CASTLEFORD TIGER
23 Mar 2018
Figures Net debt was 150We raise 125Net debt is below 100What happened to other 75?Serious questions need to be asked about what investors were told. Looks like my cash has goneTiger
seadoc
22 Mar 2018
Re: Not worth saving TX2,"if the owned wholesale division is unable to supply key lines the individual franchised stores could soon run into cash flow problems & have difficulty paying their bills & perhaps use any available cash to buy stock elsewhere in an attempt to stay in business rather than pay CVR. "When I bought into CVR (now sold) I spoke to local franchisee. He had been independent/spar and something else. The benefit of BB was that the till recorded all sales and without any intervention ordered his weekly delivery (he had to stock-take the booze as not all the locals left past the till). I will be back in April, will see what he is now "branded" but I doubt it will be BB.Meanbugger,"Sadly for shareholders I now believe the most likely outcome will be Investec tried their very best but in the end the institutions proved reluctant to throw good money after bad. I hope in many ways I am wrong and the company can be saved but it's looking much more difficult than everyone initially expected. "Sadly I think you are right.Regards,Seadoc
peddlar
22 Mar 2018
looks like a placing ,no win
TX2
22 Mar 2018
Re: Not worth saving The information in the latest RNS that the company is failing to pay its suppliers within agreed credit terms means that the company requires additional funds far beyond the figure that it hopes to raise.Nearer £200m will be required to refinance.The Bargain Booze retail division is mainly a franchise operation with over 600 franchised stores;if the owned wholesale division is unable to supply key lines the individual franchised stores could soon run into cash flow problems & have difficulty paying their bills & perhaps use any available cash to buy stock elsewhere in an attempt to stay in business rather than pay CVR. Likewise Restaurant customers of Wholesale division will switch to other suppliers and smaller ones will put payment to CVR on the back burner because they will probably be required to pay cash initially to their new supplier.The cash problem has been going on for months I suspect.What happens when you start to have difficulties in paying bills on time;to avoid supply stopping you "rob" the VAT due account because you think the" vatman" will take a couple of months to catch up.I think we have been getting the story in reverse order.The problems paying accounts happened before the company "overlooked"(ie spent!) the HMRC payment.
Bill1703
22 Mar 2018
Re: rights issue price!! "... it seems net debt must have been higher than they were letting on. Perhaps £50m - £75m higher? I'm not sure how that could come about but, in conjunction with the revised, revised EBITDA, surely suggests they were in breach of the leveage covenant?"A bit worse than that, Poleaxe.They previously said £150m net debt at FY end. Then cancelled the interim divi, which should have meant much nearer £140m. They now say "less than" £100m, but after raising (TBC) a gross £125m - and by this, we should assume "not much at all below" £100m (if more like £75m, they would have said so). The £30m tax bill is neutral to this, being due a full month before FY end and therefore should (we THINK) have already been reflected in the original £150m. Refinancing the £30m revolving credit facility is also neutral, as it is merely replacing debt with debt.So all in all, the additional cash "hole" appears to be north of £80m. Fees and costs related to the new funding will account for some of this, but only so much... I'm afraid the Carillion analogy is inescapable - this was a business where the technical year-end net debt figure was disguising (possibly deliberately?) a much higher effective, average level of ongoing net indebtedness. If they do indeed remain "trading within" covenant levels, this can only be on a fortuitous technical basis. Hardly a surprise they are struggling to get the institutions on board. CVR didn't "exist" 2 years ago, it is a hastily assembled amalgam of other businesses, overseen by people out of their depth... there is no historic track-record to fall back on, so any projections given to the institutions can only be guesswork - guesswork by a management team whose previous guesses have proven drastically wrong.So, touch and go here, as others have concluded. They talk about pursuing other sources of finance if they can't get the placing away, but if you can't sell this to small-cap specialists at 10p, where is this coming from? A suppose a bold PE player might take a punt... or potentially a trade buyer with proven experience and existing interests in the field. But either option would be a fire sale indeed, with no upside option (however tenuous it may be) through the open offer.
Meanbugger
22 Mar 2018
Not worth saving Not worth saving seems to be the view prevailing at the moment. At 10p investors have lost over 90% of their investment so the damage has already been done to their portfolios. Putting money in now just helps to bail out the banks and suppliers. The company's financial structure was far too weak to withstand the seasonal swings in cash requirements. Even a big dollop of cash just sees the company through rather than cures the underlying I think the whole board has been shocked by the Frankenstein monster of a company they created with its enormous seasonal cash demands. Some of the recently downgraded profit forecast will be due to them giving discounts for early payment where they can't use invoice discounting. Wetherspoons are such a large customer, I'd expect not all their invoices would be allowable under the facility and they are notoriously good at haggling and getting discounts.Sadly for shareholders I now believe the most likely outcome will be Investec tried their very best but in the end the institutions proved reluctant to throw good money after bad. I hope in many ways I am wrong and the company can be saved but it's looking much more difficult than everyone initially expected.
Courtier1
21 Mar 2018
Re: rights issue price!! difficult to say. I have no position so no vested interest but have been trying to work out if or where it is worth buying. These are a collection of businesses that made genuine money (under their previous management) and "should" be strongly cash generative.The lack a meaningful decrease in net debt post a £125m funding means it is probably a stay away for me. I'd need to see a lot more upside I think.Managed well this could be a good business. I seem to think the top 2 shareholders own 55% so I'd guess they are most likely to stump up, but would have to be convinced of new mgmt.Still think it is 75/25 in favour of being saved but we'll see. Not good for any small existing shareholder as they are effectively diluted out of sight and whilst there is an open offer it is largely irrelevant.
pyueck
21 Mar 2018
What does it matter now For existing investors you might as well stop checking the updates. If the fundraising is successful, and for what it’s worth I don’t think it will be, shareholders will be diluted to the point of irrlevence. 125m at 10p a share is 1.2bn new shares. There are 183m shares in existence. Whatever numbers they pluck I don’t believe them. The company is clearly burning though cash, why should I think this will change after raising money? Ebitda is such a stupid metric to even quote us, who cares about ebitda when you are struggling to keep the doors open. First thing I care about is cash flow the second net profit. Anything else doesn’t really bother me, certainly not ebitda.
megaloss
21 Mar 2018
Re: rights issue price!! Hard to see much upside even at a prospective P/E of 6, where is the competent effective management that is going to make this all happen? There's a lead time involved in getting a Board in place that can work out that two plus two actually always equals four..I wonder who will be asked to "take one for the team" by underwriting all this?
Poleaxe
21 Mar 2018
Re: rights issue price!! Like previous posters, if we've read it right it seems net debt must have been higher than they were letting on. Perhaps £50m - £75m higher? I'm not sure how that could come about but, in conjunction with the revised, revised EBITDA, surely suggests they were in breach of the leveage covenant?I hope the directors are suitably punished for the losses they have inflicted on investors. Sadly I fear they won't be.
Courtier1
21 Mar 2018
Re: rights issue price!! Interesting!!!So a £130m raise still only leaves the business at sub 100m debt. That doesn’t sound like previous statements where the £30m payment still left them at £150m debt. A £50m hole somewhere if I’ve read that right.Anyway let’s assume raise happens, we are looking at a business generating 45m next year with circa 100m debt. At 10p placing that’s what, circa £225m EV or 6* next years ebit. Probably about right given elevated risk?
Bill1703
21 Mar 2018
Re: rights issue price!! "I'm expecting the announcement tomorrow morning. Everything should be in place by now but things can slip at the last minute."Or, 6pm tonight! But still pretty good call, MB...Nice to hear from CVR, haven't heard from them for a while. There are obviously many things to debate in the statement, but I will merely offer a couple of observations based on the following section:"Assuming the Placing is successful, the Board would expect that the adjusted EBITDA* for the year ending 29 April 2018 to be in the range of £45.5 million to £46.0 million and net debt to be below £100.0 million. For the financial year ending 28 April 2019, the Board expects adjusted EBITDA* to show modest growth compared to the expected outcome for the current financial year."First, they have "lost" another £10m EBITDA for this year - a year which is nearly finished. And they've lost it in the space of a few days... sure, they attempt an explanation of the relevant factors, but it still reeks (IMHO) of a business which had no idea where its figures were actually going. Second, given net debt "below" £100m at FY end is after a successful £125m placing, then they are essentially saying a further (best part of) £75m cash has been suddenly swallowed up, compared to the previous debt forecast. This is staggering - unless there is a massive working capital swing which would hopefully at least partly reverse thereafter. But even so... I also question now whether the £30m HMRC bill was ever in the net debt forecast at all, contrary to what many of us assumed.Third, the forecast of "modest growth" in EBITDA to FY19 is the first time they've even attempted a guess at next year - as such, it sounds positive enough. If you believe or trust their figures - I am not sure why you would, and I doubt they do either.Overall, as others have surmised, it seems increasingly clear that this was a business in trouble for some time... and we should have been told long before we were. I wouldn't rule out prosecutions here, in due course...
Meanbugger
21 Mar 2018
Re: rights issue price!! I was wrong, they put out the statement at 6pm today. They confirm they are looking to raise a total of £130 million with £125 million by way of a placing to professional investors and £5 million by way of open offer to existing shareholders.I've heard it's been a much tougher sell than anticipated even at 10p a share. Institutions are insisting on meeting the management team to grill them and I suspect vent their wrath. I calculate about £50 million is needed to pay off creditors who are overdue and getting restless. £30 million to repay the revolving credit facility and £30 million for HMRC leaving £20 million to pay fees and other bits and bobs.It's not a compelling story as it highlights the way cash just gets lost in this business. Without a dividend many institutions will not be able to hold the shares in their funds. The meetings with institutions will extend into next week so I'm not expecting any further update until then. The Sunday papers are not going to hold back in their criticism of the previous management and how the fundraising is still precariously balanced. What a mess!
Meanbugger
21 Mar 2018
Re: rights issue price!! The existing authorities aren't much use. They can place 5% of the equity without offering to all shareholders. So that would be less than 9 million shares at 20p max would only raise £1.8 million or at 10p less than a million. This is why there is talk of a placing/underwritten rights issue of about 1.2 billion shares at 10p. I'm expecting the announcement tomorrow morning. Everything should be in place by now but things can slip at the last minute.
Poleaxe
21 Mar 2018
Re: rights issue price!! How far can they go with 'existing permissions' though. 5% max? Any more they'd need a General Meeting? A placing resolution would probably go through, because it would be supported by the larger holders who get to participate in the placing and PIs rarely take the trouble to vote against!
