THT.L - Thornton's

[cr6196]

UK company, Retail/FMCG in chocolate biz, over 10% on management's PBT forecast for next year. Looks interesting (think this might have been on VIC???).

 

http://ukvalue.weebly.com/uk-value/thorntons-tht

[LC]

It's on my watch list. I'm waiting for management to make more progress fixing past retail errors.

[cr6196]

It's on my watch list. I'm waiting for management to make more progress fixing past retail errors.

 

What does that mean? Closing stores faster?

[LC]

It's on my watch list. I'm waiting for management to make more progress fixing past retail errors.

 

What does that mean? Closing stores faster?

 

That sounds to my ear as the easiest solution but perhaps not the optimal solution. I don't know store-by-store economics so management is to be trusted here. I'm not sure how much of the retail ops are left to rationalize (frankly I haven't followed their progress in like 3-4 months).

[ukvalueinvestment]

Take a look at their pension deficit.  They are having to spend £2.75mln a year to fund it.  Makes EV too expensive, IMO.

[MrB]

Pay close attention to their cash flow statement.

[whistlerbumps]

I have looked at this as well but passed at these prices.  My concern is that FMCG is not as good a business as people think.  It has a decent brand in an industry with large customers (UK grocers) who continue to go through a debilitating price war  and like to use chocolate as a loss leader.  I am not sure how they ever get any decent pricing in that environment.  They are also facing large competitors with much larger resources.  10mln in marketing or retailer support doesn't matter that much to a Lindt but it absolutely crushes THT. 

 

I'd be very interested in other people's thoughts on these issues...

[LC]

Pay close attention to their cash flow statement.

 

Yeah, not a pretty picture, especially when taken with whistlerbumps' comment above.

[peter1234]

Profit warning.

Thorntons announces that its UK Commercial channel within its FMCG division has faced challenges which have adversely affected its sales performance in the run up to Christmas.

http://investors.thorntons.co.uk/regulatory-news

[whistlerbumps]

I think the following article summarizes my concerns here.

 

Graham Ruddick

    Jan. 16 (Telegraph) -- Food and drink manufacturers at risk as sales and profits slump for major supermarkets

    More than 100 food and drink manufacturers are at risk of collapse because of the brutal price war being fought between Britain's major supermarkets.

    New research shows that the number of food manufacturers in "significant distress" rose by 92pc to 1,410 businesses in the final quarter of 2014.

    Julie Palmer, partner at Begbies Traynor, which compiled the research, warned that more than 100 of these companies will fall into administration by the end of the year unless supermarkets treat their suppliers "more fairly" and trading improves.

    She said: “With shocking increases in distress among the supermarkets’ main suppliers, the largest chains need to tread very carefully if they want to prevent a new crisis creeping up through their supply chain.

    "Worryingly, with 3.6m people employed in the UK food supply chain, the economic and political risks associated with the current price war are now reaching boiling point ahead of May’s election.”

    The warning from Begbies Traynor comes just weeks after one of the world’s largest trade credit insurers said supermarket suppliers face a “perfect storm”.

    Atradius claimed suppliers to the “Big Four” risk being delisted and having their payment terms extended as the supermarkets shrink the number of products they sell and try to ease the pressure on their cash flow.

    Tesco, Asda, Sainsbury’s and Morrisons are all suffering from falling sales as they face competition from the discounters Aldi and Lidl, and a shift towards shopping online and at convenience stores.

    The supermarkets have responded by committing hundreds of millions of pounds to cutting prices, with Tesco also looking to overhaul its relationship with suppliers after uncovering a £263m accounting scandal.

    Begbies Traynor's Red Flag Alert report found there is pressure on grocers across the country. The number of food retailers in significant financial distress rose 58pc year-on-year in the final quarter to 4,552.

    However, this deterioration was eclipsed by the 92pc rise in troubled food and beverage makers, which is the worst performing sector in the country.

    Ms Palmer said: "With the battle lines drawn, the supermarket price war is intensifying and it looks like the UK’s smallest food suppliers are bearing the brunt.

    ”A perfect storm is brewing for SME food suppliers at the bottom of the food supply chain, with many suffering a double hit from larger suppliers demanding “loyalty” payments as well as vanishing margins as a result of the inevitable aggressive supermarket price war.

    "Even the Government’s appointment of a grocery code adjudicator last year seems to be having little impact, with industry insiders reporting that the new watchdog lacks real powers and is still failing to protect producers from being squeezed by the supermarkets."

 

[yadayada]

I wish had made it a bit larger. That is a quick 100% er. Seems like the shares are worth more though. But I guess I'll take it