Weekly Round Up: Gamma Communications, Emis, Dechra Pharmaceuticals and Ted Baker

Weekly Round Ups are posted on my Patreon and contain analyses of news, corporate results and wider economics that affect my portfolio holdings and similar quality businesses.


The below is an excerpt from the Weekly Round Up posted on 12th September 2021.


Good morning all,


I hope you have had a lovely week and have been able to make the most out of the last days of summer where possible.


This week, I had the pleasure of joining the line-up at the Pi World/Stockopedia virtual StockSlam, a social event where ‘slammers’ come to pitch an opportunity to viewers. The event is always a lot of fun and throws up some good ideas that are very much worth listening to. I personally benefit from hearing and responding to the tough questions from the audience at the end of a pitch, because if your argument for buying a share doesn’t stand up against strong probing, there's a good chance you shouldn’t own it. At this event I pitched AB Dynamics, a British automotive testing company known for its driving robots and suspension testing systems. If you would like to view the slam, you can follow the link here: https://www.piworld.co.uk/education-videos/the-stockopedia-piworld-virtual-stockslam-september-2021/.


Despite fantastic sponsorship and support from Pi World and Stockopedia, StockSlam wouldn’t exist without the show’s host and ‘first pitcher’ Damian Cannon. Damian writes a great financial blog on his website — if you are interested in UK small-mid caps, Damian’s trades and commentary on his holdings are well worth looking out for. You can view his August update here.

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Ted Baker released their 'Q2 2022' trading update on Tuesday last week. The UK mid tier fashion brand has had a torrid time over the last couple of years, losing 95% of its equity value from its all time highs in 2015. This quarter, Ted posted results that show tentative signs of improvement, but you are still able to see a business that has really been through tough times.


The headline figure for Ted suggests sales grew 50% during the period versus the prior year. However, unlike the companies discussed earlier, Ted had a terrible time in the pandemic. Revenue from its retail arm was up 30% in the period, but even accounting for this growth, revenue is still 30% below the level prior to the pandemic.


Also, the below three statements from the update would worry me as an investor:

  • Signed a new global HQ, Gorgeous Brown Building. The new lease deal secured rental savings of £3.3 million p.a. compared to the option to lease for Block A of the Tribeca development in Kings Cross.

  • Brand remains strong; recent YouGov survey recognised Ted Baker as second most popular luxury brand in the UK.

  • Group eCommerce sales decreased 25% and represented 39% of total retail sales (2021: 67%), reflecting a highly promotional stance last year ahead of balance sheet recapitalisation.

For a business with a total enterprise value of over £400 million (Equity + Liabilities), I am not sure why a £3 million rental saving is worth putting in a quarterly trading update. Firstly, this should be something any enterprise looks to undertake automatically, and the fact Ted Baker wants to include this information suggests they want praise for taking this decision. Or is the business under pressure to include this information from investors who worry about their capital allocation choices? Either way, it probably isn’t something you would see from a good business updating investors on quarterly performance.


Secondly, referencing this YouGov survey as a sign of brand strength is nothing short of ridiculous. The survey’s results supposedly suggest that the Ted Baker at #2 is more popular as a ‘luxury brand’ than Louis Vuitton at #26 or Gucci at #33. The validity of this survey is laughable, and it makes me wonder if management are out of touch with the reality of their business, or that they are trying very hard to convince investors that Ted has turned around. A quick look inside a large department store would tell you a different story. Even Google trends search data for the UK below shows customers are searching 3-4x the rate for other luxury brands than Ted Baker.


Google trends search data comparing google searches for Ted Baker, Gucci and Louis Vuitton over the past 12 months in the United Kingdom. The graph shows that Gucci is the most popular search term, closely followed by Louis Vuitton, with Ted Baker the lowest search term of the three.

Lastly, the company has also struggled in the delivery of its online eCommerce platforms, especially when they can no longer rely on aggressive promotion and discounting of their brand to attract customers as Ted Baker did in the prior year. Online sales decreased 25% during the period, which is a disappointment given eCommerce is a core part of Ted’s ongoing turnaround strategy.

I was very enthused by Ted Baker’s turnaround plan, as you may have seen in my Tee up of Ted Baker article a couple of months ago. However, this update shows Ted has much further to go before the business is suitable for an investment in my opinion.


This graph shows the share price of Ted Baker over the last five years. The graph shows that the share price has been falling since 2018 and is now at all time lows since mid-2020.

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