Member Info for TheTrotsky

Senator, One final point. My original post was not about disparaging investing in BME. My original post was saying that the current share price may have even further to fall because of several, as yet, unresolved factors that should become clearer in the next few months, if not earlier.

In my experience, any dividend cut, never plays out well in the Market in the short-term; even if it's expected and has been flagged in advance MMs always see it as an opportunity to drop the price to try and pick up some share "on the cheap". In FY25, according to BME's own POST-TAX CAS FLOW KMI it barely generated sufficient cash to pay the £300m dividend and, based on the expected fall in FY26 EBITDA, it would seem highly likely that BME will not be able to afford to pay another £300m in FY26 unless it increases its borrowings and, at this juncture, increasing its borrowings to pay the dividend is probably just as unlikely to court favour with the Market, at least in the short-term.

Whether BME makes a good long-term investment at these levels remains to be seen. We need to see the outcome of the external review and how it proposes to address its current operational issues. Increased discounting, capex, staffing etc. will all have a negative impact on cash flow, at least in the short/medium term. Reducing dividend payments is one way that BME can balance the books whilst it tries to turn the ship around and may be a reuirement of lenders if it needs to tap additional loans.

Senator, Are you really such an imbecile. Group post-tax free cash flow is not profit it's cash flow. I'll give you a hint - CASH FLOW, CASH FLOW, CASH FLOW!!!! Read the bloody accounts. Group post-tax free CASH FLOW is one of BME's headline measures (or KMIs if you prefer). Your c£542m of free cash flow in FY25 is c£250m too high because it does not take account of rental payments or debt financing. Since the introduction of IFRS 16 leases (including property) are no longer accounted through EBITDA. Leases are, in effect, capitalised and accounted through depreciation as right-of-use assets and, like PPE, they too have a cash cost that needs to be taken into account when you are computing cash flow.

The proof that you are totally clueless about all of this is that you claim, wrongly, that group adjusted EBITDA (pre IFRS 16) includes rent!!! PRE not POST IFRS 16, it's there in black and white and you still ignore it! Go and read up on right-of-use assets and come back and tell me that I'm wrong. I dare you!

You also seem to totally ignore the fact that in FY25 the net cash inflow, per the cash flow statement, was only £35m. If your figure of c£542m was correct the net cash inflow would be c£240m. You're a mile off.

The only figure I got wrong in my original post was the £198m because, by mistake, I overlooked the reference to H1. I have already apologised for that error but I stand by the rest of my figures. PLEASE read what I wrote not what you think that I wrote simply because it doesn't fit your narrative. I have referenced cash flow not profit as you keep trying to assert (incorrectly). Obviously we don't have all of the cash flow figures for FY26 and I've therefore had to fall back on EBITDA to make a guesstimate of the cash flow impact and where I have done I have frequently stated "all other factors being equal".

Clearly just looking at EBITDA changes alone will not enable you to calculate actual cash flow movements. We are both agreed that EBITDA alone does not take account of PPE, tax, rent and debt financing costs or changes in inventory, debtors, creditors etc. That is why I've said all along, "all other factors being equal". I've even adjusted the EBITDA figures for (an estimated) 25% corporation tax albeit that the timing of corporation payments do not always align with the accounting period in which the profits arose.

Bottom line it's an estimate. The fall in EBITDA will reduce cash inflows (can't avoid that) but the effect can be mitigated to some extent by moderating PPE expenditure (to the extent not already committed), improving working capital management (inventory, debtors, creditors) and, possibly, reducing some rental and debt financing costs. However, that's not quantifiable without further information.

Sj74, My reference to store refurbishment was with reference to what other posters were saying last week about the cramped layouts and the lack of staff at checkouts etc. I can't comment from personal experience. Also, and I don't know whether its relevant, stores can be new and still be the wrong size.

It's the line between Adjusted diluted EPS and Ordinary dividends.

Your figure totally ignores rental payments and loan financing costs.

The net cash increase, per your beloved the cash flow statement, after dividend payments, was £35m which is a lot closer to my figure of £311m than your figure of £542m.

Senator, Read BLOODY note 3 to the Prelim accounts! Your figure is your creation. My figure is lifted directly from the first page of the Prelims!

Senator, the dividends are paid out of the post-tax cash flow. Cash flow is not accounting profit. What planet are you on? You talk about cutting back PPE when other posters are saying that the store estate is crying out for refurbishment. Are you now suggesting that the company should prioritise paying the ordinary dividend over operational necessities? If BME is going to turn around the ship it's going to have to smarten up its appearance whilst mainatining/reducing its existing prices in the face of increasing operational costs. Margins are more likely to be squeezed even further in the short/medium term.

If the expected reduction in group EBITDA* from FY25 to FY26 is a straight read across to group cash flow (it won't be but it won't be a millions miles away) then if FY26 EBITDA/cash flow falls by c£100m-c£150m then post-tax cash flows might be expected to fall by c£75m-c£113m, which, in turn, would suggest that FY26 group post-tax free cash flow would be in the region of c£198-c£236m, all other factors being equal. However, it should be born in mind that due to the timing of when tax payments, in particular, actually fall due the actual cash flow may be higher or lower than might otherwise be expected.

If EBITDA is to the lower end of expectations then it seems more likely than not that the special dividend will be foregone altogether (unless the CEO decides to increase borrowing) and maintaining the ordinary dividend, at its current level, will be called into question (the post-tax cash flow cover will have fallen to below 1.5x and I don't belive that BME will have that much discretion to reduce its cash outflows), particularly given that the prospects for growth in the medium term.

I accept that the above figures are rosier than my previous figures and I apoligise for my previous oversight, but they're nevetheless still pretty dire from the perspective of maintaining the current dividend. All the main KPIs are going in the wrong direction and I think people are being unrealistic if they think things aren't going to get worse before they get any better. I'm not sure that BME getting into a price war with its main competitors would solve the problem. From what people are saying, the stores are already understaffed and trying to drive through higher sales volumes to offset lower margins may only exasperate the existing problems.

* EBITDA is near cash but not actual cash because it includes accrual and prepayment adjustments but it does exclude a lot of non-cash adjustments like depreciation

LTI, I've not lost the plot. I've just realised you're talking thru your backside about "the shares you've lost". You weren't holding any shares prior to the capital reduction. So, you've lost nothing.

I'm not interested in your previous buys and sells. They are irrelevant. You held nothing when the transaction was completed, so you lost nothing, and it's a pure fiction on your part to suggest otherwise.

All you've lost is the opportunity to buy back in at, or below, 650p. You're not an "injured" investor. You're just an opportunist masquerading as such.

Senator, Group post-tax free cash flow is exactly what its says it is on the box unlike the fudge you've created.

Anybody who thinks POST-TAX cash flow excludes the payment of tax needs to go back to Accounting 101!

Senator, I suggest you try reading the last table in Note 3 to the FY25 accounts for a further explanation of why simply deducting the purchase of tangible and intangible assets (£133m) from the net cash flows from operating activities (£675m) doesn't, and never has, equate to the post-tax free cash flow.

You've managed to completely miss out debt financing costs, rental costs (interest on right-of use assets) and tax payments!

Senator, My mistake for the £191m; I admittedly overlooked the "H1" in the "... For H1 FY26, the Group now expects to report Adjusted EBITDA (pre-IFRS 16) of approximately £191m, compared to the previous guidance of approximately £198m ..." statement in th recent update. I did wonder beause the results did seem a lot worse than I'd remembered a week or so ago. But the FY25 Prelims clearly state that the group post-tax free cash flow was £311m, not £544m (you don't need to try and calculate it; its says it in black and white in the headline measures). I wish people who can't read accounts would stop posting rubbish!

DD, I did find the Q3 update somewhat confusing. In absolue terms, revenues (only) fell c£1.5m which, when you consider that EMEA sales fell 1% and North American sales fell 16%, looks somewhat out of kilter (albeit EMEA sales are currently approx 3x North American sales). Asian sales are rising bit from a very much lower base (begs the question where Nike sales are currently booked given that the shoes are likely manufactured in Asia).

I aslo think it would have helped if ZTF could have been clearer in its messaging.

The RNS refers to the fall in Q3 revenues in North America being "... due to phasing of orders in Transport & Smart Technologies, and more subdued demand in Construction & Other Industrial ...". In my opinion, the RNS has completely skirted one of the main likely reasons for the material increase in H1 revenues and subsequent fall in Q3 revenues; namely the introduction of US tariffs. I think the term "... phasing of orders .." has been used as a euphemism for having to explain that Trump's tariffs caused a major disconnect and might actually cause FY25 revenues in North America to flat-line whilst importers are adjusting to the new cost reality. ZTF should have had sufficient customer feedback by now to know where they stand order-wise in the US and also have a clearer idea of how the second presssure-vessel might alleviate some of the problems they might otherwise have had to face (one would have thought that if they can meet US demand from within, there might be an opportunity to increase US margins as prices generally rise to account for any additional tariffs).

MarkBell, It did dawn on me when I saw his earlier post ;-)

Sj74, I'd agree in principle although I'd say "should be affordable" rather than "very affordable".

The expected FY26 adjusted group EBITDA (pre-IFRS 16) is now c£191m; c£430m less than FY25. The FY25 group post-tax free cash flow was £311m, barely sufficient to pay the £300m dividend. So, if all of that c£430m reduction in FY26 adjusted group EBITDA is cash-related, it's likely that the FY25 group post-tax free cash flow will be approaching zero, if not negative. In that event, not only would BME have generated insufficient cash to cover the special dividend but it would also generated insufficient cash to cover most, if not all, of the ordinary dividend without taking on additional borrowing.

Regardless of whether BME just cuts the special dividend or, additionally, cuts the ordinary dividend, the Market will likely react negatively in the short-term (it's very rare, if ever, in my experience that the Market reacts positively to a dividend cut, even if it looks inevitable and has been flagged in advance, whether directly or indirectly). Whether, after the dust has settled, the Market takes a more positive longer term view would remain to be seen.

I think that any dividend cut will edge the share price lower, and offer a better buying opportunity, unless there is some materially positive operational news. I think, at least in the short/medium-term, the latter scenario is highly unlikely, given its underlying competition problems, the general economic background and prospective increases in its future costs following this month's Budget, and the pressing need to invest in its store portfolio.

Oops, just realised that I've fallen into the misheard lyrics trap. It's "ride" not "rise". Hey-ho ;-)

As Neil Diamond says in Long Fellow Seranade - "... come on baby rise ..." ;-)

LTI, So, what you're essentially saying is that you've been talking twaddle about "buying back the shares you lost" because, if you were out in June at over 800p and didn't buy back prior to the capital reduction, you've lost absolutely zip! A total fiction.

The capital reduction was accompanied by the announcement of the strategic investment in Collect+ so valuing the business pre and post capital reduction becomes more problematic, depending on what price you choose as your start point. Normally speaking you'd start with the closing share price on the day immediately prior to the transaction.

The old share price closed at c735p on the day prior to the transaction be effected. So, all other factors being equal, one would expect the new share price to settle at c742p once account has been taken of the dividend payment and the subsequent reduction in shares. There's always a little bit of flux following a capital reduction, so its not entirely unusual for the sare price to undershoot for a period.

Alternatively, you could choose to totally ignore the potential benefit of the strategic investment in Collect+, treat any price action after the announcement as pure Market hype and take the closing share price on the day before the annoucement (c674p) as the starting point for your calculation or, maybe, a few days earlier (c648p) if you think it's likely that the news might have "leaked" into the market beforehand. Your target of 647p would subscribe to the latter scenario but would be pure conjecture on your part (easier to see in hindsight than foresight unless you were privvy to more inside information that your average PI).

Although the current share price looks compelling, I can think of 4 main reasons to hold off buying:

1) BME is yet to properly explain why a £7m H1 accounting error has resulted in a £40m reduction in the FY26 Group Adjusted EBITDA guidance;

2) It's looks likely that BME will have to cut its dividend and, although the Market half expects it, the Market will still punish BME if, and when, it's announced;

3) If BME doesn't cut its dividend and takes on additional debt instead, the Market will be equally unsympathetic; and

4) The prevailing superstition that "bad news (always) comes in threes"

There is some logic to the fourth point, from an accounting perspective. A first-time warning might be considered a one-off but a second warning, following closely on the heals of the first, resulting in a financial review undertaken by an external advisor more often than not leads to a third warning. People often don't appreciate how subjective accounting is (it's not simply about recording objective transactions). The CEO will want to clear the decks and can't afford to ignore any recommendations that the external advisors might make. Also, given BME's current operational problems, it would suit the CEO in the medium term to take on board more cautious accounting assumptions, take an accounting adjustment and book any benefit that might arise from that more cautious approach in the future. Reserves and the timing of the release of those reserves can help smooth out some of the potential problems ahead and add a better gloss to future results than might otherwsie be the case. The external review gives the CEO a one-off opportunity to "adjust" without taking some of the flack that would normally accompany such a decision and blame it on his predecessor(s).

DiscoDave, What I'm saying is that the large incumbent packaging companies like Ball Corporation, International Paper, Mondi, Smurfit, Tetra Laval et al have a susbtantial amount invested in long-term forestry projects and, for any new, non-forestry-based product to succeed, it would either need to be significantly cheaper (giving any first adopter a significant competitive advantage) or the regulatory landscape would need to become a lot more draconian (forcing them to look at alternatives to forestry) for them to be persuaded to dump their existing forestry investments (something which I admittedly only realised after the event).

ZTF always stated that they didn't expect ReZorce to be materially cheaper than forestry-based products. Instead, they expected ReZorce to be comparably priced at high volumes but more expensive at low volumes (packaging pricing is a volume game). It's therefore going to be very difficult for a new disruptor to break into the packaging market unless they have very deep pockets or they are are able seize high volume contracts from the get-go.

The best hope is that ReZorce Ltd will, through further product development, be able to reduce its production cost so that it is can become cheaper than existing forestry-based products at higher volumes; to such an extent that the current incumbents can no longer afford to ignore it.

ReZorce has great potential. Unfortunately I've found from bitter experience in the past that potential is never enough if it doesn't suit the incumbents and/or they don't want to pay for the technology. Most of the packaging behemoths are vertically integrated and currently own very large areas of expensive forestry. If they were to adopt ReZorce their forestry assets would become more or less worthless (I'd imagine that the trees wouldn't be suitable for alternate use; the requirements of the packaging industry are likely to be significantly different from, say, the furniture industry and there'd probably be a glut of forestry land for sale). They want a solution but only if it involves the use of trees in the production process. ReZorce doesn't.

Consensus revenue and PBT were disclosed in the H1 results (after commentary on first half) but, as fast I as I can see, there's no reference to them by either the Chairman or CEO. Neither of them appear to make any reference to actual trading vs consensus and whether or they expect ZTF to meet, exceed or fall short of consensus for the year.