Studio Retail Share Discussion Threads

[planit2] 14/2/2022 07:53

That was a surprise, looks convenient for Mike Ashley.

Company wiped out by bad inventory decisions.
These were made difficult due to Covid supply chain and Covid customer demand problems.

I wonder if they ended up like the other retailer with huge amounts of formal wear they can't shift as Christmas parties were cancelled.

Looks like banks are cutting back on lending too, I bet this will affect many companies going forwards.

[1gw] 14/2/2022 07:48

And MA buys what he wants off the administrators, I guess. Could they really not sell it as a going concern?

[zho] 14/2/2022 07:45

"The Board therefore now intends to file a notice of intention to appoint administrators to SRG and Studio Retail Limited, its wholly owned subsidiary, as soon as reasonably practicable."

Gosh!

[pejaten] 14/2/2022 07:43

Wow. Administrators appointed. Bad news for all

[1gw] 14/2/2022 07:43

Wow. What a disaster. Schroedar got it right this time, it seems.

[skindle] 09/2/2022 11:48

I would hazard a guess that we will next hear from this board sometime in April with an update on funding as part of a financial year end post close trading statement. It is worth noting that the eight members of this board received a total combined remuneration of £3,207,000 up to 21st March 2021 but not one of them has bought a single share in the company since last April.

[skindle] 03/2/2022 14:09

161 pence per share in March 19, unanimously rejected by all other shareholders.

[gamwah] 03/2/2022 11:05

Having a look at this today, assuming this is still a potential takover option here? Looks quite cheap at thsi level.

[currencytrader1] 03/2/2022 07:40

Mike Ashley increasing his holding to 35% one would guess.. Was anyone around when he made a bid last time?

[inever] 03/2/2022 07:39

It suggests they've no spare cash!Frasers swooping now it seems. I don't think management can hold back the tide this time.

[skindle] 02/2/2022 16:35

Thanks for your thoughts Inever. You should know by now though that this board of directors only release information to the market when absolutely necessary. Not one of them has yet to purchase a single share since the release of the trading statement. What does that tell you ?

[inever] 31/1/2022 19:45

Studio was my biggest holding by far at one stage but I sold out in July when there was no bounce in the share price in response to the excellent FY21 results announcement on June 30th. I posted at the beginning of August my reason for selling.Today's announcement is a disaster in terms of communication and leaves shareholders in the dark. It advises it is "exploring a range of options to meet a short term working capital funding requirement" yet it doesn't say what that funding requirement is and for how long.The reason for the requirement is sales were lower than expected because stock arrived late due to the global supply issues.So revenue is down, creditors are up and management has committed itself to buying next autumn's stock early in order to avoid the negative impact of late deliveries. Bravo to management for making that last decision except they seem to have done so without having the cash to pay for it. Either that is bad planning discipline or the soft start to Q4 has really caught them by surprise.For those investors not familiar with the planning and commitment cycle in buying and merchandising, note how far ahead commitment have to be made. This time last year orders were being placed for stock that we are now told didn't arrive on time. This time last year management had just enjoyed a stellar Q3 (and H1) because of lockdown. What sales targets for Q3 do you buy for in 2021? To match 2020 or to soften back towards 2019? These decisions were crucial and it seems to me from reading all of the announcements, a prudent approach was applied.Late deliveries can be absolutely devastating to the retailer's crucial Christmas trade so I can accept their explanation.There is one other problem stock wise that might have caught them out. At the end of March 2021 stock was only £38m, compared to £59m in March 2020 and £49m in 2019. In otherwords they started the new year under stocked by about £20m and they needed to catch up. By the end of H1 (September 24th) they hadn't caught up. Stock was £53m compared to £70m the year before and £72m in September 2019. It is a very plausible explanation for sales being weak and the late deliveries explains why stocks are now too high, though it is not much comfort to shareholders.To make matters worse what they haven't done is quantify the problem in their communication. Are we talking a £10m or £50m working capital requirement? They don't say. What is the level of stock? How big is the problem? Maybe we'll know tomorrow, but management must be punch drunk this evening. All those shareholders who stood by management when Ashley applied the pressure in 2020 are going to be hacked off. Their loyalty has not been rewarded. Another RNS has to be imminent. Any potential suppliers reading today's announcement are going to require more cash up front (or mighn't get credit insurance) on new orders. Inadvertently today's announcement may make the working capital requirement worse not better. I'll sit on the fence for now, but that £1 is attractive if funding working capital is sorted.

[currencytrader1] 31/1/2022 17:00

Someone below mentioned a rights issue at 100p. Is that something I missed??

[schroedar] 31/1/2022 16:40

Skindle

I am far more informed than you give me credit for..hence, like you the incredulity of a business which I thought looked undervalued to a cashflow crisis. Management are paid the big bucks to navigate macro uncertainty. They have run the ship into the rocks with an overpaid coterie of invisible CEO, smug CFO, old school bruiser for the sake of it Chairman and sundry woke brigade pointless NEDs...shareholders would bite Ashley's hand off for 160p now

[skindle] 31/1/2022 16:32

I’ve said for a while that Mr Kendrick is out of his depth and not the man to move this business on. Schroedar was completely incorrect before so there is a fair chance this poster will be incorrect again. 1GW is an informed long term investor who clearly understands the mechanics of Studio. I am puzzled however how in a few short months we can change from forecasting a £35-40m PBT to a working capital crisis. This can only be a failure of management. Mr Kendrick should take this opportunity fall on his sword and hand the reins over at the financial year end.

[paulof2] 31/1/2022 13:35

I understand why people who were holding into the update would feel mislead, pretty big downgrade in a short amount of time despite them saying that sales actually improved over Black Friday Xmas etc.

However looking at it now afresh although downgraded £28-30m PBT with a market cap of just £86m is pretty cheap as long as they can manage the short term liquidity issues.

The one thing I feel is encouraging is that they mentioned the additional stock they are still holding is mainly continuity stock, therefore it is just a matter of time as to when it will be sold and should be close to full price, rather than a flash sale, so I feel it should weather the liquidity storm.

I can’t see them struggling to get a new agreement, look at n brown which is a pretty similar business and the facilities they managed to get and max out in the past before turning it around over the last couple of years. Liquidity is always difficult with a credit business like this, the mistake they made as someone else alluded to was dealing with the greater loan book with working capital, a big no no when securitisation facilities are often so cheap.

One to watch for now I think.

[schroedar] 31/1/2022 12:53

Placing at 100p I understand - explains the price action and lack of volume - at least that recpaitalises the business and gives hope for a bounce back in the next 6 months. Long way back for any shareholder who doesn't top up at this level and very dangerous to do unless certain that placing is done

[currencytrader1] 31/1/2022 12:08

@1gw, good to post pal and makes sense.
Priority here is Shore up the cash position, then get back to to business.

[pokerperson] 31/1/2022 12:03

1gw...agree but equally anything they do to free up cash will hit profits and how much overbought stock will prove obsolete? So yes, they can survive but big hit. Frasers shoudl just buy it and be done with it. It's been a terrible stock to be a shareholder of

[1gw] 31/1/2022 11:45

The reaction feels a bit overdone to me, although the TU was disappointing, to say the least.

However, there are presumably levers that can be pulled besides increasing the revolving credit facility (or raising equity), as they reference in this morning's TU:

"In addition, we are considering other controllable actions to increase short-term liquidity, alongside steps already taken to manage the pace of some of our medium-term capital investments."

In the interims they referred to funding some of the growth of credit receivables from working capital. So presumably unwinding this (i.e. choosing to pause the credit side of the business) would free up some working capital.

"Credit receivables capable of being funded by the securitisation facility grew by £32.6m or 12% to £301.4m. £23.1m of this growth was funded by the securitisation facility and £9.5m was funded from working capital."

And at the Capital Markets Day in June they talked about £15m-20m capex per year - so I imagine there is more they can do to reduce this if they really need to.

Pausing the credit side of the business or reducing growth capex would both hit medium-term growth, but should provide levers to manage the liquidity situation if the banks are unwilling to extend the revolving credit facility.

[currencytrader1] 31/1/2022 11:23

Always amazes me why some people spend so much time typing doom about a stock they don't own. Answer is, they have no life.
Im happy to hold here, it's bounced hard many times... GLA

[pugugly] 31/1/2022 10:28

Personal marker at 91.4p mc £80m

[pokerperson] 31/1/2022 10:23

By the way, you don't announce you are exploring options with the banks after you have maxed out your RCF. You are well aware of what's going on and you sort with the banks well in advance, Ergo, the talks with the banks are not going well and/or the banks will only co-operate with more equity. A now £70m market cap does not support over £450m of debt

[eigthwonder] 31/1/2022 10:20

bunch of tools