The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
TED has always been a good cash generator, even last year they had £50m+ of cash from operations, when underlying EBITDA was £10m
Yuri this is a bank, so the regulators will not willy nilly allow management to do what they like with the equity. £1.6bn of equity is sitting there, most of which is tangible and Mr. market is valuing this at £190m.
This comment sums up Metro's problems, but no doubt management are still opening new branches:
"The problem is that Metro’s model, that is a focus on customer service, is one which only works when the market you operate in has nice juicy net interest margins (NIMs), giving sufficient space for the inherently costly nature of providing such a service.
Once upon a time, with base rates at 5% and NIMs at 300bp+ for secured mortgages, this was possible. Say in the 1990s and early 2000s.
Now of course, plenty people will quibble and say that even then banks offered poor service. But let’s leave that to one side for a moment. In the here and now the point is that for a decade since 2009 NIMs in the UK banking market have been decimated (there are lots of reasons, but exceptionally low base rates is the prime one). Quite simply this leaves absolutely no space for the kind of model which Metro attempted. It is impossible to make it truly profitable at any scale and the only way they managed to make it look like it could work is a combination of pushing certain liabilities (those expensive leases) off balance sheet (until IFRS16 came along and put them on balance sheet) and selling a growth story good enough to keep the equity trading far enough above boom that raising more equity is actually accretive. Once that balloon was popped the problems multiplied.
The sad fact is that UK consumers, whether they actively think they are doing it or not, are voting with their wallets: they care most about low low mortgage rates, even if that’s at the expense of customer service. That’s why every bank is ripping out cost as fast and furiously as they can (branch network, call centres etc.), as it’s the only way to keep their heads above water.
Gosh and I haven’t even talked yet about the impact that the regulatory environment has had on smaller banks (summary: it’s not good). Yup, it’s tough for Metro I’m afraid.
PS. I say all this as someone who hoped they would flourish too, and indeed still hopes I am wrong about all of the above!"
RKB, the auditors are themselves audited. I used to work for Deloitte and our audits were reviewed by Grant Thornton on audit quality. Spent most of my time documenting and very little time thinking outside the box.