Boohoo – Supplier links and other matters

Every Monday, Wednesday and Friday Wayne, Mark Simpson (@DangerCapital) and I run a live interactive show along the lines of FT Alphaville’s “Markets Live” (before it was replaced with “Markets Now”). On Wednesdays and Fridays Mark Simpson (@DangerCapital) and I lead “Small Caps Live”, but on Mondays Wayne leads the charge with “Large Caps Live”.

Today’s Large Caps Live was a bit special as Wayne surprised us by having spent the night digging out several details concerning Boohoo (definitely a large cap with a recent valuation of ¬£5bn) that had not been reported before. To quote:

  1. The Sunday Times article mentioned that a factory in Leicester (Jaswal Fashions) was making stuff for Nasty Gal (a BooHoo brand)
  2. The stuff was packaged into boxes labelled Morefray
  3. Companies house filings suggest that a Shahzad Irshad has some influence or control over Morefray [Morefray => I5 Holdings, I5 Holdings -> Shahzad Irshad]:
  4. Irshad is a director of a number of companies (including I Saw It First) with Jalaludin Kamani
  5. Jalaludin Kamani apparently has no current employment relationship with Boohoo (though he was their trading director in the past)
  6. But is still recorded as a person with significant control in the recent filings for Boohoo Holdings
  7. And separately Mr Lyttle (the CEO) owns 195 A ordinary shares in Boohoo Holdings – it is not clear what economic ownership stake this represents in Boohoo Holdings as Boohoo Group owns 10,000 ordinary shares. But it would be useful to have clarity.
  8. And the 14 day payment terms from invoice are interesting. But why does Morefray have to have a financing relationship with Bibby? And what are the accruals on Boohoo’s balance sheet for? Does it start with purchase orders – and how long from a purchase order to invoice?
  9. But we emphasise that there could be perfectly reasonable explanations for all the above.
  10. In particular Jalaludin’s position of significant control for Boohoo Holdings may be simply as part of a family group of shareholders (including trusts for his kids) so there might be nothing more complex than that.

As Wayne notes: “please tell me if some of the links or interpretation is wrong – we are not trying to offend”.

Just to put this in context, in this morning’s update Boohoo said implied they knew nothing of Morefray’s subcontracting activity to Jaswal (or its successor), for example saying that they have “very clear expectations on transparency about second tier suppliers“.

Regarding the trade payables I have since prepared the following summary showing them reducing when their 14-day payment policy came into force, but also the relatively high level of accruals which may also relate to suppliers:

You can read the entire show which contains a lot more detail by joining our discord server here.

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