Chief Executive Michael Geoghegan told a conference call that the
first-quarter performance in the U.S. had been better than the bank had
anticipated. “It was better (partly) because the tax rebate that people got in
the U.S. was used to pay back debt instead of (being spent on) consumer goods.”

GBM was reported to have enjoyed a record quarter and these trends have continued into April.

Q1 benefited from $6.5bn of own debt gains ($4bn in HSBC Finance), but these have substantially reversed since then.

Risk weighted assets declined from the level at the end of last year and the core equity tier 1 ratio was also ahead at 8.6% at the end of the first quarter.

Outlook: Private sector projects in the US and the UK remain under pressure through
lack of funding, though cost reductions have exceeded earlier management expectations (which should help the current year). Government financed infrastructure projects remain in place and Ashtead believes it has gained market share, though with
deteriorating rental rates conditions may remain difficult for some time. A -24% L4L
revenue number in Q4 suggests things getting tougher rather than easier for the short -term
at least.

We reiterate our negative view on Ashtead ahead of any change in current forecasts (only likely to be downwards) and target price of 35p.

 Costs on the mend — Cost per PGM ounce produced at R6956 was 26.7%
higher than the first half of 2008 but was 1% down on the preceding 6 months
to Sept-08 and is set to reduce further as the benefits of the restructuring
program kick in during H2. Monthly cost trends are now improving steadily.

 Cost guidance — Lonmin had previously forecast total 2009 Rand-based gross
operating costs for the full year to increase, but at a slower rate than South
African inflation. New guidance is for these total costs to actually be lower than
the 2008 total, in spite of the big wage increases in the interim.

 Assessment — We rate LMI Hold/High Risk because of the past operational
problems but we would need to seriously assess the early signs of productivity
progress.

 Rights issue — 2 for 9 at £9.00 raising $457m. Use of proceeds primarily to
reduce debt. LMI had net debt of $449m at 31/3/09 and has $975m of
committed facilities in place, with $575m of these comprising new facilities. A
good time for a rights issue, even if not desperately needed, in our opinion

The company also announced a 2 for 9 rights issue with a subscription price of
900p to raise proceeds of approximately US$457m
Key points:

- 6,400 full time employees and contractors have been retrenched with one-off
costs of $44 million and expected annualised cost benefits of $90 million

- Costs up 27% to ZAR6,956/PGM oz however monthly cost trend towards the
end of the first half of 2009 showing improvement, with costs trending down

- No dividend declared, in-line with BAS-ML forecast
Outlook:

- Expecting Rand-based gross operating costs for 2009 to be lower than incurred
in 2008
- Short term demand outlook remains uncertain, jewellery not enough to
compensate for auto demand destruction
The stock could open down on these results and the rights issue

We recognise that IPF has a good business model which is highly cash generative and delivers high returns on equity. Using our current forecasts the average Return on equity for next five years is 15%. Assuming a cost of 10% and long term growth rate of 3%, implies a valuation of 155p. However, there are serious question marks around the ability of the management team and hence this significantly increases execution risks and therefore the Group’s real cost of capital of, say, 20% might not be unreasonable, suggesting a valuation of 65p, 31% downside. Furthermore, there is a strong likelihood that IPF might breach its banking covenants. In such a scenario, creditors will be in a position to take control and the fate of equity holders will be left in their hands.

The most vulnerable covenant to the Hungarian profit warning and potentially higher impairment charges, in our view, is the interest cover covenant. 2.7x on our forecasts. Taking our ￡46.9m pre-tax, pre-exceptional forecast and adding back ￡35.9m finance costs and ￡15.4m depreciation suggests EBITA of ￡98.3m. This covers our finance costs forecast by 2.7x.

More aggressive? If, however, we had cut our old ￡67m group PBT forecast by ￡30m rather than ￡20m, i.e. at the most aggressive end of management guidance, our PBT forecast would only be ￡37m and our interest cover 2.5x. The safety margin of ￡16.5m in that instance is only equivalent to a 3% point worsening in the group impairment charge as a percentage of revenue. (Management has previously indicated that every 1% shift = ￡5m PBT). We currently forecast a 6% shift from 23.2% in 2008 to 29% in 2009.

• Markets are paying little attention to value as price action and flows are dominated by the steady and continued reversal of recession positions. This ought to provide good opportunities to relative value players, but only if they have enough risk capital to withstand indiscriminate buying and selling flows. These flows are the reason we had to cover longs in the bond market, relative to our medium-term positive forecasts. Similarly, we are quite wary of high-yield bonds –– given rising default rates and likely low recoveries ––– and greatly prefer high-grade, but the buying flows are ignoring our value concerns.