Markets Live transcript 15 Jun 2011

Posted by Neil Humeon Jun 15 11:05.

Markets Live chat transcript for the chat ending at 11:14 on 15 Jun 2011. Participants in this chat were: Neil Hume, FT bryce.elder

NH

Hola Rabble
NH

sorry for being late
NH

couldn’t get the system to work
NH

and I was looking at this
NH

RTRS-EFSF 10-YEAR ATTRACTS 8BN EUROS OF DEMAND AT MID-SWAPS PLUS 17BP, BOOK CLOSING AT 1030 GMT -LEAD
NH

the latest bailout bond
NH

Right then
NH

let’s move on
NH

and hello to Mr Barnett
NH

we have been discussing that story in the newsroom
NH

guy gamed an algo
NH

at a spread betting company
NH

that didn’t realise he’d been doing it for over a year
NH

and then he gets the book thrown at him
NH

by the FSA
BE

Is this market abuse?
BE

I’m not entirely sure.
NH

quite clever
NH

certainly
BE

Exploiting a weakness in the system.
NH

if you missed the story
NH

A UK day trader has been fined £700,000 ($1.1m) for market abuse – the fourth-largest such fine for an individual – for manipulating the price of spread bets linked to shares on the London Stock Exchange.As part of his settlement with the Financial Services Authority, Barnett Alexander was also forced to give up the £629,000 in profits he netted during the 16-month scheme. A former private client stockbroker, Mr Alexander discovered he could influence the price of contracts for difference (CFD) and spread bets in his favour by placing small equities orders in the same FTSE 250 stocks. Mr Alexander in effect narrowed the spread with the small equities orders, placed large CFD orders and then closed out the position at a profit, according to the FSA final notice.

NH

Mr Alexander, who received a 30 per cent discount for settling early, told the Financial Times he did the bulk of his trading in the early morning, when spreads were widest. He said he had not intended to break the rules.“If I had any dispute, it should have been with the spread betting firms. The FSA have bailed the spread betting firms out of trouble,” he said. “How does a private investor know when a trade is legitimate and when it is not? Everyone knows, don’t do insider trading and don’t ramp shares.”

BE

Neat.
BE

And I’m still not entirely sure of which rules he’s broken.
NH

Most of the trading occurred at City Index. The company said Mr Alexander was “abusing the City Index trading system, which gives our clients the benefit of extra liquidity when trading certain equity markets … [and] which the majority of our clients use appropriately and within the law”.
BE

You can’t “abuse” City Index’s trading system.
BE

You can just exploit where it’s not been built properly.
BE

I’m still not sure about throwing around phrases like “within the law” either.
BE

He’s not faced a jury.
BE

He’s not been criminally convicted of anything.
NH

well
NH

if he’s been done
NH

then surely the same rules must be applied to the robots
NH

shut down the trading robots
BE

Well, quite.
BE

An identical form of “abuse”, surely.
NH

but hang on a moment
NH

they provide liquidity
NH

they are a force for good
BE

They’re a force, undoubtedly.
NH

(@Barney – yes that was the main point of the FSA’s case. And they have a point(
BE

Removing the bots would remove, what, 50% of daily volume? 70%?
BE

Anyway, I see he’s going down the Nick Leeson path to reclaim some of his losses.
NH

oh yes
NH

after dinner speaker
NH

trading guru
BE

A trader who has been banned from working in the City for five years – and has had to pay £1.3m in fines and other penalties imposed by the Financial Services Authority – wants to train would-be traders and talk about his “exploits”.
NH

like Anton Kriel!
BE

Well, not too much like Anton Kreil hopefully.
BE

The man who saved Goldman Sachs by shorting BA on September 11.
BE

He says.
BE

So should we move on to the markets portion of today’s show?
NH

I guess we should
11:15AM
NH

In spite of Wall Street’s overnight gains
NH

and a good display in Asia
NH

we are down
NH

FTSE 100 off 16 points at 5,787
NH

with Glencore the biggest faller
Glencore International PLC (GLEN:LSE): Last: 484.95, down 15.05 (-3.01%), High: 495.00, Low: 482.80, Volume: 7.81m
NH

has the curse of the UK IPO struck again
BE

Ouch. 485p.
BE

There must be a lot of embarrased bookrunners out there.
BE

Or perhaps there isn’t, and that’s part of the problem.
NH

I guess said bookrunners
NH

are putting through big downgrades
NH

on the back of yesterday’s results
NH

but as they are all under a research blackout
NH

we don’t get to see them
NH

and once again
NH

we get back to this issue of pricing
NH

everything seems to be overprices on flotation
NH

and then go one way
BE

Yup – the idea of leaving a bit on the table seems to have disappeared.
BE

Perhaps that reflects the kind of floats we’re getting right now.
NH

amazingly there’s an outfit called STJ Partners
NH

going round the City telling people
NH

that banks are actually under pricing IPO’s
NH

and they have a presentation to prove it
NH

which strikes me as totally bonkers
NH

can you think of one UK IPO that’s been even close
NH

to reasonably valued?
Ocado Group PLC (OCDO:LSE): Last: 223.00, up 3.3 (+1.50%), High: 223.90, Low: 219.70, Volume: 57.34k
Betfair Group PLC (BET:LSE): Last: 846.00, down 9.5 (-1.11%), High: 860.50, Low: 836.50, Volume: 65.43k
NH

GLEn:LSE
BE

Well, Webvan’s trading above.
BE

After some time trading well below.
NH

yeah
NH

that can only be explained by the fact there’s a dotcom bubble
NH

dot.com bubble 2.0
NH

there can’t be many rational people who think it was good value on IPO
BE

And £5 for Supergroup looked a less insane price than £16, or whatever it got up to.
Supergroup PLC (SGP:LSE): Last: 826.00, down 49 (-5.60%), High: 880.50, Low: 826.00, Volume: 82.13k
NH

crikey
NH

it will be back at 500p before long
BE

FCUK 2.0.
NH

perhaps SuperGroup was the exception that proved the rule
NH

right
NH

back to Glencore for a moment
NH

I’m slightly surprised
Xstrata PLC (XTA:LSE): Last: 1,290, down 3.5 (-0.27%), High: 1,311, Low: 1,283, Volume: 4.43m
NH

aren’t down more
NH

to read across from yesterday’s results from Glencore aren’t good
BE

Well, there’s considerable confusion
NH

downgrades of 20% apparently
NH

The bottom line is we (and consensus) are definitely too high at c.$3.9bn net for 1H, primarily driven by coal pricing ($103/t vs. spot at c.$119/t), weak production (Q2 production ‘disappointing so far’), ZAR and AUD strength, and cost pressures in SA (Alloys earnings ‘way below’ what people are forecasting and costs ‘through the roof’). In short our own numbers are quite a bit too high, and the number you saw in Glencore’s results this morning is, without a doubt, bad. Now speaking to Glencore there is at least a small positive for XTA in that some losses offset the overall reported associate income figure (e.g. Mutanda), but when I said to XTA the figure implies downgrades of up to 20% (from the top end of consensus), they did not push back on that at all. In the last 28 days BBerg consensus has come down to c.$3.8bn for H1 (from c.$4.1bn), but I think consensus goes lower, more like $3.5bn.
NH

and this
NH

So aside from the correction yesterday, & luckily most of you covered/hedged at £13, the ‘big elephant in the room’ question remains; yet curiously neither the regulator or the mkt wants to acknowledge its presence… 1) Should not the companies have to publish results on the same day. Otherwise we get an unofficial disclosure from Glencore on Xstrata’s performance. 2) As GLEN is a ‘trader’ on all assets (including stocks), is their very prescence a contradiction to the ‘priveledged’ information rule. That poor guy that got fined yesterday just figured out an Algo. Here, GLEN pretty much owns XTA’s distribution lines & visa versa. 3) Just as an aside GLEN saw this China slowdown in commods coming 6 mths out, gets itself listed, & then on its maiden results announces they are seeing a slowdown in the biggest buyer of resources in the history of the world!Fishy. 4) So where’s the trade? GLEN will finally have to buy XTA. David wants £20. Ivan’s having too much fun buying small fry for the moment; but the 2 are umbilically linked. Meanwhile the Regulator instead of chasing minnows must address this massive issue of the pair of them & the imnplicit advantage both have on each other’s figs.
BE

Interesting, if true.
BE

Though a downgrade of 20% would really require some company guidance, surely.
BE

And there’s been none.
NH

one would imagine so
NH

perhaps there’s an explanation
NH

to do with seasonality
NH

whatever
NH

it needs clearing up
BE

Yeah – and it certainly needs clearing up before Q3, when Glencore will once more contradict a month-old trading statement from Xstrata.
BE

At best, it’s just not very tidy.
11:27AM
NH

Right then
NH

to the banks
NH

Mansion House speech tonight
NH

who is the sector doing?
Royal Bank of Scotland Group PLC (RBS:LSE): Last: 41.09, down 0.46 (-1.11%), High: 41.67, Low: 40.78, Volume: 15.58m
Lloyds Banking Group plc (LLOY:LSE): Last: 48.28, down 0.275 (-0.57%), High: 48.44, Low: 47.86, Volume: 37.99m
Barclays PLC (BARC:LSE): Last: 260.95, down 3.6 (-1.36%), High: 263.40, Low: 258.55, Volume: 8.53m
HSBC Holdings PLC (HSBA:LSE): Last: 609.70, down 6.3 (-1.02%), High: 616.17, Low: 608.20, Volume: 11.16m
BE

So – following the market towards a small-down.
NH

hmm
NH

I suppose
NH

confirmation from the chancellor that we are heading for ringfencing
NH

of retail assets
NH

with a 10% capital need on RWA’s
NH

is not a massive surprise
NH

and it’s not a forced break up of the banks
NH

still
NH

Osborne is trying to spin things
NH

to be seen as being tough on the banks
NH

and this is really anything buy
BE

Yeah – I guess we’ll get more heat than light tonight.
NH

indeed
NH

right I have some interesting comment from Bruce Packard at Seymour Pierce on this
NH

George Osborne is to use his Mansion House speech to say that he will accept the ICB recommendation of ringfencing, according to all the newspaper headlines. Not really the big news it is touted to be. We believe the ICB recommended ringfencing rather than full structural change to the industry (favoured by the Governor of the Bank of England), because ringfencing had a much greater chance of being an acceptable “half way house” between doing nothing and full break ups.
NH

The implications for shareholders remain unclear. Much depends on whether capital markets believe that when (not if) the next crisis hits BarCap, RBS or HSBC GBM, will be allowed to fail. If they do believe these divisions will be allowed to fail, then in return for providing funding to investment banking divisions, they should impose much greater discipline on these divisions. If the idea works, it would make the whole sector more resilient in a crisis, and a more investable proposition for equity investors.
BE

Ta.
NH

oh and here’s Deutsche Bank
NH

With the ICB focussed on deposit subordination, we note reports that
Chancellor Osborne will endorse UK retail ring fencing in his Mansion House
speech tonight (FT: ‘Osborne backs high street bank firewalls’; 15 Jun 11).
No new information is provided on the parts of the ICB plan which are unclear
and matter most: (1) What is inside the fence; (2) Whether funding can
still be raised at group level and assigned to the retail/non‐retail subsidiary
groups, which would prove less expensive for the sector. We expect a
satisfactory resolution on both issues in time, and believe that share prices
of the UK domestic banks (Barc, LBG, RBS) discount the likely costs of ring
fencing. But, unavoidably, some residual uncertainty will remain until at least
when the ICB reports on 12 Sep. A required 10% core tier 1 ratio for retail
banking is consensus, and therefore moot in our view.
BE

Oh, was just reading that.
BE

Relating to this story
NH

I like Packard’s point
NH

there’s no point ring fencing
NH

if you don’t make the risky banks
NH

have a big finish on their capital weightings
NH

at least 10%
NH

(Leonidas – that sort of misses the point. It was saving RBS and HBOS that cost this country a lot of money. not the other two)
BE

Ok – speech kicks off at 8.30pm
BE

A terrible time for newspapers
NH

yes
NH

not good
BE

And, to reiterate, the devil’s always in the detail so it’ll probably be a non event anyway.
BE

Back to movers, I feel.
11:35AM
NH

Time for a bit of retail woe then?
NH

and an upgrade
NH

Emoticon
NH

said last week
NH

the statement from Game Group would be poor
NH

and he was right
The Game Group PLC (GMG:LSE): Last: 40.00, down 5.25 (-11.60%), High: 43.00, Low: 39.00, Volume: 3.56m
NH

it is poor
NH

and once again the reason is that the low income demographic
NH

can’t afford those computer games
BE

(@reviedon: H1 consensus according to Bloomberg is $4.2bn.)
BE

Well, partly.
BE

We’re also at the back end of the upgrade cycle.
NH

true
BE

No new hardware until Nintendo launches its Wee Tea Tray.
BE

Which is the excuse the company’s dragging out.
NH

Game was yielding 14% before today’s fall
BE

Though, frankly, that should’ve been in the forecasts already.
BE

And – yes – either the price is wrong or the dividend forecast’s wrong.
NH

so is this another business in terminal decline because of the internet?
NH

another HMV?
BE

Um – possibly.
NH

I have to say
NH

the strategy annoucement
NH

alongside today’s results has not impressed anyone
NH

Nick Bubb at Arden called it guff
BE

Nice.
NH

and he has a point
NH

Multichannel: Our aim is to grow our market share significantly by joining up our ecommerce and high street operations. Our UK online market share is now 19%, up from 13% last year. We will move our game.co.uk website onto a new platform this summer.
NH

Strong customer relationships: Our aim is to have a direct relationship with every customer. 300,000 new customers have joined our loyalty schemes in the last 7 weeks, taking the total to 17.3 million. We will launch personalised campaigns to increase the number of “super users” (our highest spending customers)
NH

and so on
BE

I have a Game loyalty card.
NH

and
BE

Though I don’t have a console.
NH

how strong is your relationship?
NH

oh, you’ve answered that
BE

I’m one of those 17.3m people, I guess.
BE

Rather emphasising what a pointless statistic it is.
BE

So – downgrades?
NH

yeah
NH

the company was talking about a rise in sales
NH

now its a fall
NH

Here’s Bubb
NH

Game Group (move from Add to Neutral): Less jam today, more jam tomorrow? The most amazing thing about Game is that the shares yield nearly 13% at 45p, but of course the market is afraid that this will go the same way as HMV’s dividend, given the structural challenges in the games market. And beneath all the guff in today’s AGM update about Game’s strategy delivery the fact is that Game has delivered yet another profit warning today…
NH

Full year guidance has been shifted down from a small rise in total sales to a small fall in sales, after a poor start to the new-year (LFL sales running down 9.4% after 19 weeks) and their judgement that this autumn’s software line-up revealed at last week’s E3 games show is rather feeble
NH

Despite some cost-cutting, this sales shortfall will cause some damage to the bottom-line and ahead of the 8.30am conference call we are cutting our full year PBT forecast from £35m to £27m/£28m, which will deliver EPS of only about 5.8p. That only just covers the 5.8p dividend, but we think the divi will be held, given a reasonable balance sheet and hopes of an upturn in the games cycle next year. That prospect should underpin the shares at this level, but Game always promises jam tomorrow and we think it is right to downgrade our view on Game, and move down from Add to Neutral
BE

There’s no way Game’s jam tomorrow.
BE

None.
NH

want anymore on this
BE

Um – just glancing at Numis
NH

Seymour Pierce say sell it
NH

We have a Sell recommendation for the following reasons. 1) the lack of a fourth hardware cycle, 2) the limited number of real software blockbusters, because of the high cost of developing new games, 3) the disintermediation of the gaming market away from the physical box market to on-line platforms, which, we suspect, will become an issue for the specialists and 4) further competition from the supermarkets. Against this backdrop, we believe management’s new ‘Dedicated to Gaming’ strategy will not be enough to stimulate sustainable growth for the foreseeable future. There remains downside risk to forecasts as we believe management should be more aggressive about closing stores down and taking cost out of the business.
NH

Dedicated to Gaming
NH

Oh dear
NH

that’s rather lame
NH

(@Indeed Swedes)
BE

And a quick word from Numis, if only for the forecasts.
BE

Jan-12 PBT cut nearly 50%: With guidance around cost saves (£5-8m) and gross
margin (-100bp) reiterated, the sales shortfall drops straight through to bottom line. We
lower our Jan-12 group revenue forecast to -1.7%, reducing our PBT forecast from
£35.5m to £19.1m.
BE

Progress on strategy and new consoles are positives: Game is starting to see
results from the implementation of its strategy, including market share gains and
improved online growth, and there were encouraging tones around the new consoles to
be released in 2012 (PS Vita, Wii U). For our part, while we acknowledge that these are
clear positives, we expect Vita to have a limited impact, with mobiles and tablets
weighing on sales of handheld gaming consoles, and doubt that Wii U will have the
mass appeal that Wii managed to achieve.
BE

But we remain negative: Although its strategic initiatives seem to be having an
impact, we reiterate our negative recommendation, believing that our two key structural
concerns (erosion of pre-owned margin and share of mint titles) will continue to play
out; even ignoring the longer-term threat of disintermediation, Game operates in a
horribly competitive space, and we would continue to avoid.
BE

So, sub scale in a declining market.
NH

those downgrades are savage
BE

And management’s holding for the next upturn to reinvent its market.
BE

Which, by the time it arrives, may no longer exist.
BE

Emoticon
NH

yes
NH

risky strategy
NH

I’d suggest buying something
NH

a live events business perhaps
NH

to build the relationship
NH

oh wait
NH

that’s been tried
Hmv Group PLC (HMV:LSE): Last: 7.56, down 0.18 (-2.33%), High: 8.00, Low: 7.32, Volume: 4.83m
NH

right
NH

still in the retail sector
J Sainsbury PLC (SBRY:LSE): Last: 327.60, up 0.8 (+0.24%), High: 330.80, Low: 325.80, Volume: 2.77m
NH

what’s the great PR man Justin King
NH

been banging on about today?
NH

the great customer offering
NH

how many miles of bunting they sold for the Royal Wedding
NH

Despite the tough economic conditions our customers celebrated Easter, the Royal Wedding and the glorious weather in April, playing to our strength of supporting family occasions. We sold nearly 300 miles of bunting, 159,000 flags and 49,000 mugs. Hot cross bun sales increased 29 per cent and we sold the most champagne we have ever sold outside of Christmas.
NH

there we go
NH

playing to our strength of supporting family occasions
NH

WFT?
NH

it’s not a party planning outfit is it?
NH

and why were Hot Cross Bun sales so strong?
BE

Um ……..
BE

Perhaps they’re taking business from Greggs.
BE

I don’t know.
BE

And I don’t really care that much.
NH

yeah
NH

PR guff
NH

at least he wasn’t on Radio 4 this morning
NH

going on about it
NH

puts me in a really bad mood
BE

Well, the headlines aren’t actually that good.
BE

Sales up 1.9% like for like
NH

ex-Vat
BE

Which, given the late Easter and TEH WEDDING isn’t great.
NH

they are flat
NH

not much better than Tesco in fact
TESCO Plc (TSCO:LSE): Last: 407.05, down 0.25 (-0.06%), High: 407.25, Low: 404.00, Volume: 4.05m
NH

and Tesco
NH

has more non food
NH

and that performed very badly
NH

all told
NH

a pretty unimpressive set of numbers
NH

in spite of the Justin King spin
BE

Sainsbury says its clothing/non food kept growing, but that’s off a relatively low base.
BE

And they added 209,000 feet of floorspace
BE

!!!!!!
NH

don’t get me started on the expansion plans
NH

of the big 4 supermarkets
NH

madness
BE

Right – some comment then, I guess.
BE

Here’s Credit Suisse.
BE

Headline LFL (inc-VAT/exc-fuel) was 1.9% compared to our estimate of 2.0%,
Stripping-out VAT, exc-VAT/fuel LFL was around 1.0% (our estimate 1.2%,
Reuters consensus 1.3%). So, the key KPI is broadly in-line with expectations,
which should be well-received given Tesco’s very slight miss at this level
yesterday. Although Sainsbury’s Q1 started later than Tesco and so should
have benefitted more by not including most of weak March, it also ended later
and so included end-May/start-June where tough weather/World Cup comps
weighed. And, like for Tesco yesterday, cash sales growth was strong – adding
high fuel inflation/volume growth, inc-VAT/fuel LFL was 4.8%, and further
adding new space sales growth, Total Sales were +7.3% (our estimate 6.5%).
BE

Within the detail, most components look robust – convenience and online
continue to grow at >20%, and non-food again grew faster than food albeit
market conditions are very tough. The outlook is cautious but unchanged – the
market “remains very competitive” and Sainsbury expects “this to be the case
throughout the year”. As such, we do not expect consensus revisions today.
BE

Our view and valuation. The UK’s biggest two food retailers have now both
reported Q1 Total Sales growth of 7%. Although new space, fuel inflation, food
inflation and VAT wholly make up that growth (i.e there is no/negative volume
growth), we think Sainsbury and Tesco continue to ‘win’ from other less efficient
and responsive retailers. This bodes well should the UK consumer environment
finally begin to improve slightly. Most important will be easing fuel inflation,
which would free-up non-discretionary food spend. Also, improving discretionary
spend markets would help, but more for Tesco than Sainsbury. Although, there
is no sign of any improvement yet, we are not assuming much in our near-term
estimates, so consensus earnings appear robust at least for now.
BE

Sainsbury shares have underperformed substantially recently (–10.6% relative
to the FTSE All-Share over the last three months), while its two major UK peers
have outperformed. This 15%-plus valuation swing means Sainsbury now
trades in-line with its UK peers on P/E (all of the Big 3 trade in a tight range
around 10x 2012/13E with Sainsbury at 10.4x). Without estimate downgrades
we do not expect the shares to fall much further, but still think both Tesco and
Morrison deserve a premium rating and expect them to continue to outperform
Sainsbury. We retain our Underperform rating.
11:54AM
NH

Right
NH

service announcement
NH

Bryce has a posh lunch today
NH

somewhere in W1
NH

so we made need to end the show early
BE

Actually, not W1, but it’s some tiny place that doesn’t take bookings.
BE

What kind of madness is that?
NH

sounds interesting
BE

No website either, so you can’t cross examine the wine list and grumble about out expenses budgets.
BE

So, in short, I’m off in a moment or two.
BE

Anything else before I disappear?
NH

Let’s have a look
11:56AM
NH

we have some more mining super-tax jitters
NH

in Tanzania
NH

which is bad for African Barrick
BE

Yeah – confusing, this.
BE

First there’s a super tax.
NH

it’s a bit back and forth this one
BE

Then there isn’t.
BE

Then there is again.
BE

Can you clarify?
NH

no
NH

and nor can Citigroup
NH

When is a Super Tax not a Super Tax? Tanzania’s parliament yesterday approved a 5-
year development plan backing the proposed introduction of a super-profit tax on
mining companies. On Sunday, the country’s mining minister clarified that Tanzania
would not impose the new tax (no details provided) on existing companies but would
negotiate with the companies to have them pay voluntarily.
Both Anglogold and African Barrick have recently argued that their tax agreements with
the state are watertight and should not be subject to the super tax
NH

The government
seems to have acknowledged this and said it won’t ‘impose’ a super tax but will enter
into discussions with miners about a voluntary tax payment. The government statement
said, “We will not impose the proposed super profit tax on existing mining companies. If
implemented, we will have to negotiate it with the companies because they already
have agreements in place with the government.” There is much confusion.
NH

Our estimated NPV (10% WACC, gold declining to $950 over the next few years) for
ABG is £4.14 and ABG is currently trading at £3.99, well below its IPO price 14 months
ago of £5.75 (when gold was trading at $1350, not today’s $1520). This process of
consultation between the government and the miners is likely to drag on and until then
ABG will likely trade at a discount to the 1.5x P/NPV that we think it deserves.
However, a discount to NPV seems excessive to us, even in the light of the tax
BE

“a voluntary tax payment”
BE

Yikes.
NH

indeed
BE

How voluntary are taxes, generally?
NH

not very I’d say
African Barrick Gold PLC (ABG:LSE): Last: 401.90, up 3 (+0.75%), High: 406.70, Low: 400.00, Volume: 473.18k
11:58AM
NH

Other things to look at
NH

Mouchel
NH

management turned down loads of bids
NH

and one has to ask why
NH

the FD has just quit
NH

trading looks awful
NH

they have loads of debt
NH

and the share price is sinking
NH

well played Mouchel chairman
Mouchel Group PLC (MCHL:LSE): Last: 60.25, down 8.25 (-12.04%), High: 62.75, Low: 59.00, Volume: 774.22k
BE

(@Ptolemy: that’ll be Polpetto, above the French House. Excellent place. And no, not there.)
BE

Mr Bo Lerenius
BE

Bo joined the Mouchel Board in January 2009 as Non-Executive Director and became Chairman on 1 May 2009. He is currently Honorary Vice President of the Swedish Chamber of Commerce, Non-Executive Director of G4S plc. He is also a senior advisor to EQT, a major private equity group, Land Securities Group plc and Thomas Cook Group plc. Bo is the former Group Chief Executive of Stena Line and Associated British Ports, and was awarded an honorary CBE in 2005.
NH

ah yes
NH

AB Ports
NH

I remember that
NH

was eventually flogged to someone
BE

Selling teh family silver.
NH

anyway
NH

turning down those bids
NH

was a pretty dumb thing to do
NH

look at this
NH

from Peel Hunt
NH

Markets continue to be very challenging. With net debt rising
since the interims, Mouchel now needs to generate £42m to meet
the £30m voluntary debt reduction necessary to avoid the issue of
warrants and higher interest charges. It will take time before we
can assess with enough certainty whether Mouchel has been
successful in generating sufficient funds Therefore, despite the
potential medium-term outsourcing opportunities, we remain cautious. Hold
NH

and this from Arbuthnot
NH

We view this morning’s IMS as mainly negative. The numbers are said to be in line but are benefiting from a greater than expected gain from one major client. Both the disappointing win rate and the much reduced order book (£1.5bn from £1.9bn) reflect we believe the uncertainties which beset the business and its impacts on the client base.On an operational level, Management Consulting and Highways remain under pressure and BPO is stable. We retain our lower end forecasts unchanged this morning. We also note the debt at £107m and that the repayment of the £30m remains work in progress conceptually.

We view the prospects for the company as remaining challenging while the outgoing Finance Director, David Tilston, has commanded respect. We reiterate our sell recommendation on MCHL with a reduced target price of 45p.

NH

shocking
BE

Agreed. Can’t imagine shareholders will be too calm after this.
BE

Anyway, I’m off.
BE

So you have a Neil monologue until he chooses to close.
BE

See you tomorrow, rabble.
NH

I will keep it brief
NH

promise
NH

I too have a lunch
NH

in Mayfair
12:03PM
NH

Right then
NH

what else is there to look at?
NH

I know
Pursuit Dynamics PLC (PDX:LSE): Last: 283.00, down 15.5 (-5.19%), High: 298.50, Low: 272.50, Volume: 827.36k
NH

not looking to clever
NH

we finally got to the bottom of what happened yesterday
NH

at the RAC meeting
NH

an analyst from a US hedge fund was there
NH

Barrington Associates by all accounts
NH

he asked the CEO about revenue forecasts
NH

Pieper said he did not think they were obtainable
NH

and then refused to give any forecasts
NH

cue lots of selling
NH

anyway
NH

we put this to the company
NH

which came up with this gem
NH

Pursuit’s fundamental expectations for the revenues our business can generate overall haven’t changed, in fact the company has today upgraded its guidance for FY 2012 in the results announcement. The CEO’s comment merely reflected that some revenues that were expected this year will now be in the following year instead.
NH

So
NH

there you have it
NH

they have missed forecasts this year
NH

but it’s an upgrade for next year
NH

because they have been moved?
NH

how to turn a negative in to a positive
NH

may be not
NH

doesn’t seem to have impressed too many people
NH

and all this volatility in the share price
NH

just puts people off
12:08PM
NH

RIght a couple more things to look at
NH

Experian
Experian PLC (EXPN:LSE): Last: 778.50, down 22 (-2.75%), High: 801.50, Low: 760.00, Volume: 5.47m
NH

credit checking business
NH

taking something of a knock today
NH

and the reason seems to be worries
NH

of
NH

increased regulation in the US
NH

this just in from Shore Capital
NH

Reports suggesting that regulation in the USA is set to be extended to credit bureaus operating in the country are likely to be correct, in our view. We believe that from 2012, Experian and its peers are likely to come under a similar regulatory umbrella to their clients in banking and financial services; this has yet to be implemented in law, however. The issue is whether this is a significant threat to the credit bureaus.
NH

however
NH

they says it’s nothing to worry about
NH

Our view, based on past regulatory history and present involvement in regulation, is that an extension of banking regulation to these companies is not something to be feared for investors; any impact on our forecasts is likely to be limited and manageable in nature.
NH

Soundbuy
ITE Group PLC (ITE:LSE): Last: 218.30, down 20 (-8.39%), High: 235.60, Low: 218.00, Volume: 751.72k
NH

Investec doing the damage
NH

on the company
NH

which does exhibitions in emerging markets
NH

We move to Hold near term given incremental uncertainty on new Mosbuild competition. This is not entirely unexpected given Crocus’ now surplus space and previous history, and competition stands a very good chance of being beaten given Mosbuild’s strong market position. However, this may not be known for a while for a stock on a premium rating – we reduce our PT to 240p (from 265p) given added near-term uncertainty. Any material weakness would be a buying opportunity, in our view.
NH

(@Leonidas It has always been the case with Pursuit. good technology, iffy management)
NH

OK
NH

and to finish today
NH

a bit of RAW
RAW is market chatter – information that has not been formally tested through traditional journalistic channels (PRs etc). The story might be complete rubbish, but if we believe there is some substance to it we will say so. Either way, Reader Beware.
NH

we are back on the Carrefour story
NH

I think we are getting to the bottom of it
NH

it seems to be a rehash of the sell Brazil story
NH

and here it is
NH

A report in the Chilean press has suggested that local retailer Cencosud has held talks with Carrefour
with a view to acquiring the French firm’s Brazilian assets. The reports come shortly after rumours
that Brazil’s largest retailer CBD had held discussions with Carrefour over a possible merger, and
taken together indicate that Carrefour may well be contemplating an exit of the Brazilian market.
Rapid consumer growth makes Brazil a highly attractive retail market; however, the country is very
competitive and low margins may have persuaded Carrefour that the market is not currently delivering
the required return on its investment.
NH

An examination of the operating results of CBD suggests that the country is currently not a very
profitable region in which to operate. This can be attributed to the significant level of competition in
the Brazilian sector, with CBD (part owned by France’s Casino), Walmart and Carrefour all of a
similar size and battling ferociously for market share. The results of all three suggest that they have
been prepared to sacrifice margins to fund expansion and the massive potential of the high growth
Brazilian market suggests that this is likely to be a sensible strategy for firm’s that can afford to
prioritise longer-term returns.
However, for Carrefour the prospect of a good return at some point in the distant future may no longer
be seen as a viable option. The management is under pressure from activist investors – the Colony
Capital investment fund and Bernauld Arnaut, France’s richest man – to deliver a swift improvement
in the firm’s share price and if Brazil is currently offering up only meagre returns on equity, a
divestment could be positive for the firm’s valuation (at least in the short term).
NH

there you go
NH

that’s it
NH

I am off to Mayfair
NH

to see evil hedge fund people
NH

good afternoon to you all
NH

and see you tomorrow
NH

bye

This entry was posted by Neil Hume on Wednesday, June 15th, 2011 at 11:05 and is filed under Uncategorized.

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