Taking a bite at SFH, page-11

Guidance has been that all inclusive ebitda will be +$15m, see separate posts on this and ex CEO commentary, not repeating here again.

@natnicnak

Official guidance, first announced on Oct 18th 2017 and then reiterated at the AGM on Nov 21st 2017, was for an underlying EBITDA of 14.0/17.0m$ in DH2017 and 14.0/20.0m$ in FY2018. That implies an expectation of -1.5m/4.5m$ for JH2018, on an underlying basis.

“Underlying”, as you know, means before exit/restructuring costs: that is consistent with the format in which yesterday’s results were presented, i.e. underlying EBITDA of 18.5m$ (which exceeded guidance, as previously announced) and net exit/restructuring costs of 1.6m$ (inclusive of a 1.4m$ government incentive).

When you mention the ex-CEO commentary, I assume you’re referencing this article, which appeared on the AFR on Nov 21st 2017

http://www.copyright link/business/...st-strike-to-close-300-stores-20171121-gzpm0l

and, specifically, the following paragraph:

“The company, which also owns Millers Fashion Club, warned last month earnings in the December half were expected to fall by half to between $14 million and $17 million and full year EBITDA would be between $14 million and $20 million, compared with underlying EBITDA of $26 million in 2017 and $60 million in 2010. Outgoing chief executive Gary Perlstein, who resigned last week after 14 years as CEO and 24 years at the company he co-founded, said the guidance took into account costs associated with closing stores and accelerating turnaround plans.”

Sure, if you choose to take it literally it does seem to imply that the full-year EBITDA guidance is after restructuring costs, and that would indeed make a big difference. It’s your choice what you want to make of it, but before presenting as evidence of anything, I would at least add the following caveats:

1) It is not an official announcement to the ASX; it is merely an interview to the press, with plenty of room for misunderstanding and reported by a journalist who is not a Company officer. Perhaps (and I am not suggesting this has to be the case, it is just a possibility) GP might just have been talking about the first half, where net restructuring costs were going to be minimal.

2) If the implied -1.5/4.5 EBITDA guidance for JH2018 were indeed after restructuring costs, given the scale of the shop closures coming that would entail a massive improvement in underlying EBITDA over the previous corresponding period (where EBITDA before restructuring costs was a negative -3.7m$, as of JH2017). It seems weird to me that such a significant improvement in underlying performance would not be explicitly and unequivocally emphasised in the Company’s official announcements.

The reduction in trade creditor balances back to around $84m will consume $20 of the $27m in cash. The drawn facility of some $6m and total available facility reduces to $22m. Surplus at or around +$20m across both.

Sorry, but I'm not following your reasoning here. This is the Company’s working capital situation as of Dec 31st 2017:

Current Assets
Cash: 27.7m$
Receivables: 11.3m$
Inventory: 81.9m$
Total Current Assets: 120.9m$
Current Liabilities
Payables: 103.7m$
Provisions: 21.3m$
Other: 16.4m$
Total Current Liabilities: 141.4m$
Net Working Capital: -20.5m$
Total Non-Current Liabilities: 17.1m$

If the Company, as you suggest, consumes 20m$ from the Cash balance and draws an additional 6m$ from the existing credit facility, the new Balance Sheet (before any further movements in WC and/or Free Cash Flow) will look as follows:

Current Assets
Cash: 27.7m$ -20.0m$ +6.0m$ = 13.7m$
Receivables: 11.3m$
Inventory: 81.9m$
Total Current Assets: 106.9m$
Current Liabilities
Payables: 103.7m$ - 20.0m$ = 83.7m$
Provisions: 21.3m$
Other: 16.4m$
Total Current Liabilities: 121.4m$
Net Working Capital: -14.5m$
Total Non-Current Liabilities: 17.1m$ + 6.0m$ = 23.1m$

So I don’t see how a reduction in Payables by 20m$ would fix the working capital deficit. In particular, I don’t understand what you mean by “Surplus at or around +$20m across both”; do you care to clarify that statement?

My point is that the Company needs to somehow be able to roll the WC deficit into the following year: the most natural way of doing that, without raising equity capital, is by securing a new long-term credit facility; that is certainly a possibility, but not one I personally feel comfortable about, at a time when the existing lender is reducing the total credit availability rather than extending it.

This is just my personal way of looking at it (and rationale for not staying invested at this stage); I sincerely hope for all holders that a good external offer will come through in due course and sort it all out.

IMHO & GLTAH