Member Info for Senator1

That is fictional, £5m created from new brand valuation (stick your finger in the air and think of a number), half a million value to customer relationships (give me a break) and an ESTIMATED pension surplus which could be gone in a months time. Its not even final by their own admission. I know how negative goodwill is created, the detail is what is important. The business was only slightly cash generative at net operating cflo, as I said previosly, but after the acquistion it was not. The balance sheet move in cash is largely because they raised £15M last year in a share issue and £0.5m with the acquistion from the sellers, thats not from operations. Mgmt do that all the time when things are bad to take the gloss off, raise money from shareholders and then give a small part back to hope they dont see the underlyings. They have told you in their outlook, things are bad. The doubling down by spending over £13M cash for PBT losses in a very weak consumer environment was daft. They might indeed cut say a million off overheasds and get it slightly profitable over the next year to call it £1M, take off tax at 25% and thats £0.75M on £13.9 investment. That 5% return on investment is way below their cost of equity which must be circa 15-20% for such a small business so they have destroyed value in the short term and thats being generous. Balance shhet looks better because of share issue but the underlying is eating away at it and thats obvious and right now likey to get worse. This share price will go lower, much lower.

Look at the detail of how it was generated, brand and customer valuations and an estimated pension surplus which changes daily with markets. Cash isnt fictional all that accounting guess work pretty fictional to me. Go to adjusted PBT line where they take out the one offs and look again. The co. can play games with how they allocate costs to COGS and the overhead base but this all catches up at PBT line. If the GP was so great it should get reflected further down the P&L, when it doesnt, question it. The accountants have got WH Smith in a pile of trouble, my advise just watch the cash, hard to play games with that.

Their previous valuation required growth. If you cant generate it organically, most management teams will buy it. They bou8ght £6.1M of turnover for 5 months, of course increasing top line, but it produces losses. What do they do?, let people go and try and cut overheads which you can see in the accounts. Its all very well creating fictional profits from a dubious bargain gain (which isnt a cash profit by the way) to justify spending £13.9M to get losses in return to say nothing of the doubling down in a dreadful consumer environment. The BA sellers must be doing cart wheels, they were smart.

Bought for £13.9m and in the 5 months contributed a PBT loss of £465,000. They only recorded a bargain gain of £3.9M because they attributed £5.4M valuation to brands, £419,000 to customer relationships and a pension surplus of £1.75M and thats preliminary as the pension isnt valued until next March. It's only the half year but the underlying business is in significant decline at the PBT level, even at the top line, without BA, turnover would be down 6%. They can play around with accounting numbers all they want and adjust everything but they cant change the cashflow and the net operating cashflow was +£4.8M and after the acquisition and PPE was -£9.2M. If they hadnt raised £15.2M from the share sale last year they would have cash of only £2M, supporting £50M sales. That's the problem with companies of this size, they are always on a knife edge. Putting acquisitions on a declining business is a bad idea.

Adj PBT (taking out exceptionals and one offs like negative goodwill gain) is down 56%. At its current size and terrible interims a forward PE of 10x is way too high. There are much bigger retailers at 6-7x.

Obviously none of this MS decesions per se, they are acting on client instruction. Institutional client directing the TRS to avoid SD, slso a sign that it is a short term trade NOT an investment view. Just someone trying to make a few bucks trading, assuming its overdone.

MS crossed on 22nd which means trade placed 21st day of gap down to 8.6M shares in the hope of getting a material bounce and increased to 9.2M shares in days after. 21st and 22nd two highest volume days and since then they have been exiting. They have to be careful as the volume has fallen dramatically and they need to manage the down sizing with care as it is against their original position and dont want to compound losses but the strategy is clear. Catch the bounce (they got a little the next day) but that fissled out and since then they have been downsizing as the material bounce didnt materialise. the fact they are not fully out reflects the much lower volume on the days post 21 and 22. The volume on the 26th was c. 20% of that on the 21st and the next day 9% so they have to thread carefully but what they tried to do is very clear and the direction they are going.

They went up 22nd and 26th (client hoping market over-reacted is my guess) to max of 9.2M shares and then they obviously thought about it andas of 29th at 7.3M. Thats a net down over 7 days. Those are the RNS facts.

If the £110 pre-tax holds and the £70 non-undelying this comes out to £30M after tax or 24p a share, give it a 17x multiple and you are at £4.03. If the investigation throws up more stuff or it gets widened on how they are generally accounting for supplier discounts, sub £4 is possible. Thats my rationale.

Pulling income forward isnt an error! nor is inflating sales growth. You believe what you want. official intelligence because it comes from the company itself, give me a break!

Im with the smart money, the short guys. They have to pay every day to hold their position. I have already explained why, Im not going to repeat it

Since the news on US they are down, who cares about a month ago, before the news. Stupid comparison!

I suspect Morgan stanley reducing is because they are counterparty on a total return swap where their client is reducing their exposure. If PBT is forecast at £110 before the already known non-underlying charge of £70M, thats £40M pre tax or c.£30M after tax or 24p a share and thats before we do whether this issue gets bigger. Buying with this level of uncertainty is foolishly brave, its gambling. Not only could this go below £6, it could go below £4.

Why are these just a US feature. Leave aside the issue on whether WH Smith pulled income forward on these discounts which seems issue in the US for now. However, why are these discounts added to sales rather than deducted from costs. Whether you add the discount to sales or reduce costs it has the same impact on $ gross profit but it has very different impact on the ratios. Adding to sales increases sales growth but depresses gross profit margin and taking off costs leaves sales growth static but increases the gross profit margin. I am sure they get supplier discounts elsewhere, not hjust US. So lets say that the pulling forward is just a US issue, however where do they account for these discounts outside the US, sales or costs? This is why this issue isnt just a US issue. The shorts have increased over last few days, I suspect thats the way they think. Pulling forward income is unforgivable but so is manipulating sales growth even if it has a cost on the GP margin and EBITDA margin....etc. Would love to hear the argument on how they persuaded the auditors that quantity discounts or product promotion discounts should be considered Revenue. As a product promotion I can see the argument (sort of), as a quantity discount more tenuous. This is more complicated than it might seem.

In the year to April 25 Moonpig FCF to equity £30.7M, on market cap of £644M thats a yield of 4.8%. Excluding the acquisions in year to Jan 25 Card FCF to equity £46M on £369M market cap is a yield of 12.4%. Yes, Card is more leveraged at 1.32x Net Debt to ebita as compared to Moonpig's 1x but it is still mangeable at 1.3x. The smart trade is probably short Moonpig, long Card as this difference should coverge as there is a big gap and you are then hedged against the macro risk (roughly). Looking at the price charts, this is what market is saying. Moonpig is being held up by the share buyback of £25M last year and further £60m scheduled for this year as they don't need cash to reduce debt. For a relatively small company a FCF yield to equity of 4.8% just isn't high enough in a 4% risk free world. At 6% this suggests the right price £1.5-1.6 area. If this breaks £1.88 this gets interesting. I agree with Parvus, lets see.

What are you talking about? Rev +2% but PBT -6%. EpS down 5% as mitigated by buyback. PE is circa 19x which is the average 5 year NTM PE. Recent share price run isover, imo

Wrong, the non-underlying of £70m is reported pre-tax as are all non-underlying numbers. You have made up £86M. Your implied tax rate of 19% also tells you, your number is wrong. If you dont know, dont make stuff up.

In their 1H presentation they said £70m, can you detail where you get the extra £16m? Numbers only.

There will be no material news on this stock until November. They will likely kitchen sink the costs to sort out the finances. Can it credibly only be the US they get supplier commissions? The non-underlying was stated at -£70M at first half, this is definitely going much higher. This sp will at minimum go back to £6.4 and then I think below £6, my estimate £5.5 area. Accounting investigations never end well and I would be amazed if they just looked at the US.

Revised Underlying PBT : £110M

non-underlying costs: -£70M

statutory PBT: £40M. Tax at 25%, PAT best case £30M. No info on Deloitte costs and whether they booked loss on sale of high street.

Pro-forma EPS for full year £0.24 or PE of 29x at £6.86 share price. Thats why the shorts are there. This could go much lower by time Deloittes report back.