Tandem Share Discussion Threads

[castleford tiger] 29/6/2023 15:03

Eezy and RC turner

2 of the biggest bike dealers have gone under this year and others will follow.
You may conclude from reading the statement that bike sales are down.
Well they are not. Adding electric to traditional means sales are actually up.
Likewise if you look at the headline reduction in sales you arrive at your conclusion. Again the reason is a switch from FOB sales booked when shipped to more direct deliveries from Tandem in the U.K.
So the numbers will be pushed more into the second half.
The share price is as a result of the current market conditions and at less than half NAV (after deducting intangibles )
Serious investors were at the AGM have you seen them reducing?
My comments this morning before leaving are justified as it’s tough out there.
Profit target for the year has been maintained so even a chunky 5.2% yield will be covered.
The groundwork is almost finished with the new warehouse up and running( we did a tour )
Efficient handling now will help reduce costs and we voted to allow the company to buy its shares back.
Of course there are economic headwinds of which Tandem can do nothing but as soon as the situation starts to move back towards normal tandem will rapidly move forward.
Iam a long term investor here and I am happy with the team and the way the business is coping in difficult times.
Tiger

[cwa1] 29/6/2023 10:43

A snippet from this morning's Cenkos note:-

 Valuation & rating – Whilst profitability remains subdued, given the weak macro environment, we believe Tandem is well positioned to benefit from an eventual normalisation in trading conditions. The business is asset backed (owning the freehold to its warehouse and distribution facility in Birmingham), and currently trades on a P/TNAV of just 0.6x, which we consider to be far too cheap given the company’s positive long-term growth prospects (particularly in e-mobility). We reaffirm our Buy rating.

[rcturner2] 29/6/2023 10:42

Boystown, he isn't taking a long term view that would be something like "times are tough at the moment but there is value here for the long term".

He said "the company is doing rather well in difficult markets". Mental.

[davidosh] 29/6/2023 10:09

the Board remain confident in the Group's ability to continue building and gaining market share. We remain committed to evolving our strategies, nurturing customer relationships, and leveraging our growing brand presence to drive further growth and success in the market, and we therefore maintain our view of achieving market expectations of our performance for the full year.


It would really help shareholders and potential investors to see detailed information showing the 'market expectations' in the same RNS announcement as not all investors will have easy access to the broker research and there is potential for this to have changed during the period in question.

[boystown] 29/6/2023 09:44

Or maybe he takes a long-term view and has bought more sub 190p. I got some at 187p earlier FWIW

[rcturner2] 29/6/2023 09:29

CT is in too deep and has lost all objectivity.

Has been like that for a while.

[eezymunny] 29/6/2023 08:18

"I think overall the company is doing rather well in difficult markets".

Hard to reconcile that with "our sales have experienced a 26% decrease compared to the prior year".

May well be loss-making at that level of sales.

[our haven] 29/6/2023 08:04

And after we slow considerations, I see that is what has happened

[our haven] 29/6/2023 08:03

CT, I do fear that despite the current low share price, the market will continue to devalue the share after today's statement.Very happy to be proved wrong.

[castleford tiger] 29/6/2023 07:37

I think overall the company is doing rather well in difficult markets.
A 5% yield helps until we get some traction in the shares which remain undervalued.
Tiger

[darrin1471] 27/6/2023 14:44

1tx. The F2C case I was referring to was not a major brand but a brand at the level of Tandem's brands and lower.

A purely fictional example using Tandem:
Tandem buys bikes from multiple Chinese factories. Those factories not only supply Tandem but also multiple similar companies to Tandem in US, Europe etc.
Bike costs 100 to manufacture. Factory sells to Tandem for 110. Tandem sells to Halfords for 150. Halfords sells to customer for 300. Or Tandem sells direct to consumer via their own website or Amazon for 250.
Factory is approached by company "XX" which provides all the services to sell directly on Amazon and other marketplaces across the word. Software, shipping, warehousing and returns etc.
Factory sells essentially the same bike sold by Halfords and Tandem on Amazon and marketplaces worldwide for 200. All they do is change the colour and decals.
By going F2C the factory is increasing their profits by 300-500%.
As the Tandem bike is a collection of non patented parts, there is little Tandem can do as the service company XX is offering the same service to all bike factories.
The Tandem example is fictional.

The case I heard of is not fictional. They had a UK own brand which was also sold internationally to a lesser extent. They competed against other UK and European companies selling similar but essentially the same product. On a month long buying trip (the 1st post covid) to China the company discovered one of their factories had set up an off site F2C selling on Amazon and marketplaces worldwide. Further digging showed most of his suppliers were doing the same thing. One factory had more staff off site employed running the F2C than were in the original factory.
Consequently the owner is fighting to save his business and he has heard of competitors sitting on huge overstocks as their prices have been undercut on marketplaces. The F2C was well hidden from the UK importers during covid and he does not think his competition are aware of what is happening.

F2C may be the future and change the retail supply chain forever.

Losers: importers, retailers and landlords.
Winners: the consumer, company XX and marketplaces.

[1tx] 27/6/2023 11:04

I am not aware of any UK brand that meets that profile.Sadly there are few major UK brands.There is of course a trend to direct selling to customers cutting out retailers....including by Tandem.

[castleford tiger] 20/6/2023 17:36

no darrin not heard that one.

anyone for the AGM next week?

Tiger

[darrin1471] 20/6/2023 13:40

tiger. Have you heard anything about Factories in China cutting out importers and going straight to online marketplaces like Amazon. F2C.
I heard of a case recently where a company built up a UK brand over many years, importing a range of goods from multiple Chinese factories. The factories supplied multiple companies similar products worldwide with slightly different colours and packaging. The factories had set up an off factory site business to avoid detection by the UK wholesaler. They were suppling marketplaces direct and under cutting the wholesaler and retailers with essentially the same product. The factory was discounting against UK retail prices but making a huge margin which covered marketplace fees and costs. The whole set up appeared well organised with a new business offering a whole package to the factory including software, importing and warehousing.

[darrin1471] 20/6/2023 12:53

I think that UK consumer will surprise to the upside during the summer. The lower energy cap will add a further boast.
£ strength vs $ compared to 09/2022 should work though to shop prices in H2 through to 2024
Imported prices should fall but importers are likely to try and boost or rebuild margins before passing on all the reductions.
Fixed mortgage headwinds will build as more mortgages come up for renewal. Disposable income squeeze will move from poorest in society to young families who have the biggest loan to value mortgages.

Current warm/hot weather is good for retail but heatwave weather like we had last year is bad

[darrin1471] 20/6/2023 12:25

NEXT's Unscheduled Trading Update was not just simply weather.

"Trading in the last seven weeks has been materially better than the guidance we issued in May"
"Full price sales in the first seven weeks of the second quarter were up +9.3% versus last year. This compares to our guidance of -5%."
Reasons for the over-performance
1. Weather
2. " In an inflationary environment, annual salary increases deliver a significant uplift in real household income at the time they are awarded. For example, during April annual inflation was running at 8.7% and monthly inflation was 1.2%; if an individual received a pay rise of 5.0%, then their real income would have risen by 3.8% in that month. We do not think it is a coincidence that sales stepped forward so markedly at a time of year when many organisations make their annual pay awards."

OUTLOOK
"If recent pay rises and the sudden change in weather have indeed contributed to the current over-performance, then it is reasonable to expect that the effect will diminish over time because ongoing inflation will slowly erode the positive effect of annual pay increases. This is why we are not anticipating the current performance to continue at the same level going forward"

[castleford tiger] 20/6/2023 11:38

I am not sure ACTS.

The cheaper end of Bikes and toys have been hit hard.
Gardening stuff had a very slow start.

I think it was probably a tough first half.

Thank goodness we are strong.

tiger

[actscap] 19/6/2023 16:25

This great summer weather we've been experiencing should be a positive for cycles and leisure divisions. Everyone is out enjoying the sun! NXT even commented on the good weather in an unexpected trading update today saying...."The onset of warmer weather has made a significant difference to our performance, particularly coming after a wet and cold April."

[jeff h] 06/6/2023 10:53

Another competitor seemingly about to bite the dust:-



How long the glut of oversupply takes to clear and how many more fall by the wayside who knows.

[castleford tiger] 29/3/2023 18:37

Babscabs

Interesting post thank you.

As a CEO myself in an equally tough sector ( food and drinks) let me give you my take on it.

Firstly i agree the cycle market is going through a tough period sources say a 20 year low.

However within those headlines there are many strands.

Firstly e bike sales are massively up on this period last year. I expect this to continue especially at the more value end of the market.
The kids bike market is a different thing altogether and the customers TND have will and are still buying bikes both in the UK and FOB basis.

I do not believe that the cycle division will suffer significant losses this year but time will tell.
Therefore to say zero chance is in my opinion wrong.

looking at Moore large now......... The business lasted 12 months after the MBO which tells me a few things.
Firstly is there any point in buying £40m of turnover if its not profit making?
The profits had been paid out over 3.5m in dividends and not put into assets for the dark days.

Why not let the stock get sold/cleared ,and its one less player in the market.
There are others who will go under leaving only the very strong.

These are normal business cycles and the industry will be leaner once its washed through. Tandem being very strong, should in the longer term pick up more business.

I have just under 3% ( 150,000 shares) and as such i take a keen interest in whats going on.

I am also aware its tough out there right now for tandem due to some strange government and banking ( interest rates) decisions.
Energy has been responsible for the majority of inflation ( its not structural) and terrible harvest in Europe in 2022 and winter 22/23 has caused a spike in inflation to 15%. ( on many food items)
We cannot afford to grow food if the energy costs are up 600% Electricity 12p per kwh to 75p kwh........so you get inflation.

This will fall rapidly now energy prices are falling
However taking more money out of peoples pockets by raising interest rates is foolhardy in my opinion.
These were not Tandems doing by the way.

However we have a single site now ,that we own that would cost us £1.5m a year to rent.We used past profits to buy the land and build. ( who owned the MOORE buildings !!)
We have stripped out costs as per the statement that should save us at least £500k a year going forward.
We have some good trading partners and in Peter we have a CEO who is not afraid to make sometimes difficult decisions.
Clearly having been round the block not everyone will be a supporter but i think he is doing a good job..

Can i also clarify i do not mind other opinions good or bad but i do get upset when things are quoted as fact but actually they are a opinion. ( not you by the way)

I will have a read back by the way.

All the best and i hope you do not take offence to my views.

tiger

[actscap] 29/3/2023 15:59

I think there's enough green shoots to weather the next 18-24 month window. It'll be tough for sure but I'm optimistic tandem can do it. See: 1. Ebike sales"In our eMobility segment, we continue to see exceptional results in our eBike sales as people seek alternative means of transportation. Sales of eBikes have had a very strong start to the year, resulting in sales to 20 March 2023 more than three times those of the comparative period in 2022."This suggests 2023 is already off to a better start than 2022, certainly in terms of ebike sales. 2. IBD wins"The Group has had continued success in opening new accounts nationwide with Independent Bike Dealers (IBDs) and national retailers alike. Since the beginning of June 2022, we have opened 128 new accounts with IBDs. This will allow for further growth, particularly through eBikes, for which we are seeing increasing levels of proactive engagement by the independents and nationals alike." Re. IBD wins. Let's say there's 2k IBD across UK (see:https://cyclingindustry.news/bike-shops-the-uks-most-populous-independent-store/ has it at 1675)Winning 128 new accounts is roughly 8% of UK IBD market. This is hopefully going to translate into improved sales in 2023. 3. Management executionThe team have delivered on a number of projects (new website, consolidation of sites, new stores, etc.) and have provided an honest and detailed picture of the business and how they're responding to the macro challenges. I don't see why they wouldn't be able to navigate another difficult 12 month period whilst remaining in profit. Although agree bikes sales will be depressed for some time to come. 4. Balance sheet strengthClear they're in better shape than competitors with toys sports and leisure giving them an edge over bike wholesalers. The negatives are well versed - v difficult macro headwinds, nervousness of national retailers, delays at UK ports. But all of these are temporary in nature and looking out 18 months I would hope a more steady operating environment with the possibility of more relaxed legislation around e scooters as ab added bonus. One thing that did pop out was the legal costs that I think were associated with Jim's departure plus redundancy costs.

[babscabs] 28/3/2023 21:39

TIGER

I have a very strong inside track on bicycle Industry current performance and I would say it is fairly certain that tandem bicycle division is entering a period of significant losses, not so much as their underperformance (even though they underperform the industry) but due to a falling tide market.

They have hope with golf / toys etc but trust me bicycle market is going through absolute armageddon,

Specialised have laid off 8% of their workforce, Moore large a UK wholesaler (bigger than tandem) just closed their doors. Huge stocks at all UK importers plus a mountain of orders stacked up in Taiwan.

There is zero chance tandem being in profit on bicycle division for next 24 months.

I have 25 years behind me and check my previous comments on tandem that you took a different point to and Im generally right .

Times are tough, Zyro, Madison, Halfords, Specialised - its a falling tide with margins obliterated.

If tandem were brave they could have acquired Moore Large a few weeks ago for circa 4 million and that would have got them 40 million turnover on top .

You post a lot on tandem and clearly have a positive view albeit that of an interested party so I am not sure it is appropriate to comment if someone else "has a downer on the business" because they dont agree with your rose tinted views which have not been correct inn the past 18 months .

Ill get my coat and Im sure you will attempt to counter this opinion

[davidosh] 28/3/2023 15:44

I do think the positives within a tough market did not come through in the results statements whereas clearly they have done in the Investors Chronicle write up which is a shame as the shareholders who sold out early yesterday will now be disappointed.

I think we need a shareholder presentation with Q&A to understand more behind the numbers and see how all the savings work through to the bottom line.

[banburyboy1] 28/3/2023 13:59

Don't post oftern.
RC Turner what spectacular bad timing.
Good rise today as the market digests much of what Tiger said.

[castleford tiger] 28/3/2023 08:48

Well we all have opinions but lets start with a few errors. ( in the above statement)

We are currently not net cash but have a small amount of debt after building the warehouse.
The rent on such a building would be over 1.5m a year if we did not own it.

I would rather have this on the books ( as an appreciating asset )than have rent of over 1.5m a year to pay.

The poster goes on to say they estimate a swing to 1-2 million loss this year V a company forecast of £1.6 million profit. ( i actually have £1.2m as my target)

Clearly the poster has a down on the business.( the company will have to tell us if targets will be missed)

The savings this year that were not there last year.............are the

Rent and rates on the northants site.
The rent on the Felixstowe site.
The costs of double handling goods will be removed.
The wages of the staff at the northants site
The dual computer and other systems
other costs associated with running a second site.

With the shares being traded at less than 50% of their NAV i would of considered starting a share buy back program to buy 10/20% of the company shares back and put in treasury.

This would of increased debt in the short term but rewarded shareholders with a reduction in capital.

Whilst 2023 will be another difficult year i think TANDEM are well placed to pick up business from failing weaker companies.

Tiger