Douglas -> refi.

All,

First up, we are very proud that some of you bought the SUNs with us after New Year and we look forward to knitting a tight club together for more analysis, more intel, more P&L.

Some perspective on the results:

As per previous mails and our analysis (here), it was a record Christmas in Germany and specialist chains like Douglas benefited. Interviews with Douglas staff over Christmas confirmed that. Also a recent study suggested that Douglas was now significantly more present in the mind of young Germans' than only a year ago. Hence the online performance. 

Q1 is always a strong quarter and is always the deleveraging quarter due to the strong cash inflow over Christmas trading. That tide will go out again in Q2, but ~E50m gains will remain.

Turnaround:

The company has been increasingly able to maintain market share in its stores and grow it via online without sequentially bleeding margin as it did in 2017/18. In other words it’s become competitive. Most of the operational turnaround is now behind them. 

Road ahead:

IPO is nonsense. A secondary buy-out more likely, but still pre-mature and too much information asymmetry so soon after all this turbulence the last years. But a refi is certainly likely. 

Both bonds have calls in Feb / March. So certainly no refi before. Then, they’ll get another quarter or two under the belt while LTMs are sure to look good before refinancing the entire structure after summer (Although my timing seems off already. Maybe before summer). 

Wolfgang