Mbl Share Discussion Threads

[jeffian] 06/5/2011 17:37

We can all speculate, RBCRBC, but I don't see why we should have to. The point remains that there is an obvious omission between what the company has said and what has actually happened and, as the answer is potentially price-moving, I think that warrants some sort of statement sooner rather than later. I'm sure they're hoping to be able to issue their "imminent" settlement terms with MRW soon and perhaps there will be further explanation on the back of that. Mind you, if the settlement terms are as bad as some above have speculated, there'll be no need of further explanations..........(other than by way of post mortem).

[rbcrbc] 06/5/2011 17:21

One possibility that no one has mentioned is that MRW might have terminated the contract if MBL broke the terms of the contract. I have no reason to suspect that is the case, but it is the only explanation I can think of that fits the events.

[masurenguy] 06/5/2011 15:06

jeffian - 3981: Morrisons has the option to terminate the contract six months early, in September 2011, provided they give MBL six months written notice" does not explain how they were able to terminate it in March 2011 and without any settlement terms which are the subject of ongoing negotiations.

Exactly but no explanation has ever been provided to shareholders despite this issue being raised during the recent conference call with Allan and Cowgill a few weeks ago !

[jockblue] 06/5/2011 15:02

Kimboy

Your analysis would work if 82% of the inventories were specifically held on behalf of MRW and they had a legally binding agreement to take them. It would exclude the possibility of stocks being held on the chance that they would be bought (and most distributors work with large stocks as that's their business model). So, you can safely assume 82% of the receivables + whatever % of stock is contractually tied into MRW, and then subtract everything that MRW are contractually allowed to return. It's obviously in MRW's interests to return as much surplus stock as it can to MBL. Often these return arrangements can be fairly onerous, involving large % of initial purchases, particularly of large volume short shelf life items such as chart DVDs and CDs.

I suspect a lot lower than 10m net....

[microscope] 06/5/2011 14:09

Encarter School Report:

Very Basic Maths = Pass; Advanced Maths = Fail.

[jeffian] 06/5/2011 14:07

"Now that the confusion over the 3 year contract is resolved"

Eh? It isn't "resolved"! "The contract runs to March 2012, but Morrisons has the option to terminate the contract six months early, in September 2011, provided they give MBL six months written notice" does not explain how they were able to terminate it in March 2011 and without any settlement terms which are the subject of ongoing negotiations. I don't know what the outcome will be but, whatever it is, there's still a lot of explaining to do.

[kimboy2] 06/5/2011 13:47

The interims said 82% of trade was with MRW. If we look at the balance sheet in this light we get;


Assets
Total MRW
Inventories £20.941 £17.17
Receivables £10.341 £8.5
Cash £2.596

Liabilities
Payables £19.336 £15.85
Tax £1.663

That would suggest that they are owed over £26m by MRW and if they only got £10m they are bust.

The surplus on the balance sheet is £12.8m. If we assumed they got the receivables but only £10m for the inventories that would reduce the figure to, assuming the inventory is worth nothing, £5.7m.

From this there are redundancies for 300 workers to be paid. There is the pay off to their mates with the shed to come perhaps as well as any trading losses from the other businesses to absorb.

IMV if they only get £10m they are gonners.

[effortless cool] 06/5/2011 13:31

In that case, I trust you've bought lots and lots of these, encarter?

[encarter] 06/5/2011 13:21

Now that the confusion over the 3 year contract is resolved and I was proved correct the only real issue is the figure that they will receive shortly from Morrisons. My guess is the announcement will come early next week and they will get around £10m which should easily double the share price

[kimboy2] 06/5/2011 13:19

I got the impression from the Lancashire Evening Post report that they had perhaps got some brass out of MRW but not all of it yet.



MBL Group put plans to start talks about redundancies with its 320-strong head office workforce at Farington, near Leyland, on hold due to talks with supermarket chain Morrisons over a settlement on its contract over-running.

Finance director Lisa Clarke said these "unforeseen circumstances" had meant it had been unable to discuss redundancies with employees until now, but added it had not yet finalised an agreement with its customer.

This report was 3 weeks after the contract had been terminated 'with immediate effect' and suggests to me that they had got some money which enabled redundancies to be paid - perhaps.

It is now a month since MBL said they anticipated 'an imminent conclusion'. Doesn't sound like £1m management to me.

Having said that MRW have them over a barrel. They have nothing to lose by stringing it out.

[encarter] 06/5/2011 13:07

Timesmoney, it's you and your cronies that resort to name calling instead of reasonable debate, so I would greatly appreciate it if you all put me on filter.

[timesmoney] 06/5/2011 12:21

All.
It serves no purpose to engage or to respond in any way to Encarter.
Encarter lowers the tone and the generally usefull contributions to this BB.
I suggest no further response to him irrespective of comments he may make. He will sonn find other things to do.

[encarter] 06/5/2011 12:16

Masurenguy, thanks it's nice to be appreciated.

[masurenguy] 06/5/2011 12:09

davidosh - 3971: If MRW then change their strategy and do not want further stock I fail to see how they are not responsible in a properly written legal contract for the historic stock ?

I agree - one would have thought that would have been the case otherwise how could they have managed or quantified their potential liability.

I think MBL should issue a statement making it clear what is being done to clarify this problem having already stated there would be an imminent conclusion.

They should but I wouldn't hold your breath after the series of rather inconsistent references to the status of this inventory over the past 5 months !

[masurenguy] 06/5/2011 12:05

encarter - 3962: 2+1=3

I think that you're true mathmatical genius is apparent to everyone on this thread. Shame that the same can't also be said for your English language comprehension !

[davidosh] 06/5/2011 11:48

A Morrisons buyer must surely have signed to accept the stock on a regular basis for MBL to have taken it into their warehouse and regularly distributed to MRW. If MRW then change their strategy and do not want further stock I fail to see how they are not responsible in a properly written legal contract for the historic stock ?

I think MBL should issue a statement making it clear what is being done to clarify this problem having already stated there would be an imminent conclusion.

[encarter] 06/5/2011 11:47

Masurenguy, so it seems that I was correct again and it's would seem that it's you that has difficulty understanding basic English when you put together those extremely long posts but actually say nothing. You are a waste of space.

[masurenguy] 06/5/2011 11:37

If that was the case then it surely made the contract not worth the paper that it was written on as soon as MRW gave notice of termination. Surely the BoD, who have been handsomely paid to do look after shareholders interests, should have been aware of that potential contingency and have covered it via some form of mutual guarantee with MRW at the outset.

Furthermore, why was the outstanding inventory position not part of the final agreement to terminate the contract, as opposed to still apparently remaining an unresolved issue a month later !

[kimboy2] 06/5/2011 11:23

The reason they didn't stick to that was because they agreed to terminate the contract at the beginning of April.

I suspect that this was because MUBL were unable to complete the contract because suppliers were unwilling to give credit.

[masurenguy] 06/5/2011 11:22

Very true, especially when they announced on March 15 that the contract would be terminated in Sept 2011 and then 3 weeks later announced that it had been mutually agreed to terminate it immediately. It wasn't considered necessary either to explain to shareholders this sudden and abrupt premature termination.

When it comes to the inventory position it is worth considering these two prior references.

RNS Number : 6382X - 09 December 2010: "MBL's major customer implemented a change in the in-store proposition for home entertainment which increased the concentration of chart titles to the detriment of space historically available for back catalogue titles. As a consequence MBL has credited higher than anticipated returns from the customer which has affected revenue. The terms of the contract with this customer provide limits for returns and it is anticipated that the majority of the stock returned will revert to either the supplier or customer in due course."

RNS Number: 3170A - 31 January 2011: "Morrisons has confirmed to the Company that it will assume responsibility for the stock held by MBL on its behalf during the remaining period of the existing contracts. This stock commitment represents a significant proportion of the stock held by the Company."

They very clearly state that the terms of the contract provides "limits for returns" and that MRW has "confirmed to the company that it will assume responsibility for the stock held by MBL on its behalf." So what is there to negotiate ? Either MRW take the stock or they pay MBL for it and ask them to dispose of it elsewhere, possibly repatriating its subsequent realised liquidation value back to MRW.

However since then there have been the following further references to the inventory position.

RNS Number: 9476C - 15 March 2011: "Negotiations are also continuing regarding the stock balances which MBL has purchased in support of the existing agreements and which represent a high proportion of the total stock balances of the Group. The Board will update investors as soon as the financial commitment has been agreed with Morrisons."

RNS Number: 2446D - 18 March 2011: " the main priority of the Board will be to quickly secure a payment plan from Morrisons for the considerable stock MBL holds on behalf of Morrisons. The Board will update shareholders on progress in this matter as soon as it is appropriate to do so."

RNS Number: 3979E - 6 APRIL 2011: "The Board of MBL is in advanced negotiations with Morrisons in regard to the realisation of the stock position relating to the associated contracts for supply and anticipates an imminent conclusion."

Exactly a month has passed since the last reference to an "imminent conclusion" and since then there has just been.....silence !

[jeffian] 06/5/2011 11:15

And it still leaves the whole thing open to question, of course, as they didn't even manage to stick to that arrangement!

[masurenguy] 06/5/2011 11:13

Cheers kimboy - at least somebody here can provide an intelligent and informative response. I'd not previously seen that clarification but it is indicative of the lack of transparency or attention to detail that characterises some of their official communications.

[kimboy2] 06/5/2011 10:55

To clarify, the contract with Morrisons was signed in June 2009, but was dated March 2009. The contracts runs to March 2012, but Morrisons has the option to terminate the contract six months early, in September 2011, provided they give MBL six months written notice. It should be noted that MBL has had a successful long-term commercial relationship with Morrisons

[masurenguy] 06/5/2011 10:49

Well it's nice to see that you have a grasp of basic arithmetic but you clearly have serious problems in understanding basic English !