MADE.COM - made for it? - General Discussion

Made.com (LON:MADE) (I hold)

Some very useful and quality posts on Made.com (LON:MADE) interim results last week – but I am struggling to find them buried in the SCVR of the day – so a thread to help keep track. I won’t attempt to outdo the posts, just an intro to the company and some links to the SCVR’s with discussion to start the thread and hopefully this will build of its own accord.

Here’s an intro to MADE.COM from last week’s interims

About MADE

MADE is the leading digitally native lifestyle brand in home, disrupting the industry with high-quality, exclusive designs underpinned by a responsible, small-batch production model, enabling customers to realise the vision of their homes. In addition to its in-house design team and collaborations with leading designers, MADE champions independent talent, offering them a platform and access to a scalable supply chain that makes their ideas reality. These partnersbring their unique perspective in the creation of bold statement collections and work with MADE to produce iconic designs.

Operating at the intersection of design and technology, proprietary algorithms take consumers on a journey: from outreach that makes designs discoverable to a frictionless digital shopping experience. Combined with an innovative ‘just-in-time’ order model, MADE provides a fresh and ever-changing range, with nine new collections launched every week and more than 8,000 active SKUs in the catalogue as at 30 June 2021.

Founded in 2010, MADE sells its products across the United Kingdom, Germany, Switzerland, Austria, France, Belgium, Spain and the Netherlands via its e-commerce platform. The brand also has seven showrooms globally, with flagship brand experiences in London and Paris.

Things that I note peering inside the PR Guff -

• The partnership (royalty based I think) with artists and designers is distinctive
  
• The speed of cycling new design collections on a 'test and small batch repeat' basis (now where have I heard that before)
• Data and algorithms used to predict customer order and optimise make and delivery schedules
• International Sales across 9 countries
• Although not clear from this text- MADE have direct supply agreements with a network of suppliers around the world including the UK, Europe and Asia which gives them diversification in their supply base - which I understand is unusual in the furniture retailing space.

The IPO
MADE was only admitted to the main market in June - at a shareprice of 200p valuing the company at a market capital of around £700m. Today its somewhat less.

I am not an expert IPO watcher but this one looked less like the usual VC or Institutional exit to me. None of the institutions that held prior to the IPO exited - although some sold down, about 10% of the share capital in total - and MADE raised £100m for specific projects - to fund growth in Europe, Reduce dispatch times and fund the development of a homewares marketplace as well as pay down debt. Subsequent to the IPO at least once institution increased their holding at 200p and others bought. Bet they wish they'd waited now?

The opportunity – I can’t improve on this summary by Davidjhill in the SCVR for weds 15^th sept

EBITDA this year expected to move positive and remember they have £175m of net cash. Their aim is to get to £1.5bn of sales by 2025 and should achieve at least 10% at a PBT level so your back of envelope calcs probably aren't a million miles off with some conservatism built in. In my view the key is whether you think the brand and management is strong enough to continue to execute at the sales growth rates they need.

There are other posts with insight into the sales growth – particularly the work shared by abtan and others on sales growth and kpi’s here in last thursday 16^th sep SCVR

The Threats

Risks Abound. Primarily expressed in terms of :

Competition - what stops a competitor eating their lunch.

Supply constraints and logistics delays - MADE.COM operate a negative working capital model or 'asset light' in which customer orders and payment are taken whilst product is still being made or in shipment - worsening conditions may lead to an increase in cancellations or lack of orders -

and Growth - MADE may not prove able to capture the growth they expect to reach their sales and margin targets.

So plenty of potential for both upside and downside risk here? Is this a GARP (Growth At a Reasonable Price) or a GAAP (Growth at Any Price) share? Is it better to wait before investing in the hope that it becomes cheaper? Or will the share price go up rapidly well before it become clear that they will achieve the growth that they seek? Questions, question......

H1 Web Presentation

There is a short presentation of the H1 results on PIWorld here – but without the Q&A – and although they are clearly talking their own book, and they do it very well, I found it useful and informative to see how they perceive themselves and gain a sense of how they see their own priorities.

I am genuinely struggling to decide whether to gradually increase my mid-sized (for me) holding, to hold and await developments or take the money and run on any improvement in shareprice - so I welcome all discussions and views - let discussion commence,

Cheers

Mark