Scs Share Discussion Threads

[woozle1] 09/4/2017 17:47

Colder temps are better for sofa companies over the blank holiday weekend. If it's warm, it's good news for the garden centres. If there's no warning in the next few weeks, our 10% dy will be in the bag.
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[karmastuartra] 07/4/2017 08:16

Just booked my spot on the sofa tonight with Rachel,stain resistant scotch guard should help!

[thorpematt] 22/3/2017 20:19

Me, I'm not concerned about any of those accounts issue raised above. Can't see bankrupcy as anything like an issue.

The concern for me is the narrative of fairly dissapointing start to the year and lacklustre LFL. Those 2, together with a wider sentiment within the market of headwinds to this sector are the explanantions for the "cheapness" of this stock. (e.g Things will get interesting when mortgage rates go up etc.)

An analysis by a stock-trader as opposed to an accountant will give you the more accurate prediction of the near future for the price of this stock in my opinion.

In essence an accountant will buy this stock; an experienced stock trader would sell it. FWIW in those cases the second one is usually right in my experience.

[karmastuartra] 22/3/2017 10:27

Awful results imo,will ask rachel to the maths tonight on our sofa,if we get time that is!

[salpara111] 21/3/2017 14:09

Well, if they increase the final divi by 5% as well then the forward yield is over 9% which doesn't make sense in that either the share price would have to rise to trim that back to around the 6% level or the market is expecting a divi cut rather than a rise going forward.
I continue to hold given how undemanding all the metrics are.

[aim11] 21/3/2017 12:26

any one a view on the LFL performance? given that UK consumer confidence has been OK and consumer credit remained strong, and UK housing market also, was any one surprised by the weaker implied LFL performance in February? Not sure what could have caused this dip although they say March is better

[woozle1] 21/3/2017 12:12

Your second point is the reason that these businesses have always gone bust in the past. I'm happier for the company to have a strong b/s, which it will need in a downturn.

[simso] 21/3/2017 11:27

A couple of points re Customer Deposits. Firstly I am surprised it is as high as the £22m quoted above. Is that a number you saw in the detail of the Announcement, which I missed on my skim through?
Secondly, that money does not need to be held in any sort of escrow or ringfenced, and can be used in the business like any other Cash. Competitors like DFS will have much larger Deposits, sit on debt rather than cash, and yet are proposing a large special dividend this year. It is the Clearing Bank who hold the risk for ScS going bust and customer deposits which were paid by Credit Card would be their problem.

[woozle1] 21/3/2017 10:19

I think there are quite a few start up costs in the operating expenses for the HoF and the flooring business as most of the increase in expenses is personnel. HoF is EBITDA positive and flooring is making progress. All this is taking more time than originally anticipated when the business was refloated.

Assuming that £14m of the £36m net cash is the real net cash, this implies an Enterprise Value of £40 (£54-14m) and assuming £17m EBITDA (just £1m more than last year), this equates to an EV/EBITDA 2.3 times. Private equity firms like to take companies private at 5 times.

This company is either too cheap or about to go bust. The latter looks unlikely on the basis the dividend is up (unless management are playing a game of bluff), which leaves me in the too cheap camp.

[aim11] 21/3/2017 09:58

recent trading didn't sound particularly good though, unlike what john lewis has been seeing in furniture

[owenga] 21/3/2017 08:21

Dreadful conversion of revenues to bottom line. Revenues up 20m, net loss only reduced by 0.8m. Very disappointing.

[elsa7878] 21/3/2017 08:02

Current assets £70 million, current liabilities £72 million. Cash is a red herring. £22.7 million of it is people who have paid for their sofas and not got them yet.

[mister md] 21/3/2017 07:29

Increased divi too

[simso] 21/3/2017 07:28

Yes a decent first half, with PBT up 0.8m v Ly. Brokers have 0.5m v Ly for full year. The cash is £37m which is well over half the entire market cap.

[mister md] 21/3/2017 07:16

Results look good enough to me

[opodio] 10/3/2017 16:25

will it touch 130p again next week?

[karmastuartra] 09/3/2017 16:25

Me jiggy jiggy on the sofa!

[karmastuartra] 09/3/2017 10:22

Just to let you all know I'm now dating Victoria Thomas and we are trying out the scs sofa tonight.

[karmastuartra] 08/3/2017 15:53

Now you're getting nasty!

[woozle1] 08/3/2017 14:11

Maybe 69p px target?
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[karmastuartra] 08/3/2017 13:44

Can we concentrate on the business aspects of scs woozle?maybe your humour would be appreciated elsewhere? Thanks.

[karmastuartra] 08/3/2017 12:07

I will give a share prediction of 85p by the end of the year.
Now I am being serious!

[woozle1] 08/3/2017 10:43

So on a serious note, looking back at the numbers before ScS went bust, what seems to be depressing the margin is the increase is staff costs as a % of sales.

I'm assuming that this is because they now have more people in the shops selling carpet and more staff in the franchises. Essentially, these are start up costs (and it's good to see these in the P&L) and so the margin should improve as they sell more carpet and the HoF becomes profitable. Interesting to note that HoF became EBITDA profitable in the last period. So, hopefully, we should start to see margin improvement. It was around 8% before they went under and is currently around 3.5%. This is unacceptably low.

Nearly every listed furniture has gone bust in the past, which might explain why the shares are so depressed. Here are some reasons as why it might be different this time:

- the negative working capital is not being used to finance the growth, which, by the way, it is modest

- Net cash exceeds working capital by £5m.

- They have a large R/C facility in place, which should take care of the credit insurance, which triggered the bankruptcy

- Instead of seeing Sun Capital as an overhang and a negative, their presence is reassuring as they will ensure that the business is run for cash as they'll want to protect the 40% investment

- The management team all have large stakes in the business with David Knight buying more post Brexit

As ever DYOR
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