Takko - €200m

All,

Please refer to our unchanged analysis here.

Our thesis that customers would flock back to discounters - in particular in the vicinity of DIY shops - was confirmed, even smashed, yesterday when Takko reported record results for its Q2.

€200m:

- The retailer reported €200m of cash per July, with only €13m of arrears to cycle through.

- The LC facility showed 27m undrawn and there was cash of €175m of cash per quarter-end.

WC:

- Inventory is clean, with much out-of-season stock sold at or near full price.

- Accounts payable are also back in line - safe for above-mentioned €13m. The company has aggressively renegotiated rents, some of which will stick.

Adj. EBITDA:

- Following the lock-down quarter with negative €-24m, Takko achieved a colossal €82m in Q2 (pre-IFRS16).

- Corona-related uncertainties are lingering on the continent, so management wasn’t drawn into raising guidance yet.

Supply Chain and inflation:

- Takko spend some 5% of sales on shipping, which will see headwinds.

- Supplier labour cost inflation did not seem to matter in Management’s calculations.

- Neither did the high Cotton price.

- Trucking-related problems are limited to the UK.

- Management sees price inflation for next year, but see Takko in a better position than peers, looking forward to raising prices only moderately to take some market share.

Positioning:

We remain long Takko for 6% of NAV. We had forecast strong, but not record-breaking sales, on the basis of which the company was to continue with strong liquidity. Now that Takko hold €200m of liquidity, it is hard to see further serious problems arising that wouldn’t be adequately provided for. It’s just yield from here.

Happy to discuss,

Wolfgang

E: wfelix@sarria.co.uk

T: +44 203 744 7003

www.sarria.co.uk