Markets live chat transcript for the chat ending at 12:06 on 25 Sep 2007. Participants in this chat were: Helen Thomas (HT) Neil Hume (NH)
HT: Good morning
HT: Welcome to Markets Live
HT: Paul isn’t here today – MIA
HT: But Neil Hume is with me
HT: He’s just getting going
HT: It’s been a busy morning for him
NH: sorry just answering an email about Barclays
NH: shares very weak at the moment down 24p at 592.5p
NH: everybody wants to know why
HT: including VPsub it seems
HT: do tell
NH: well one theory is that people have been looking at the Sept remittance data for subprime RMBS deals
HT: resi mortgage backed securities
NH: which indicates the deterioration is accelerating
NH: apparently the ABX index has been trending lower over past few days
NH: and that could be affecting the banks
NH: aside from that there was a scathing note on barclays from bear stearns yesterday
HT: ha – pots and kettles
HT: what did bear have to say on the dangers of subprime etc
HT: neil’s just hunting
HT: success?
NH: got it
NH: was out yesterday though
NH: Barclays (Underperform (NEW), BARC.L, P=632.68p, MC=£43.2bn) Revising Down Earnings and Downgrading to Underperform
European Financials (Market Weight)
NH: We are reducing our recommendation for Barclays to Underperform from Peer Perform and cutting our
earnings estimates by 7% for 2007 EPS and 13% for 2008.
NH: Revisions relate primarily to lower expectations for Barclays Capital. The Q3 results reported by some of the
leading U.S. investment banks last week suggested significant divergence in their ability to deal with the current
market conditions. Certain negative trends and features were common to all, however, and we believe that Barclays
Capital’s income will also have suffered despite many years of outperformance.
NH: We have adjusted expectations for Barclays before those of other UK banks. Other UK banks are also exposed
to the more difficult operating environment. Many have, in addition, greater exposure than Barclays to now harsher
funding terms and the U.K. mortgage market
NH: We do not believe that significant acquisition risk relating to the offer for ABN AMRO has been discounted
in Barclays’ share price. If, as we expect, Barclays does not succeed in its effort to acquire ABN AMRO, then it
follows that we cannot expect any significant bounce in its share price when the outcome of the bidding war is
finally known.
NH: Barclays shares have outperformed most UK banks in the year to date. On our new estimates, they are still
trading at a premium to the sector. We do not believe this is merited, at least in the shorter term. We believe the
group has at least average earnings risk and less potential upside than other worse-performing banking stocks in the
event of a sector bounce. In view of this risk-return trade-off, we are amending our rating to Underperform.
HT: mm -so it’s a big earnings downgrade
HT: and all to do with BarCap
NH: yep
NH: the other thing I am hearing
HT: everyone’s been waiting for the Barc powerhouse to lose momenturm
HT: what’s the other thing?
NH: just got this from broker
NH: think it’s a reaction to the negative news on Sunday regarding it’s sale of
Firstplus + bearish article in the times yday on Barclaycard + bad news
regarding Deutsche Bank write downs = reason for the hedgies to give it a
pounding…………
NH: they are saying its all about this First Plus unit
NH: of course it could just be the case that the bears are targeting barclays today, having grown tired of the former bank and Alliance & Leicester
NH: 
HT: ok – enough on Barclays
HT: you said you were busy this morning
NH: a few deals around and a few stories including a some RAW market info
HT: Go on
NH: Telent is the most interesting
HT: that’s the rump of the former Marconi right
NH: indeed
NH: and it has been bid for by something called the Co-Investment No 5 LP Incorporated
HT: catchy name
NH: rolls off the tongue
HT: inspires no end of confidence
NH: actually it is a bidding vehicle put together by Edmund Truell, who founded Duke Street Capital and ran the private equity house for 11 years, through until 2005
NH: since leaving Duke Street, Mr Truell has been focusing his attentions on the corporate pension market
NH: basically he buys companies to get at their pension funds and then flips the underlying business to a trade buyer
NH: and today has agreed a 600p a share offer to buy Telent
NH: some more background on Mr Truell
NH: Last year, he founded the Pension Insurance Corporation to join the market for taking on the assets and liabilities of occupational pension schemes
NH: has secured £1bn of capital from a group of investors led by Christopher Flowers to take on theses assets
NH: here are some examples of his work
NH: he bought Thresher Group, the UK’s biggest chain of off-licence stores
NH: and then the legacy pension assets of the Thorn television rental business
HT: right
HT: so presumably the attraction of Telent is the old Marconi pension fund
NH: got it on one
HT: I think if I was a Marconi pensioner I would be worried that my retirement cash was being managed from Guernsey
NH: well Mr Truell has tried to address those concerns this morning
NH: here’s what he had to say in the press release accompanying the deal
NH: The strength of telent’s UK pension fund is vitally important to over 62,000
people; a legacy from what was once the second largest industrial company in the
UK. We intend to apply Pension Corporation’s market leading pensions investment
and administrative approach to support and enhance the management of the GEC
plan.
NH: “We have established Pension Corporation to be a holder of pension funds over
the long term. With the excellent quality of our Board and management team,
substantial committed funding from our investors and our expertise in managing
pension assets and liabilities, we are able to demonstrate our commitment to
responsible pension stewardship.
NH: “With this Offer we are also providing telent shareholders with the ability to
realise their investment for cash at an attractive value. Once private, we
intend to free up Mark Plato and his management team to focus on the operating
business and give them our full support in re-building a strong and high quality
service business.”
HT: hmmm so seems like they are going to hold onto the operating business
NH: at least until they have built it up
HT: What state is the pension fund in?
HT: any details on that?
NH: Yes
NH: this is from the annual results in May
NH: Our net pension scheme deficit as at 31 March 2007 amounted to #65 million (31 March 2006: #59 million) comprising a net neutral position in our UK Pension Plan (which represents both assets and liabilities of #2,540 million) and liabilities of #65 million relating predominantly to the un-funded legacy pension liabilities we have retained in our German business (#64 million at 31 March 2007).
NH: Actuarial assessments of our defined benefit pension scheme liabilities and
valuation of our pension scheme assets in accordance with IAS 19 were undertakenas at 31 March 2007.
HT: So huge scheme – but not a big deficit?
NH: and there is also £490m of cash in the UK Pension Plan Escrow account
NH: this payment was made after the old Marconi sold the bulk of its business to Ericsson a few years back
HT: ok – I remember that deal
HT: then telent was bid for by Fortress the hedge fund
NH: Yep Telent agreed to be acquired by Fortress after failing to find a buyer for the pension fund
NH: here’s what we wrote at the time
NH: Telent, the rump of the old Marconi telecommunications equipment business, has agreed to be taken over by Fortress Investment Group, the US private equity and hedge fund firm.
NH: The decision to accept Fortress’s proposal in principle followed Telent’s failure to find a buyer for its Pounds 3bn UK pension fund.
NH: Fortress has made a preliminary offer worth 529 1/2p share, valuing the group at Pounds 346m. If successful, the cash deal would spell the end of independence for the remnants of a once mighty British industrial giant.
NH: Of course that deal was eventually scuppered by another hedge called Polygon which built up a huge and voted against the deal
NH: All of which brings us nicely back today
HT: why?
NH: because Polygon have sold their stake to Truell
NH: before I forget here is how the deal works
NH: CILP (Co Investment and Pension Corp) makes recommended 600p
(GBP398m) cash offer for TLNT.
NH: Shareholders on the register as at 21
Sept will retain the right to the final dividend of 11p on 17 Oct (shares already
trading ex-dividend).
NH: CILP has unconditionally agreed to acquire 26.39% of TLNT
and already owns 2.99%.
NH: To be financed using a combination of committed
equity funds from its investors and loan facilities. Break fee GBP3.9m. Offer
conditional on 90% acceptances, no MAC, regulatory approvals and no significant change to the terms of the trust deeds constituting the pension schemes
HT: and what’s the polygon connection?
NH: well its look like they sold their stake to Truell this morning
NH: although merrill lynch who are advising truell won’t say where the 26% stake they have bought has come from
HT: but looks like a done deal
NH: merrill are saying the seller will make a statement in 48 hours, which is not very helpful
NH: the other odd thing about this deal is that it is being structured as a tender offer rather than a scheme of arrangement
NH: if anyone can tell me why, I would very grateful. had loads of questions about this today
HT: one more odd thing – telent must be spelt with a small t
NH: really
HT: not just because of poor typing
HT: bizarre piece of branding – makes the statement looks very odd indeed
HT: anything else?
NH: well I reckon we could see other deals like this
HT: listed cos being acquired to get at underlying fund
NH: yep
NH: he now owns 11% of Aga which looks ripe for a break up and has a big pension which is in surplus I think
NH: and he also owns 9.5% of Uniq. Which again has a big pension fund
HT: interesting
NH: Aga certainly is. The company is already selling its industry food division
NH: and it looks like rival Enodis will buy that
NH: after that’s gone, Aga will have plenty of cash and because of brands it has will be vulnerable to a bid
NH: and perhaps Mr Truell is the man to do it
NH: one scenario is that he waits for the industrial division to be sold and then make s bid for the rest of the company, flipping the core aga unit to a big US company
HT: some share prices please
NH: telent up 76p at 585.5p – that’s a rise of 14.9
NH: Aga down 6.25p at 422.25p
NH: and Uniq off 2.25p at 195.25
HT:
HT: was going to go to wider market – but there’s interest in BP
NH: lots of interest following our front page story this morning
HT: I know he’s new – but really
NH: for those who missed it
HT: i’ve got story here
HT: Tony Hayward, BP’s new chief executive, has prepared staff for a far-reaching shake-up of the oil company as he delivered a blunt warning that third-quarter revenues would be “dreadful”.
HT: Mr Hayward told a staff meeting in Houston he would be announcing a streamlining of the company’s organisation next month, the Financial Times has learnt. He said that BP’s financial performance was at its lowest since the crisis of 1992-93.
NH: amazing comments and it has unsettled the share price too
NH: BP down 15p at 574.5p
NH: that’s a fall of 2.5% which for a company of BP’s size is quite a move
HT: Interesting from fx trader below – is Hayward guilty of giving too much away – or are some of his employees a little loose-lipped?
HT: well more than a little
NH: what I want to know is whether the FSA will look at Hayward’s comments
NH: they could be considered selective disclosure
NH: which is of course is frowned upon by the powers that be
NH: anyway brokers seem quite relaxed about his comments. they claim a poor set of results is already in their spreadsheets.
NH: this is from Merrill Lynch
NH: Despite the sensational headlines from the FT this morning this is not a profit
warning (as analysts pretty much have all of this bad news for the quarter in their
numbers already) but pretty negative for sentiment nonetheless
NH: BP has been dogged by operational difficulties again this quarter. In the
downstream there have been outages at Texas City and Whiting. In the upstream
there have been operational problems in Cats and Alaska. In addition, the
company has the greatest exposure to US gas prices which has been the work
performer of all energy commodities this quarter.
NH: What we are seeing here is a classic case of expectation management by a new
management team while they still have a grace period with investors (ie they can
point the finger at Browne for all the problems) ahead of an expected recovery in
earnings in 2008 as new fields come onstream and problem assets like Texas get
back online.
NH: I think this is the maybe cynical view the market will take as well this morning
particularly given that if you look at the hard numbers we don’t see this quarter
being any worse then recent quarters. In fact on our first pass of numbers for
3Q07 we have BP up 10% on last year versus RDS down 4% so not sure where
the CEO is coming from when he says financial performance is at its lowest since
1992-3.
We think what is interesting in
NH: We think what is interesting in the article is the apparent comment from Tony
Hayward that “assurance is killing us” and that it was time to take some well
“judged risks”. This suggests three things to us: 1. The company will look to up its
exploration budget (note it is half the level of RDS and only just more than BG’s
even though BP has 8x production of BG); 2. That the pace of share buybacks
may ease in favour of higher levels of organic investment; 3. Possibly a move
back into the M&A arena (and let’s face it this is where BP have had most
strategic success since the turn of the decade). Possible targets: a move into the
oil sands or bold move to step up LNG exposure make most sense strategically.
NH: Recommendation remains neutral. Despite underperforming RDS by 12% this
year, the shares are still on pretty much the same rating as RDS on PE, cf, dy.
Think there could be a time to get back into BP when we think operational
momentum starts to build. We doubt that will be before mid 2008. The risk in the
meantime at least relative to key peers is the prospect of limited positive
newsflow and possibly even some more bad news on the guidance front as the
management continues bottom expectations.
NH: and this is some stuff from Cazenove
NH: BP – [BP/ LN 590p] OUTPERFORM, Sector OVERWEIGHT. An interesting FT headline (‘BP results set to be dreadful’) may focus minds on BP’s Q3 2007 results – due early in the sequence of oil major results on Tuesday 23 October. Macro environment weaker overall despite higher average oil price – Despite the rise in the oil price (Brent has average $74.4/bbl vs $68.7/bbl in Q2, a rise of 8%), the US gas natural price has averaged down 19% (from $7.66/mmbtu to $6.22/mmbtu) and global refining margins have, more or less, halved from over $16/bbl to around $8/bbl Q3-o-Q2
NH: These weaker macro parameters will exact a toll on all three of the Super Majors and are transparent to the market. However, BP carries above average exposure to the US gas price. BP, like others, is also experiencing rising upstream costs that partly offset the benefit of the higher oil price. Judged by its low valuation, we continue to believe that BP is rated to disappoint – so the risk of an expectations gap is minimal. Its new CEO has wisely made a point of pulling back expectations for both production growth and refinery uptime
NH: We look for project specific triggers during Q4 to confirm an operational improvement, both upstream and downstream – specifically, the start up of the aforementioned fields and crude processing units. The shares ought to respond positively to these specific events. We therefore reiterate our OUTPERFORM recommendation, Sector OVERWEIGHT.
HT: so they’re not worried
HT:
NH: some news flashes
NH: CHRISTIAN SALVESEN CONTINUING TALKS
*CHRISTIAN SALVESEN SAYS MAY LEAD TO RECOMMENDED OFFER
*CHRISTIAN SALVESEN RECEIVED APPROACHES FROM TWO PARTIES
*CHRISTIAN SALVESEN SAYS IT HAS RECEIVED APPROACHES
NH: shares up 13p at 64.5p – a rise of 25%
NH: and some news from one of America’s biggest housebuilders
NH: *LENNAR 3Q REVENUES FROM HOME SALES DECREASED 44% :LEN U
*LENNAR REDUCING OVERHEAD FOR ANTICIPATED LOWER VOLUME LEVELS
*LENNAR 3Q INCLUDES $32.1M VALUATION ADJUSTMENTS :LEN U
*LENNAR 3Q INCLUDES $16.5M GOODWILL WRITE-OFFS :LEN U
*LENNAR 3Q INCLUDES $9.3M WRITE OFF OF NOTES RECEIVABLE :LEN U
*LENNAR SEES CONTINUED REDUCTIONS IN WORKFORCE IN 4Q :LEN U
*LENNAR 3Q BACKLOG DOLLAR VALUE OF $2.2B – DOWN 60% :LEN
*LENNAR 3Q CANCELLATION RATE OF 32% NEW ORDERS OF 5,804 HOMES
*LENNAR 3Q NEW ORDERS OF 5,804 HOMES DOWN 48% :LEN US, LEN.B
*LENNAR HAS CUT WORKFORCE TO DATE BY ABOUT 35% :LEN U
*LENNAR 3Q NEW ORDERS 5,804 HOMES, DOWN 48% :LEN US, LEN
*LENNAR 3Q DELIVERIES OF 7,636 HOMES – DOWN 41% :LEN
*LENNAR 3Q LOSS $3.25-SHR WITH CHARGE $3.33 :LEN US, LEN.B
*LENNAR 3Q LOSS $3.25 WITH CHARGE $3.33 :LEN US, LEN.B
*LENNAR BACKLOG DOLLAR VALUE $2.2B, DOWN 60% :LEN US, LEN.B U
*LENNAR 3Q LOSS PER SHARE $3.25 :LEN
HT: wow
HT: that is a catelogue of bad news
NH: it is
NH: and that looks to have affected the US future as the London market is now down
NH: ……FTSE 100 60 points lower at 6,406.3
HT: S&P futures down 7.4
NH: yes Bucketshop boy the results were always going to be a horror but US futures are at session low following the release of the numbers
HT: worse than expected
NH: and follow a profits warning from home improvement company Lowe’s
NH: could be in for a rocky rise on the street of dreams this afternoon
HT:
HT: where next?
NH: well I resist it for any longer
NH: its been 37 mins and we have not mentioned it
HT: Crock?
NH: yes, the former bank
NH: there is a bidder stalking Northern Wreck
NH: I know it sounds unbelievable but there REALLY is someone interested in the former bank
NH: here’s what Sam wrote on the site earlier
NH: Northern Rock’s new hope – God
NH: Forget HM Treasury. Northern Rock’s deposits could be guaranteed from the top. The very top.
NH: Northern Rock has been approached with a bid offer from a group of Spanish banks, according to reports from Spanish daily newspaper El Mundo. The group of banks is headed by Spanish entrepreneur Jose Maria Ruiz-Mateos, who approached Northern Rock CEO Adam Applegarth on Friday:
NH: Mr Jose Maria Ruiz-Mateos, representing a group of Spanish investors, would be interested in acquiring a package of shares in Northern Rock large enough to give him direction of the bank.
NH: Muy bien. But if you’re a fan of conspiracy theories…
NH: From what we understand of Mr. Ruiz-Mateos’ past, he was imprisoned in the 1980s for smuggling, fraud and tax embezzlement – extradited from West Germany and carted off to a Spanish maximum security prison. Those charges where then quashed in 1999.
NH: Oh, and did we mention – he’s a prominent ex-member of the ultra-catholic Opus Dei sect.
NH: In fact, if you believe what Catholic scholar and Opus Dei specialist Michael Walsh has to say, then Ruiz-Mateos’ Rumasa company was all part of a complex financial front to fund Opus Dei in the 1980s. Remember the Ambrosiano banking conspiracy anyone?
NH: The Spanish government confiscated all of Ruiz Mateos’ assets and companies in 1983.
NH: Who knows, maybe Adam Applegarth would be great as God’s banker. It’s not that we’re suggesting the Holy Trinity is a more suitable business model for Northern Rock, but, compared to their current one… surely it’s worth a try?
HT: Very funny
NH: oddly no one is taking it very seriously
HT: you surprise me
NH: shares in the former bank are down 3.5p at 168.1p
NH: in fact they have traded in a pretty tight range all morning
NH: which is quite surprising given the universal view in the press this morning was that a bid for the former bank is now very unlikely
HT: indeed – incidentally – story in the Times this morning about a letter from Ridley to MPs
HT: should have more on that later on the site
HT: actually there was another amusing article on the pebble this morning
NH: oh yeah
HT: well if investors had listened to analysts they would have not lost any money on the Crock
HT: no, no
NH: really. Can we have a look at the piece?
HT: the clever analysts saw it all coming
HT: From Financial News
HT: : Investors who have lost as much as 86% of their money after the collapse in Northern Rock’s share price since February should have taken more notice of research by analysts covering the UK mortgage bank
HT: Instead of recommending the stock as a buy as the price collapsed, most analysts either told investors to sell for months or rated the stock a hold, which is often used as a code for sell.
HT: Five analysts covering Northern Rock have been recommending the stock as a sell or underperform since early this year when the shares were trading around £12, according to data from Bloomberg on the recommendation history of the 15 analysts who have issued a rating on the stock this month.
HT: Two others told investors to sell the stock in the spring when it was trading at nearly £11. Five analysts downgraded the stock over the summer, and just two – at Merrill Lynch and Keefe, Bruyette & Woods, an investment bank specializing in financial services – have been left red-faced by reiterating their buy recommendations as the share price collapsed.
HT: Now Neil – I don’t quite remember it like that – you?
NH: nor do I
HT: there’s lots more on that story for those who want the details
HT: it goes on and on and on
NH: when the stock was £12 in June I seem to recall few discenting voices
HT: I agree – the Crock was a bit of darling
HT: then the profit warning hit – and bam – it lost 12% if memory serves
NH: and the rest is history
HT: One more thing before we move on
HT: the FT’s Brussels correspondent Tobais Buck has been in touch
HT: to update our readers
NH: what on EU law
HT: well – to answer their questions on the crock
HT: sweet eh?
NH: public sector broadcasting
HT: I’ll paste
HT: I saw some of your readers were speculating on whether the European Commission might step in to prevent further BoE funding for Northern Rock.
HT: The legal situation is as follows: Brussels cannot (and does not want to) interfer with lending decisions made by central banks. Indeed, under EU law central banks are essentially not subject to Commission scrutiny at all. European commissioners in principle don’t even comment on central bank decicions, and the Commission would in any case not be so foolish as to second-guess the need for BoE or ECB intervention.
HT: With regard to Darling’s savings guarantees, the Commission appears to take the line that such moves are aimed not at the company itself but at individual savers. As such, the guarantee does not hand NR an unfair advantage over its competitors – which means it is unlikely to raise state aid concerns.
In sum, Northern Rock will certainly not fail owing to pressure from Brussels. Which just leaves all their other problems.
NH: good point from VPsub below and it tallies with what I have been hearing this morning
NH: the crock may go ex tomorrow but the divi will not be paid until 26th of Oct
NH: so we could have a situation where investors are entitled to a payment but the rock then cannot pay
NH: if that happens it could be a real settlement nightmare for the LSE etc
NH:
NH: anyway from one car crash to another
HT: you must mean erinaceous
NH: this has all the makings of a SERIOUS blow-up
NH: And the reputations of some really high profile people are going to be SERIOUSLY tarnished by this
HT: so what’s today’s news?
NH: well the shares, which almost halved on Monday, have fallen another 11.5p, or 19.9%, to 46.25p
NH: as we suspected, the company has postponed the announcement of interim results until it has finished discussions with its lenders
HT: Jeepers
HT: hang on a minute, I thought the company said on Monday it was confident of a successful conclusion
NH: it did but no one is prepared to believe this company anymore
HT: they’re in property services, for the record
NH: I mean this was the company which claimed that after five months of takeover talks no one had even got to the due dillgence stage
NH: and they put this bullish trading statement out at the end of July
NH: Erinaceous Group plc, the ‘one stop shop’ property support services group, will
hold its Annual General Meeting today.
NH: The Group’s Chairman, Nigel Turnbull, will say: “Our long term growth strategy
of offering a comprehensive range of property services continues and in 2007 our
focus has been on integration. In particular we have invested in IT, rebranding
and premises rationalisation to deliver cross-selling opportunities, cost
savings and economies of scale.”
NH: Whilst the first half of the year has represented a period of significant
transition for the Group, which will have an impact on the first half results to
be announced in September, the Board anticipates a satisfactory outcome for the
full year.
NH: Transactional business in the year to date continues to validate the strategy of
combining fund management, asset management and agency operations to deliver
enhanced deal-based professional service profits for the Group. This is a major
and growing area of profitability and clearly demonstrates the opportunities
arising from the Group’s portfolio of property services.
NH: The Group has also made a series of carefully targeted acquisitions in line with
its strategy. Exceptional costs as a result of the acquisition and integration
programme have increased during the first half in part due to the additional
costs associated with the acquisitions in March of Letsure and Dearle and
Henderson. These costs are expected to tail off significantly towards the end of
the year.
NH: The Group’s Chief Executive, Neil Bellis, will say: “So far in 2007 we have
spent in the order of #30 million on a series of small acquisitions and payment
of deferred consideration in respect of earlier acquisitions, utilising our bank
revolving credit facility. Each acquisition is a bolt on to our existing
divisional structure.”
HT: last line is interesting
HT: deferred consideration
HT: bit of warning sign
NH: ERG has been highly acquisitive
NH: anyway brokers are staggered by today’s news
HT: why?
NH: have u looked at the board of ERG
NH: stufed with some real heavyweights
NH: Nigel Turnbull is chairman
HT: of Turnbull report fame
NH: yep and for those of you who don’t know that’s the report on risk management and internal controls
NH: Something which ERG could obviously do with
HT: any word from Turnbull?
NH: No
NH: nor have we heard anything from the non-exec’s – Lord Razzall of the Liberal Democrats and Lord Poole, a one-time confidant of John Major, former prime minister.
NH: as I said earlier their reputations could be seriously damaged by this
NH: ERG shares are sinking fast
NH: gone from almost 400p at the start of the year to 40p
NH: This is a real car crash. It’s almost as bad as Northern Crock
HT: Oh not them again
HT: we’ve finished that – otherwise SIV lite will start abusing your powers of recall again
NH:
NH: Tony Hayward is not the only CEO putting his foot in it this morning
HT: go on
NH: Paul Walker of Sage, now Newcastle’s biggest company, has also been talking
NH: its on the subject of these recent takeover rumours
NH: he says there is a “definite possibility” it might become a takeover target
HT: that is a very strange thing to say
NH: dunno it came from an interview with a German paper, so something could have been lost in translation
NH: anyway here’s what went up on the wires earlier
NH: Sage Group Plc Chief Executive
Officer Paul Walker said there is a “definite possibility” the
British accounting-software maker may become a takeover target,
Handelsblatt reported, citing an interview with Walker.
Sage is interested in making acquisitions in Germany,
especially in the area of software for clinics and doctors, the
German newspaper citing Walker as saying. Sage, based in
Newcastle, last year bought Emdeon Practice Services for almost
300 million pounds ($603 million), Handelsblatt said.
NH: not really had any impact on the sage price. stock up 0.5p at 257.25p
HT:
HT: Anything to finish up with?
NH: just a bit of RAW market gossip
NH: comes from 
NH: concerns Abbot Group
NH: that’s an oil field services company
NH: RAW rumour is that Co has been approached
NH: but won’t enter talks because it is worried about the credit worthiness of the bidder
NH: apparently the bidder, a fund from the middle east, is slightly miffed and considering its next move
NH: all highly speculative but that’s the talk in the City today
NH: shares up 4.25p at 279.25p
HT: thanks for that
HT: readers divided on appeal of Crock story
NH: personally we love it
NH: the only fear we have is that the Crock won’t be with us for much longer
NH: could be RIP the Crock by year end
HT: We’re out of time
NH: before we go, just a quick line on man group
HT: share up on their pre-close statement
NH: and you wouldn’t really have known that we’ve had a turbulent summer for hedge funds
HT: AUM up to $68bn
NH: just looking at the statement – EPS expected up more than 10 per cent – redemption rates virtually unchanged on last year
HT: bit shy of what some of the analysts had but still considered impressive
NH: here’s a report from Merrill – they’re house broker
NH: Encouraging Q2 Update
Man’s preclose update, covering the period to September 2007, is overall a pretty
encouraging document. AUM for the end of September is set to be around
$68bn, up from $61.7bn at the end of March and fractionally up on the end June
figure. We were looking for $70bn, but these estimates were completed before it
was clear that August would be a very difficult month industry-wide, and
September a pretty modest one.
NH: Net inflows in both retail and institutional
Turning to flows, both retail and institutional managed decent net inflows for what
is usually a pretty lacklustre quarter. Retail saw net inflows of around $1.5bn for
the quarter, institutional about $0.4bn. Importantly, outflows were about the same
as the first quarter in retail and lower than Q1 for institutional. We regard this as
an extremely positive outcome against an unhelpful backdrop. Net flows were in
line with our estimates, but with more retail in the mix, which is overall a plus.
NH: 4% performance in H1
Finally, although Q2 saw negative performance (no surprises there), overall the
company has generated $2.4bn of positive performance in the half, roughly a 4%
return on starting assets.
NH: Earnings 10%+ Up YoY
On numbers, inevitably there is a degree of imprecision here, as these are
preliminary. Guidance is for core earnings to be “at least 15%” ahead of H1 07,
and performance fees “ahead” of H1 07. Overall, this guidance suggests core
eps fractionally light of our estimates – maybe by 1-2% – and performance fees
about three quarters of our estimates. However, our estimates for both elements
essentially date back to July; we caveat these, inevitably, with words to the effect
that they depended on positive AHL performance. Although AHL remains close to
performance fee territory, it will not have added any fees to the total when we last
produced estimates.
NH: that’s it from me for today. see you all tomorrow when Paul should be back
HT: yes – usual service resumes
HT: enjoy the crock saga til I see you next
HT: bye neil
NH: bye