Member Info for Senator1

Croda, has 2 issues which make it a difficult purchase.

1.) At current market cap it will be a contender for exit from the index along with Berkeley, Persimmon, Easyjet & Hikma. Taylor Wimpey & Unite went in Sept with Burberry and Metlen in. Views?

2.) its expensive compared to Ashland. Using their valuation suggests a fairer price of £21, 16% further downside. Ashland trades far more than Croda so its a more realistic valuation barometer. Over last 12 months it trades on average 1.6x more daily value.

For these two reasons, despite Croda being one of the worst performers in the FTSE 100 over the last 3 years, it's hard to think it has a good risk-reward ratio. Then there is also fact that both share prices look terrible from a technical point of view. Overall too much downside. Would like to hear the bull case?

The problem is a 25% cash return as you say does not translate to a 25% return on capital employed because of IFRS 16. They lease most of the stores so their cash investment is fit out and remodelling and the equipment investment. The capital employed includes the lease obligation capitalisation. When calculated accurately few retailers have a 25% return on capital employed, hence they stress cash investment. You sign a lease for 10-15 years with a PV of £0.75M, you spend £250K fitting it out before opening and all other cash investments. You make £62.5k net p.a. (your 25% on the cash investment day one), thats a 6.25% return on capital employed because of IFRS 16 & the capitalisation of RoU and associated lease liab.

He's the ex FD, already gone from WH Smith executive in formal way but no doubt still can be of value, if asked.

You might be right in the long term but in the short term (next year and a bit) they won't. They pay interest on the spend or earn less interest on surplus cash, they have upfront costs, they have delays, frustrations, things not going to plan and unfortunately they have no margin for mistakes as this is a low operating margin business, really low 5-6% from memory. I wouldnt pay 12x net for this type of business. That's an earnings yield of 8% and I have to put 4% back in to business to keep growing and I lots of employees with all their issues. Life's too short for this hamster wheel. I fully understand the perspective of the shorts for the next year or so. Maybe when the capex is all done and they show me they are getting a return on this spend, until then, its a much better short.

We are back to Autumn 2012 level for the share price and below Covid levels, that tells you how seriously the market takes questions over accounting. In a situation like this nobody knows what the right price for the share is. How can they? When in doubt sell. You can always buy back later.

Not taking his seat on Board of Greggs until Deloitte review completes. If the accounting applied was middle of the fairway, why not back yourself? This accounting stuff never ends well. If you were very cynical you could view it as an opportunity for Deloittes to question PWC's oversight. That has to be fun for Deloittes. Im sure they are far too professional to be so cynical but there is a nice free option here if they did push the envelope a bit. The one thing I am sure on is, the longer it goes on the worse the outcome.

The shorts are a very valuable part of the market and it wouldnt work without them. You dont hear them complain when people buy shares, saying they are inflating values and supporting dumb management decesions that will ultimately get caught out. They have as much a right as the longs to express a view that a share is overvalued. Generally the people who work on the short side are smarter and do much more research as they have theoretically unlimited losses. In Greggs case it is simple, they are spending way too much money expanding, which you can see in the cashflow statement. They are betting that Greggs wont get an adequate return on this large investment in the short term. Its that simple and they are right.

No they won't. £14 and if it breaches that, then £12 ish. They are spending money at an incredible clip in a very bad consumer environment. The short guys pay every day in cash to hold their position, bet against them at your peril and their moves after interims was to increase the bet. They can see the cash flying out the door on big capex programme.

Im not distorting anything, giving hard numbers most of time and saying that dealing with the national retailers is no walk in the park. They have market analysts and can read accounts accurately and know what their supplier margins are and because they can push real volume they expect and get great deals. To make it work with these retailers you have to be able to push real volume and then it pays off. At the beginning, it costs you money because they squeexe you on margin. They call it your investment in the partnership. Warpaint need them now and Superdrug, Tesco will see the -19% and the lack of their internet sales and know they have all the cards. Its just business. Harsh but the way it is. If they get sales growth, I guarantee it will be at a much lower gross. The one advantage they have is that BA brings them more stuff to put through the big guys as they just wont deal direct with a narrow product range as its too much hassle.

I quoted operating margin, there is a difference between gross and operating!

OMG, you are quoting growth including BA. LfL UK -19%, yes down 19%, thats a disaster!!! The biggest market LfL down 19%!!! Doesnt give lfl Europe but Europe was down 4%. US flat. Yes RoW up 144% but to £3.6M, hurrah, £3.6M sales in all of the rest of the world. Fabulous job, take a bow. Similar online, up 48% to the magical, wait for it, £3.4M. You know 100% of nothing is still nothing. You are getting drunk on denominator fallacy. If you are putting money in this share you should be much much much more diligent, you are way out of your depth.

In 2024 Warpaint had 13% growth( no acquisitions). In 2025, -6% excl BA acquisition and the genuis you referenced has said (I didnt listen nor have i any interest in doing so) "the fundamentals have not changed". In very simple terms that means underlying W7L 2025 sales were £6m higher than FY 23. Again £6M!!! and this was being valued like some dynamic growth company. It's obvious growth has stalled in the underlying business and now they are going to try and deal with the "big dog" retailers and hold GMs of 45% plus in an environment where retailers are squeezing all suppliers hard and the national chains are being brutal. There is no way in hell Tesco are going to see those margins and say you make it for 55, of course you can sell it to me for 100, while they make operating margins at 3.5 to 5%. There is a price to barking with the big dogs and its not 100!

£1.20/1.3 here we come

What a load of c..p. Americans think UK & Europe are slow growing bureaucracies that are so usless they cant defend themselves. Business people in the US think only America have it and everyone else needs them. They respect if it makes them money, thats it. They couldnt give 2 brass monkeys about resilience and your problems. Sell it to me cheap, let me make lots of money and be available to me 24/7 and when I ask you to jump, just ask how high. That simple. BTW, Warpoint's products arent premium, they are cheap mass market with bright colours. Learn something about the co. Who sells premium anything in Tesco and Superdrug?

Of course and UK can make anything in the UK cheaper than China!! Good luck with that.

Add to this Trump and his China tariffs, this could kill the US business when this all settles as they have outsourced manufacturing to China. Then, how much are they going to lose on the UK co. that went in to administration? Warpaint doesnt even communicate with retail investors. There are loads of platforms that make this easy but they dont bother, they couldnt care less. Inside ownership is great but too much is bad as it means everyone else gets ignored, viewed as a pain in the a...e. Watch what Rathbones & Schroeders do, they start selling and it will definitely hit my targets.

The sales growth ex Brand A was -6% so the underlying business had run out of steam as was no longer growing. To try and get growth back they bought BA. In the accounts for FY 24 BA had a £1.5M loss loss at EBIT level (fact, look on Cos House) and -£1.4M after tax and worse still had a negative £0.8M cashflow from operations. So, bottom line W7L running out of steam and they buy a loss maker with negative operating cashflow to inflate revenue and try and get growth back. So they now have 2 issues, revive underlying Warpaint and stem the losses at BA and the negative operating cashflow. The way I learnt it is you only take on some ones elses problems is from a position of strength. No one knows how the second half will go but the issues are clear as the numbers dont lie when you look at them objectively. Getting in to Superdrug, Tesco and all has its issues. These guys dont let you away with 50% margins and they take their pound of flesh. Until you prove their customers need you they charge you for the opportunity to prove it. When you do the very basic analysis, this share has issues. JP saw this and acted accordingly. I havent seen the Berenberg research but Shores is just a megaphone for management and is poor. They could have looked at BAs accounts but didnt. The issues with this acq are clear. Im not saying they cant be solved but the task for W7L management is serious. Falling demand, poor consumer finances, acquisition losing cash and making operating losses bought for a big price and they have got in to some of the hardest retailers in the world to supply which will mean a reduction in margins, definitely not an increase. The sp isnt cheap for such a small co. to add to their woes. Im with JPM.

If I take mgt guidance on EBITDA LNR and run it through to eps I am getting 3.6p for the FY thats a 41.69x PE or an earnings yield of 2.4%. This is a gym co. not NVDA, ridiculously over valued IMO. Even looking out to 2026 eps of circa 5.4p its 35x. Can someone, in numbers, make the bull case.

The fictional bargain purchase (just accountants one day view on value of assets acquired) is 61% of statutory PBT, strip this out and IH eps was 2.3p. Lets say they do double this in second half, thats 4.6p plus 2.3 = 6.9p. Give it a generous 15x and thats 103p. Give it 20x and thats 138p. My price target 120 ish and Im being generous. They will probably write off the US in second half as that is dead for time being. UK budget will push UK to recession and the only thing working in Europe is banks and defense cos. Lets see what ECB says. Anyone buying now is trying to catch a falling knife, that never ends well. Mgmt will come to regret the acq. Well done to sellers for only taking £500K of stock, they would have to take something and they did a great job low balling it.

MS down again, gently does it