Headline Group Ltd ("HLD") - the next TRS??

[steve fleming]

As a dad of a little baby girl, I've watched with interest the huge turnaround/ transformation and success of baby products retailer HLD over the last year:


share price up over 350%
sales have gone from about $10mil pa to currently running close to $100mil
Heading towards almost 50 stores

The baby products market in Aus is extremely fragmented - there is no national player,
and very few large retailers with multiple stores. The opportunities for sector consolidation are huge.

HLD, using the very successful international brand - Mothercare (and it proven store rollot model), through acquistion and store roll-outs, is very quickly becoming the dominant player in the sector.

Sales are expected to reach $200m within 3 years. Valuations are a bit difficult at the moment given the normalisations required to earnings, however profitability is expected to grow substantially in the coming years as a result of the increased scale, relative market share and market coverage.

It has a rolls-royce shareholder base including the UK retailer Mothercare, Clime Asset Management, and as from yesterday Myer Family Co and Allegro private equity. Word on the street is that other institutions are trying to position themselves into a story that is increasingly looking like the next TRS.

Certainly one to watch, everyone I talk to can't speak highly enough of HLD management, and reckon this is one stock to be on if you want retail growth exposure.

[steve fleming]

HLD also has a store in NZ (ELC in 277,Newmarket).

I would expect that that store will be converted to a Mothercare store in due course.

[mark100]

Hi SF, I have been keeping a watching eye on HLD. As you say its hard to nail down the actual profitability at the moment given all the normalisations required. That's the only reason I haven't bought yet, I just want a bit more clarity on profit

[percy]

Cirtieron Tim Boreham mentions HLD this morning.www.theaustralian.com.au/business "cashed up buyers can't turn a trick"
I brought a few at 44cents today.Thanks for the intro.

[steve fleming]

Here is some press re the Myer investment into HLD:

http://www.smh.com.au/business/myer-family-puts-its-cash-into-a-growth-industry-20100922-15n0e.html?skin=text-only

"The Myer Family Company...which maintains a minority stake in the fashion retailer Myer and a seat on its board, has invested in Headline along with Allegro Private Equity of Sydney. Both will take a seat on the Headline board once the acquisition is complete.

The move gives them exposure to a growing and highly profitable sector, as parents spend their savings and baby-bonus cheques on everything from baby capsules and prams to nappies, thermometers and high-tech sound and movement monitors."

I can definitely agree with the above statement - visits to baby stores have certainly eaten up a fair chunk of our savings over the last year!!

[David Hardman]

I like this stock as well.

Got in about 3 months ago @ 34 just prior to the Mothercare investment.

The "baby" market is highly fragmented. Mothercare is a huge in the UK. If they can replicate the model here we will have a great niche retailer on our hands.

Going to be a little hard to get a feel for numbers with all the takeovers/rollouts etc. At this stage its more a case of buying the "story".

Also held TRS for about 5 years. Will be happy if they can perform in the same way!

[winner69]

and it wasn't that many years ago that JB Hi Fi revenues were only a few hundred mill and now they are in excess of 3 billion

The secret to success for Headline is get a decent operating model up and running with good operating ratios like margins and the cost of doing bsuiness .... then earnings will be a %age of ever increasing revenues eh

TRS success is based on supply chain efficiencies along with the use of technoklogy to move stock as fast as possible. JBH use technology as well but keep the cost of doing business down. HLD hopefully is developing something that will in a few years will generate ever increasing profits from a decent operating model which produces NPAT margins of 5% of a growing number of stores .... easy peasy eh

Good luck to them but be preapred for some shocking financial results in the next few years or so .... one to believe the story and stay with

Like the fact that Myer family have bought in the story .... always a good sign

[Footsie]

What kind of EBTIDA and NPAT margins we talking on $100m?

[winner69]

What kind of EBTIDA and NPAT margins we talking on $100m?

Thats one of the great unknowns methinks

Until it all settles down I don't think one can assess what 'normal' margins are likely to be ... but in a niche sort of market selling good brands you would hope that they are pretty healthy

You have any idea footsie

[David Hardman]

Mothercare has been listed on the LSE for about 4 years.

http://www.mothercareplc.com/

[percy]

at present the market cap is approx $60mil.Sales expected to rise to $100 to $150mil pretty quickly. Net profit is expected to rise to $6.4mil 2011-12 and $13mil 2013-14.Because it is mothercare Mall owners and other landlords will welcome a new concept store.So roll out should be fast.Because the Mothercare concept is a proven model risk should be reduced and margins should be good.We just need Steve Fleeming and other posters to keep breeding.!!

[Footsie]

mothercare has an NPAT margin of 6.7% and trades on a p.e of 17x

so normalized 100m = $7m NPAT 150m on issue post placements EPS 4.6c p/e of 17 = 79c

at 44c its on a normalised o/e of 9.5x
It's just that you gotta have faith because the figure wont spit out till 2012

I love the brand , I love the concept but its still very unproven.
for the risk, I think one can do better.

[percy]

My first retail business was nursery furniture and toys.The baby business is a good one to be in.If you give new parents GOOD ADVICE and good products you do well.One grand parent buys the bassinette,the other the cot.Same with pram/pushchair.There is a huge amount of product to sell.The brand is the best. The concept is good.
The Mothercare concept will be accepted.The higher incomes,and less unemployment than UK should help to lessen the risks.I know I would have hated competing with Mothercare.Babycity does a good job in NZ but no way could they compete.The brand is the best.I am sure that will save them millions in set up costs and advertising.

[winner69]

HLD shareprice down in the dumps recently after the enthusiatic boost over 40 odd a few months ago

Prob due to punters reducing risk in a uncertain retail environment

Still one to watch for the long term .... might get some close to 20 cents .... yes?

[winner69]

Everybody said this was going to be a rocky ride .... but this rocky one may ask?

[percy]

KW. Thanks for the link.The baby business is certainly a lot more competitive than we I was in it.I hold HLD, but will not add to my holding until there are some positive results. Only retail stock I am holding.Thought they would be able to swim against the tide.Wrong again.!!

[winner69]

Everybody said this was going to be a rocky ride .... but this rocky one may ask?

Ouch ... getting even rockier as the MLC shareprice plumments to 15 cents

You guys nearly convinced me to take an interest in this at 40 cents .... still on the watchlist as the chart looks worse and worse .... good old charts eh to keep you out of trouble

But with market cap down to $3om odd one would have to say worth while keeping a closer eye on now ... even with the general malaise in retailing in Australia

Could always revert to the old babies will continue to be born and grannies will continue to buy nice things for them so Mothercare future assurd and no reason for the share slump to have happened so this must be cheap as .... but I;ll go by what the market thinks at the mo ... and over the enxt few weeks / months

Getting interested

[percy]

Ouch ... getting even rockier as the MLC shareprice plumments to 15 cents

You guys nearly convinced me to take an interest in this at 40 cents .... still on the watchlist as the chart looks worse and worse .... good old charts eh to keep you out of trouble

But with market cap down to $3om odd one would have to say worth while keeping a closer eye on now ... even with the general malaise in retailing in Australia

Could always revert to the old babies will continue to be born and grannies will continue to buy nice things for them so Mothercare future assurd and no reason for the share slump to have happened so this must be cheap as .... but I;ll go by what the market thinks at the mo ... and over the enxt few weeks / months

Getting interested

Yes,well convinced myself to buy some at over 40 cents. All the posts I posted about how difficult retail was and was best to avoid.!!!Sold all my retail stocks except this one.Just proves that when the tide goes out all ships sink. Whether the tide will turn or keep going out remains to be seen.But the chart will have to show a change of trend,and they will have to show they are on track before I add to my holding.

[drillfix]

Dont know why, but I cannot bring up any code on this stock HLD either on IB or commsec.

Has there been a name/code change or something?

[percy]

Dont know why, but I cannot bring up any code on this stock HLD either on IB or commsec.

Has there been a name/code change or something?

You don't really want to go there.!!!!! lol.
Yes namecode change. MLC is the new code.

[drillfix]

Ahh yes ok folks, MLC reads fine.

Guess whoever started this thread needs to update the thread Title as shown in my sig :)

[winner69]

Jeez .....hadn't looked at for a while and see down to 5 cents or less and in a trading halt as more money pumped in ....heck market cap $10m

Think current shareholders to take another bath?

Hope you cut your loses a while back percy

[percy]

Jeez .....hadn't looked at for a while and see down to 5 cents or less and in a trading halt as more money pumped in ....heck market cap $10m

Think current shareholders to take another bath?

Hope you cut your loses a while back percy

NO [cry] No [more tears], I have gone down with the ship [or sh't].I only hold one retail stock in Aussieor NZ and this is it..!!!!!!!!
Read the report before the trading holt,saw sales up 9.3% while on line sales were up 43% and thought well you know where to concentrate,then as I read on I could see things were worse than I thought,and then mention was made of discount capital raising,and I knew what a fool I am.
Lessons learnt ;stay away from retailers,and remember to sell at first sign of trouble.

[winner69]

Looking ominous for existing shareholders ......has thevukncompany given up and the Myers buying back the pommies share?

Highly dilutionury they say ..... You know what that means

[winner69]

latest announcement suggests all over bar the shouting for shareholders .... maybe a small return but MLC will be back in private hands

Was tempted once with all the hype once around this outfit but glad never in it ... and again charts were the main determinate

[percy]

latest announcement suggests all over bar the shouting for shareholders .... maybe a small return but MLC will be back in private hands

Was tempted once with all the hype once around this outfit but glad never in it ... and again charts were the main determinate

Wished I used the same charts as you.!! Looked to be in a nice uptrend when I brought. lol.

[winner69]

gone broke percy .... myer didn't go ahead with the deal and administrators called in

prob business model was broken in the first place

a bargain for someone to pick up and start again maybe