not cheap at 8.5x pro-forma 25 turnover and if I give them the benefit of the doubt re 2026 and say growth is 60%, thats a 5.3x turnover multiple for 2026. For a company still loss making, competing with some giants, thats more than enough. The US market is at historic highs, if this market falls back than companies like CREO with high valuations and "faith value" will not be immune.

It wont. Its trading at 8.5x pro-forma sales and in line with current net assets which proforma will be down by year end by the continued losses. There is no real visibility on profitability. I know management say Adj ebitda positive by 2028 but thats over 2 years away. Earlier this year they tried to award options to management at 12/13p strikes (if I remember right) and thankfully the institutions stepped and made them change to the 24p of the recent fund raise. This was poor by management and wasnt even referenced by way of explanation/apology. The institutions that buy hope value are in, who will move the needle and why would you do it now, with such uncertainty. The fact they are focusing on existing users and trying to increase utilisation is also a worry as they only have 230 users across the globe. This needs to be in the thousands.

Wait for the pharma tariffs and then let the CB say what impact there will be!

Back to 175 would be my guess. JPM increasing their short on 18th was good call. They had a good call on W7L as well. Let's see what happens but the uncertainty of a new CEO will weigh on the price as they will do a strategic review. As changing guidance 3x isnt acceptable and so first thing I would want sorted is the data I am getting. I would want real time data on sales across the business. How much will that cost?

My CoE requirement is fair for the size of company. The big boys are at 9-11% and I have put a premium on it for customer concentration risk and fact their biggest customer has very tight margins and is expanding rapidly. Concensus this year is about £17.2M so Im just a bit back from there (nowhere near the £22-24M someone else referenced, they are miles off, dreaming).

I do my own analysis. I have a masters degree in finance and worked at much larger organisations in finance than Shore and the like, so their opinion means little to me.

Currently, it 100% has negative EVA at a realistic CoE. The only way you can justify it is going out further with your projections. For me that is way too hard right now until I see how they do with these new chains so I use what I know, until they prove themselves with Tesco, Superdrug etc and the margins they achieve.

This is a £100M turnover business, with £25M from a discounter on very tight margins, rapidly expanding, attempting to play with the big dogs in UK and Europe, dead in the US and having recently acquired a loss maker. I 100% think a CoE expectation of c.15% is fair. 9-10% is totally miles away. BTW, private equity unleveraged hurdles for this size are way north of 15%, 15% on the multi-billion dollar deals with not a couple of hundred million. One slip at this size can be game over and they know it. If they work with Tesco and Superdrug etc the working capital investment required will be significant because if they call for product you better be able to deliver. The £17M cash at the half year, supporting a £100M business when your customers are demanding is nothing particularly comforting and bear in mind that reduces by £3.2M with the interim DVD, so its really at £14M.

Look at it this way, when you have a concentrated customer base your CoE has to be higher, lets say thats 15% for W7L (I think that is generous, its a small co. with lots of concentration). If I take the 1H PAT at 5.4M and say the 2H is 2.0 x higher (very generous) thats £16.2M. On the current market cap thats a return of 11.3%, so that means the business is destroying equity value to the tune of 3.5-4% p.a. on current numbers (15%-11.3%). I think market cap needs to be around £120M, another 30% or so down, to £1.50-£1.60. Thats my rationale and I think I have been generous with my numbers.

The profit reported is 100% attributable to the gain on sale, the underlying net result was negative £9.3M and that includes a £0.8M tax credit, so £-10.1M without it. The lethargic sales growth in UK (11%) and Europe (0%) is an issue. The bigger issue is do they have enough cash to get to being self sustaining. They had £20.5M cash at 1H 25, I think they will be down to £12.5M by year end assuming a DVD of £1.2M from the associate. This is way too tight and hard to believe management assurances as their track record isnt supportive of this leap of faith. They need to provide more information on this aspect. They wont of course!

The only issue I would like to understand is Sales in UK grew only 11%, Europe zero and the US 125%. Why is UK and Europe so lethargic? and what are they doing to manage the fall in the Dollar? They are very exposed to the US market. I would like to see more growth from the home market.

Yes, I believe that client is Normal which I accounts for c.25% of W7L sales. Normal is growing very fast and has very low margins but I don't know enough about this entity but if I had a position in W7L I would watch this very closely. I would also want to know what % of sales are accounted by their top 5 customers and ideally who they are.

Over 5 years share price down 93% and the core to 1H 25 generating £2.2M in revenue. The progress has been glacial but we must acknowledge they did well on the European businesses they acquired and scaled and now retain a minority stake. Question I have is why was it necessary to retain 49%, would 20% have been better to ensure they have the cashflow to get to a cashflow positive situation. Historically their forecasts have been terrible, lets hope they have got this right?

I traded financial stocks during the GFC and if I listened to the analysts then I would have gone broke. Most of them have never run anything and see a business through an excel spreadsheet. Running a £100M turnover business is tough and you are over exposed to a few clients and until you get to much bigger scale, a couple of knocks can do immense damage. For W7L, if you take BA out of Rev, revenue was down 6%. They blame it on one client going bust and another found he was overstocked and so pulled back. 6% drop in sales might not sound much but the operating leverage for a small business is very significant andyou can see the effect in the fall in the PBT to 6.4% from 10.9% in same period last year. That might all be fine if it werent for the BA acquisition. This was a loss making business and so while they were having underlying problems, the management chose to double up by making a loss making acquisition to show Rev growth of +8%. To make this work they have to cut the overhead base of BA. That is hard and stressful as it means letting people go in a tough UK environment, while trying to keep the remainers motivated. Add to all of this and Tesco and Superdrug are going to save them, maybe! You then suggest W7L products are impulse buys rather than loyal repeat customers. Thats makes me more nervous which if you are right makes building online very tough. Bottom line, I just dont like any relatively small company that doesnt have a strong moat and a very strong, robust underlying business before they go off chasing acquisitions. £17M of cash can very quickly get eaten up in working capital when you are supplying the big dogs across multiple stores when they demand 90 days credit. Im not persuaded. The drop in underlying sales, the acquisition and trying to bark with the big dogs are individually big issues, together im very fearful of their combined effect. Finally and most importantly (as Im not a huge fan of funnymental analysis) the chart says univestable and its clearly too small to short. I will look again if it goes to £1.50 ish.

Half the volume in closing auction at 5M plus @2.2180. This is the important information as this is the price that balanced the buyers and sellers in the auction on half the days volume.

Bravo 2.182 you held them off. Enjoy the weekend, I suspect your services will be needed again next week. The stock borrow is still relatively cheap for this stock so there is no reason for the shorts to be nervous and so they will continue / wont cover yet. Doubt the big guys will add until they see it break £2. 218 is the David of Ocado! Bravo again!

Back to IPO closing price, 385 on June 11th 24. Next 280, the IPO price?

It takes 2 sides to make a market

Tranquilo..... just watch and admire 218p putting up the fight to the Goliath's surrounding it. If if gets over run on the way to 203, I hope you will stop and pay your respects to the brave little soldier that was 218. For your sake and the sake of 218, I hope there is real conviction behind 203 and they dont just run away.

Recent intraday low on Sept 17th. This gets breached and we enter a brave new world, going back 10 years! Over last 10 years intraday low on June 14th 2016 was 203p and closing low 208.1 on June 27, 2016. Will these prices hold? My guess is no. If they break the shorts will increase as there is no price history resistance.

"Turnover is vanity, profitability is sanity". All those roll-outs you reference will come at a much lower gross margin in the early stages and that will feed through to the bottom line. Then, lets assume as a worst case, the products dont get traction. The big guys are ruthless and they have Profit expectations from every square inch of the front line. Then what? Their online is undeveloped and tiny. If you search on Google, Warpaint, the band comes first! They have lots to prove.

We have already been given the information to work out 1H 25 results. What is more important is how sales are going in the second half. Why do you think this is good?