GB : boohoo group - Timing is not in Boohoo’s favour; risks loom and we move to being cautious

FY’22 numbers came bang in line but with adj. EBITDA margins down -370bps to 6.3%; sets an uneasy direction of travel for FY’23. Recent trading is very tough with deep discounting and promotional activity needed to hold onto market share. Hence it comes as no surprise guidance for FY23 is now for low-single digit growth, even a decline in Q1’23. Margins are expected to fall further (we forecast c.4.5% EBITDA) but guidance is very wide highlighting just how uncertain mgmt are. Net cash has fallen to c.£1m down from £276m cash LY, and with capex ratcheting up to c.£120m this year; the group has signed a £325m RCF. With margins declining, sales hard to come by and competition as rife as we have ever seen it; layering on debt and doing expensive capex projects (as needed as they are) seems unfortunate timing. Move to HOLD on valuation grounds but note the increased risks.