Markets live chat transcript for the chat ending at 12:13 on 25 Jul 2008. Participants in this chat were: Bryce Elder (BE) Neil Hume (NH)
BE:
Hello - earlier than usual! - and welcome to Markets Live.
BE:
We’re still chasing things at the moment.
BE:
But, because of my technical hamfistedness, I started the session early.
BE:
So if you can hang tight for the next ten minutes, we’ll start properly at the usual time.
BE:
And feel free to post some questions for us to address later.
BE:
Ok - Neil’s logging on now.
BE:
Murphy is still away as its east Africa retreat
BE:
And, as posters have noted, I now have a picture.
BE:
Taken with a cameraphone at arm’s length.
BE:
Our snappers are all too busy hanging around outside the High Court to do a professional job on this kind of thing.
BE:
Ah - there you are. So, bear market rally over then?
NH:
US markets took a real battering last night
NH:
and it did not take much to trigger it
NH:
a tick up in the oil price and some scary comments on Washington Mutual
NH:
and Bill Gross at Pimco making the following the prediction
NH:
PIMCO estimates a total of 5 trillion dollars of mortgage loans are in risky asset categories and that nearly 1 trillion dollars of cumulative losses will finally mark the gravestone of this housing bubble.
NH:
the dow off 280 points
NH:
and this morning there is more bad news from the banking sector
NH:
but it seems people want to discuss the latest disaster at the Royal Ratcatcher
BE:
No longer by Royal Appointment, I thought …
NH:
(Jagger, you have been reading the Times haven’t you?)
NH:
they have lost the Royal Appointment tag
NH:
not surprised HRH is trying to distance herself
NH:
seen the stock price??
BE:
Down 34.5p at 67p. 34% drop.
NH:
profits expected to be £34m below management’s internal forecasts
NH:
Integration/restructuring issues at washrooms and pest control, as
well as problems in Australia have continued throughout Q2.
NH:
also, trading conditions in textiles and washrooms have deteriorated
NH:
(Jagger, I think I know who is putting the story about and we are not that excited. Our M&A people distinctly cool on this)
NH:
Management expect the issues the business
is facing to persist for “at least the remainder of the year”.
NH:
and remember this is the new crack management team brought in from ICI
NH:
who are obviously finding things tougher than expected
NH:
and Rentokil a bidder mess than they thought
NH:
so what sort of downgrades are we talking about
BE:
This is from Merrill:
BE:
Rentokil has issued a profit warning this morning stating that trading has
deteriorated across many of the divisions into the second quarter of 2008. as a
result, management now expect PBT for 2008 to come in around £35m lower
than previous guidance given at the time of the Q1 trading update on 2 May.
Management’s new guidance would imply earnings downgrades in the region of
20-25% to our current PBT.
Trading has deteriorated in UK washroom and the European textiles services
businesses are also facing increased cost pressures. The Pest control business
is seeing slowing sales momentum in Q2 to an extent while Asia Pacific is facing
significantly lower levels of profitability across all sectors and geographies. City
Link’s restructuring is progressing to plan but revenue trends have worsened,
more an indication of general market weakness according to management.
Ambius (tropical plants) is also seeing weakening trading conditions in Q2, mainly
in North America.
BE:
Rentokil Initial - Trading statement
Woeful statement….Last statement noted the difficulty in implementing change programmes which was impacting the performance of key businesses. City Link has made good progress in improving service levels although demand is generally weak across the division, problems with restructuring UK washrooms business has continued in Q2. Trading has also deteriorated in Textiles & Washrooms during the quarter and revenue has fallen sharply. It is unlikely that profitability will improve in 2008. These problems are mainly due to serious operational issues in the UK but businesses in Europe are also facing a number of cost or growth challenges and these will continue for at least the rest of the year. Pest Control is broadly in line although the slow down relating to poor weather and the weak UK economy will affect business H2. b PBT will be c.£35m lower than that at the time of the Q1. “challenges are considerable” going forward.
BE:
Investec keeps a “sell” …
BE:
Hard to break old habits
The group has come out with another profits warning, showing that the new
management team has inherited a business in much worse shape than they
can have imagined. The new team has a very good record and are
undoubtedly getting to grips with the problems, but market hopes of a
relatively quick turnaround in the business are kicked firmly into touch. We
will be reducing our forecasts substantially in line with guidance.
BE:
Trading update. In today’s trading update, Rentokil Initial has stated that,
although it had alluded to difficulties in the Q1 trading update in May, trading has
deteriorated since that time and the group’s internal forecast is now £35m lower.
This entry was posted by Bryce Elder on Friday, July 25th, 2008 at 10:40 and is filed under Uncategorised.
