Here's a bit of a rarity: a retailer for which Covid has -...

Here's a bit of a rarity: a retailer for which Covid has - instead of providing a huge sales boost - has been a quite significant tailwind.  

And not just in terms of lockdowns meaning the bulk of TRS's stores located in major metropolitan areas (especially Melbourne and indeed in the entire state of Victoria in the half) were unable to trade of much of the period, but also on the input side of the business where supply chain disruptions caused stock shortages and pushed up logistical costs.

Every retailer's nightmare....  all in one six-month period.

And yet these guys managed to produce a result where the Pre-Tax Profit is 82% higher than pcp.


Since Mssrs Reich and Acquilina took hold of the reins of the company around 18 months ago, Working Capital has been reduced by some $30m, $20m of it coming from lower inventories.

As a result, over the past 12 months the company has generated $32m in FCF, which even if no further working capital liberation is envisaged, so maybe "normalised"FCF is currently running at $25mpa, that is sufficient to support a company with a $300m or $350m EV, rather than TRS's current $185m EV.  

The other notable feature of the company, which is making it increasingly investment grade, is the reduction in its liability risk profile.

In 2014 the company had almost $360m in debt and lease liabilities, which was placing the business at potential existential risk.  

The reduction in lease commitments, which commenced last year under the new management, and is continuing into the current year, combined with the increase in the cash holdings (as discussed above) is significantly de-risking the business, as can be seen in the graphic:




Total lease liabilities, net of cash holdings, are now just $82m.

(And that dramatic improvement has been achieved requiring a mere $25m of recourse to shareholders, so it is virtually all of the improvement is being organically driven.)

And remember, this has been achieved against the backdrop of Covid for the bulk of LTM to Dec 2020, which has been very disruptive to TRS's business.


Going into the current reporting season, I was thinking that TRS might be a stock which had possibly delivered all of the alpha which I had envisaged 18 months ago and that I might sell my shares.

The quality of this result, and the numerous little proxy clues that it contains, made me pause, and I expect I might end up doing the exact opposite, by adding to my shareholding.

I think that all Reich et al have done over the past 18 months is stopped the erosion of shareholder value; the value creation leg of their mission hasn't begun yet; that will be seen over the coming 18 months.

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