Markets live chat transcript for the chat ending at 12:06 on 25 Apr 2008. Participants in this chat were: Paul Murphy (PM) Neil Hume (NH)
PM:
Welcome to Markets Live
PM:
We are rushing around a bit
PM:
Neil is just logging in
PM:
he is used to relaxing Fridays where he sits around and thinks about his column for the paper
PM:
But Rob’s gone
PM:
I can report that we are getting a new colleague — Bryce Elder joining us soon
PM:
Im sure he will bring us lots of fresh insights
PM:
He might even be a dab hand at setting his kit up in time
PM:
Might he neil 
PM:
Thank you Greenback
NH:
morning
PM:
Vote for us at the Webbys!
NH:
sorry for being late
NH:
SNAFU
PM:
We promsie to hold a party
NH:
For some reason if someone else uses this machine
NH:
i can’t log on
NH:
so I have to unplug it and re-boot the whole thing
NH:
takes ten minutes
PM:
Greenback – -yes he was for a time
PM:
But dont hold that against him. People have to start somewhere
PM:
PM:
Right — straight to readers’ requests this morning
PM:
CPW
PM:
Carphone warehouse
NH:
yep, shares up 9.25p at 258p
NH:
more rumours
NH:
but this one does not even make sense
PM:
What is then??
NH:
hearing that Vodafone are interested in CPW’s wireless business, while Best Buy are looking at the retail business
PM:
hang on, Carphone have a broadband business and retail mobile phone business
PM:
but they don’t have a wireless biz — unless you count the virtual network
NH:
which we don’t
NH:
mind you
PM:
But this is pushing the price higher?
NH:
it is but so is this
NH:
CPW.L, Carphone Warehouse — Cash flow concerns overdone /Growth now back to a very reasonable price; upgrading to Overweight
PM:
Oh well thats mroe like it
NH:
Morgan Stanley & Co. International plc
Morgan Stanley & Co. International plc
Geoff.Ruddell@morganstanley.com, Fred.Bjelland, Brooke.Bone, Claire.Kent
NH:
We leave our forecasts unchanged today and see no reason to change our 290p price target.
However this now implies 16% upside so we upgrade the shares to Overweight-V, from Equal-weight-V. Last week CPW confirmed that it will deliver c.65% EPS growth for FY 2007/8 when it reports next month. It also gave detailed guidance to support a further 25-30% EPS
growth in FY 2008/9 (broadly in line with the five year CAGR of 32%).
NH:
Despite this, the shares have fallen 30% over the last five months. This represents pure de-rating and has left the shares on just 10.8x FY 2008/9 earnings. We consider this a very attractive entry point.
NH:
there’s more if you want it
NH:
Much of the share price weakness appears to have been caused by concerns about CPW’s seeming inability to turn profits into cash. We think it unreasonable to expect a company growing so fast to generate cashflow.
PM:
Kind o fMr Ruddle — We think it unreasonable to expect a company growing so fast to generate cashflow.
PM:
NH:
very unreasonable
NH:
We believe it is quite unreasonable to expect CPW to generate
cash whilst it is growing earnings so rapidly. On page 10 we
contrast investor discomfort about CPW failing to produce cash
with investors’ very relaxed attitude to Tesco’s very similar
cashflow profile. We understand that Tesco has a much
stronger balance sheet, but CPW’s isn’t particularly stretched
and the returns that CPW is generating on the cash that it is
investing are much, much higher than those at Tesco.
cash whilst it is growing earnings so rapidly. On page 10 we
contrast investor discomfort about CPW failing to produce cash
with investors’ very relaxed attitude to Tesco’s very similar
cashflow profile. We understand that Tesco has a much
stronger balance sheet, but CPW’s isn’t particularly stretched
and the returns that CPW is generating on the cash that it is
investing are much, much higher than those at Tesco.
NH:
and here’s some stuff on the demerger rumours that keeps doing the rounds
NH:
CPW hinted last week that it may look to separate
in due course…
Following last week’s annual strategy update this now looks a
distinct possibility. CPW announced that it was planning a
“greater separation of operating divisions to give increased
autonomy” to both its Retail and Fixed line telecoms divisions.
CPW management said that this was not necessarily a first
move towards a full de-merger/separation, but it also stated
that the driving force behind the move related to the channel
conflict developing within the business.
in due course…
Following last week’s annual strategy update this now looks a
distinct possibility. CPW announced that it was planning a
“greater separation of operating divisions to give increased
autonomy” to both its Retail and Fixed line telecoms divisions.
CPW management said that this was not necessarily a first
move towards a full de-merger/separation, but it also stated
that the driving force behind the move related to the channel
conflict developing within the business.
NH:
wanting to give consumers ‘simple impartial advice’ about
connectivity in its retail stores, whilst also owning the UK’s third
largest broadband network) has the potential to damage
CPW’s reputation with both consumers and the network
operators. Whilst a sensible first step, we are not convinced
that the internal ‘chinese walls’ that CPW is proposing will
prove sufficient. We would now not be at all surprised,
therefore, if a complete separation were to be announced in
due course
connectivity in its retail stores, whilst also owning the UK’s third
largest broadband network) has the potential to damage
CPW’s reputation with both consumers and the network
operators. Whilst a sensible first step, we are not convinced
that the internal ‘chinese walls’ that CPW is proposing will
prove sufficient. We would now not be at all surprised,
therefore, if a complete separation were to be announced in
due course
PM:
Hmm — this coincides with your thinking
NH:
and I will just spell that out again for you
NH:
We would now not be at all surprised,
therefore, if a complete separation were to be announced in
due course.
therefore, if a complete separation were to be announced in
due course.
NH:
I reckon there is deffo something happening at Carphone
NH:
that fact that they are creating separate cost centres for their two businesses
NH:
makes me suspicious
NH:
and there are too many people chatting about this for it to be completely untrue
PM:
no smoke without fire then
PM:
PM:
Just to points below
PM:
Gold — suspect taht has everything to do with the dollar going all over the place
PM:
bsb has mentioned HBOS — which reminds me of the bank robber
NH:
The £100m bank robber from Mayfair
NH:
sipping champers in the finest eateries and all that
PM:
But we should state here that we are both feeling MIGHTY RELIEVED this morning.
NH:
Yes, we feel safe at our desks. Safe-r anyway.
PM:
They’ve got him. They’ve taken out a baddie that had infiltrated the equity market.
NH:
what, the £100m man??
PM:
Er, no not that one. This one is the £13k Man
PM:
This is the SEC of course – not our own much-loved FSA.
PM:
SEC swat team have gunned down this sophisticated bank robber – this was a SHORT-SELLER who was spreading FALSE RUMOURS about Alliance Data Systems – suggesting that the takeover by Blackstone last autumn had run into trouble.
NH:
No! The cheek of it. Bare-faced robbery.
PM:
This is from Ben White’s news story on it
PM:
According to the complaint, Mr Berliner on November 29 sent instant messages to traders at brokerage firms and hedge funds and elsewhere suggesting that Blackstone’s agreed deal to acquire ADS for $81.75 was being renegotiated at $70 a share. The rumours were picked up by the media and caused ADS’s shares to fall 17 per cent, according to the complaint, which did not identify the media outlets.
Mr Berliner agreed to settle the charges without admitting or denying guilt and to disgorge $26,129 in profits and pay a $130,000 fine. He will also be banned from working for any broker or dealer.
Mr Berliner agreed to settle the charges without admitting or denying guilt and to disgorge $26,129 in profits and pay a $130,000 fine. He will also be banned from working for any broker or dealer.
PM:
So he made 13 grand – sterling.
NH:
Big fish eh. Criminal Kingpin.
PM:
Cant have been very good rumours!
NH:
actually I think the deal did collapse
NH:
but it was regulatory grounds
NH:
Helen is doing a separate post on it
PM:
Instant messaging eh. — thats what got him
PM:
THE MSN MANIPULATOR
PM:
You know it is instant messaging software that we use to do this chat.
PM:
Oh course we don’t use instant messaging to spread false rumours.
PM:
I don’t quite understand what a false rumour is.
PM:
The underlying information is either right or wrong. Once that is clear it is no longer a rumour.
PM:
Like you had a rumour about RDF media yesterday, which I was taking with a pinch of salt.
PM:
And then it came true. Bang.
PM:
I’m beginning to think the regulators actually don’t understand how financial markets work – what makes prices go up and down.
NH:
what, you are beginning to think..
PM:
PM:
PM:
Can I come back to this stuff about false rumours and the like.
NH:
Sure.
PM:
I was trying to find details on line, but it’s from pre-internet days so bit tricky.
PM:
There was an important case involving short selling and rumour spreading I London in the early 1990s.
PM:
Bascially, a trader rang up a market maker at Goldman Sachs saying he wanted to sell Maxwell Communications because he had heard the business was going to go into liquidation.
PM:
They threw the book at him. GS provided all the tapes to what was then the SFA. GS pushed the authorities into prosecuting him.
PM:
All went to trial – but they guy I think he was called Peter Marks was acquitted on the basis that he “believed” Maxwell Communication was in trouble rather than knowing it was wrong and therefore spreading a malicious falsehood, etc.
NH:
Ok – and?
PM:
Well, after Maxwell died it emerged that amongst the market makers trading Maxwell stock, on any given day while most market makers had a few thousand shares on their books, Goldman Sachs had a cool 45 million on their book
PM:
It was supporting the market – to any ordinary observer it looked like GS were supporting the share price. And maybe they had motive in pursuing this supposed bear raider.
PM:
I should add that GS were eventually acquitted of charges that they supported Maxwell stock. They’re holdings were bound up in various option deals they had direct with Maxwell.
PM:
But I think it is fair to say that in those days the market in Maxwell stock was never anything other than “false.”
NH:
Bet GS love to be reminded of that little episode.
PM:
Hmm. All part of the service here.
PM:
IN fact this is from the DTI report
PM:
It added that Goldman Sachs, Maxwell’s brokers for many of his share trades, “bears a substantial responsibility in respect of the manipulation that occurred in the market” as Maxwell’s companies ran up debts of over #2.5 billion and tried to support the share price of Maxwell Communications Corporation and then MGN.
PM:
That’s from a piece in the Scotsman at the time
PM:
Point I’m making is that it is not necessarily clear at the time whether a rumour accurate or not.
PM:
So when HBOS got raided last month by the dastardly champagne bank robber, who lives on Curzon Street, what would we have made if we had then known …..
PM:
That if and when the Bank of England set up a rescue liquidity facility – like the SLuSh (TM G Cox) fund –
NH:
That HBOS would be first in the queue with a request for NINE BILLION !?!?!?!
NH:
Because that seems to be the read-thru from this £9bn RMBS securitisation by HBOS.
PM:
Bascially issuing all this mortgage paper, but not selling it to investors. So we assume that – over time – it will all go to the Bank of England, who will dole out gilts in return.
NH:
Which can be turned into cash.
NH:
Yes, you know the assumption across the market is that banks will use this facility to raise cash, which they will then lend to certain hedge funds…
NH:
Who will then purchase the various toxic stuff still sitting on bank’s balance sheets.
PM:
Perfect – so the SLS is actually going to work.
NH:
Seems so. That’s why the banks have stopped falling.
PM:
What a bail out.
NH:
Under Gordon Brown’s watch. Treasury hikes tax for the poor; BoE lends tax payers money to vulture funds to hoover up distressed assets. Marvellous!
PM:
PM:
right — lets get to some features rather than prattling on
NH:
OK
PM:
(Hi Bryce — welcome)
NH:
WPP
NH:
stock has taken a bit of a knock this morning
NH:
actually it is turning a bit more serious
NH:
now down 48.5p at 581p
NH:
that’s a drop of 7.7%
NH:
follows Q1 trading statement and some gloomy comments from CEO Martin Sorrelll
NH:
and guess what
PM:
go on
NH:
Like everyone else he is going on about March
PM:
March?
NH:
yep
NH:
he says business in Europe got much slower in March
NH:
Looks organic growth was around 3%
PM:
??
NH:
which was well below Jan and Fed
NH:
it is as if, March was the month that the reality of the credit crunch and the impact it will have/is having on the economy finally hit home
NH:
all of which hit growth in Q1
NH:
which ended up coming in around the low end of expectations
NH:
and even though the company is keeping its full year earnings targets
NH:
the market is worried now
NH:
that growth could really slow
NH:
anyway the tone of this statement is quite marked when compared to what Sir Martin was saying at the start of March
NH:
this was in our paper at the time
NH:
Sir Martin Sorrell, chief executive of the world’s second-biggest advertising group, said WPP had seen “little or no impact” from the crises in subprime mortgages and monoline insurers, adding that the 5 per cent revenue growth it had seen in January suggested that “2008 should be a better year than 2007
NH:
His forecast was supported by Interpublic, the US owner of McCann Erickson, which said yesterday it saw “no evidence of a pullback in 2008″.
Announcing 4.7 per cent growth in WPP’s annual revenues to Pounds 6.18bn in spite of adverse currency movements, Sir Martin cautioned that the “real” economy would eventually be affected by financial crises in 2009.
Announcing 4.7 per cent growth in WPP’s annual revenues to Pounds 6.18bn in spite of adverse currency movements, Sir Martin cautioned that the “real” economy would eventually be affected by financial crises in 2009.
PM:
so the slowdown is biting more quickly than expected
NH:
yep
NH:
here’s some broker comment
NH:
Collins Stewart
NH:
Q1 numbers on target
WPP’s released on-target Q1 results this morning. Reported Q1 revenues were up over 14%, in line with our 14% growth forecast. New business wins in the quarter were good ($1.1bn) and the group also confirmed it is on target to hit this year’s 15.5% margin target. So the headlines are good, but the details give some cause for caution; organic growth was below our expectations and is slowing.
WPP’s released on-target Q1 results this morning. Reported Q1 revenues were up over 14%, in line with our 14% growth forecast. New business wins in the quarter were good ($1.1bn) and the group also confirmed it is on target to hit this year’s 15.5% margin target. So the headlines are good, but the details give some cause for caution; organic growth was below our expectations and is slowing.
NH:
Organic growth not so hot, and cooling
Organic growth was “almost 5%” against our forecast of 6%. This is weaker than Omnicom’s 6.4% Q1 organic growth announced earlier this week. Of concern is the fact that “March was slower, somewhat surprisingly in Western Continental Europe”, which managed only 3% organic growth.
Organic growth was “almost 5%” against our forecast of 6%. This is weaker than Omnicom’s 6.4% Q1 organic growth announced earlier this week. Of concern is the fact that “March was slower, somewhat surprisingly in Western Continental Europe”, which managed only 3% organic growth.
NH:
Geographic trends surprising
Geographic organic growth trends make surprising reading as North America remains stronger than the economic gloom suggests, >5% organic revenues. This is better than the UK (19%) and Latam (15%). The rest of Asia produced 6% organic growth.
Geographic organic growth trends make surprising reading as North America remains stronger than the economic gloom suggests, >5% organic revenues. This is better than the UK (19%) and Latam (15%). The rest of Asia produced 6% organic growth.
HOLD recommendation and price target under review
We wrote earlier in the month (Boom and Gloom, 2nd April) that we expected upgrades following Q1 results, but were concerned about 2009. What surprises us here is the slowdown in March, earlier than we expected. We’ll review our numbers and recommendation following this morning’s analysts’ meeting.
NH:
and this is from Panmure
NH:
Q1 revenues, £1.56bn in line. However, lfl growth rate of ‘almost 5%’ slightly
weaker than expected, and clear deterioration in Europe in March. FY 08
EBIT margin objective of 15.5% retained. However, possible downside risk to
FY 08/09 estimates. Shares may come under pressure near term.
weaker than expected, and clear deterioration in Europe in March. FY 08
EBIT margin objective of 15.5% retained. However, possible downside risk to
FY 08/09 estimates. Shares may come under pressure near term.
Q1 2008: Reported revenues +14% yoy at £1.56bn. This is basically in line with
expectations and reflects a strong euro translation effect. However, the main focus will be the like-for-like revenue growth (lfl) of ‘almost 5%’ in Q1. This is below expectations of 5.5%-6%. Whilst it is always dangerous to over-analyze quarterly data, this is a mild
negative.
NH:
Focus on Western Europe: WPP flag up a slower March in Continental Europe, which
will attract bearish attention. Conversely, North America has shown 5% plus lfl revenue growth in Q1, which is encouraging. The UK is said to be 2% plus lfl, which is marginally better than H2 2007. Across Rest of World, there are a range of growth rates but China/India importantly remains very strong, at 19% lfl growth yoy.
will attract bearish attention. Conversely, North America has shown 5% plus lfl revenue growth in Q1, which is encouraging. The UK is said to be 2% plus lfl, which is marginally better than H2 2007. Across Rest of World, there are a range of growth rates but China/India importantly remains very strong, at 19% lfl growth yoy.
Targets retained: WPP retains its 15.5% FY 08 group EBIT margin target, which is
encouraging. Additionally, hidden within the text, is a reference to expectations for
higher lfl growth in FY 08 than FY 07, which is also encouraging. However, the market may ignore this initially.
NH:
Investment comment: Near term the market is likely to focus on revenue trends (eg
scope for deterioration) in all markets The risk in Europe is most clearly on the
downside. There is possible scope for modest EPS cuts, though we caution there are a
number of moving parts here. Whilst the WPP valuation is superficially low, c.12x 08, today’s statement is not a catalyst for the shares.
scope for deterioration) in all markets The risk in Europe is most clearly on the
downside. There is possible scope for modest EPS cuts, though we caution there are a
number of moving parts here. Whilst the WPP valuation is superficially low, c.12x 08, today’s statement is not a catalyst for the shares.
PM:
thanks for all that
PM:
Just looking to see whether Sir Martin has been mentioning baths or saucers in his update
NH:
doesn’t look like it
PM:
famous for his recovery predictions
PM:
This time it might be a shower of course
PM:
PM:
Good stuff below on HBOS — think there’s plenty more in that story — interesting on A&L as well
PM:
But — to the wider market
PM:
Neil?
NH:
FTSE 100 currently up 13.4 points at 6,064.3
NH:
was as high as 6,086 earlier
NH:
amazing performance really
NH:
considering at one point yesterday we were below 6,000
NH:
and the market felt absolutely awful
NH:
and even more remarkable
NH:
is that today’s gain have come without any assistance from the mining sector
NH:
Which is under pressure because the dollar is rallying again
NH:
and this is based on the belief that the US Federal Reserve is going to pause for breath as far as rates are concerned
NH:
dollar/euro now 1.55
NH:
was 1.60 earlier in the week
PM:
Big mvoe
NH:
it is
PM:
This is on the back of a sharp reassessment of US interest rate prosepcts
PM:
people reading Greg Ip in the WSJ
NH:
what, the unofficial Fed spokesman
PM:
that’s right
PM:
Was conversing with one shrewdie reader earlier
PM:
There have been wacky knock on effects in JGBs this morning
PM:
carnage apparently
PM:
Gwen’s done a post — which Sam is going to put up shortly
PM:
And what else
PM:
Oil?
NH:
moving higher, although with a stronger dollar it should be headed lower
PM:
This is cos of the refinery stuff noted below
PM:
Grangemouth
PM:
PM:
Any RAW this morning?
NH:
apart from Carhone not a lot around this morning
NH:
didn’t even managed to pick up any up at the Winterfloods party last night
PM:
Oh yes. NFI
PM:
how was it?
NH:
not as good as previous years
NH:
I blame the change of venue
NH:
they always used to hold it at one of the City livery halls
PM:
yep, the one behind Cazenove
PM:
Chartered Accountants Hall
NH:
this year it was at the Great Eastern Hotel in Liverpool Street
PM:
not called the Great Eastern any more
PM:
Andanz or something like that
PM:
Known historically for its occupancy rates being north of 100 per cent
NH:
what after lunch?
PM:
NH:
anyway it is not like that anymore
NH:
very Conran now
NH:
anyway
NH:
by the time I got there a lot of people had left
NH:
still
NH:
I bumped into a few old faces
NH:
Brian Winterflood was working the room
NH:
which had some big pictures of him on the wall
PM:
Ah
PM:
so what was the gossip
NH:
well a lot of people were moaning about the way Goldman handled the underwriting for the RBS rights issue
PM:
really?
NH:
yep
NH:
now, a lot of this was mentioned in our article yesterday
NH:
but there was real anger
NH:
one guy who works at one of the big institutions was furious
NH:
as he tells it
NH:
the advisers went out with a sub-underwriting fee
NH:
Goldman went out with a sub underwriting fee of 80-100 basis points
NH:
and asked for bids
PM:
Ok
NH:
they came back in
NH:
and it looked like the fee was going to be set around 100 basis points
NH:
in fact as most people headed home on Tuesday night it looked the fee was going to be set around there
NH:
but the demand kept coming
NH:
eventually there was enough demand to cover the £12bn twice
PM:
whoa
NH:
knowing that they decided to cut the amount of stock that was going to sub underwritten
NH:
well, the big RBS shareholders that put in for the sub underwriting went ballistic
NH:
so much so
NH:
that the advisers backed down and the fee went back to 100bps
NH:
and increased the amount of sub underwriting
NH:
what I had not appreciated in all of this was
NH:
that an underwriting fee is around 2.5 to 2.75%
NH:
now the underwritten rule is that 1% is given away for the sub underwriters
NH:
and when you are asking shareholders to cough up £12bn
NH:
you want something in return
NH:
ie a 1% sub fee
PM:
well
PM:
seems to me that the whole thing is money for old rope
PM:
or at least limited risk
PM:
and as Lombard put it this morning
PM:
no one can really take the moral high ground when it comes to underwriting fees on deeply discounted share offerings
PM:
anyway interesting tale
PM:
PM:
Ring the bell on RDF Neil
NH:
Oh year
NH:
a bit of RAW that came right
NH:
anyway, if anyone is interested in some read across on the bid for RDF
NH:
they should look at Shed Productions
NH:
here is a little note from Landsbanki
NH:
Landsbanki Securities acts as broker, NOMAD and market-maker to Shed Media
RDF announced yesterday it had received an indicative offer from management for the company. No pricing indications have been set but the share price has already moved to accommodate the customary 25% exit premium (127p). This follows the bid for UK listed but Dutch based indie TV producer 2waytraffic in March.
RDF announced yesterday it had received an indicative offer from management for the company. No pricing indications have been set but the share price has already moved to accommodate the customary 25% exit premium (127p). This follows the bid for UK listed but Dutch based indie TV producer 2waytraffic in March.
NH:
This means that Shed is the only indie producer of scale left on the UK stockmarket. At current levels the read across value for Shed would be 85p on an EV/ EBITDA (6.2x) basis or 125p on an exit PER basis (10.6x 2008).
NH:
Shed are due to report their prelims for the 12m to end Dec 2007 on the 30th April. We look for pre profits of £ 9.0m on revenues of £98m for the 16 month period to end December. Unlike 2waytraffic and RDF (both suffering profit upsets in 2007), we expect Shed to more than double pre tax profits between 2006 and 2008 with enhanced forward visibility . We retain our Buy recommendation on Shed and see market m&a activity as offering a useful support for the shares ahead of the results.
PM:
thanks for that
PM:
PM:
Interesting note below from Ian on petrol queues in edinburgh
PM:
rice, oil…bread
PM:
PM:
CLARKSON ( CKN ) — for Sean
PM:
Shipping rates are behind the move
PM:
Frm John Kemp at Sempra –
PM:
Charter rates for crude oil tankers have risen sharply on all the major routes over the last fortnight — the largest sustained rise this year.
PM:
Freight rates surged higher again — led by soaring gains for the largest capesize bulk carriers.
Rates on the C3 iron ore route from Brazil to China climbed another +$3.63 per tonne (+4.5%) yesterday taking the total increase since Thurs Apr 17 to +$10.91 (+15.0%) in eight days.
Rates on route C5 from Australia climbed +52 cents (+1.6%) yesterday and are up +$3.84 (+13.3%) in eight days.
Rates on the C3 iron ore route from Brazil to China climbed another +$3.63 per tonne (+4.5%) yesterday taking the total increase since Thurs Apr 17 to +$10.91 (+15.0%) in eight days.
Rates on route C5 from Australia climbed +52 cents (+1.6%) yesterday and are up +$3.84 (+13.3%) in eight days.
PM:
And various charts to prove the point
NH:
NH:
moving on
NH:
time to look at Sci Entertainment
NH:
and that’s because we have details
NH:
of the cash call
PM:
haha
PM:
do share the details
NH:
naturally it is massively dilutive
PM:
Much better than a bid at a sig premium
NH:
obviously, much better
NH:
shareholders get to share in the upside
PM:
But wasnt the bid in paper?
NH:
ah, yes so it was. they could have shared in the upside of that
PM:
NH:
rather than coughing £60m to SCi
NH:
check out these figures
NH:
Sci shares currently in issue 86.8m
NH:
Open Offer shares 77,222,441
NH:
Placing Shares 94,382,983
NH:
Enlarged Share Capital 258,480,671
PM:
yikes
NH:
Issue Price 35 pence
NH:
current market price 46.25p
PM:
Full on rescue
NH:
if all goes to plan SCI should raise around £60m
NH:
which will pay off its overdraft
NH:
secure a new banking facility
NH:
provide it with working capital
NH:
here’s the detail on the banking facility
NH:
* for the repayment and cancellation of the amount drawn on the Company’s
existing #35 million overdraft facility with Lloyds TSB (#19.1 million drawn
as of 24 April 2008); and
existing #35 million overdraft facility with Lloyds TSB (#19.1 million drawn
as of 24 April 2008); and
* the remainder for working capital requirements including the development
and marketing of new releases.
PM:
Anything interesting in the statement
NH:
a few quirks
NH:
Time Warner and Robbie Tchenguiz have both agreed to back the cash call
NH:
Time Warner remember paid 500p a share for a 10% stake a few years agp
PM:
So they are averaging down
NH:
big style
NH:
they have also struck a distribution agreement with SCI
NH:
and got some money back they lent the company
PM:
Really?
NH:
yep
NH:
look at this
NH:
Net proceeds receivable by the Company do not include the sum of
approximately #5.9 million relating to certain of the New Shares subscribed by
WB, such sum to be discharged in full by the allotment and issue of 16,985,614
New Shares to WB in satisfaction of a Group debt currently owed to WB in respect
of amounts payable under existing distribution and other commercial arrangements
between the Company and WB.
approximately #5.9 million relating to certain of the New Shares subscribed by
WB, such sum to be discharged in full by the allotment and issue of 16,985,614
New Shares to WB in satisfaction of a Group debt currently owed to WB in respect
of amounts payable under existing distribution and other commercial arrangements
between the Company and WB.
PM:
ta
PM:
PM:
anything more??
NH:
here’s the details of the new loan facility with a warning at the end of it
NH:
4. THE LLOYDS FACILITY AGREEMENT
NH:
On 25 April 2008 the Company and certain of its subsidiaries entered into the
Lloyds Facility Agreement with Lloyds, pursuant to which Lloyds agreed to
provide a #25 million revolving credit facility to SCi, Eidos Limited, Eidos and
Pivotal Games Limited as borrowers for the purpose of funding the working
capital needs of the Group. The Lloyds Revolving Facility will not be available
to be drawn until certain conditions precedent have been satisfied including the
receipt of #40 million of net proceeds from the Placing and Open Offer. If such
proceeds are not received by 27 May 2008, the Lloyds Facility Agreement will
lapse.
Lloyds Facility Agreement with Lloyds, pursuant to which Lloyds agreed to
provide a #25 million revolving credit facility to SCi, Eidos Limited, Eidos and
Pivotal Games Limited as borrowers for the purpose of funding the working
capital needs of the Group. The Lloyds Revolving Facility will not be available
to be drawn until certain conditions precedent have been satisfied including the
receipt of #40 million of net proceeds from the Placing and Open Offer. If such
proceeds are not received by 27 May 2008, the Lloyds Facility Agreement will
lapse.
PM:
and what about Mr Tchenguiz?
NH:
reading between the lines
NH:
it seems he will take up his share of the open offer
NH:
then immediately stick it on to a CFD
PM:
really?
NH:
look at this
NH:
Thorson is indirectly owned by the Tchenguiz Discretionary Trust, which is
advised by R20 Limited, the investment vehicle of Robert Tchenguiz. Thorson
holds 13,413,073 ordinary shares, representing 15.4 per cent of the Company’s issued share capital as at 24 April 2008.
advised by R20 Limited, the investment vehicle of Robert Tchenguiz. Thorson
holds 13,413,073 ordinary shares, representing 15.4 per cent of the Company’s issued share capital as at 24 April 2008.
NH:
It also has a long economic interest
held through contracts for differences in another 2,181,666 ordinary shares,
representing 2.5 per cent. Of the Company’s issued share capital as at the same
date.
held through contracts for differences in another 2,181,666 ordinary shares,
representing 2.5 per cent. Of the Company’s issued share capital as at the same
date.
It has agreed to procure that the Thorson Prime Broker subscribes for up
to 42,857,140 New Shares under the Placing, consisting of 23,571,427 New Shares
placed firm with it and 19,285,713 New Shares placed with it subject to clawback
under the Open Offer.
NH:
The total subscription sum payable by the Thorson Prime
Broker for these shares, assuming the Thorson Prime Broker subscribes for such
shares in full, is #15.0 million. Thorson has confirmed that one of its
associates, Heatherville Limited, which is also indirectly owned by the
Tchenguiz Discretionary Trust, will acquire, with effect from Admission, a long
economic interest in 42,857,140 ordinary shares pursuant to a contract for
differences entered into by it with the Thorson Prime Broker.
Broker for these shares, assuming the Thorson Prime Broker subscribes for such
shares in full, is #15.0 million. Thorson has confirmed that one of its
associates, Heatherville Limited, which is also indirectly owned by the
Tchenguiz Discretionary Trust, will acquire, with effect from Admission, a long
economic interest in 42,857,140 ordinary shares pursuant to a contract for
differences entered into by it with the Thorson Prime Broker.
NH:
As Thorson is a substantial shareholder, together the Thorson Subscription Arrangements constitute a related party transaction for the purposes of chapter 11 of the Listing Rules and will therefore require shareholder approval at the EGM.
On 25 April 2008 the Company, Thorson and Heatherville entered into the Thorson
Relationship Agreement to regulate their relationship following Admission. The
Thorson Relationship Agreement includes provisions for the appointment of a
director by Thorson and restrictions on an appointed director voting where there
are conflicts of interest between the Group and Thorson. The Thorson
Relationship Agreement is conditional on (i) the passing of the relevant
resolution at the EGM (ii) the completion of the Thorson Subscription
Commitment, (iii) the acquisition by Heatherville of the long economic interest
in ordinary shares referred to above, and (iv) Admission.
NH:
A detailed summary of the Thorson Relationship Agreement is included in the
Company’s prospectus and shareholder circular to be published today.
Company’s prospectus and shareholder circular to be published today.
PM:
that all looks very very intriguing
PM:
But for the moment i cant make head nor tail of
PM:
(Monkey — wev’ve just been prattling on as usual)
NH:
well it looks like to me he is taken up his entitlement and then putting on a cfd because that’s a margin product
PM:
very interesting
PM:
NH:
interesting on Lufthansa
NH:
bad news for BAY
NH:
more competition at Heathrow
PM:
Price hodlign at 220p for the mo
PM:
Shire figs going down rather badly
PM:
Tax avoidance and drug company
PM:
Anyway – we are done
PM:
Thank you for joining us. We will be back on Monday — refreshed at 11am
PM:
Goodweekend everyone
NH:
bye