Findel (lon:stu)
STU - Studio Retail Group PLC

Findel Financials

ItemCurrent PeriodPrevious Period
Year20202019
Period12 Months12 Months
Revenue£515m£504m
Earnings
Adjusted Earnings
EBITDA
Adjusted EBITDA
Statutory Profit
Adjusted Profit
Total Debt£282m£270m
Net Debt£250m£233m
Findel Share Price
Grade:The Orange Grade - Shares That I Think Show Promise With A Few Caveats.
Title: STU - Studio Retail Group PLC
Company: STU - Findel
Share Price Then: 228p
Author: Ian Smith
Date: Tue 25 Aug 2020
Comments: Studio Retail Group group is Studio which sells a general household and clothing range to consumers and Findel Education a supplier of educational resources to schools and nurseries, both are on-line businesses.

Neither are names that I knew, but for the last three years the share price has been yo-yoing between 150p and 300p

Studio, being entirely on line would be expected to be only lightly hit by COVID, and the business revenue was £434.9m of which £123m was financial services.

The average credit period taken on sales of goods is 222 days (2019 restated: 213 days). On average, interest is charged at 3.5% (2019: 3.4%) per month on the outstanding balance.

During the current period, overdue receivables with a gross value of £56,586,000 (2019: £35,492,000) were sold to third party debt collection agencies

At the balance sheet date forbearance measures were in place on 11,685 accounts (down from 2019: 16,922) with total gross balances of £7,656,000 or 655 per account down from (down from 2019:£10,429,000)

This business is starting to look very much like the mail order catalogues that were very popular up the 1990s where goods are sold higher prices than the high street but with easy credit. So it is probably reasonable to look at Studio as a lender as much as a retailer.

It is worth noting a £5.6m provision for PPI and a £1.3m cost for refunding interest and fees charged on missed payments when the correct letters had not been sent to the customers.

The sale of Findel has been agreed with a buyer Yorkshire Purchasing Organisation (YPO) but is under consideration from the CMA with a decision expected in December 2020.

YPO are 100% publicly owned, by 13 local authorities sell to a wide range of customers including schools, local authorities, charities, emergency services, public sector and other businesses such as nurseries and care homes and represent many suppliers.

During the year Findel contributed around £82m to the revenue total of £515m and around £3M of the profits, so it was only very slightly less profitable at around 3.3% than the 3.4% from Studio.

This sale is £50m gross and at the moment I am not sure what that means as the sale is on a debt free, cash free basis.

The groups overall “real” net debt is £250m up from £233m, with an extra £43m of lease liabilities.

The group has something that they call Core Net Debt which is £52m down from £57m which excludes leases, which I get, and £197m of securitisation borrowings which I don’t fully get.

The securitisation borrowings seems to be loans from HSBC that allow Studio to fund the purchase and sale on credit of its stock with a caveat that if Studio doesn’t get paid then neither does HSBC.

With Frasers being such a large shareholder its really easy to see this as a positive, but we also saw that Frasers couldn’t build a relationship with the Debenhams board.

In January at the AGM Frasers Group (Sports Direct) voted their shareholding 37% against reappointing the CFO Mr Caldwell.

Apparently the issue was ..the treatment of Frasers Group as a related party in the Company's 2019 Statutory Accounts and its inventory and depreciation policies.
Read Count: 114

Buy/No Buy In A Nutshell
NegativesStandard mail order catalogue from the 1970s model put on line, reliant heavily on profit from credit rather than product sales.Bad debit may be at a worrying level
PositivesThe model might be old but it has stood the test of time, Frasers (Sports Direct) is a major shareholder.
Initial Review Price228p
Last Review Price228p
Last Review Date02-Sep-2020
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