Markets live chat transcript for the chat ending at 12:04 on 3 Dec 2007. Participants in this chat were: Paul Murphy (PM) Neil Hume (NH)
PM: WELCOME!
PM: To Markets Live
PM: FT Alphaville’s daily market chat
PM: Employing instant message technology from Assanka
Cracking little software shop who built FT Alphaville
NH: Why all the adverts for Assanka
NH: You trying to get something out of them?
PM: Might be.
PM: Anyway, I’ll stop being cheerful.
PM: It might be sunny outside now. But it was cold and dark when I set off for work this morning.
PM: So what downbeat stuff you got for us??
NH: plenty of bearish stuff
NH: 
NH: further signs of a consumer slowdown
PM: Grreat
NH: that’s the big news in the UK market this morning
NH: company called Clapham House has issued a big profits warning
PM: Clapham House??
NH: : it owns the Gourmet Burger Kitchen and Tootsies
PM: Sort of place you take the kids at the weekend
NH: or not as the case may be
NH: has been something of a stock market darling
PM: until now
NH: yep
NH: shares currently down 114p at 134p
NH: that’s a fall of nearly 50%
PM: Yikes
PM: Flame grilled
PM: 
NH: no one is spending £8 on a burger anymore
PM: Must be a pretty severe warning to have caused that damage
NH: here’s what the company had to say
NH: Whilst the Board still anticipates strong growth for the Company for the years
ending March 2008 and 2009, this is expected to be significantly below its
original expectations. This is a result of the following factors:
NH: The Board is concerned about the uncertain economic outlook, potential
food cost inflation and recent increases in rents quoted for new properties and
has therefore concluded that it is prudent to adopt a more conservative opening
programme for the Group in the UK for the year ending March 2009. This will
concentrate on the expansion of the Gourmet Burger Kitchen Limited (“GBK”)
format in the UK and internationally under franchise. The Board now anticipates
the opening of 18 new restaurants across all formats in the year to March 2009,
of which 13 will be in the UK and 5 overseas. As a consequence the Board has
substantially reduced its growth expectations for the year to March 2009.
NH: The sales shortfall in Tootsies, as announced in the September AGM
statement, has been exacerbated in recent weeks by poor sales at the eleven
Tootsies restaurants located at shopping and leisure centres. These restaurants
are normally the most profitable within the Tootsies estate so any sales
shortfall has a disproportionate effect on profits. The Board attributes this to
pressure on UK consumer spending which appears to be affecting these locations
in particular.
PM: so its not just a profits warning
PM: Bear with us — Neil’s Dell screen is making a fuzzing noise — as tho it is about to catch fire
NH: its back – no one wonder Dell warned on profits on Friday
NH: they tried to blame slowing demand on the credit crunch
NH: whereas everyone knows that people aren’t Dell because they aren’t very good
PM: In your personal view
PM: And mine
NH: yes and as I spending 10 hours a day glued to one I am qualified to talk on the subject
NH: anyway back to burgers
PM: Know abotu them as well do you?
NH: actually never been in to of these GBK’s in the UK
NH: did have one in Queenstown, NZ though
PM: Anyway — i was saying not just a profits warning
PM: Thanks for the advice from bsb — student reader
NH: no, the company has also scaled back its expansion plans
NH: and I think that’s the reason why the shares have taken such a pasting this morning
PM: it really is a very bearish reading of the outlook for consumer spending
NH: it is
NH: and you would have thought that something like the GBK, would have been fairly resilient in a downturn
PM: right, what are the analysts saying?
NH: some of the downgrades are large
NH: and analysts are also worried about the read across for the rest of the pubs and restaurant sector
NH: Mitchells & Butlers taken another hit on the back of this warning
NH: Shares down 20.5p at 556p
NH: Restaurant Group, which owns Frankie & Benny’s, has fallen 18p to 200p
NH: Whitbread also lower – off 25p at £14.16
NH: although Whitbread has also been hit by a Citigroup downgrade
NH: anyway, here is some comment from Landsbanki on the read across for the rest of the sector
NH: Pubcos (Travel & Leisure) – Clapham House Group trading statement’s “read across” for the pub sector is poor
Clapham House, the owners of the Gourmet Burger Kitchen, Tootsie’s, The Real Greek, and Bombay Bicycle Club, has issued a trading statement today, two days before its interims are due. The reading is not good for pub restaurants. They flag poor sales in shopping and leisure centres which is the domain of their Tootsie’s format. The price point at Tootsie’s is about £9.50 for a main course, so higher than Wetherspoon which could be in the same location, but they flag pressure on consumer spending rather than their format as being the culprit. This has a poor read-across for the pub sector which is focussing its growth on food sales. If as is likely, mid-tier restaurants drop pricing, there will be even more competition in the casual dining sector. We continue to recommend that investors avoid the pub sector.
NH: and this is note from Investec Securities on Clapham House
NH: CPH has issued a trading update this morning which highlights a number of
factors that will negatively impact our estimates – higher interest costs, one-off
delays on a key site development and ongoing difficulties in Tootsies. The most
important issue, however, is that management now feels it is prudent to cut the
number of openings over the next few years to reflect a cautious outlook on
the consumer, unrealistic rent demands and higher food input costs.
NH: The downgrades are magnified by the current low profit base and reliance on
the opening pipeline. Our EPS estimates reduce by 36% in FY08 and 48% in
FY09. This puts the shares on 24x FY09 P/E, 9.8x EV/EBITDA.
NH: We are placing our recommendation and target price under review ahead of
interims on Wednesday, which should provide more detail on the issues in
Tootsies, plans to re-energise the brand, and trading in GBK, which appears to
remain healthy.
PM: Big downgrades
NH: and here’s the thoughts of Numis Securities
NH: original expectations due to delayed site openings and weak trading at Tootsies. It is also scaling back its opening programme in FY2009 due to concerns on the economic outlook, potential food cost inflation and recent increases in rents. The group, due to release interims on Wednesday, said it will report adjusted interim PBT of £1.5m (25% y-o-y growth).
NH: We have put our forecasts, BUY recommendation and 460p target price under review ahead of the analyst call at 8.30am.
NH: FY2008 profit forecasts to be cut: The group has given three reasons for FY2008 profit to be significantly below its original expectations: 1) a 12 months delay in the GBK and The Real Greek sites at Spitalfields market opening which would have contributed £0.5m of operating profit in FY2008. 2) Interest will be £0.2m higher than anticipated due to higher LIBOR rates and higher level of net debt. 3) The sales shortfall in Tootsies has been exacerbated in recent weeks by poor sales at the 11 Tootsies restaurants located in shopping and leisure centres.
NH: FY2009 rollout programme cut: We had previously forecast 30 UK openings and 4 overseas openings in FY2009. CPH is now saying it will open 13 restaurants in the UK and 5 overseas. Given this is an aggressive roll-out story, cutting the opening programme by 57% is likely to have a similar impact on the bottom line.
NH: Forecasts under review: Ahead of the 8.30am conference call we have put our forecasts under review. We had previously forecast PBT of £6.2m (EPS 11.6p) in FY2008 and £11.2m (EPS 20.7p) in FY2009. We now do not envisage PBT of more than £3.0m-£3.5m in FY2008.
NH: Read across: Obvious negative read across for the whole sector. The Restaurant Group has the largest exposure to shopping and leisure centres whilst we would highlight Domino’s Pizza as a safe-haven given its leadership of the relatively defensive home-delivery market
NH: Consolidation: GBK is a jewel in the crown of the UK restaurant market and we believe it will prove very attractive to other restaurant groups. There will be 41 UK GBKs at the end of the month and fledgling franchise operations in the Middle East and Turkey
NH: 460p target price from the boys at Numis under review
NH: 460p wonder how they got to that in the first place
PM: But hang on — look at Regent Inns just come out with an AGM statement — and it looks v ugly!!
PM: Stock is off 8p at 35p
NH: that’s a fall of 18%
PM: Just getting the statement
PM: As we reported at our preliminary results and in the interim management
statement issued on 2 November 2007, the late-night market has become more
challenging. During the year, increased competition following licensing
deregulation and customers going out on the high street later and spending less
on liquor inevitably had an impact on sales. In November, we have also seen a
disappointing decline in trading across the business with the result that
like-for-like sales for the 21 weeks to 24 November 2007 were down by 2.8%
which, we believe, is reflective of overall growing consumer caution in the
market. We were also frustrated by the failure of the England team to qualify
for the 2008 European Football Championships in June next year. In light of
this, the unprecedented levels of regulatory intrusion facing the industry and
the increasing evidence of a slowdown in high street consumer spending, we are
no longer confident the Group is able to achieve growth in pre-exceptional PBT
in the current financial year.
PM: We remain cautious in our outlook given the trading conditions in the late-night
market, the likely slowdown in consumer spending, the full impact of the smoking
ban and England’s failure to qualify for Euro 2008. However, the traditionally
strong Christmas and New Year trading period is ahead of us. In addition, we
will continue to look at corporate activity opportunities where we believe the
business is well placed to deliver value through consolidation
PM: What’s going on with that last line — look at corporate activity — value thru consolidation….
NH: help. we are in trouble. we need to be part of a bigger company
NH: try that
PM: Dear oh dear
NH: or is that too harsh??
PM: No — i dont think so
PM: On my reckoning this company has been in trouble for almost a fully decade
NH: it has, but investors were hoping the new management under Bob Ivell would turn things around
NH: Ivell was a highly rated executive from S&N
NH: but even he can’t stop the rot
NH: mind you the Regent aren’t great
NH: Old Orleans
NH: Walkabout
NH: and Jongleurs
PM: 
NH: anyway, regent inns is not the only consumer facing company to have issed a downbeat statement today
NH: SCS Upholstery has warned on profits too
NH: well they have issued a very gloomy trading statement
NH: that everyone in the City believes is a profits warning
NH: even if management do not
PM: (Interesting point below on farmers’ logistics)
PM: UPDATE on Regent — shares off 35%
PM: Back to SCS…
NH: it shares are down just 5.5p at 106.5p
NH: but they have suffered a massive de-rating since the start of the year
NH: down 83%
PM: so what’s the news from SCS??
NH: here it is
NH: “Since we last updated the market in September 2007, trading conditions have
been much more challenging than anticipated. Total sales order intake is down by
9% for the first 17 weeks of the current financial year and like for like sales
order intake is down by 16% on the comparable period (down by 8% for the first 7
weeks).
NH: Not only are we up against strong comparables for this period, but the previous
interest rate increases continue to affect consumers. When combined with the
high profile collapse in the sub-prime debt markets and the resultant credit
squeeze, we believe that consumer confidence has been severely hit with regard
to “big ticket” purchases.
NH: The downward trend in our sales order intake will have a significant adverse
impact on sales and, therefore, the result for the six months to 26 January
2008. However, given that we have so many key trading periods ahead of us,
namely the Boxing Day and January sale, Easter and May Bank Holidays, when
comparable figures are softer, it is too early to predict whether recent trading
will affect our original expectations of the full year result.
PM: that’s really bearish as well
PM: Carpet sales victim of subprime
NH: but look, management think they might be able to pull things round
PM: Dream on
PM: what are analysts downgrading by??
NH: here’s an amusing note from Christian Koefoed-Nielsen at Panmure Gordon
NH: When lfl sales in the last 10 weeks of Q1 are worse than 20% negative, and with
the current consumer outlook, we believe management are whistling in the
dark in their belief it’s too early to predict whether earnings for the year will be
below original expectations. We predict they’ll be down substantially. We may
not be precisely right, but are almost certain to be directionally correct. The co
has cash and a good franchise, but it’s too soon to buy. We retain our Sell
NH: We have cut our current year forecast from the already low end of consensus £9.2m pbt to £4.8m on the back of the continuing weakness in trading. Next year’s forecast goes from £9.3m to £5.8m. Any forecasts made now are likely to be guesstimates – but, equally, it almost defies belief to accept that current year forecasts will be hit against the current pattern of poor trading, and what we believe will be a very difficult outlook for big ticket purchases in the year ahead.
NH: On our new estimates the co is on 11.7x FY2008E, falling to 9.5x FY2009E earnings. This is not cheap enough in our view, given that consensus forecasts are likely to move downwards, there may be further risks to numbers going forward, and the dividend may well be cut. The current dividend yield of 17% appears unrealistic to us, we can’t think of any other companies that have paid out this much. We retain our Sell recommendation
PM: Thanks for all that
PM:
PM: Well let me come in with some bearish stuff of my own.
PM: Remember Draaismaland?
Draaismaland – a warm and happy place, home of the former Super Bull, Teun Draaisma of Morgan Stanley. Sadly, it turned out to be make-belief
NH: Yeah, mirage. The Super Bull capitulated, didn’t he?
PM: Teun did.
PM: And, like many creative people, he’s gone from one extreme to the other.
NH: Has he now.
PM: Well actually, this is not from him, but from his colleague in European strategy at Morgan Stanley, Graham Secker.
PM: UK Strategy
2008 Outlook – Fat Tails,
Lean Times
PM: Generally saying that the credit malarkey will hit growth here and in the US hard, corporate earnings could well contract.
PM: This is the line that caught my eye:
PM: Under our base case scenario we set a FTSE100 target
of 6300 for December 2008. However, we believe the
risks around this forecast are to the downside and set a
‘bear case’ target of 5350.
NH: Ouch – bear case prediction is for a 16% drop in the Footsie for next year.
PM: Here’s a good par:
PM: As discussed, one of the main reasons why we doubt the
authorities’ ability to sustain the growth outlook is due to the
high levels of gearing and low levels of savings that exist in
many parts of the economy. As our prime minister has been so
fond of telling us, the UK economy has enjoyed a record 15
years of economic growth. However, instead of using this
golden period to bolster savings and prepare for leaner times
ahead, the public sector is in deficit (unlike the years preceding
1990/91 and 2001/02). In reality, Exhibits 1 – 3 highlight that
the government, households and banks have all been guilty of
stretching the elasticity of their balance sheets – in effect,
betting on the absence of an economic cycle.
PM: I’ve certainly been guilty of stretching the elasticity of my balance sheet – or at least my various daughters have.
PM: Think there idea of an economic cycle is saving a cab ride by going by bike.
NH: To be fair, Morgan Stanley’s formal Footsie target is not this bleak – it’s 6,300 by Dec 08, compared with 6400 now.
PM: They have a 7500 Bull case — But they only think there is a one in five chance of this “bull case” panning out
PM: They’re bear case – 5350 – carries a 35% probability, in their view.
PM: Another small quote:
PM: we
believe that any cash you can accumulate today is likely to
become more, not less, valuable in the months ahead.
PM: But lets leave this on a positive note.
PM: Here’s ten defensive stocks from MS in case you don’t want to hold all your assets in cash – (putting us out of a job in the process):
PM: BG, BAT, Cable & Wireless*, Dana Petroleum*,
easyJet*, International Power, Sage, Shire*, Tesco and
Vodafone.
NH: that’s a really, really defensive portfolio
NH: actually, hearing that Goldman has turned negative on Euro equities
PM: Really?
NH: While the ‘structural’ bull market driven by the long-lasting impact of
globalisation and technological change remains in place, the ongoing
financial crisis is likely to further reduce investor confidence in
economic activity. A further adjustment to growth expectations is likely
to push equity prices lower. We believe that 2008 consensus profit
expectations (at 9%) remain unrealistic: we forecast zero growth in net
income pre-exceptionals. The market is implying roughly 3% profit
growth for 2008 by our estimates. Further downgrades remain likely.
NH: Expect further downside of about 10%-15%
NH: Using 3.5% risk premium as our base assumption, with no earnings
growth next year, our model suggests the market needs to fall c.5% to
reach fair value. In practice, however, markets tend to overshoot as the
ERP rises. Using an ERP of c.4% (the level reached in 2002) would imply
a further 10%-15% fall. We believe that financials hold the key to a
recovery in 2008. History suggests this occurs at a P/B discount of
c.40% (25% currently) and when the sector recapitalises.
NH: The equity
market also tends to trough well in advance of the economy and
profits. We expect a sharp rebound in 2008 from lower levels, with a
total return of 5%-7% for the year, but with high volatility. We expect
greater differentiation of returns, with a focus on growth, balance sheet
strength and large caps.
PM: How interesting
PM: as though we are going to get an avalanche of profit warnings..
NH: and GS have also had something to say on the UK market
NH: We expect 2008 to mark the turn in the economic cycle – US
and UK growth are forecast to slow sharply at a time when
financial market issues remain unresolved. We believe
equities will fall further as banks continue to underperform –
our fair value model suggests market downside of at least
10%. We have increased the defensive bias in our portfolio
and recommend companies offering undervalued growth.
NH: Fair value model suggests at least 10% downside to UK equities
We believe equity markets will price in a hard-landing scenario before
making a convincing recovery. Our core scenario suggests profits could
fall by 2% next year versus consensus which remains at c.8% growth.
Based on a 5%-10% fall in profits and a 3.5% risk premium, the market
could fall by at least 10% over the coming months as it prices in a more
pessimistic scenario.
NH: Getting domestic: Timing the turn in the UK banks
Timing the turn in the UK banks will be critical for performance of the
broader market. We believe it is too early to call the bottom as the financial
fallout of the summer remains unresolved, there is continued revenue risk
associated with a slowing housing market and relative valuation is not yet
back to the lows of the early 1990s.
NH: We are increasing our defensive bias for 1Q2008. We remain Overweight
oil, pharmaceuticals and telecoms and raise tobacco and food retail to
Overweight. We upgrade beverages, chemicals, food producers and
utilities to Neutral. We remain Underweight consumer-facing areas and
downgrade media, support services and technology to Underweight. We
downgrade insurance and mining to Neutral.
NH: doesn’t get more bearish than that in terms of allocation
PM: Sure
PM:
PM: So how has all this doom and gloom affected the wider market??
NH: not much is the answer, rather surprisingly
NH: down just 13 points at 6,419
NH: again the market is being held up by expectations of rate cuts
NH: hopes for a 50 bp cut in the US next week
NH: and for the BoE to move this week and reduce rates
NH: not sure it will happen
NH: but the doves will say “look at today’s tales of woe from the high street.”
NH: traded as high as 6,456.1 and as low as 6,384.7
PM: Just looking at some of the main movers…
PM: Some of the consumer stocks are actually quite strong — Next, Kingfisher…
NH: yeah. v odd
NH: retailers up
NH: but the pub and restaurant companies down
NH: surely a slowdown in consumer spending affects both
NH: unless of course it is already reflected in the share price of retailers
NH: and in the case of kingfisher and Home retail perhaps that is possible
PM: Debenhams is up 3.25p at 90.25!
NH: exactly – it is 90p
PM: 
NH: and the ceo was talking the company up in one of the sunday’s
NH: ahead of a trading update I think
NH: agm statement tomorrow – according to reuters
PM:
PM: Better do stuff on the former Tank
NH: the stake building stories have been confirmed
PM: of course
NH: after pleading ignorance last week
NH: ( I called the PR on Wed and Thurs and he seemed to have no idea what was going on)
NH: the company has suddenly issued a statement this morning
NH: which says that Genting, the Malaysian gaming company UK, has amassed a 9.4% stake
NH: of course this story was trailed quite heavily in the Sunday papers
PM: so it was
PM: Hmm. So what are you saying?
PM: that the identity of the stake builder was known last week?
NH: I could not possibly comment
PM: 
NH: but if the company had started firing off Companies Act notices then….
PM: OK, enough of moaning about the PR
PM: What have the shares done?
NH: well, they raced up 115p
NH: but have eased back a touch
NH: and are now trading 10.2p better at 110.75p
NH: which is slightly surprising
PM: Why?
NH: this looks like a defensive move by Genting
PM: Go on
NH: a couple of years back Genting bought the casino estate of Stanley Leisure
NH: the value of which coincidently it wrote down by £152m last week
NH: I would have thought it unlikely that Genting would be allowed to buy Rank’s Grosvenor casino chain as well
NH: that said, Stanley Leisure and London Clubs International did try to merge a while back
PM: so why has it bought the stake
PM: ??
NH: it might think that Rank shares are cheap
NH: or it might be trying to block a bid for Rank by a rival
PM: such as?
NH: Guoco Group
PM: that’s the gaming firm based in Singapore but listed in Hong Kong that you were going on about last week
NH: they own the Clermont Club in the UK and have a handful of casino licenses
NH: there has been speculation that they would like to buy Rank to accelerate their expansion plans, which look to have stalled
NH: and the chief executive of Rank, Ian Burke, knows Guoco Group well
NH: having sold them the Clermont Club and Thistle Hotels
NH: he was chief executive of Thistle
NH: alternatively Genting may be trying to block one of the Las Vegas gaming companies
NH: we know that Harrah’s recently approached Rank with an asset swap deal
NH: that was rejected apparently
NH: but Harrah’s might be keen to come back
PM: all very interesting
PM: of course Genting is no stranger to stake building
PM: it built holding in Stanley Leisure before bidding
NH: and also a large stake in London Clubs International
NH: which was eventually bought by Harrah’s
PM: so, this stake — far from being the launching pad for a bid — looks to be nothing more than getting a seat at the table
NH: I reckon so
NH: and in a way that is encouraging
NH: clearly Genting think that someone is going to bid for the company so they have taken a near 10% holding as insurance
PM: Noticed a line somewhere about moves in the CDS for Rank this morning
PM: Tightening — indicating they think a bid less likely now
NH: so the equity market and the credit market are at odds over Rank
PM: Yeah — but dont read too much into that. CDS market has become seriously illiquid
NH: right, here is some comment from Ivor Jones at Evo
NH: he has been following the Rank rumours closely
NH: RANK GROUP (RNK.L) – BUY – PRICE/TARGET : 100p/175p – STAKE BUILDING IN COMPANY
NH: Press reports Genting has built a stake in Rank
NH: EVO TAKE – Sunday newspapers reported that Genting has taken a 10% stake in Rank Group. We believe this makes a takeover of Rank within the next twelve months more likely and reiterate our Buy recommendation. Rank’s casino assets are likely to be more attractive to a buyer than its bingo business, so the situation is not clear-cut. We should expect gaming companies to be adroit at not revealing their hands too early and it may be some time before true strategic intentions, of all potential parties, become clear.
NH: DETAILS – Genting is one of the world’s biggest gaming groups and owns Stanley Casinos in the UK which it acquired in 2006. Acquiring Rank would establish Genting as the clear leader in the UK casino industry with 91 licences (46 from Stanley, 45 from Rank). Where the estates overlap there would be the opportunity to close a casino made unprofitable by the change in casino duty and try to consolidate the business on a single site. There would also be corporate synergies.
NH: However, it is not necessarily the case that Genting’s strategy is to buy Rank. Firstly, it may not be possible on competition grounds. Secondly, Genting had the opportunity to own more of the UK casino industry last year when it had a 28% shareholding as a platform for a bid for London Clubs. Instead, it chose to sell that stake to Harrahs and concentrate on Stanley. Finally, the preceding discussion has all been about casinos but Rank has bingo assets which Genting may not wish to own. Genting may be trying to create a situation where it buys the casino business from Rank.
NH: At the right price, this could be a good deal for Rank shareholders as it could provide enough cash for investors to be sure that Rank will get through the post-smoking ban dip in business without requiring refinancing.
NH: VALUATION AND RECOMMENDATION – If there are, as reported, several credible parties – Harrah’s, Aspinalls, BIL, William Hill and Ladbrokes – interested in Rank we believe this must be good at least for putting a floor under the share price and accelerating the end-game. We reiterate our Buy recommendation and 175p price target.
NH:
NH: just heading back to the leisure sector for a mo
NH: mark brumby at Blue Oar Securities has just sent us over his thoughts on this morning’s developments
NH: REGENT INNS (REG):
Even for the leisure sector, to have two profit warnings in one day is somewhat rare but, after Regent Inns confirmed at its AGM that it is ‘no longer confident the Group is able to achieve growth in pre-exceptional profit before tax in the current financial year’, that is what we have today.
NH: Black Monday it perhaps is not but Regent points out rather comprehensively that, whilst Old Orleans is ‘an important strategic development for the Group
NH: ‘…the late-night market has become more challenging…’
‘…customers are going out on the high street later and spending less…’
November LfLs have shown a ‘disappointing decline’ – it looks like a pretty tooth-grinding minus 6.4% for the 7 weeks to 24 November
The customer is becoming more ‘cautious’
Group is ‘frustrated’ (along with the rest of us) by England’s failure to qualify for Euro 2008 and also bemoans ‘regulatory intrusion’ and the ‘slowdown in high street consumer spending’
It manages to avoid mentioning the smoking ban and the weather, neither of which have been particularly helpful
NH: Not surprisingly, Regent is now ‘cautious’ on the outlook for profits and is no longer confident of hitting full year targets. Having fallen from the thick end of 120p, where the group goes from here is unclear. Consolidation is necessary but who takes over whom (and whether premia get paid) are the sticking points.
NH: As regards other companies, Luminar, Sports Café & Ultimate Leisure operate in a similar space but all have updated on trading recently. Greene King reports H1 numbers tomorrow and Whitbread updates on 11 December. The readacross here is limited but the ‘feel-bad’ factor may prove to be impervious to fact / company differentiation in the short term.
PM:
PM: Right — that’s enough doom and gloom
PM: Comments below suggest we are pushing some of the readers towards the edge
NH: flash – one month sterling libor at highest level since 1998
PM: Libor rates out!
PM: One month sterling — 6.715
PM: Three month £ is 6.62%
PM: Which again , is up
PM: Thanks for the Julian Clary comparison
PM: Havent heard much of him since his famus Norman Lamount gag
PM: I’ve just been told that he was in strictly come dancing last time around
PM: By a viewer
PM: Helen
PM:
PM: You seen this deal between Shore Capital and Lehman Brothers
NH: Glanced at
PM: The two firms are jointly launching a European opportunities fund – raising $500m to invest in secured loans, real estate and asset-backed cash-generative businesses – and it expects to focus initially on central and eastern Europe.
PM: The two firms are jointly launching a European opportunities fund – raising $500m to invest in secured loans, real estate and asset-backed cash-generative businesses – and it expects to focus initially on central and eastern Europe.
NH: And there’s some quote from Howard Shore – one of the two Shore brothers – about how this is going to growth their alternative assets biz etc. They’ve also hired some guy from Bear Stearns – Ralf Nocker
PM: Lehman Brothers and Shore Capital – who would have thought.
PM: Dangerous game being played here – Shore associating with Lehman. If something went wrong it could seriously damage Shore’s name.
NH: Sarah Spikes has just been over and said that there is a very bearish note out on the stockbrokers today
NH: she was pointing out that a number of share prices in the broking world are weak
NH: penned by jeremy grimes, who seems to be the most widely followed analyst in the sector
NH: he used to be Altium
NH: now at arden
NH: just finding the note
NH: Equity markets are more difficult. Demand for new paper
issues is weaker and brokers are suffering, so we are
downgrading estimates. Collins Stewart is a modest tweek
to numbers whilst Evolution, Panmure and Numis are more
significant changes. Some of these companies will
outperform during a market downturn. Numis and Collins
Stewart did in the last bear market. Consolidation would
help and is probably inevitable. We would back Collins
Stewart with 45% upside. It is disappointing to downgrade
Evolution and Panmure, although we suspect that Panmure
is likely to be a victim of consolidation. Consequently we
have an ADD recommendation. Numis has the best rating
and the most conservative estimates.
PM: Downgrades — any more detail?
NH: Collins Stewart 3%
downgrade
NH: Evolution 14%
downgrade
NH: Numis 23%
downgrade
NH: Panmure 17%
downgrade
PM: Ouch
PM:
PM: What’s Arc Fund Management done?
NH: Down 1.75p at 11.50 in the middle.
PM: This is a little asset manager run by Christopher Rowe.
NH: He came across our radar about a year ago when he was forced out of Subprime Invesetment – Subsea Resources
PM: Keeps cropping up, that thing – ship wreck salvage firm. Been a car crash for investors.
NH: Well, Arc’s had a capital injection from one Lord Michael Ashcroft.
NH: Bizarrely, it seems a straightforward deal – there is not a blizzard of complexities and side deal, with new stock classes and all the other weirdo bits that usually accompany an Ashcroft deal
NH: He has simply bought stock in a placing handled by Fiske.
PM: Fiske!? The White Rat’s place? Haven’t heard of them for ages.
NH: The Rat has retired, of course.
PM: But look, there must be a wrinkle in this – it’s Ashcroft.
NH: There is – with the market price at 13.25p, Ashcroft has bought about 21% at 8p – and other investors have topped up at 11p.
PM: Oh, right, so net effect is that the market price is down 13%, but Ashcroft is up 40 odd per cent on day one. Lovely!
NH: that’s how to make money!
PM:
PM: WNG — worthington Nickels
PM: What has happened there??? A reader was asking earlier
NH: i think Retail Punter hit it on the head
NH: looks like new management have come in and found all sorts of nasties
PM: Stock is supsended!
NH: looks like we are going to get a revised trading statement at some point
PM: suspended even
NH: all looks horrible
PM: last trade at 17.25p — stock down from two quid
PM: We are just trying to dig out the trading statement from Oct 15
PM: For the public record
NH: here’s what it said
NH: On 19 September 2007, Worthington Nicholls Group plc (“Worthington Nicholls”, the
“Company” or the “Group”), installers of air conditioning, heating, ventilation
and chilled water systems, announced, inter alia, that it was undertaking a
review of its accounting policies, had initiated a strategic and operational
review and would seek to update the market on these matters and on the likely
outturn for the financial year ending 30 September 2007 by the second half of
October.
NH: Accounting Policy Review
Following the appointment of Chris Neilson to the Board as Interim Finance
Director, the Audit Committee appointed KPMG to undertake a targeted accounting review.
As independent advisers, KPMG has assisted management in undertaking a review of
certain accounting matters in relation to the major subsidiaries of the Group.
These subsidiaries account in aggregate, for approximately 77% of turnover and
93% of net assets.
NH: here’s the important par
NH: Based on the work to date, the board of directors of the Company (“the Board”)
presently estimates that write offs totalling #6.5 million to the Group net assets
at 31 March 2007 are necessary. The impact of these adjustments on current and
prior years is currently being reviewed. In addition, a substantial write off to
the goodwill held on the balance sheet is anticipated.
NH: and there’s more
PM: uh-ho
NH: Alongside completing the current review on the remainder of the Group, the Board
has instructed KPMG to assist with a full review of the circumstances that have
led to these adjustments.
PM: Dear or dear. Shouldnt pre-judge of course –
NH: here’s another weird bit from October’s statement
NH: On the 17 August 2007, the Board announced that it anticipated turnover for the
year to 30 September 2007 would be #31.5 million producing a break-even result.
Prior to the effects of the write offs referred to above, the Board believes that
the Group will report results that are materially in line with its statement of
17 August 2007.
PM: materially inline!!!
PM: I’m materially in line with this desk
NH: i think we can safely say WNG won’t be trading at 17p when it returns from suspension
PM: Assuming it does return
NH:
PM:
PM: Right we are done!
PM: Thanks for all the comments — particularly to FXtrader, who is becoming something of a pro poster
NH: is he George Soros in disguise??
PM: Stevie Cohne, actually
NH: and where was the real Robert Pesston this morning??
PM: Oh, dont encourage them — that was Helen and Rob on friday
PM: Lost control of the situation
PM:
NH: see u tomorrow
PM: We will be back at 11 tomorrow. Thanks for joining.