FT Alphaville » Markets Live transcript 18 May 2010

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Markets Live transcript 18 May 2010

Posted by Neil Hume on May 18 11:02.

Markets Live chat transcript for the chat ending at 11:27 on 18 May 2010. Participants in this chat were: Neil Hume, FT Tony Tassell

good morning

and welcome to Markets Live

FT Alphaville’s daily markets chat

an hour or so of lively stock market discussion

and we have another special guest today

someone from the main newsdesk

Tony Tassel

who edits what we call second front

or what you will know as Companies & Markets

Tony are you in?

good morning all..good to be here

if i appear a little discombobulated…it is new baby syndrome…

she still has not quite worked out the difference between day and night..a bit like markets have not quite sorted out what mood they are in

join the club

anyway

warning

the BOTR have been in feisty form recently

BOTR?

sorry

they used to be called the Rabble on the Right

but ML readers then suffered a credit downgrade

they got cut to the Bigots on the Right

in honour of the dear departed Gordon Brown

dear departed?

who was something of a pin up boy for the BOTR

right

enough of that

let’s get on with the show

11:06AM

where shall we start?

suppose we should go macro…how about the inflation numbers

yep, good idea

so…

CPI rose 3.7% year on year in April

which was above expectations for a 3.5% rise

that’s the four month in a row it has been above the 3% target

however, the biggest surprise was the RPIX number – surged to 5.4% year on year

expected rise was 4.9%

wow

has Merv penned a letter to Gideon

sorry I meant George

yes indeed..at least it makes a change for Merv from the Dear Darling letters

here are some of the flashes from reuters

RTRS-BOE’S KING – OIL PRICES, VAT RISE, PAST FALLS IN STERLING LARGELY ACCOUNT FOR APRIL CPI RISE

RTRS-BOE’S KING – THESE TEMPORARY FACTORS MASK DOWNWARD PRESSURE ON CPI FROM SUBSTANTIAL SPARE CAPACITY

RTRS-BOE’S KING – LIKELY INFLATION WILL FALL BACK TO TARGET WITHIN A YEAR, PACE, EXTENT OF FALL UNCERTAIN

RTRS-BOE’S KING – MPC VERY CONSCIOUS OF RISKS TO INFLATION IN BOTH DIRECTIONS

RTRS-BOE’S KING – ON DOWNSIDE, IMPACT OF SPARE CAPACITY COULD BE MORE SIGNIFICANT THAN ASSUMED

RTRS-BOE’S KING – UPSIDE RISKS TO CPI INCLUDE FURTHER COMMODITY PRICE INCREASES, INFLATION EXPECTATIONS

RTRS-UK FINANCE MINISTER OSBORNE SAYS SURE BOE WILL REMAIN VIGILANT TO ANY UPSIDE RISKS TO INFLATION

RTRS-UK’S OSBORNE-AIMS FOR FISCAL POLICY TO ALLOW MONETARY CONDITIONS TO BE SUPPORTIVE,CPI LOW AND STABLE

hmmm

how have the markets reacted

hang on, will just pull up sterling

cable is $1.4433

while a euro thing buys 0.8599

hmmm

just thinking about this

inflation is remaining high

much to Merv’s surprise

but I guess

with our debt levels a little bit of inflation is not bad news

inflate the debt away..and it is a sign of recovery

here is James Knightley from ING on the inflation figures

The fact that CPI has exceeded the 2% +/-1% range for the fourth consecutive month means that BoE Governor King has to write another letter of explanation. Given the forecasts within last week’s BoE Inflation Report showed that they expect CPI to fall dramatically in the next two years (to 1.4%) the BoE are unlikely to be sounding too worried. Indeed, with fiscal consolidation set to constrain economic growth and dampen inflation pressures we also believe that CPI should be moving back below 2% in the next couple of years. There are risks though, with the threat of further sterling weakness and the potential for higher VAT putting some upside risk to this view. Nonetheless, given the weak growth, tight fiscal policy environment we believe that rates will be on hold through the rest of this year with the prospect of only very modest interest rate rises next year.

thanks for that

I have an interesting bit of comment from RBS

UK inflation came in on the stronger side of expectations in April. Headline CPI rose to 3.7% yoy from 3.4% yoy previously, while the core measure rose to 3.1% yoy from 3.0% yoy. This is the fourth consecutive month that inflation has been at or above the 3.0% target. The most notable miss however was on RPIX which surged to 5.4% yoy from 4.8% yoy. This was well above the 4.9% expected and is also well above the old 2.5% target

This is a worry given that with the economy is still showing only sluggish growth and the prospects of tighter fiscal policy this year implies that the BoE will be unable to tighten monetary policy too soon without risking the recovery. It also suggests that the relationship between inflation and growth may have changed.

So far, the MPC has maintained that the rise in inflation is only temporary. However, CPI data continue to overshoot their forecasts and the risk to their credibility is rising. For GBP, the kneejerk reaction is to the buy the currency on the expectation that the data will bring forward rate hikes. However, uncertainty surrounding the June Budget, ongoing but still fragile recovery and a high level of debt at a time of stubbornly high inflation is an uncomfortable environment for GBP. Sell GBP/USD rallies.

and here’s one more bit

from the ever reliable and prolific Howard Archer

The April inflation data will provide a jolt to the Bank of England’s system, and it may lead to some heightened doubts within the MPC as to whether consumer price inflation will fall back as quickly as expected over the coming months and will be back under 2.0% through most of 2011. Nevertheless for now at least, the Bank of England is likely to stick to this view and the central bank still looks unlikely to raise interest rates anytime soon. Indeed, the May Bank of England Quarterly Inflation Report suggested that interest rates could even stay down at 0.50% over the next two years. However, we think it is more likely that interest rates will start to rise early in 2011 and then increase gradually to be around 2.0% at the end of 2011. Interest rate rises will be limited in 2011 by the major fiscal squeeze which is shortly to start hitting us.

everyone seems agreed

not rates rises in spite of the stubbornly high inflation

It just seems a genuinely interesting time for marikets

it is a consensus view but we are still torn between the ugly, cloudy macro outlook and the improving bottom up outlook for corporates

yep

that’s the two-way pull

every now and then we get a scare and the market focuses on marco…i thought last week’s sell-off was maybe a test of the risk management committees of the banks

even the threat of a big risk on the horizon was enough to spark selling..i thought Joe Ackermann’s comments last week were pretty interesting

where he said he doubts about whether Greece would make and it that could spark a broader meltdown in the eurozone

other banks must have been saying the same thing internally and offloading risk

hmmm

I think they probably have been

and of course we just found out

the ECB bought 16.5bn of sovereign debt last week

still the corporate proftitability is looking very good

it is

that must be said

here ironically is Deutsche on the earnings season

but has it peaked?

The first quarter results season is shaping up to be very strong. The beat:miss
ratio on earnings is 65%:34% (in-line 1%) for the Stoxx 600, the highest since Q1
2005. Admittedly, the last two weeks have been
slightly softer – of the 149 companies that have reported their earnings over the
last fortnight, 84 have beaten expectations while 65 have missed, equating to a
beat:miss ratio of 56%:44%. Consequently, the share of companies beating
expectations has fallen from an extremely high level of 74% as on 3 May 2010 to
the current still strong level of 65%. These two weeks have resulted in
downgrades of the Stoxx EPS. 63% of companies
have surprised positively on revenues, which is only marginally weaker than on
EPS.
The reporting season in the US has also been strong. Out of the 437 companies of
the S&P500 that have reported so far, the beat:miss ratio on earnings

stands at
82%:18% and 68%:32% on revenues

thanks for that

11:18AM

Right

We’ve had the daily announcement from the FSA

another wrongdoer has been punished

his head put on pike

i am surprised they did not squeeze this one out before the election

yes

a biggie this

would have impressed the new govt

they have got a proper fat cat banker this time

The Financial Services Authority (FSA) has been carrying out an investigation into Johnny Cameron, former Executive Director of The Royal Bank of Scotland Group plc (RBS) and former Chairman of Global Markets. Global Markets included the investment banking business of RBS (Global Banking & Markets – GBM). The FSA’s investigation looked at the systems and controls in place in GBM.

Following this investigation Cameron has agreed to settle with the FSA on the basis that he has undertaken to the FSA that he will not:

(a) perform any significant influence function in relation to any regulated activity carried on by any authorised person, exempt person or exempt professional firm; or
(b) undertake any further full time employment in the financial services industry.

In return for the undertaking given by Cameron, the FSA will not take disciplinary action against Cameron. The FSA has not made any findings of regulatory breach against Cameron and he has not made any admissions.
This undertaking does not prevent Cameron from engaging in part time consultancy work in the financial services industry provided that the work does not involve performing activities which would require approval for a significant influence function.

interesting that…

Cameron can never work in the City in again…except as a consultant

how much demand would there be for his advice?

well

he did have to turn down a couple of offers

one with a headhunter

I think

but we still don’t know precisely what he supposed to have done..or is just carrying the can for the whole RBS debacle?

and rather annoyingly

today’s statement from the FSA

does not come with one of those full case reports

which give you all the nity grity details

The FSA’s investigation looked at the systems and controls in place in GBM.

that’s all we know

it might have been part of the settlement not to disclose

and I guess

we might have guessed

that there was an issue with controls at the IB part of RBS

but

I would have thought there should be some consistency in these cases

Cameron might not be alone in finding it difficult to re-enter the city

it must be pretty tricky at the moment for a lot of bankers – having RBS on your CV

still it could be worse..you could have Goldman Sachs on your CV

that’s true

but I wonde how many more RBS cases the FSA are working on

and what HBOS

and some of the lending there

it is a target rich environment out there

is there a probe into Fat Bloke Finance

just on Goldman..i liked this line on politico.com

An NBC News/Wall Street Journal poll taken May 6-10 found that Wall Street is enormously unpopular in America — Goldman Sachs, for example, had an approval rating of just 4 percent. That’s lower than BP at 11 percent amid the Gulf oil spill and Toyota at 31 percent after the repeated recalls. President Barack Obama, by contrast, had a 49 percent approval rating in the poll.

4 per cent…how much worse can it get

well

i also thought this was kind of amusing

you know the downside

a Californian governor candidate attacking Meg Whitman for promoting porn okn ebay…but it ends with this vague slander of her doing deals with Goldman

http://tpmdc.talkingpointsmemo.com/2010/05/poizner-meg-whitman-used-to-sell-porn-video.php?ref=fpb

ie…the Goldman connection was much more a tar than the porn links

wow

things are really bad then

and I thought BP had for Blankfien off the hook

well i think the prospect of tougher than expected financial reform is still a risk under-rated by markets

the politico.com piece talks about how unlike healthcare, the reform bills are actually getting tougher in debate rather than being watered down

that’s true

and the Goldman stock price

is reflecting that

to a degree

where is it trading at the moment

closed at $142 yesterday

11:28AM

OKay

some of the BOTR

talking abou the Falkland

I hear some of the hot money is going into Falklands Oil & Gas now

and some people are talking seriously stupid share price targets

I won’t repeat them

but I will put up this

sent from a broker earlier today

BUENOS AIRES, May 14, 2010 (Xinhua via COMTEX) —
Argentine President Cristina Fernandez sent a letter to
Britain’s new Prime Minister David Cameron on Friday, renewing
call for stopping Britain’s oil exploration activities in the
disputed Malvinas Islands, called Falklands in Britain.
“Recently there were unilateral hydrocarbon exploration
activities in the area in dispute, which has been rejected by
my government and I expect you to have the possibility of
stopping those actions in benefit of a fruitful cooperation
with my country,” reads the letter.

Argentina and Britain have been for decades at odds over
the sovereignty of the islands. Tensions rose further recently
when British company Rockhopper Explorations announced a first
discovery of crude oil in a well off the islands.
In the letter, Fernandez also reiterated her commitments
to solve the territorial dispute through negotiations.
The islands are home to 3,000 people of British descent
and are controlled by Britain. However, Argentina maintains
they are part of its Tierra del Fuego province.

11:29AM

well enough macro, how about some stock specific stuff

good idea

let’s start with an Alphaville favourite

let me guess

Yell

how did you guess

price is being smashed as we speak

Yell Group PLC (YELL:LSE): Last: 37.21, down 9.9 (-21.01%), High: 45.65, Low: 36.71, Volume: 42.10m

remarkable morning for it

not every day you see a CEO and CFO bail out of a company

true

but they aren’t going immediately

and what I think has worried the market is the guidance

things just aren’t getting better

in terms of sales

it is hard to believe it will

it is a structural decline

management keep banging on about how this is a cyclical recovery story

it’s not

this is a structural decline story

the business model has been completed undermined by the internet

i never know what to do with my yellow pages when they land on the doorstep other than send them straight into the recycling bin

and they are still struggling under a mountain a bull-market debt

yep

and it really doesn’t matter too much

who is at the helm

anyway I think they were effectively forced out by shareholders

in return for last year’s rights issue

what are the analysts saying..are they seeing any glimmers of light….

well

some of those who have a close relationship with the group are

others

aren’t like

like Lorna Tilbian at Numis

she has given up trying to value the company

Yell has released FY10 results which are in line with our expectations, with Normalised PBT of £238m vs NSe £240m. Revenues fell -15% l-f-l in fiscal Q4 to March, in line with NSe and slightly better than guidance for -16%. However, the group expects 1Q11 revenues to fall -11%, which is -3pts worse than our forecast for -8%. We are lowering our FY11 l-f-l revenue decline to -8% (was -5%), which reduces revenues by c.-£60m.

The group has identified a further £60m of cost savings which will offset this decline. We do not expect to change our forecasts (2011 £250m/7.1p, 2012 £290m/8.2p) materially, though we will also adjust for recent FX movements. The group has also announced that John Condron (CEO) and John Davis (CFO) will leave the group. The group is holding an investor day on Thursday, which will outline its medium-term prospects. Given the uncertainty on trading and strategy we put our recommendation under review last week (was Reduce, tp 34p) and we expect to resume coverage following the investor day. We retain our view that given the cyclical, structural and now management uncertainty facing Yell, combined with its very high leverage, the group remains a very high risk investment.

Lorna has always been one of the straighter analysts in the sector

and the cost cutting point is an interesting one

how much longer can Yell keep doing this

without completely wrecking the business

BOTR..any other uses for the yellow pages?

right

in the interests of objectivity

here’s the views of JP Morgan

and Merrill

JP first

The company is guiding to -11% const FX rev decline in Q1/Q2
11E, customer confidence is improving though not fully returned:
The revenue decline at constant FX in Q4 10 was -15%, in-line with
JPMe, but ahead of company guidance (-16%). The company is
guiding to -11% revenues at constant FX for Q1 11E (Jun-10 qtr), or
400bps improvement from that realised in Mar-10, which is broadly
what consensus expects. For the Sep-10 quarter (Q2 11E), c60% of
revenues are booked and the rate of decline is expected to also be
about -11% at this stage (significantly better than the -15.6% reported
in Q2 10), despite being a seasonally more difficult quarter (e.g.
includes London and Manhattan print books).

The company has identified a further £60m net cost reductions
(after investments) in FY11E, which would help deliver stable
EBITDA YoY in FY 11E in the face of a mid-single digit revenue
decline in FY 11E. With an expected -11% revenue decline in both Q1 11E and Q2 11E at this point, the rate of revenue decline would need
to ease considerably in H2 11E to support a mid-single digit decline for
the full year (we and consensus currently assume mid-single digit
revenue decline). At this point the company has not provided FY 11E
EBITDA guidance. We remain comfortable with our FY 11E EBITDA
estimate of £586m, which looks supported by the cost savings should
revenues be slightly lower than anticipated (we currently assume -5.2%
constant FX revenue decline in FY 11E). We think consensus FY 11E
revenues may reduce 2-3% and consensus EBITDA of £598m reduce
by c1-2%, closer to our own FY 11E EBITDA estimate.

are these guys the house brokers?

I’m not sure. They might be

her’s Merrill

Our first take on forecasts sees our EBITDA move c1% higher to £575.4m in
FY2011E (we were bottom end of consensus), reflecting the combination of a
higher 2010 base, downgrade in organic growth to -7.1%, updated fx, changes to
operational gearing assumptions plus the new cost initiatives. The impact on
2011E EPS is higher at +6.1% to 7.35p from 6.95p previously, reflecting a cut in
our interest charge due to hedges rolling off.
The flow through of these changes, increased WACC and roll forward of DCF
move our PO from 50p to 54p, although one could argue the risk profile is rising
further still given the Q2 organic growth trend. For now we stick with our
expectation for cyclical recovery, albeit more lagged than previous anticipated.
The Investor Day on Thursday will also a key touchpoint for assessing how Yell is
evolving its business model to meet new structural developments.

11:37AM

well onto another alphaville favourite

Regus…a company that has never had an easy relationship with the market

May 18 (Bloomberg) — Regus Plc, the world’s largest operator of serviced offices, fell the most in almost 18 months in London trading after saying signs of improvement in the U.K. have “lost momentum in a fragile market.”

Regus fell as much as 17 percent to 94 pence, the most since December 2008. The stock lost 12 percent to 99.5 pence as of 9:37 a.m. local time, slashing its yearly gain to 9 percent.

ouch

big fall

they shares are back now a bit but not much

Regus PLC (RGU:LSE): Last: 95.50, down 17.4 (-15.41%), High: 100.50, Low: 94.00, Volume: 18.43m

So, the UK serviced office market

not excatly booming them

who would have thought it

you would think also these people being banned by the FSA would be looking for office space to work as consultants

all these people i meant

suprisingly the brokers are not too gloomy..here is some reaction

here is investec which has 150p target price for the stock

Trading to date is “broadly in line”, with improvements in lead indicators,
notably in the Americas and Asia Pacific, but the UK, the most challenging
region, continues to be tough. We have always seen 2010, especially H1, as
the most difficult period and today’s update confirms the need for more
tempered expectations for the year. However we retain a Buy recommendation
based on the long-term global opportunity for this financially strong business.

hang on

KBC Peel Hunt

have upgraded to buy on the back of the statement

RGU’s recovery is varying regionally, but the trend is clear
with leading indicators in key markets continuing to
improve, albeit gradually. We upgrade our numbers by 11%
and 7% for FY2010E and FY2011E respectively. In our
view the key issue is that the clear passing of the trough
validates the business model and gives better visibility,
even if the rate of recovery is difficult to assess. Pricing in
an expansion programme assuming low end returns gives
a minimum TP of 140p. We rate RGU a Buy.

WFT?

and Oriel is upbeat as well

Gathering momentum generally, albeit the UK is challenging.
• Revenue for H1 at £341m for the first four months in on target for our H1 estimate.
• Workstations numbers are up 7.5% in the first 4 months to 176,078.
• Net cash at £235m, £2m down from end December but after investing £14m in capex.
• Leading indicators continuing to improve particularly in Americas and Asia Pacific.
• Trading remains tough and the statement is cautious on the pace of recovery.
• UK remains its most difficult market. The early improvement has not developed into trend
recovery. UK is 18% of revenues.
• Continues to expect an improvement in business over the year. Plans to grow the
business making progress.
• We believe RGU passed the inflexion point for the group overall in Q1. But this isn’t a
sharp V recovery, uniform across the group’s markets.
• We expect H1 to be below H2 of last year, after that the improvement should become
increasingly clear.

thanks for that

just been flicking through the statement

to see if there were any figures on the UK decline

and there isn’t

all we have is this

The UK remains our most difficult region and the early signs of improvement seen in the first quarter have lost some momentum in a fragile market. We are continuing to take measures to achieve an improvement in performance.

let’s move on from that

obviously some guidance is being given on the UK though

11:43AM

Okay

Tony wants to talk about a new issue

one that announced plans to float today

Posh Bloke Asset Management

another one to brave these tremulous markets

or Jupiter

PBAM

it seems to be a growth sector for the market – the listed fund manager

it is not hard to wonder whether this is a two-track process – ipo or sale

really

who might buy PBAM?

maybe they could get someone like Commerzbank to buy it

don’t go there

and bring things to a full circle

Edward Bonham Carter must be savouring the moment and the contrasting fortunes with John Duffield’s New Star

just flicking through

today’s statement

here are some facts and figures in Jupiter

At 31 December 2009, Jupiter had £19.5 billion of AUM, including £14.7 billion of AUM in 47 mutual funds. It was the fifth largest fund manager of UK retail mutual funds by AUM at 31 December 2009 and the fourth largest by net and gross sales in 2009 (Source: IMA and Lipper Feri, respectively).

Its record of net new business generation, combined with disciplined control over operating costs resulted in EBITDA in 2009 of £91.3 million, broadly flat on 2008, despite an 18 per cent. decline in average UK equity market levels (as represented by the monthly closing values of the FTSE 100 index).

Summary Financial Information

n AUM of £19.5 billion at 31 December 2009

n Total net sales of £3.1 billion over the three years ended 31 December 2009

n Net revenue of £182.2 million in FY 2009 (of which net management fees comprised 87 per cent.)

n EBITDA of £91.3 million and an EBITDA margin of 50 per cent. in FY 2009

n Net management fee margin of 97bps in FY 2009

n Strong momentum in the first quarter of 2010: net sales of £0.5 billion and AUM of £21.1 billion at 31 March 2010

I think they are going for a valuation of around £1bn

and one has to think this might go a bit better than Gartmore

not as much key man risk

or hedge fund business

but then again

we all remember what happened to New Star

which soon overextended itself as a listed company

i always think retail money is more sticky and higher margin..providing you do not do anything disastrous

great line Tears for Tier one

anyway it was a great scoop by Kate Burgess and Anousha Sakoui of this parish….they have leading on this story

it was

hat tip to them

but henceforth

Jupiter must be know as PBAM

11:49AM

Right

some of the BOTR

asking about the hedge fund agreement

being discussed by the Ecofin finance minsters today

any comment in conference on that Tony?

not yet

here’s the latest from Reuters

May 18 (Reuters) – European Union finance ministers have reached broad agreement on the need to impose tighter restrictions on hedge funds and private equity firms, Spain’s finance minister said on Tuesday.
“I think there is a general agreement around this,” Elena Salgado told reporters as EU finance ministers met to discuss how better to regulate the industry.
“We can basically say that we have the agreement we need to take a general approach (to tighter restrictions).”

not sure

what if any exceptions they UK can get

I will send Sam Jones

an email and see what he thinks

11:51AM

Fitz on the Irish drinks, I passing through Dublin on the way to a wedding on the last Friday of June

if that helps

11:52AM

how is Man is doing this morning

it bounced

quite a bit

Man Group Plc (EMG:LSE): Last: 213.50, up 11.6 (+5.75%), High: 213.60, Low: 206.70, Volume: 11.91m

people reappraising the deal

and saying it looks reasonable value

if the revenue synergies come through

but like Father Xmas

I don’t believe in revenue synergies anymore

the rhetoric from the key men in Man and GLG has been amusing

a real love affair apparently between the two sides..ala Dave and Nick

(the wedding is the following week I think)

it was also notable that the GLG guys accepted a much lower price than the offer for the other ordinary shareholders

they are

but how much money do the big three at GLG manage now

as Sam noted today

it is people lower down like Cofley

who are the real stars

and they might not want to work for Man

well Coffey already made his excuses and left

at least for Man it obviously reduces the dependence on AHL…the share price of Man might not so obsessively track the AHL weekly NAV

that’s true

but it comes at a price

anyway

here’s a bit of reaction

from Evo Securities

EVO TAKE – Man’s acquisition of GLG to create an alternative fund manager with FUM of US$63bn makes good industrial sense given the benefits of scale in a more regulated and more institutionalised market place. However, with the real value in the deal arising from revenue synergies as GLG’s product is combined with Man’s distribution, it is likely that investors will demand both detail and delivery to realise value.
DETAILS – Man’s deployment of US$1bn of its cash resources to acquire GLG’s FUM of US$23.7bn is set to combine GLG’s product with Man’s product structuring and market leading distribution. The limited overlap in distribution, geography and in client type offers clear opportunities for future sales if the integration can be managed well. Given the close relationship between Man and GLG over a number of years (as Man invested in GLG’s funds) and the limited scope of any integration, the integration risk should be more manageable than is usually the case.
VALUATION AND RECOMMENDATION – Given the limited clarity over GLG’S potential earnings, we retain our Buy as we look to work through a clearer view of accretion than the guidance of ‘accretive in FY2011’.

11:56AM

Taxloss

mentions Pru

and we were just coming to that

shares weak today

Prudential Plc (PRU:LSE): Last: 528.50, down 6 (-1.12%), High: 547.00, Low: 522.50, Volume: 4.58m

which is a sign that people think this deal is going to happen

i thought you were pretty tough on a fellow gooner yesterday Neil..but fair it must be said

I didn’t know he was a gooner

that is Mr Thiam

but the point here is

that this is a very risky deal

but turkey don’t vote for Christmas

Pru has upped the underwritting fee for the institutions

and there is a massive gravy train on this deal

that will make millions

they will vote this through probably

after making noises

and Pesto

sums it up well

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/05/pru_pays_850m_in_city_fees_and.html

And here’s a statistic which investors need to mull over: according to a 936-page prospectus published this morning, the Pru would pay out a staggering £850m in fees and other expenses to bankers, brokers, lawyers, accountants and fund managers in connection with the takeover and the rights issue to raise £14.5bn.
That’s an astonishing amount of revenue for the City of London. And if you want to see how important that £850m is to the prospects of financial firms, it would be enough to pay the salaries for a year of 4,250 bankers (on the assumption they’re each paid £200,000) or well over 30,000 British employees on average earnings.

More-or-less every big City bank has been offered a piece of this particularly luscious, deep-filled pie. Which means that all of them are in effect on the Pru’s payroll, thus preventing them from publishing objective research for investors on whether this deal is sound or not.

the figures are quite staggering

i still think you should watch David Cumming very closely…

enough to pay the salaries for a year of 4,250 bankers (on the assumption they’re each paid £200,000)

The Standard Life head of investment

when i was doing the Investment beat covering shareholder activism, he was easily one of the most influential fund managers in the UK

When David made a public stance on something, he usually got is way..

his way i meant

“I think [the Pru] will have quite a lot of trouble raising that cash.

“We and other shareholders believe the price is too high and the financial case for the deal hasn’t been particularly well articulated, so I think they are going to have a difficult task getting this deal through.”

Well

there’s over a $1bn riding on it going through

(emptyend, pls enlighten us)

12:02PM

It’s approaching midday

so we had better starting bringing things to a close

Vodafone have had results out today

and they look pretty solid

apart from a big impairment charge in India

Vodafone is off 0.85p at 136.1p at the moment

here’s some comment from Bernstein

Vodafone reported results this morning, with revenue at £44.5bn, 0.7% ahead of consensus, and EBITDA at £14.7bn, 0.7% ahead of consensus, FCF also came in ahead of consensus and guidance at £7.24bn.

The full year dividend 8.31GBp a 9% increase on last year’s final dividend.

The Company has guided to a return to positive organic revenue growth next year and FCF from £6.5bn to £7.0bn with flat capex. They expect margins to decline slightly next year but showing a significant improvement on last year’s trend. Perhaps most importantly the Company has committed to shareholders
to increase the dividend by 7% YoY for the next 3 years offering a minimum dividend per share of 10.18p by FY2013 equivalent to a ~170GBp share price at the current dividend yield. The only potential concern in these promises is that they assume exchange rates broadly in line with the rates of the last 5 months, so the sterling and euro would have to stabilize at a slight improvement on current very low rates.

All of the Company’s major European assets showed improving top-line trends, with the UK showing a stunning turnaround from -4% YoY service revenue last quarter to +1.4% YoY since the Company started offering the iPhone. With these the last major European result to come in, it is now clear that recent mobile trends have been more cyclical than structural and that mobile data should support growth
from here. Germany also showed a significant improvement with Service revenue decline of -1.8% this quarter versus -5.9% last quarter. European margins came in slightly ahead of our expectations at 36.6% for the full year with margin improvement in Italy and very modest declines in Spain.

• India continues to grow ahead of peers, and margins showed an encouraging slight improvement in that market in the second half. Also, there are reports this morning that the attempt to double dip on 2G licences will be rejected or significantly watered down by the Indian Department of Telecommunications.
Vodacom has continued to grow and margins have improved significantly in the last quarter. Turkey continued to show signs of a turnaround with top line growth over 30% in the last quarter

12:04PM

just on the Pru, David Cumming also told our reporters that issue had some support in Asia

“They do supposedly have backers in Asia, particularly the government of Singapore, but I think it’s still going to be a very difficult deal to execute,” he said

that’s interesting

thanks for that

Right

we have got through until midday

and not even mentioned the wider market

FTSE 100 is up 47 points at 5,309

risk is back on

sterling up

$1.4443

and the euro back through $1.24

not sure what’s caused it

but risk is on

Tony

anything else you want to look at?

well the BA bounce has been pretty limited

British Airways PLC (BAY:LSE): Last: 202.40, up 1.9 (+0.95%), High: 207.00, Low: 201.20, Volume: 4.54m

anything else

well as an Australian i could not resist pointing out a Commerzbank strategy note this morning

on the Aussie dollar as a true safe haven

Australia stands out due to its good fundamental data and solid national finances. Actually, Australian government bonds and the Australian dollar are the safe havens par excellence. Even if the aussie might suffer due to a temporary rise in risk aversion we maintain our generally positive view on the currency.

that will make taxloss happy

by the way Neil, how many South Africans can you squeeze into an English team and still be called English

oh dear

I thought it would come to that

what I can say

your boys took one hell of beating

we are waiting for the Ashes revenge

yes

not long now

I see Shane Warne has been mouthing off again today

just how tiresome is that

it will be a lot tougher in the winter etc

long enough to hand out a few more passports to south africans

ooooooooh

BOTR…it was only Twenty 20 game

here’s warney

in the Telegraph

Congrats England. Well played, big tick in the box, round one to England – but when it comes to the first day of the Ashes in Brisbane, winning the World Twenty20 will count for nothing, unless MBEs are being handed out!

Every time Australia play England there is talk about the Ashes. We ask, has anyone gained an advantage?

But the Ashes in Australia is very different. It is the hardest series to win and England were embarrassed last time around. England’s planning must be to go out there and beat them every time to keep the momentum going.

They have now got the right tools to do that. England have a very balanced side and in Graeme Swann they have a spinner who, when you examine every format of the game, is the best in the world right now.

In Kevin Pietersen England also have, not the best, but the most destructive batsman. The Indian Premier League and World Twenty20 came at a good time for him.

He was struggling in the Test arena. When he gets into trouble he gets technical and reads too much into things. He is best when he plays on instinct and in Twenty20 there is not much time to think. You just have to go out there and hit the ball.

god the minds games begin already

i can’t wait for it to start

12:13PM

Anousha has just got back to us on PBAM with some investor reaction

hey on investor feedback on jupiter – i just asked one and he said he was still scarred by gartmore…and then left it at that…i thought i heard whimpering.

yes

the scars of Gartmore will take a long time to heal

Posh Bloke Asset Managment will have to be price attractively

has the FSA concluded its review of Gartmore?

Not sure on that

12:15PM

Okay

Tony needs to go

he has real work to do

thanks for very much for helping out today

it has been a pleasure

Tears for Tier one….Kepler was a fine cricketer. played for both Aust and Down under…there have not been that many rope-ins though

thanks Tony

12:17PM

before I go

a couple of things to finish on

small cap

BATM Advanced Comms

stock has plunged

following another profits warning

BATM Advanced Communications Ltd (BVC:LSE): Last: 24.50, down 12.5 (-33.78%), High: 28.00, Low: 22.25, Volume: 36.94m

but volume is massive

so I think a share holder must have dumped stock

anyone here’s some reaction

from KBC

Weak channel sales have negatively impacted trading in Q1
and the group expects to breakeven in H1. The shares are
likely to open lower but have already fallen considerably
this year. We are moving to Hold.

Weak Q1 IMS. Q1 revenues declined 7% yoy, attributable to slower channel
sales in the US. This is a continuation of the weakness we began to see in Q4.
We are moving to Hold on the back of this. This runs contrary to guidance that
Telco revenues would recover this year.
 Gross margins down sharply. Gross margins have decreased by 7% to c.35%,
a significant fall from the 2009 margin of 42%. Weak euro in addition to the
above movements will see the group breakeven in H1, with H2 operating
margins expected to be substantially weaker and in the region of 8.5%.
 Breakeven H1. FY margins are expected therefore expected to fall to c. 4-5%
from 15%+ in 2008. This margin collapse is a very disappointing performance.
 Forecasts are under review. Tentatively, a 5% margin would deliver adj. PBT
of $11m. On a zero tax charge, this would produce adj. EPS of 2.85c (2p
equivalent). We have moved to Hold and reduced our target price to 35p.

Predictably the CEO

has bought stock post warning

but no one is going to fall for that trick again

and here’s a little something

for all you muppet investors out there

Gulf Keystone Petroleum Ltd (GKP:LSE): Last: 80.50, up 2.5 (+3.21%), High: 81.50, Low: 78.00, Volume: 1.08m

In Kurdistan what we are waiting for is a government to be formed in Iraq . To say it is contentious is a mild understatement. However, bickering aside, the thinking at the moment is that once a government is formed in Baghdad , then shortly afterwards, an export and payment agreement should be in place and then a significant amount of risk is removed from the companies operating in Kurdistan including Gulf Keystone

ISTANBUL, May 17 (Reuters) – Oil exports from Iraq ‘s semiautonomous northern Kurdish region will start only after the formation of a new Iraqi government, the region’s natural resources minister said. Parliamentary elections were held on March 7 but produced no outright winner. A vote recount in Baghdad and coalition building talks has prolonged the formation of a new government

Oil deals Kurdistan signed independently with foreign firms have put Kurdistan and Iraq ‘s central government at loggerheads for months. The Arab-led government deems the deals illegal and refuses to pay firms involved such as Norway ‘s DNO and Turkey ‘s Genel Enerji. The disagreement halted oil exports from Kurdistan last year, but Iraq’s deputy oil minister said last week that an agreement between Baghdad and the Kurdish region to restart oil exports could come within days. But Kurdish Natural Resources Minister Ashti Hawrami told Reuters late on Sunday that the deal, designed to help exports resume ahead of the formation of the new government, was unlikely to take effect.

“Will the interim agreement will be pushed through? I don’t think so, wait until the government is formed. I think export will happen as soon as the formation of the government,” he said. A recount of the Iraqi vote showed on Sunday that a cross-sectarian coalition led by secularist former Prime Minister Iyad Allawi held its two-seat win in the March election.

12:19PM

Okay

that is it from me

quick market update

FTSE 100 up 44 points at 5,307

cable at $1.445

and almost forgot this

a couple of bits of RAW

RAW is market chatter – information that has not been formally tested through traditional journalistic channels (PRs etc). The story might be complete rubbish, but if we believe there is some substance to it we will say so. Either way, Reader Beware.

- YUAN REVALUATION – chatter doing the rounds of an imminent move. UNCONFIRMED
- Please be aware that this Bloomberg headlines hit earlier:
* CHINA TO `IMPROVE’ EXCHANGE RATE, FOREIGN MINISTRY SAYS
- But balance this against the NYT article suggesting that the declines in the
euro are making Chinese companies less competitive in Europe
- Notes the moves in the euro, complicates any move to break the yuan’s peg to
the dollar.

and

GERMANY – hearing UNCONFIRMED chatter Germany could hike VAT to 25% (from 19%
currently)

that’s it for today

thanks for logging on

and all the comments

hang on

breaking news

from the EU

on the hedge fund directive

Britain sought to play down the impact of a European Union move to impose tighter restrictions on the hedge fund industry on Tuesday, saying it had secured the “best possible” outcome from talks.

“This is the best possible outcome, it shows what committed, intensive and fleet-footed engagement can do,” a British official who asked not to be named said in response to the EU’s decision to push ahead with broad restrictions on hedge funds and the private equity industry.
Spain, which holds the rotating presidency of the EU, said earlier that EU finance ministers meeting in Brussels had agreed on the need to push ahead with restrictions on alternative investment funds in order to combat the risk of a repeat of the global financial and economic crisis.
The bulk of the EU’s hedge funds are based in London.

enough of this cricket stuff

ciao

bye

This entry was posted by Neil Hume on Tuesday, May 18th, 2010 at 11:02 and is filed under Uncategorized. Edit this entry.

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Markets Live transcript 18 May 2010

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