Mereo Biopharma Share Discussion Threads

[momentos] 19/12/2007 10:16

Doom, gloom, doom, gloom!

[wbjunior] 19/12/2007 10:12

good luck everyone, hopefully recovery soon..........................wbj

[chap1889] 19/12/2007 10:11

... only if they pay the expected dividend (lawfully this time)!

[deanroberthunt] 19/12/2007 10:01

at this rate we'll have a yield of 15%+......

[rellestrohs] 19/12/2007 10:01

The whole economy is in trouble...

[momentos] 19/12/2007 09:56

Er, cos, not just the UK Retail sector potentially in trouble at the moment....

Wonder if our short seller - who has appropriately named himself backwards, says everything really - is Mr Bashed Ear in a new guise.

[rellestrohs] 19/12/2007 09:45

A new low avoid.

Why arent the directors buyinmg big time!!!

[cosnova] 19/12/2007 09:32

retail sector taking a hammering, fortunatley mph are not just in the UK,
someone likes the company, just brought 50k

[momentos] 19/12/2007 08:42

Hardly the volume to justify the fall (Plus only)

19/12/2007 08:15:35 42.00 7,500 O 3,150.00
19/12/2007 08:15:21 41.05 1,458 O 598.51
19/12/2007 08:09:59 43.00 5,000 O 2,150.00


Must be something in the background. Market Cap down to 11m (or 8.3m for the 75% not Morris / MOrris trust owned)

Barclays now down, erm lots! Now at old 8p, unbelievable. 80% drop in 5 months.

[momentos] 18/12/2007 16:31

Yes agree transparency is not exactly wonderful. I think they may get to 10p FY, albeit they may need an acquisition and a bit of "fair value over acquisition" shenanigans!

As far as the pipeline visibility goes, I thought (for eg Autumn Winter) they finalised designs mid Jan, presented Feb, Took orders over next couple of months.

Turnover is recognised at delivery (correctly). Order collation to delivery must be several months, 3-4 minumum. OK the commission to production will be based on actual orders plus potential additional sales, but there must be a fair degree of visibility, especially with the larger firms.

Unless as I suspect they are being squeezed by the larger chains who are rationalising brands or acquiring / producing their own mid market stuff.

[marben100] 18/12/2007 13:48

Hi Momentos,

a) At another AGM I attended, from a relatively reputable company, the meeting was told by directors that the term "our expectations" are generally understoood to be MORE optimistic than broker/analyst forecasts, in response to a question on this point. Using that change in wording as an excuse for dropping an unexpected bombshell is no get out AFAIAC - though it probably avoids FSA enquiries.

b) The interims say "we expect that the results for the year as a
whole will be slightly lower than anticipated." How does that square wih their house broker slashing their forecasts the very next day? And in the Bloomberg interview the next day MM saying that business may (had?) slip into th next FY?

If the finals turn out to be just slightly lower than the forecasts in force at the time the interims were published, then I'll revise my view - but, somehow, I doubt it.

I suspect that the truth of the matter is that profit visibility is much poorer than I thought it was. Hence not much reliance can be put on outlook statements. Moreover, given MM's dominance (and the fact that he doesn't seem to have a good handle on the month-to-month forward financials) I am worried about the business "sleepwalking" into a cashflow crisis (during a credit squeeze). Perhaps my worries are misplaced. We'll see.

Happy holidays,

Mark

[momentos] 18/12/2007 11:28

marben, I find that, as far as published management statements go, they generally tend to be true in the strictest of senses. BUT:

1. YOu have to read them VERY carefully (the IMS to AGM statement changes in wording from expectations to OUR expectations). That was a deliberate change, several sentences in each statement were practically the same with this one small change. Did they think it was clever to do this (instead of stating clearly the difference)?

2. You have to also look for the missing information: stuff that has previously been given but isn't now (eg forward order figures by brand) and info you would expect to get but don't.

3. You have to look out for the sophistry. Best example was following (one of) the Boateng judgements. Verulamium, a poster here, went to the court, reported Marchpole mostly lost. Got slated here when Marchpole RNS'd that they had won. They hadn't, except on one point.

4. You have to check previous statements carefully. The emerging markets is now presented as the strategy all along. It wasn't. It was US first then emerging markets.

5. You have to disregard comparisons 60% forward orders up - vs what?!? Turnover up ex YSL - yes but it should be ex Greenmark too!!!

Obviously this is notwithstanding the general view a profit warning should have been RNS'd prior to interims.

[dan de lion] 18/12/2007 11:09

They have gone from "In line with Expectations" to "Slightly below expectations", hopefully we will get an update early in January.

[marben100] 18/12/2007 10:08

The problem is, which management statements can we now trust?

[momentos] 18/12/2007 09:23

2007 AR says this, which doesn't wholly reassure but goes some way:

The Directors consider the business model to have a low risk. The key components of financial risk are credit risk, currency risk and cash flow risk. Credit risk is mitigated by accepting only the major retailers in each country as customers, and obtaining if available, credit insurance for sales. Only when sales orders have been contracted are purchase orders placed with reputable manufacturers thus giving the Group a forward view of at least six months' revenue at any time, and limiting the risk of inventory being left with the Group. This forward order book also enables the Group to manage its forward cash flow proactively, and to use both import loan and invoice finance facilities to minimise cash exposures. The foreign exchange risk inherent in the purchase order is hedged with forward foreign exchange contracts to lock in the bulk of the cost.

(BTW 2006 said: Credit risk is mitigated by accepting only the major retailers in each country as customers, and obtaining credit insurance for all sales. Slightly changed.)

Although I don't believe it is a significant risk to the business because of the protections in place, but this is expensive to maintain. As you will note the other side of the (interim) equation has liabilities as 6.2m trade payables, 15.7m bank overdraft (vs 23.5m trade receivables). So they seem to pay the suppliers quickly, then get paid themselves slowly. Effectively a bank loan to pay the suppliers then paid off later when Marchpole gets its dosh. Ouch.

Does, to a degree look cyclical though, appearing at interims and improving greatly by finals.

[dan de lion] 17/12/2007 19:54

I was refering to Homebody/Homemummy, Greenmark and JCC, all of which given time could be individual winners.

[1947jim] 17/12/2007 18:21

dan de lion 3421 --- who says the brands are excellent ?? 2 of them are known for mens 3 piece suits --- and very nice they are --- but not exactly volume in todays casual market. JCC is different, and for sure has top market appeal, but again not exactly volume ... but could become so.
Agree with marben100 --
Too many debtors, and too much borrowing............. have to agree also with dan de lion 3424 --- today wholesalers have to finance retailers stock --- therefore you have to have some cash to do this ..... fatal to borrow to do it ! ( see Northern Rock ..)
Would also note for those who are interested .................wholesalers/importers make pretty bad retailers, if they open shops.

[dan de lion] 16/12/2007 16:56

MPH are owed £23.5 million pounds from retailers and lisense`s, the vast majority of this should arrive in the second half, the few accounts that will be unable to pay(if any) are covered by trade insurance.

Thats the problem for wholesalers, you have to finance your retailers stocks.

[marben100] 16/12/2007 16:27

P0lzeath,

You only asked for positives. There is one other negative which I did not mention and anyone considering investment needs to take into account: cashflow. Truly horrible in 1H08 (-£14.4m from operations). Now, if all comes good, as promised in 2H then - no worries. OTOH, in the Bloomberg interview MM talked about delays in 2H. That worries me. If MPH DON'T get the cash in in 2H08 then I imagine that their bankers might get twichy in the current climate: bank loans & overdrafts £15.7m at the interims, with NTAV standing at just £2.2m.

I'd put MPH in the high risk/high reward category now.

Cheers,

Mark

[p0lzeath] 15/12/2007 19:01

I stand corrected. Cheers and have a good evening both. At this level the downside must be limited vs 100+p and now on my watchlist. Probably better (for me and other non-holders) to miss the bottom and get another TU under the belt first. Not really my favourite sector but starting to feel very cheap.

Good luck holders.

[dan de lion] 15/12/2007 16:51

They do have three excellent wholly owned brands.

[marben100] 15/12/2007 16:41

Well, Polzeath, just as an intellectual exercise, I can come up with 4. Perhaps someone else here can suggest a fifth?

- Extremely low P/E: lt 2 historic, 4.5 current, 2.4 forward (according to Shore's latest, reduced, forecast)
- High yield gt 8%
- Scope for growth from internationalisation
- Scope for growth from recently announced distribution agreements

[Previously I would have added, "luxury goods" to the positives but I now think this claim is dubious]

However, in my eyes, there is one overwhelming negative which makes me unlikely to reinvest (I still retain a small holding in recognition of the positives): I feel badly let down by management which gave every indication that all was on track, right up until releasing dreadful interims. Subsequent comments also suggest that they treat shareholders with distain. Up with this, I will not put :0).

Cheers,

Mark

[p0lzeath] 15/12/2007 14:20

There are no 5 positive points

[dan de lion] 15/12/2007 13:10

Lets hope bash ear never again becomes bullish, the last time he was bullish was just before we dropped like a stone, I did say that he had doomed us at the time.