Matalan - Timing
All,
Please refer to our unchanged analysis here.
Timing is important now for Matalan. The company now has time enough time to report on at least 3/4 of a year before it must refinance its RCF and other senior facilities. Note that these facilities are altogether held in sufficiently concentrated hands to allow for a negotiation that might facilitate the reporting of a fourth-quarter - if needed - before the SSNs come due too. In that context the company’s refinancing explorations of recent weeks seem to have been put on hold for the moment.
Status Quo:
- Trading since re-opening was described as encouraging, although no specific figures have been given. Elsewhere retailers are indicating expectations of sales levels to resume at 2019 levels. Retail parks have done better than other destinations in attracting footprint and so we remain confident in the company’s ability to rebound.
- FX represents a P&L tailwind this year for some E12m, but the cash effect has already been received last year with the sale of its hedge assets.
- Matalan has managed to maintain the aggregate of deferred payments of which £50m have to be repaid over summer. Note that this does not leave much liquidity headroom under its RCF covenant of minimum E30m. But with an inflow of payables likely and excess AW stock overhang, Matalan has reserves it can liquidate.
Q4:
- Overall, Q4 developments were pretty close to expectations. Management achieved higher sales and managed WC and CapEx and Overdues as expected:
- Sales exceeded our expectations, resulting in EBITDA of £-21.5m vs our estimate of £-27.7m.
- Net Working capital developed £8m better than our projections (although we flagged that management was going to beat our somewhat robotic forecast) when untangling write-offs and net CapEx was £5m better.
- Arrears remain at £83m vs our £85m.
- Thus ultimately the company’s cash balance stood at £110m - £27m better than expected.
Positioning:
We remain long the SSNs for 6& of NAV, which we consider safer than houses these days.
Wolfgang
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E: wfelix@sarria.co.uk
T: +44 203 744 7003