Deep Dive: The Rise and Fall and Takeover Fight for Accent Group, Australia's Shoe Giant

23:41I looked at it and it's like of all of the third-party retail businesses, this is definitely one of the better ones. It's not Mecca, but what you saw in Athlete's Foot when you went in there is something that I've consistently seen over an extended period. And that has a lot of similarities with Mecca. Like that experiential engagement that has a lot of similarities with Mecca. And obviously what they've tried to do is, like I'm not the only person that's caught on to this vertical retail thing. Like they went and bought Style Runner, which I think was basically broke, right, when they bought them.

24:16and Style Runner sells a lot of their own stuff and they've managed to grow Style Runner pretty aggressively and pretty well. And so they are trying to push into this vertically integrated let's hold more margins. But ultimately today their business is pretty much a mix of selling their own brands that they have exclusive licenses for and selling brands, just other people's brands like Nike through their own stores. That's basically what those – they've got a little wholesale business and a little vertical integrated business, but predominantly they're still a third-party retailer selling some of their exclusive in-Australia brands.

24:52It feels like the future bet on revenue growth is really around, like shoes really seem to be their specialty and it's really around the market for shoes in Australia. And they say that they're, this is a very interesting argument, because running and exercise is becoming increasingly popular, shoes wear out faster. Yeah, it's a great spot. That's a good pitch. And also, like, GLP-1, skinny drugs. Absolutely. Surely people are going to be doing more exercise once those really flow through. So there are some arguments for tailwinds. What do you think about, you know, the things that have been going badly for this business?

25:33All right. Well, COGS is the big issue. The fact that that gross profit's been smashed is disastrous. The cost of goods is rocketed. And they couldn't really explain. Like, the explanation they gave, those three explanations, High discount retail environment means your brand's weak or you haven't got any pricing power. Well, maybe I'd put that down too. I'd say high discount environment is. So you saw, Scott, that the store was full, but you also saw all these other stores were not very full. That's called consumer confidence. That's called we have to run discounts in order to get people to buy.

26:03That is what's going on in Australia right now, definitely. Yeah, just on that one, the Hype DC, which is also an accent brand shop downstairs, was nowhere near as full as the... They're other brand, obviously. But I'm guessing because that one's more fashion, that's where you're going to have to be running more discanning. I think that they said that business is also doing okay. That's not their problem business. Well, the thing I was thinking about is if you know that you're going to have to ride these trends, because the write-downs relative to their net profit, I think there's like eight or nine million of lost money on brands that didn't pan out, that they had to wind up.

26:43That's the best glue store as well. Glue store coming, actually. It's not a big one. Do you almost have to, if you're riding these trends, have you almost got to go into them where you're not taking ride-offs? Yeah, like you've got to, you ride them. You've clearly got to ride them because of looking at the Hocker results. Yeah. But then it's not over-capitalising what you're going to ride into. That's a great point because if you're going to say, we'll take on this brand and make some investment to see if we can make it work. Okay, Hockers are no-brainer because, as Adam said, they're selling a ton of the shoes and they say, will be the exclusive.

27:13We're all at our own stores. In Chatsun, they've got a Hocker store there. It's full all the time, that store. And that's run by Accent. That's not run by Hocker itself. Because remember, you know, Lego stores. Lego, Alchemy ran Lego stores, but then Lego has the other agreement. So if you're selling Lego into Kmart, that's Lego out of Denmark. That's right. I'm not fully sure Hocker is like that. Yeah, I actually don't know, but my assumption would be from looking at the material that Accent runs that Hocker store. Because they talked about rolling one out in Sydney. so I see what's theirs. There's definitely a couple of brands, not just Hocker, but there's a couple of brands where they do the...

27:48I presume Skechers is a big brand. We talked about Skechers this year before, which is great business and that must have been in you, if you remember. But your point is a good point, which is there's the write-downs are not exactly the same as... So there are write-downs where businesses buy some acquisition and then it was dumb. And so then they write it down because there was a dumb acquisition. but this is actually they've got kind of an investment thesis about growing the brand and so there will be some element of write downs for the ones that just don't work out. You know it's going to come so don't overdo it and it seems to impact net profit quite a bit.

28:24Yeah, that's true. The flip side is because you know the way the world of accounting works is that you get the write down and that feels unfair but on the flip side the money they invested in the years they invested didn't hit the expenses of the income statement. It was capitalised onto the balance sheet. And so it all evens out in the end. But I take, like, if you're going to give them a pass on the downside, you've got to say when they're investing, that's also not appearing on the income statement, you know? If you look at the profit, the business still makes decent, even with its profit drop last year.

29:00It makes, well,$60 million a year. And it made last half, what, 28. So this is not a business that does make money. But you need to explain the COGS, by the way. Oh, do you want to do the COGS? You said like, all right, one problem with the margins is they're discounting. I'm just going to turn everything into simple words. So one is we're discounting. Two is… Well, the other one's similar. It's forced inventory clearances. We bought too much of the wrong stuff. That goes to my thing on like, if you know you're riding a trend, you've really got to watch over. You know that's going to come and I think you've got to watch it.

29:30It's hard to tell from the aggregate how they're managing that, but that just struck me as like a… Who are you going to back more than Daniel Augustine? an alley to know what to buy. Okay, come on. Like, give me a break. This guy, yeah, every business that has inventory goes through a period of having to clear out the wrong... So yes, that's... If I kept seeing that, I'd say maybe this guy's lost it. But one, you know, one... And then the third was the AUD, UST. Because they buy inventory in UST. Yeah, but the UST wasn't super strong last half of last year. So I'm not sure how that's even an excuse.

30:04It feels like they're kind of just chucking darts at the dartboard. So maybe we want to say... Yeah, and I feel like you want to kind of pull that out. In something like this, you'd be wanting to pull that exchange out a bit more. Yeah, show us the same. Show us the light for light. Yeah, yeah, yeah, constant currency basis. So I agree with your, basically what you're saying is there's been a dramatic drop in gross margin and it's not well explained in the documentation. I would tend to agree with that.

30:40Well, that's the only explanation for the share, because the share price, the market cap... That's not the only explanation. Well, the market cap drops like$400 million. That's a six times net profit after tax multiple. That's a low multiple. Businesses that has over 10 years shown they can deliver growth. So it's a crazy low multiple. The growth's come off a little bit, though, right? Like the last year or so, it's come off. It still grew, though. Compared to those early years where it almost... Half or half, it was, what, 5%. So not amazing, but not disgusting. Yeah, and it's not going to get, unlike some of the other things, like it doesn't have that AI risk attached to it.

31:10No, that's why I love retail. And the benefit of GLP tailwinds as well. Yeah, like I'm going to be buying shoes again. It's actually got more tailwinds. As a sector, there's a lot of tailwinds here. And these guys who have been great executors, they've got great brands locked up. It feels like the market was irrationally punishing them for that COGS issue. So one thing that I think is playing into it around the share price, at least recently, is the level of dividends to the amount of cash coming in. And just recently it looks like they're borrowing to pay a dividend, which starts getting a bit into, I feel like...

31:48The balance sheet's not a terrible schmalt. Yeah, but just to borrow it, they've increased recently, they had$100 million or so, and they've increased the facility to$300 million or so. That's my recollection. There's a bit going on in this balance sheet. So there's court networking. So trade receivables plus inventories, less payables is 153. So 150 million inventory there, which is a decent chunk of inventory, to be honest. Probably more than you'd like. 800 mil revenue business. And a 60 mil profit business. So part of the problem is just that because the cogs have gone up so much, the margin's been smashed.

32:20So one way to think about inventory that's often used. It's 1.4 billion revenue. Oh, sorry, give it a half. Yeah, yeah, give it a half. So one way to think about it is, because these businesses are a tale of two halves because of Christmas time. Yeah, yeah, yeah. But if we just use round numbers and don't adjust the inventory for the timing, 1.4 bill, 120 mil of inventory, it's 1.11 of the year's revenue. So what's that, 9 % roughly. So like an 11 times stock turn is maybe the way you'd talk about this. That's fine. Like that's a fine percentage. Yeah, and given that it's not like they're experiencing that rapid growth, at the moment.

32:59So that rolling of stock should be pretty, given the rate that they're on, which is where I do come to the paying out of the dividend. I just generally my spidey sense goes off a bit when you see a dividend being paid out out of cash. Oh, it's never great. That you've borrowed. You don't want to be borrowing for dividends. It should be. That's shocking. So let's talk about that whole dividend stuff in detail. Because I know you're very worked up about the dividends by the sound of things. But should I take that on board? I think Fraser's has worked up about the dividend. Well, Fraser's we'll get to.

33:30You're going to talk a lot about Fraser's. That may or may not be true, by the way, that they worked up about the dividend. Keep going, what were you saying? If you look at the balance sheet, so you've got networking capital of 153, then you've got core intangibles and PP &E. Just forget. I'm just going to ignore that. I'm also going to ignore the lease. So all of their product, plant, and equipment will be fit-out. Fit-out, yeah. So whatever. Ignore that. Intangibles, obviously, that's just brand stuff. Ignore that. And then a bunch of lease stuff. I'm going to ignore that as well. Guess that AASP 16.

33:59Yeah, yeah, correct. Forget that. Ignore all the stuff. So let's look at the stuff that matters. So there's networking capital of 153, and there's net debt of 114, so a bit less. Yeah. And you've got some tax, what they call tax and derivatives. Okay, that 50 million bucks positive on the real balance sheet. So it's not a terrible picture. We can just say the balance sheet is irrelevant to working at the valuation of this company. Would you think that's fair or not? Well, just the other thing to throw in is the dividends and also they're under a program of two things one is acquiring the remaining athletes foot franchisees so they need cash to do that I mean they could pause it if you didn't have cash you'd say hey we're just pausing for now how much cash have they got?

34:43we've got net debt how much cash have they got? I don't have that balance sheet here I think it's I don't know 36 mil 36 mil this is 2025 but I dare say it hasn't moved too much 36 mil how much does an athlete's foot store cost to buy that'd be a you question I don't know I've no idea how much each store makes how many athlete's foot stores are there it wouldn't be that much because I know there are there's 900 stores there's always different brands I know so let's say half are athlete's foot or less than that I think your point about acquiring the franchise stores is important and so let's say this it seems like it costs somewhere between 600k and a million dollars to buy a franchise store per store per store and they've got 30 to go according to their own presentation.

35:27So they're not going to buy them all tomorrow afternoon. They'll be able to have, between the cash and the facility, they'll have enough cash to be able to buy back those stores. Yeah, so the franchise agreements, I think the last one runs out in 2029. Right. Yeah. So I think that's fine. Would you agree that, because you talked about dividends, you've got these dividend issues you're going to talk about, and then you talked about buying franchisees, but not to teach you accounting because I didn't study accounting, but that doesn't appear on the balance sheet. And so could we agree? That's like more cash flow issues.

35:59So can we agree? I know that the dividends come out of cash. Yeah, yeah. But can we agree that the current, in valuing the company, the current balance sheet, we can ignore that for the purposes or we can just use an earnings multiple if we want to use, talking about what the company's worth. Obviously the intrigue around this company though is what's happening from a takeover M &A front which adds a lot, we're just talking about how this business is going and we've had some pretty high high excitement stuff happening why don't you talk us through the phrases before you just say that this throwaway line they make like 60 million dollars of net profit or something they might make less now but I can't remember what they forecast for this year but why are they trading on 7 times earnings and the answer is because they provided effectively a pretty dramatic downgrade in the last month and a half that says conditions are really terrible and we think we're going to do badly i mean that's basically why they've been penalized now it's been it has been sliding a little bit before that but yeah right now that's the the penalty that yeah so to talk through talk through what's going on the bit the bit that uh at first i was a little not so sure doing a retail one but they're not usually my my place but if you're like me and you prefer reading through a form 604 rather than watching harry potter or something you'll love the this is form 604 is a substantial shareholder notice um if you prefer that you're gonna love this story of like it's an epic epic uh hostile takeover going on here barbarians of the gates by fraser's group and so Fraser's it's Mike Ashley right there's a billionaire behind it you got a couple of billionaires to throw in to make the story extra fun but yeah Fraser's group is no stranger to doing acquisitions so just for context Accent Group there's a takeover bid and it's a hostile takeover bid from Fraser's group who's already a shareholder who is already a shareholder and they're Sports Direct right they're what yeah Sports Direct and JD Sports they're big competitors they're Sports Direct and they've got the license in Australia, right?

38:13They own LaCost and a couple of other brands, Slazenger they own. There's quite a few brands that people would be familiar with that they own. And what's, yeah, it's really interesting. So they put a hostile bid over for, I think it's 65 cents. So basically a zero premium. Zero premium. Which is unheard of, essentially. Our business has been smashed share price-wise. It's been absolutely destroyed. They've gone, I'll give you the lowest price you've ever got. Well, it's had a good month. I'll give you that as a tip. Yeah. Yeah. And so what's the, I think, what I want to do is just kind of wind back a bit into where this all started from.

38:46So there's been, Fraser's group has been trying to get into the Australian market for over a decade. So this player, the accent group, it's not just an overnight thing. With their sports direct business. We can go, well, no, no. So we can go kind of right back to 2014 and Fraser's group acquires a stake in, at the time, what was called MySail. Oh, back in 2014. They were essentially competitive ours when we had a brands exclusive business back in the mid-2010. Should have sold the real business. There you go. You could have been acquired by Frazes. We tried. We weren't interested at the time. To my sale or Frazes?

39:19No, to my sale. Yeah, we literally did. It was our product business, not our travel business, obviously. So they got in. They bought in while it was public for a small percentage. This is a business that was worth like 500 million bucks or 700 million bucks. It was just outrageous how it valued. This is like the adored beauty of the 2010s idea. if you remember the old sale or my sale business that i remember back in 2000 would have been 2013 i remember our good friend paul greenberg ran this retail event in in versace in the gold coast and i was like we were early days with like sense i was kind of like largely the irrelevance there but there was gabby from catch the day was a big time and and carl and so jamie was there who was a really charismatic great looking guy was running awesome these guys they're worth 400 plus they hadn't listed yet they're worth 500 plus million i think maybe this deal was had happened or it was about to happen.

40:05You were fanboying by the sounds of it. I was fanboying. I remember a whole lot of that conference is, we were in this like session, it was Versace then. It was like very fancy. I couldn't believe I was staying there. And we didn't work with it at that point. And everybody's in this session and it's like really serious retail corporate stuff. And the guy who was running Super Cheap Auto was there. So there's like, I think Peter Bertle's his name. There's some big people there. And everybody's like concentrating and we turn out like outside, they open the curtains and Gabby's like doing laps in the pool.

40:33It was like, you're not giving less of a shit about this conference. I think Gabby had it right, to be honest. But Paul did an amazing job. I'm shocked to hear that. Paul did an amazing job of getting just every single person in retail was there. Yeah, right. Other than the Meyer and DJs. That's the Paul superpower. He was his incredible. Everybody is always happy to talk to Paul. And come. I mean, genuinely happy. Yeah, and he did a great job. And Jamie was there, and it was peak of his power there. Yeah, okay. Yeah, so that's a great – Yeah, so you get a bit of a colour of what's going on up there with Catch Group and everything.

41:05And then I think they were viewing it as a way to get into the Australian market. So they, in what we'll see is like similar to what they're doing with Accent Group, they started upping their stake, upping their stake, upping their stake. And then they got over 20 % and then they launched a takeover bid. This is after it became public. This is after, yeah. And then at the same time, which is fascinating, they bought another brand called Sneaker Boy out of administration. I remember that. Which even why no? So at the same time they bought - You didn't go back into administration. They bought the - Yeah.

41:35Well, they bought it and then they put Sneaker Boy into administration. Yeah. But then looking at what they've done, they've rolled it into the MySale. My guess is a whole bunch of the assets - Well, Sneaker Boy and Chadston, I think, went - Like, got shut. So I presume that was the case for - Fraser's was the group that bought it. Yeah. They bought it for probably cents or a dollar. Pennies or a dollar. Yeah. Yeah, out of administration. and then we come forward from 2022 get to July 2024. This is just before Fraser's first gets involved with Accent. And Fraser's is what, like a$10 billion group or something like that?

42:07Yeah, it's quite a large, like it's large international and this is the, he's got a bit of a nose for acquisitions. Yeah, it was an amazing acquirer. And so just before Fraser's gets involved, We've got the founders of Accent Group, Craig Thompson, Brett Blundy, a few others. But between Craig and Brett, they own 22%. Accent's trading at those all-time highs. Yeah. Up, around and above$2 a share. And Blundy probably senses the moment. He's good, isn't he, Brett? Doesn't get much wrong. Sells$165 million of his shares. You could have rung the bell when Brett's selling, I reckon. His entire block goes to Fraser's Group.

42:48Fraser's Group. I remember seeing Brent Brett sold, I thought, oh, this can't be good, and I wonder why he's selling. Those are the two things that crossed my mind. And the announcement at the time is interesting because there's an announcement from the company that says there's a strategic shareholding with talks going on for some time. So they've bought Brett's shares, and then Craig Thompson sells a few months later for a good pop on his shares. So Brett helped him out there with a bit of a – Presumably Brett would have said to Daniel at the time, Like, I'm going to sell that to phrases. You're doing a sports direct deal.

43:22It's going to be good to have them on the register. They're going to be putting one of their directors on their board. That's a whole other conversation I'm sure you're going to get to. And I think at the time, Daniel would have been positive about that. It looks like it, yeah. Although he sold down a few million dollars of shares at the same time, but not many, three or four million or something. It was the inside trading incident, was it? Was it? I must have. That was one of the incidences that he's being investigated for. Well, whatever the case is. He sold out a few mil, but he wasn't selling ours.

43:53Allegedly, obviously not. And I think that at that moment in time, people maybe didn't see Mike Ashley for the wolf that he actually is because he was so beautifully dressed and purring like a pussycat. so I don't think that they were I don't think people realised where this was going to go when that transaction look at his CV it would have been pretty clear that this guy doesn't buy passive stakes I maybe would call a few other people I mean like these are smart people they probably do this but I would call a few other people that he'd acquired and said before he acquired you like a year earlier was there a gnashing of the teeth or was there just a nice purring sound of how we'd work together you know I think that would be a good question to ask Yeah, and then so like you point out, Adia, then they put on, Fraser's put someone on the board.

44:47I think it's worth, so they've bought Blundie's share, which is 14.5%. They're about 14.6 % at the time, goes down to 14.5%. They put a board member on. It's worth just for our listeners kind of explaining the corporate chess that's, takeover chess that's going on here. Well, the thing is they appointed a director who didn't work for Fraser's. So that looks great. like yeah it's an independent director we're going to put him on the board by the way he worked for me for 35 years beforehand and recently retired and ran the sports direct business in some big jurisdiction that they had run so this is a guy and so you're sitting there and you're mike ashley and you're saying god i want to get into australia and i think accents yeah my opportunity and i just locked up 15 of the company and um but i need to know what's going on how the hell am i going to Well, one way I can know what's going on is I can do a Sports Direct deal.

45:41That's going to be good. That's going to get me some information on how the business is going. That's some information, but I want more information. So how about I appoint someone on the board that ran a chunk of my Sports Direct business and that I really trust. I think that will really nail the information flow for me. Now, I don't know that he did that. The director shouldn't really be doing that. But my guess is there was some high-quality info that was flowing back to Fraser's group from this director. Well, they went in before the partnership's announced. So the shareholders are board, the board members are on, and then a year later they announced the strategic partnership.

46:16And it's kind of curious from the outside as to what came first, the chicken or the egg, the strategic partnership or the shareholding. I think the likelihood that Fraser's did not have in mind using Accent as their distribution partner for Sports Directed and Australia at the time they made the acquisition, the likelihood of them not having that thought is 0%. Like, that's got to have been planned. It's also, if you're Mike Ashley and you want to get this business as cheaply as possible, they do this, JB. They've got to roll out these Sports Direct stores. That's got pretty significant capex.

46:44They're distracted. That's a lot of work. Great. While they invest in these businesses, they're going to be a bit weaker. So Mike says, you just go spend a couple hundred million bucks on this, and then boom, I'm going to take you out when you're a bit weaker. The flip side to that argument is the way to not get this business cheaply is to buy 15 % from Brett Blandy at the top of the market, right? So that's the corollary of that argument. Yeah, that's true. That was, in hindsight, Brett clearly sold at the absolute perfect time. He couldn't have gone a better sale than that. And I don't think, my honest view is, I think when Brett sold and Fraser's bought, Fraser's was not of the view they were overpaying for that stake.

47:20I don't think Mike wants to overpay for anything. Yeah, I think everyone thought this business was going to be doing well and like whatever his long-term, his long-term plan is always take it over for as little as possible, but I don't think this is... You're kind of going to win. You're going to win either way. Either they're going to bring Sports Direct in and it's going to go really well and you get the bump on the share price, or if it doesn't, goes a bit in the middle, you can buy it for a bit of a cheaper... Well, even when they bought it, they're making$90 million MPAT 1.5. It wasn't...

47:45It was like a, what,$17 million MPAT multiple. It wasn't a crazy valuation even back then. It's just gotten a lot cheaper. And they, Accent Group, to drive their growth, needed this Sports Direct deal. Yeah, they needed... I think, again, you know, if all I showed you was this deal and I said, how do you think this turned out? At that moment in time, project four years forward. I think we'd be pretty likely to say, this seems like a sensible arrangement. It probably went well. One little asterisk. If you go to the Australian market, of course, for category killing sports stores, Rebels, the original one, but I'm not sure there's that much space.

48:22So, yeah, I think Foot Locker, you would say, is a competitor to athletes. Which is owned by Dick's Sporting Goods, the massive US giant. One of the world's most popular sports apps. Do you know that Dick's Sporting Goods sells more guns than anyone else in the world as well? Has one of the world's most popular sporting apps. Yeah. Like, actually, it's crazy. Going really well. Yeah. But I think Foot Locker is kind of a competitor to both sides of Accent's business. The performance side of it and also the leisure side of it. Yeah. Well, I guess that's a big question, Adam. It's like, that's the big market question.

48:53Can it fit a Sports Direct athlete's foot? Foot Locker. Rebel. And we're not the UK. We're not London where you can go down Oxford Street and there's all these different stores. There's only 26 million people in this country. Maybe we're all buying out more shoes than we realise for running. Well, we probably are. But also, you have to remember, there's Nike's own stores as well. One of the big franchisees of that went broke in New South Wales recently. I was going to say this at the time, I just want to let the conversation keep going, but you talked about 5 % growth. Yeah. Now, there's two ways to look at that.

49:33The way athletes foot positions, that is, it's growing faster than the industry. Footwear is on a downward trend. If you look at the US footwear index, like for public companies, it's gone down. Which is like, yeah, that's Puma. That's predominantly. And so we always grow faster than the system growth. That's what Accent says. That's a good argument, but the flip side of that argument is, God, it's terrible how slow the footwear industry is actually growing. It's growing really slowly. I've been able to do barefoot running, I reckon. So there's all these... I've destroyed the industry. So whilst they do grow faster in the system and there are all these tailwinds that we think maybe are coming through the industry, in the short term there's a headwind.

50:15There's a few real headwinds in this industry and their company update that they gave when they buried the ASIC announcement in there was basically we think the war in the Middle East is going to further increase our COGS problems. So there are short-term headwinds in this business. But it does feel like this is a very undervalued business. Well, I'll tell you the real – so I think the numbers are a bit wrong. So they say they're going to do 80 mil of EBIT ballpark. I'm thinking it could do more. And when I look at their EBIT, the thing about their EBIT is they've got interest expenses. And so I think that after interest, that 80 could be 55.

50:52Yeah. And then they pay some tax, maybe they get to 35, and they're valued at 400 mil. I think this is more like 11 times earnings. Yeah, but you're talking EBITs only like what? EBIT 80. So five times EBIT feels very cheap. It depends how much you want to consider. I've got it six times current, 6.6 times based on last 12 month EBIT roughly. But I think they gave you an EBIT for FY26, which was 80. They said, we think we're going to do 79 to 84. And so the question is, what do you think about, because there was all sorts of allegations thrown at Daniel, like, you know, he got an 82 % vote against his REM.

51:31See that? For increasing his pay 300K. Yeah. On that size business, yeah. Whilst reducing dividends. I mean, you think, what do you think they're going to do with dividends in this business? Depends if Fraser buys it or not. Let's say that. Yeah, I feel like they've got to stop the dividends. Freeze? Or reduce them. I think maybe not stop them, but reduce them. I don't know if they've got the option. Like if you're committed to the plan of buying these, even though it's small, they're not really in a cash accretive situation. So you think they might freeze dividends? It's possible. Can you assume that, I mean, I'm not a shareholder, but if I was, I'd be thinking, I actually want this Sports Direct deal to succeed.

52:14They're investing in that still, by the way. They're investing in that. Yeah, absolutely. More slowly. And I want, you want the group. They're in a good spot as a business market-wise, like we're talking about. I want that to succeed. Actually, I feel like the dividends are going to hurt my capital growth. What's Mike Ashley saying? He's saying, you losers. You're running this business backwards. The share price is tanked. You're paying out all dividends based on these crazy dividend numbers. You increase your salary. 82 % of people voted against you. ASIC's investigating you. There's been some own goals here.

52:48You're slowing down the sports direct rollout that you promised me. Like, get rid of these guys. All that stuff is actually not. He's probably right. It's a good narrative, right? It doesn't mean that he's getting a steal here. If he pays anything less than, I reckon,$800 million, it feels like it's been stolen. So the share price is already above what he's offered. Yeah, but still only 20 % above. So what do you think about, I'm going to call it five times EBIT, because a lot of the EBIT gets eaten by this interest expense. But interest, that's agnostic. That's why I said five times EBIT. It feels so cheap.

53:18It feels cheap. I agree. This feels cheap. I think they'll buy this business. If he wants to buy this business, it'll cost him a buck. What do you say to that? 90 cents to a dollar. And what's that in market cap terms? $800 million or so? It's like, let's call it 50 % more than the current market cap. So 600 to 600, 600 to 700. That still feels cheap to me. I'd say if he's paying a dollar instead of 65 cents, the total would be about 700 million, which is 15 times net profit would be around the... It feels cheap, but if you go and offer an investor who five seconds ago was sitting at 55 cents, if you go and offer them a buck, and by the way, your dividends are going to be cut so you can forget about those anyway, I think they would get this away at a dollar.

54:09I'm not sure Mike actually wants to pay a dollar for this company. We obviously want to pay as little as we can, clearly. But I think a dollar would get this across the line. I agree with you. That's why I think we'll absolutely get it done. But I think it's probably still a really good buy for Mike, who's obviously a super smart guy. And he's been doing this for 20 years. He started the business for nothing. This is a guy who understands M &A and won't spend it on anyone. Well, I don't think he's going away either because they've been working on the Australian market for 10 years. And he owns a big chunk of this business.

54:35Which is another way. Anybody who's a shareholder knows, well this guy's got a blocking stake because no one else can acquire it so this is really the only show in town hedge funds start coming in give it the old bear hug he's going to get it the question is what price and you're right with your comment about he can't lose like either this goes badly and he gets it more cheaply or the sports director all that goes well and this company becomes increasingly more dependent on him as part of their growth strategy like I mean this guy has manoeuvred himself into a great situation you don't make$6 billion US unless you're a pretty good operator and Mike clearly is on that note we're going to wrap it up great to see you in the studio as always Scott thank you I dear we'll see everybody back on our big episode on Tuesday