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We note this morning’s announcement from Boohoo Group strongly refuting several allegations made in a short-selling note published yesterday afternoon. In our opinion arguments made in the short selling note are flawed and do not disclose any new or unexpected information about the Group. The unprecedented market backdrop resulting from the COVID-19 crisis has only acted to highlight the strengths of Boohoo’s agile, pure play, e-commerce model and we see current share price weakness as offering an attractive entry point.
Sale of Fowler Welch
Companies: Dart Group
Boohoo Group has announced the acquisition of the remaining 34% of shares in prettylittlething.com (‘PLT’).
- Terms of the deal: Boohoo Group has acquired the remaining 34% of shares in PLT for initial consideration of £269.8m, comprising cash consideration of £161.9m and share consideration of £108.0 including £54m of share consideration subject to an 18 month lock-up, £54m of share consideration subject to a 24 month lock-up payable on completion. A further £54.0m of contingent consideration is payable if the Group’s share price averages 491p (+46.7% on last night’s closing price) over a six-month period between completion and 14 March 2024. PLTs management team will remain in the Group, with the structure of the share consideration providing strong alignment of management interests with the wider Group shareholder base.
Gaming Realms is a creator and licensor of innovative games for mobile, with operations in the UK, U.S. and Canada. Through its unique IP and brands, Gaming Realms brings together media, entertainment and gaming assets in new game formats.
Companies: Gaming Realms
MMH has provided an update, which confirms it significantly outperformed the market during Q1. During lock down there has been some signs of pent up demand both in aftersales and new/used vehicles with over 3,700 vehicles sold during lock down in addition to the March order book and Q2 order book. We believe MMH has sufficient balance liquidity as well as support from its OEM and banking partners.
Companies: Marshall Motor
FY19 was a transformational year, with the addition of seven new hostels to the estate/pipeline and strong growth in Revenue (+26%) and adj EBITDA (+11%) demonstrating that the model can work across European cities. Significant liquidity headroom remains following the RCF extension and £5m overdraft facility recently agreed.
Directorate change: DWF has announced that Andrew Leaitherland will step down as Group CEO and a managing partner of DWF Law LLP and DWF LLP with immediate effect and will be replaced by the Group’s Chairman Sir Nigel Knowles. Sir Nigel has over 40 years of experience in the legal sector and was previously. Global Co-Chairman and Senior Partner of DLA Piper. We believe he has the experience and leadership qualities required to lead the Group through the near-term challenges it faces. Chris Sullivan, Senior Independent Non-Executive Director, has been appointed as interim Chairman.
Companies: DWF Group
In FY20, prior to COVID-19, management delivered on its four key proof points, including growing group EBITDA and membership at Roadside. The business model is proving resilient during COVID-19 and we have reduced our FY21 EBITDA forecast by only 7% since the outbreak began – much less than most.
Companies: AA Plc
Following last week’s trading update, in this note we revisit the progress Inchcape has made, along with the structural benefits it has gained, in focusing its business on its distribution model. Whilst there is no doubt the Group faces pressures at present, we believe it has sufficient liquidity to withstand this crisis within its current banking facilities and see scope for further significant cost savings and efficiencies that should help mitigate current pressures, which we expect hear more on at the H1 results in July.
Topps’ sale & leaseback of its head office and warehouse for a consideration of £18m will help give the group total liquidity available of £42m heading into June. This is a very strong position considering our analysis suggests monthly cash burn from trading may well average no more than £2m over June-August. At the recent interims, the group outlined its store re-opening progress and is well on track to have all c.350 open on a ‘controlled entry’ basis by the end of June, giving further grounds for optimism. We will re-instate our forecasts at the next update, which is due in early July.
Companies: Topps Tiles
After launching a £1bn recapitalisation by way of a rights issue at a price with a heavy discount, the UK-based restaurant and (the largest) hospitality group, Whitbread, saw its share price plummet by 13%. The market movement reflects investors’ concern about the uncertain duration of Whitbread’s business downturn.
Whitbread was on our list of issuers likely to be wrongfooted by the crisis the day before the rights issue announcement.
Card Factory is a deep value retailer, offering a core product at 99p that retails for twice that at high street competitors. Despite the wide price gap, management is adamant that it does not need to raise prices to maintain profitability, with a range of actions in progress to optimise both top line and cost structure. The share price has fallen steeply, but this could present an opportunity as there are a number of potential catalysts.
Companies: Card Factory
Loungers continues to outperform, delivering the scarce trinity of LFL sales growth (5.4%), unit growth (10 openings) and margin growth (40bps). This drove a 22% increase in Revenues and 26% increase in EBITDA in the first half of FY20E.
What’s new. This morning Purplebricks UK has provided an “update regarding current trading and the potential impact of COVID-19 and Govt guidance on the UK housing market.” Key points are:
1. Purplebricks first priority is health of people and customers: its online business model includes “video valuations, virtual viewings, connecting customers with potential purchasers via Purplebricks online platform.”
2. Govt restrictions on movement are weakening vendor and purchaser activity; deferral of completions would have a further negative impact.
3. Immediate cost-saving measures will materially reduce cash burn including suspending TV and radio advertising, reducing online marketing, taking advantage of the Government Job Retention Scheme.
4. Purplebricks currently has net cash of £35m and no debt.
Companies: Purplebricks Group
Air Partner has issued a further COVID-19 update. The Group has had a strong start to FY21, with both February and March delivering profits well ahead of both budget and the prior year. The current indication is that the Group has delivered around £2.4m of underlying PBT in these months. Management’s expectation is that business will now slow as the pandemic continues to restrict aviation activity globally, though the order book for April is encouraging. In response, management has implemented a series of temporary cost management initiatives and made use of the available government grants and benefits to significantly reduce the cost base for the coming months. At the end of March, adj. net debt stood at £5.0m. The Group has access to a total debt facility of £14.5m, comprising of a £1.5m overdraft and a £13m RCF. We are reassured by today’s update and management has reiterated its confidence that Air Partner is effectively positioned to cope with the challenges and uncertainty posed by COVID-19.
Companies: Air Partner