I imagine it's because that £34m of cash providing a 'margin of safety' has turned into £11m. It's unclear whether the cash has been transferred into other assets or been lost through operating activities. Not a good situation for shareholders to be in. Lets say what james has to say, he seems to have some good insights.
I imagine it's because that £34m of cash providing a 'margin of safety' has turned into £11m. It's unclear whether the cash has been transferred into other assets or been lost through operating activities. Not a good situation for shareholders to be in. Lets say what james has to say, he seems to have some good insights.
james1989
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Profit warning this morning Aparoid,
It doesn't have no material impact upon value but the headline scares amateur holders. Seems to be some huge volume coming in at 30 so institutions are no doubt filling their boots at this price.
Had a limit in at 40 but thankfully got filled at 32.5 due to a gap, still worth 59 minimum, at this price there may be acquirers on the prowl, hold on.
Regards
james1989
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Regarding the cash Mpat, good spot, seems that management have used a substantial portion of this without expressing any real clarity what for.
They do mention temp. working capital movements, but we must wait for the report to be released.
I can't see how the cash has dropped that much without a serious error of judgement from management or a transfer elsewhere, as you say assets, I intend to hold until I get the statements through, but it may be safe to say that the margin of safety has been somewhat reduced.
Best regards
They do mention temp. working capital movements, but we must wait for the report to be released.
I can't see how the cash has dropped that much without a serious error of judgement from management or a transfer elsewhere, as you say assets, I intend to hold until I get the statements through, but it may be safe to say that the margin of safety has been somewhat reduced.
Best regards
james1989
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If all other balance sheet variables remain the same apart from cash standing at 11m, the NCAV of FCCN is 47GBX, hence we are still trading at a 33% discount not including long term assets, brand etc., which for me is cheap, but I would urge you to keep an eye on this, if it approaches 45-47, look to sell. As Warren Buffett says, time is the friend of a great company, and the enemy of a lousy one.
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Like I said in a previous post, this investment really depends on the quality of management and the way they deal with the issues they face. Seems like they've hired management consultants to help them turn the business around. This really gives the message 'we don't know what to do anymore'.
It's all very well calculating NAV's and so on but there is a real risk that one or two years losses can wipe out the entire value left in the firm. If price reaches 45-47 as you say, I will be looking to remove my holding awaiting further information, mainly from the interim income statement in three months. Otherwise I will wait for the interim income statement and make my decision to buy, sell or hold then.
It's all very well calculating NAV's and so on but there is a real risk that one or two years losses can wipe out the entire value left in the firm. If price reaches 45-47 as you say, I will be looking to remove my holding awaiting further information, mainly from the interim income statement in three months. Otherwise I will wait for the interim income statement and make my decision to buy, sell or hold then.
james1989
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Okay i'm out of FCCN.
As Buffett puts it, leave this kind of investment to the liquidators, and that's where I intend to leave it in the future, instead concentrating on what works (investing in good steady co's at good prices).
The position may rebound but I would prefer to cut a small loss rather than hold on to uncertainty, the French Connection management as mpat states have ran out of ideas, hiring outsiders will not necessarily help, but instead eat into our MOS ie cash reserves.
Best regards
As Buffett puts it, leave this kind of investment to the liquidators, and that's where I intend to leave it in the future, instead concentrating on what works (investing in good steady co's at good prices).
The position may rebound but I would prefer to cut a small loss rather than hold on to uncertainty, the French Connection management as mpat states have ran out of ideas, hiring outsiders will not necessarily help, but instead eat into our MOS ie cash reserves.
Best regards
I think you need to look a bit closer at the company (in particular, look at who manages the company and the history to answer the first paragraph). also bear in mind that ex-UK the company made £15m last year, i.e the main question is how much it will cost to get out of UK leases (the company's main problem is overheads, it took out a lot of really bad leases at the top of the market in places that didn't hit the right customers i.e in shopping centres).
I would say though that basically everyone in this stock got attracted by the spike up to 60 and is thinking the same thing as you as they are way underwater now (i.e ill just wait till I can break even). Most of these guys didn't sell yesterday or today, this will weigh on the stock for a long time and things will only pick up when they can't take the pain anymore. Obv, there isn't a lot of free float and around 7m traded all around the peak so the 1.2m over the past two days just isn't enough to turn this around.
Am I right in thinking the company is still run by the original founder? If so, I'm pretty sure this guy will be married to certain elements of his business and find it difficult to make the necessary changes. In a way, it is good that management consultants have arrived. I doubt that the changes required are particularly complex or difficult to implement. If the business was able to discontinue the operations outside of the non-UK £15m profit you mention with a relatively reasonable one-off charge or some kind of manageable debt financing, it could be that the company suddenly becomes incredibly attractive to investors at these prices, especially if the one-off charge/debt required is not too big.
Will be interesting to see what happens. I don't think it makes sense to offload at these levels though, especially given the lack of information at present.
Why will people not selling weigh on the stock? Or do you mean that there needs to be a substantial change in hands before price will start moving.
Right so your saying the company has the same elements as in 1972...either way, I don't care...all I care about is that this guy is with shareholders and is in serious **** if this goes wrong. He has turned the company around multiple times before (if you know retail, the mere fact that he has survived since 1972 should tell you a lot).
Saying management consultants are either good or bad doesn't make sense, as the company's problem is leases/locations it isn't suprising they are getting outside help, I don't expect people who sell clothes to know that much about the UK commercial property market. However, the changes are complex and difficult to implement, it is involves a very wide range of complicated factors with the easiest comparison being a debt restructuring. The sales problems are making a bad situation worse, although this could help lease negotiations.
Looking at what just happened, no-one is looking to buy here and no-one is looking to realize their loss. It is going to just keep creeping down until people can't take the pain anymore and panic. Its a combination of no supply, no demand. I have seen this happen a few times with small shares with retail volume, where the trades basically stop for weeks at a time after weeks of £10m+ days. It only stops when sellers can't take the pain, I guess this will be at 25p or, more likely, at 20p.
I forgot to say, about the cash, it is a big problem but the company always uses a lot of cash due to working capital through this part of the year. For example, last year's interim was £18m, year-end was £34m.
Me too, just dumped everything in my portfolio, gonna wait until the Greek election to see what's what. There's some serious pessimism right now, I don't think I want to hold on and try to outlast this bear market. Basically lost most of what I made from the rally between December to march.
