PGR and SFH

The SFH divestments announced yesterday are very interesting in the context of PGR.

For those who missed it, SFH has sold several businesses for $31m that recorded a combined EBITDA loss of $6.2m for the 12 mths ended Dec 2017. These brands included Katies, Rivers, Millers, Cross Roads and Autograph. SFH will also keep their City Chic business which is expected to make $19m-$20m this year. Overall a great result for SFH shareholders (although I think Noni B shareholders should be more concerned than they are).

This transaction clearly shows that buyers of retail assets know we are at cyclical lows and are prepared to pay up based on future earnings potential. It also shows the value of a portfolio of retail assets that provides the flexibility to churn assets as brands grow and die (and great pickup Ashentegra on Metallicus).

The more important conclusion however is that with a mkt cap of $54m, net cash, and EBITDA of $12-$15m at the bottom of the cycle, if PGR was sold today it would go for substantially more than 39c per share. Will be very interesting to see what Colliseum does next.