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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.
Vertu has delivered FY20 results broadly in line with our forecasts at the adjusted PBT and EPS level. However, the real focus is how it has fared during lock down. The monthly cash burn in April and May was lower than we estimated, while cash balances were higher than we expected approaching £45m. While there are no doubt difficult trading months ahead, we believe Vertu has sufficient liquidity and support to come through this and fully reap the opportunities that lie ahead in a sector where significant capacity reduction is expected.
Companies: Vertu Motors
Vertu’s FY20 results demonstrate the qualities of the business in terms of a strong management team exercising financial discipline, supported by sector-leading systems. Strategically, Vertu is leading the market in omni-channel retailing as it prepares for a post-lockdown world. The business incurred losses of £20m across April/May, but emerged with significant headroom and liquidity. It’s low LTV on used car stock will support cash generation. With dealerships having just opened on 1 June, guidance remains withdrawn and our estimates are under review. Management is upfront about its desire and ability to consolidate the market and emerge from this crisis stronger. This remains the bedrock of the longer term investment thesis.
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
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
Top line growth was 26.6% in FY20, despite a refocus away from unprofitable online regions (e.g. Russia) and a drag in Q4 from adverse weather/flooding. In highly fragmented UK/European markets, and potentially supported by accelerated structural change post CV19, there remains a significant growth opportunity both online and offline for the lead consolidator. Weak bottom line contribution highlights the benefit that changes being implemented under a strengthened management team should yield. These include improved stock management processes and a greater focus on gross margin and operating cashflows. With sufficient liquidity to navigate the crisis, a profitable/growing store estate and scope to realise scale economies online, ANG should be a long term winner.
Companies: Angling Direct
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.
Unsurprisingly, the limited business progression in H1 19/20 and the pandemic outbreak towards the end of the year have resulted in a significant FY profit contraction.
However, the unprecedented pandemic crisis seems to be dragging all the industry to the same starting line, in terms of market transformation. In particular, after the group showed a better than expected cash position after additional RCF and CCFF and substantial cost-savings, this gives new hope to the market.
Companies: Marks And Spencer Group
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.