Takko - Q1 Preview

All,

Please find our updated Takko analysis here. Evidently Takko neither breached its covenants, nor did it have to materially draw its RCF in Q4 - thereby frustrating our short.

Nonetheless, liquidity has been extremely low in January and LfLs in Q1 were flat. With an equally flat GM (guided) that leaves the company under pressure to achieve positive LfL sales for the remainder of the year if it is to stem the E22m cost headwind from having rolled out another 122 stores in 2018. 

Given the narrow room to manoeuvre and the typically strong order volumes in the run-up to Easter, we believe the revolver will have had to be drawn after all and we know that the company met banks early in the year. Clearly, this may have been due to Alexander Mattschull taking over from his father. 

As a result, we remain short into next week’s reporting. The likelihood that the company significantly outperforms our model is low. However, risk to our position could come - for instance - from a cash injection from the Mattschull family or from an alternative solution that may have been found. After all the company received sign-off from its auditor on the 2018 financials. 

Upside to our position could come from exposure of how tight the liquidity is and how it is becoming tighter unless Takko manages to actively grow LfL sales (not a consistent feature…). Meanwhile we continue paying 7% running yield on the position, so we will reassess after the call. 

Wolfgang