Markets Live chat transcript for the chat ending at 12:06 on 1 Feb 2012. Participants in this chat were: Paul Murphy Bryce Elder/FT
PM
Morning
PM
Welcome to markets Live
PM
Some of you might have had a disappearing session if you logged on early
PM
sorry about that
PM
Some bug
BE
Yes, bug number 2.
BE
The phantom session bug.
BE
We’ll be handing out bug bingo cards shortly.
BE
Match five bugs and win a bottle of champagne.
PM
hehe
BE
So where to begin?
PM
Well we were going to go straight to Knickergate
PM
But we should share the Portugal news first
BE
Yes, sure.
PM
Bryce — seen these T-bill sales
PM
?
BE
*PORTUGAL MAY 2012 BILL AVG. YIELD 4.068% VS. 4.346% ON JAN. 18
PM
v short term paper
PM
Not sure how much we read into these
BE
Moderate positive, I guess.
PM
yes, things like 3y paper tightened slightly on that news
PM
Not dramatic tho
PM
ome in from 23.6 to 23%
PM
Still eye watering at the 2/3/5 year level
BE
And, as you say, they were only three-month and six-month auctions.
BE
Nevertheless, Germany’s cover was fine earlier.
BE
*GERMANY GOT BIDS FOR EU5.683B OF 10-YR BONDS VERSUS EU5B TARGET
BE
So that’s the excuse for switching to risk-on mode.
BE
Anyway, knickers.
PM
Yeah Knickers
PM
The White House today issued an angry denial following claims that Michelle Obama indulged in a $50,000 shopping spree at a luxury lingerie boutique in New York.
According to a report in the Daily Telegraph today, Agent Provocateur’s boutique in Madison Avenue, New York, was partially closed off for the U.S. First Lady.
But Kristina Schake, director of communications for First Lady Michelle Obama told MailOnline this morning: ‘This story is 100 per cent false.’
According to a report in the Daily Telegraph today, Agent Provocateur’s boutique in Madison Avenue, New York, was partially closed off for the U.S. First Lady.
But Kristina Schake, director of communications for First Lady Michelle Obama told MailOnline this morning: ‘This story is 100 per cent false.’
PM
That is the daily mail about this
PM
Today I find myself on the wrong end of the West Wing, not to mention most of the American press and Fox News. All for a financial results story on Agent Provocateur, the lavisciously upmarket lingerie chain. Well, you’ve got to say it’s well named.
I have, it seems, stepped into the incendiary world of US politics, one where a twang of the wrong suspender belt can be literally career-threatening.
My brush with the Oval Office happened when my financial results story on Agent Provocateur morphed into a more interesting tale about its clientele – well two of them in particular, Michelle Obama and Sheikha Mozah, the Queen of Qatar.
I wrote that they, and their entourage, had closed off New York’s Madison Avenue for a shopping spree that ended up with a bill at Agent Provocateur of $50,000. How much of the bill was directly down to them, I didn’t say.
Neither myself or Agent Provocateur could have foreseen just how explosive my results story was going to turn out when the company’s private equity owner – the UK-listed 3i – arranged my interview last week with Garry Hogarth, the boss of the bras and knickers store. But you live and learn.
I have, it seems, stepped into the incendiary world of US politics, one where a twang of the wrong suspender belt can be literally career-threatening.
My brush with the Oval Office happened when my financial results story on Agent Provocateur morphed into a more interesting tale about its clientele – well two of them in particular, Michelle Obama and Sheikha Mozah, the Queen of Qatar.
I wrote that they, and their entourage, had closed off New York’s Madison Avenue for a shopping spree that ended up with a bill at Agent Provocateur of $50,000. How much of the bill was directly down to them, I didn’t say.
Neither myself or Agent Provocateur could have foreseen just how explosive my results story was going to turn out when the company’s private equity owner – the UK-listed 3i – arranged my interview last week with Garry Hogarth, the boss of the bras and knickers store. But you live and learn.
PM
poor Helia Ebrahimi
BE
Yes.
BE
The original story is still on the site.
BE
The First Lady is better known for shopping at more modestly priced High Street brands. But along with the the Queen of Qatar, Sheikha Mozah, she closed off part of Madison Avenue to spend time in the luxury lingerie shop.
BE
Their purchases contributed to a market-spanking 12.5pc lift in sales.
Agent Provocateur, which is styled on vintage Hollywood glamour, sells handmade Calais lace corsets that sell for up to £900, which could ruffle the feathers of more than just President Obama in an election year.
Agent Provocateur, which is styled on vintage Hollywood glamour, sells handmade Calais lace corsets that sell for up to £900, which could ruffle the feathers of more than just President Obama in an election year.
PM
Does Mrs Bryce shop at Agent Provocateur, Bryce?
BE
Nope. Millets.
BE
Does Mrs Paul?
PM
We’re just not going to go there.
PM
Here’s another snippet. Not sure where this is from
PM
does a totally fake news story come to dominate the day’s papers? It needs international figureheads and a lot of sexy lingerie.
Yesterday morning, the Telegraph reported that First Lady Michelle Obama had spent Sunday afternoon shopping Madison Avenue with Sheikha Moza, one of Qatar’s three first ladies. Helia Ebrahimi reported that the two woman spent $50,000 at Agent Provocateur, the fancy British lingerie brand founded by Joe Corre (Vivienne Westwood’s son) and used it as the peg for a greater story on the brand’s increased profits. Without confirmation from the White House, Qatar or the AP store, Ebrahim ran quotes from CEO Garry Hogarth that said they did in fact have a “secret client list” with “unexpected famous names.”
Of course, the story was picked up everywhere, until the White House was forced to respond. Press secretary Jay Carney said in yesterday‘s briefing, “When I was a reporter, usually the standard for British tabloid reporting was the assumption that it was false. In this case, it’s utterly false, and it’s irresponsible of an American news organization to repeat the story, even allowing that it could be true. So it’s wrong.”
Even Agent Provocateur released a statement saying, “Recent claims regarding Michelle Obama and purchases made at an Agent Provocateur boutique are incorrect. Agent Provocateur never discusses any of its clientele or their purchases.”
Yesterday morning, the Telegraph reported that First Lady Michelle Obama had spent Sunday afternoon shopping Madison Avenue with Sheikha Moza, one of Qatar’s three first ladies. Helia Ebrahimi reported that the two woman spent $50,000 at Agent Provocateur, the fancy British lingerie brand founded by Joe Corre (Vivienne Westwood’s son) and used it as the peg for a greater story on the brand’s increased profits. Without confirmation from the White House, Qatar or the AP store, Ebrahim ran quotes from CEO Garry Hogarth that said they did in fact have a “secret client list” with “unexpected famous names.”
Of course, the story was picked up everywhere, until the White House was forced to respond. Press secretary Jay Carney said in yesterday‘s briefing, “When I was a reporter, usually the standard for British tabloid reporting was the assumption that it was false. In this case, it’s utterly false, and it’s irresponsible of an American news organization to repeat the story, even allowing that it could be true. So it’s wrong.”
Even Agent Provocateur released a statement saying, “Recent claims regarding Michelle Obama and purchases made at an Agent Provocateur boutique are incorrect. Agent Provocateur never discusses any of its clientele or their purchases.”
BE
I do note the Telegraph felt the need to add a slideshow ….
PM
he
PM
he
PM
he
PM
Insert knife
PM
twist
PM
Oh my that has taken me to the Elle blog
PM
PM
Oh god I cant get out now
PM
No
BE
Look. We shouldn’t wallow in this.
BE
The Telegraph is a quality paper.
PM
We need to hire this Ebrahim
BE
And the slideshow was merely illustrating the kind of people who wear pants.
BE
It’s informative.
PM
course
PM
Just reading the comments on today’s telegraph piece
PM
The sub-head of your original article says “Michelle Obama has risked the wrath of cash-strapped Americans by indulging in a $50,000 shopping spree at Agent Provocateur.”
In the article above you claim “How much of the bill was directly down to them [Obama and the Queen of Qatar], I didn’t say.”
What possible interpretation is there of the sub-head that doesn’t mean Obama herself spent that amount? Or did you not bother to read your own article? You seem to have been very casual with your facts (to be generous) twice in succession.
PM
Best blame the subs.
PM
Right enough of that
PM
Worth adding taht ms Ebrahim has a good record on stories generally
PM
Someone at 3i to blame?
PM
maybe…
BE
Maybe, but it’s unsafe to speculate.
PM
Okay
PM
to the markets
11:13AM
PM
It’s an up day, no?
BE
It is.
BE
FTSE’s stuck on 1.5%
BE
Ahead 84 points at a soaraway 5766
BE
Auctions obviously helping the mood
BE
As is the China Take
The Truth! Unvarnished. The price of rice always falls. Shanghai investors do not sell stocks. Torch protestors are vile.
BE
China PMI 50.5 from 50.3 in December
BE
And officials talking about further fine tuning of government policy
BE
Analysts talking about the lunar holiday improving consumer spending last month
BE
As if the figures were actually correlated to anyting actually happening.
BE
Meanwhile, China house prices down for a fifth straight month.
BE
All fits into the soft landing playbook.
BE
So ……..
PM
Fits perfectly
BE
Etc.
BE
Though, basically, everything’s up.
PM
You are almost right there
BE
Only five blue-chip fallers at the tick.
11:18AM
PM
top of the risers list…
PM
ICAP
PM
Soaraway or what
PM
People seriously wrong footed here
PM
ICAP up 7% at pixel time
BE
Hm.
BE
Considerable confusion this morning.
PM
ICAP warns on profits; shares jump 7%
BE
Yes, exactly.
BE
Reuters, I think, called the statement a warning.
BE
Which it was, if you ignore the mind meld among analysts over the past month or so.
BE
Which pushed the range down from £358-£390m ….
BE
To £336-£358m.
BE
So, basically, the bottom end has become the top end.
BE
And Icap expects to get near to the top end.
PM
hehe
PM
Nicely put
PM
Any snap research on this
BE
Loads, of course.
BE
Icap’s 
likes this one
likes this oneBE
And wishes that you all see it, ROTR.
BE
It’s from BarCap
BE
ICAP’s trading statement for the quarter to Dec was widely expected to contain a profit warning, we believe, given November’s management guidance relied on some improvement in activity Jan-Mar. The good news is there is no profit warning. Management states it expects Mar 12 PBT to be towards the upper end of a consensus range of £336m-£358m, which is consistent with BarCap’s forecast of £353m and implies flattish PBT yoy. Outlook is relatively upbeat “highlighting encouraging recovery in Voice revenues” in Jan. Management is starting to take action on costs, reducing headcount, and identifying £20m of cost saves yoy. Slight negatives are the -7% yoy run-rate for Q3 revenues and Jan electronic volumes are still -19% yoy, although up m-o-m.
BE
No profit warning, PBT upper end of new consensus range: We believe it was widely expected that ICAP would profit warn in this trading statement given November’s management guidance relied on some improvement in activity Jan-Mar. The key positive today is no profit warning. Consensus PBT for FY12 has come down to £336-358mn from £358-390mn in November. Management states it expects PBT to be towards the upper end of this range, which is consistent with BarCap’s forecast of £353mn, and would imply broadly flat yoy (Mar 11 £350m).
BE
Cost action of £20m: The second positive was news that in response to market conditions, ICAP has taken action to reduce its cost base. So far, a net reduction of £20mn versus the prior year has been achieved. This is equivalent to 1.5% of Mar 2011 expense base. This was done by reducing headcount in areas of lowered profitability, while investing and hiring in growth areas such as financial futures and commodities. There was also additional detail that the Brazil restructuring is on track, with strong revenue growth in the last quarter and breakeven expected in the second half of FY13.
BE
Improving Voice activity in January: Outlook is relatively upbeat highlighting “signs of an encouraging recovery in voice broking revenue” in Jan and “some ground for cautious optimism”. Improvement in the US economy and European government and institutional activity has improved liquidity conditions. Management also states that “In January we saw encouraging signs of activity starting to return, albeit cautiously in some markets”.
BE
2 small negatives – Qtr to Dec revenue run-rate and Jan electronic volumes – The revenue decline for 3Q (quarter to Dec) at -7% yoy is worse than the -4% we expected. 9mth 2012 revenues at -2% is in line with our forecast for FY Mar12 but if the Q3 run-rate continues it could come in slightly worse. However, management is highlighting improvement in Voice qoq and cost saves. The quarterly decline in revenues is attributed to a significant reduction in risk appetite leading to more subdued volumes. On the Voice side, credit remained challenging but energy, Euro government bonds and Chinese renminbi performed well. In January management highlights that electronic volumes are still down strongly yoy at -19% to $641bn ADV. This is against a pretty tough comp and does still show some sequential improvement m-o-m of 4%.
BE
Then, however
BE
There’s this one from UBS, who don’t seem to be quite as on message.
PM
BE
ICAP reduces guidance but top end of range on cost cutting In their trading statement for 4 months to 1 February 2012, ICAP reduce their
guidance for full year FY12E PBT to be within consensus range of £339m to
£358m (UBSe £339m); effectively reducing guidance by 7% as the range provided on 16 Nov was £358-390m. We note, however, that ICAP are guiding to be at the top end of this new range, as they are taking out £20m of costs.
guidance for full year FY12E PBT to be within consensus range of £339m to
£358m (UBSe £339m); effectively reducing guidance by 7% as the range provided on 16 Nov was £358-390m. We note, however, that ICAP are guiding to be at the top end of this new range, as they are taking out £20m of costs.
BE
Weak revenues – further downgrades in FY13
Revenues over the period are down 7% y/y (in line with UBS). ICAP’s electronic
volumes declined 19% Y-o-Y in January, this is inline with our IDB proxy
indicating volumes down 17% Y-o-Y and compares to 17% Y-o-Y in December.
The tone of the outlook has turned more cautious but still guiding to “cautious
optimism” on volumes. We are not so optimistic: FX and interest rate volumes
traded on exchange remain weak; banks will be shedding 10-15% of RWA. We see downside to FY13E consensus which looks for low single digit volume decline.
Revenues over the period are down 7% y/y (in line with UBS). ICAP’s electronic
volumes declined 19% Y-o-Y in January, this is inline with our IDB proxy
indicating volumes down 17% Y-o-Y and compares to 17% Y-o-Y in December.
The tone of the outlook has turned more cautious but still guiding to “cautious
optimism” on volumes. We are not so optimistic: FX and interest rate volumes
traded on exchange remain weak; banks will be shedding 10-15% of RWA. We see downside to FY13E consensus which looks for low single digit volume decline.
BE
iSwap losing further share?
No mention of iSwap, we suspect that share momentum has turned; iSwap’s share was 20% in September 2011, down from 30% in March 2011.
No mention of iSwap, we suspect that share momentum has turned; iSwap’s share was 20% in September 2011, down from 30% in March 2011.
BE
Although ICAP trades at a three-year low at 9.2x PE CY 12E, the same can be said
of most market structure stocks, which offer higher visibility and less exposure to
banks’ deleveraging. We reiterate our Sell rating on ICAP and 310p PT, based on
SOTP.
of most market structure stocks, which offer higher visibility and less exposure to
banks’ deleveraging. We reiterate our Sell rating on ICAP and 310p PT, based on
SOTP.
BE
Feedback from the call, apparently ….
BE
Is that the costs haven’t come out of labour
BE
But are from sourcing and that kind of thing.
PM
(iSwap — http://www.iswap.co.uk/home/home.asp)
BE
And Spencer’s heading into China this week, apparently.
PM
is he?
BE
Because he thinks the yuan will be the reserve reserve currency.
BE
And that’s their new frontier.
PM
Just trying to get my head round Spencer in Shanghai
BE
The idea of Icap traders being allowed to cross borders scares me considerably.
PM
BE
Some of them are rather …. unreconstructed.
BE
Anyway, we should probably move on.
11:27AM
BE
Ok – rabble talking about Rolls Royce.
PM
yes, bit of a mystery, no?
PM
up 27p at 762
BE
Well, the India news yesterday should really be a negative
BE
With India picking Dassault’s planes over the Eurofighter
BE
(Possibly.)
BE
(Though there’s a lot of horse trading still to come)
BE
Merrill, however, are not fussed.
BE
They’re pushing a buy call this morning.
BE
Usual kind of argument
BE
Marine and civil services give downside protection.
BE
(That’s servicing plane engines on 747s, not “civil services.” Sorry. Badly put.)
BE
Here’s the gist.
BE
Rolls-Royce shares performed well last year (up 27% rel to EU300) but we think
that RR has structural long-term advantages over its peers which are not fully
priced-in at current levels. Rolls-Royce remains our preferred pick in the civil
aftermarket space. We have raised our FY12-13E EPS by 4-6% reflecting better
defence and offshore marine trading, and our PO from 805p to 855p. Next
potential catalyst: FY11 results 9th February (see preview inside). We are 4-5%
ahead of consensus in FY11-12 with underlying EPS at 46.3p and 57.3p.
that RR has structural long-term advantages over its peers which are not fully
priced-in at current levels. Rolls-Royce remains our preferred pick in the civil
aftermarket space. We have raised our FY12-13E EPS by 4-6% reflecting better
defence and offshore marine trading, and our PO from 805p to 855p. Next
potential catalyst: FY11 results 9th February (see preview inside). We are 4-5%
ahead of consensus in FY11-12 with underlying EPS at 46.3p and 57.3p.
BE
In our view, Rolls’ positioning is better than its European peers’ Safran and MTU.
Post the IAE-stake sale to P&W, Rolls’ core portfolio is mostly exposed to widebodies
which are starting to benefit from increased Emerging Market maintenance
revenues. On Trent engine production, we estimate that launch engines as % of
total deliveries will decline from 45% in ’12 to 26% in 2013 leading to a
mechanical improvement in underlying margins. MTU and Safran, in contrast, still
have most of their new engine development and launch costs ahead of them.
Post the IAE-stake sale to P&W, Rolls’ core portfolio is mostly exposed to widebodies
which are starting to benefit from increased Emerging Market maintenance
revenues. On Trent engine production, we estimate that launch engines as % of
total deliveries will decline from 45% in ’12 to 26% in 2013 leading to a
mechanical improvement in underlying margins. MTU and Safran, in contrast, still
have most of their new engine development and launch costs ahead of them.
BE
Over 2011 the offshore marine end-market (c.75% of Commercial Marine) has
been more resilient than expectations. For 2012 we are raising our estimates in
this end-market by 3%. At the FY11 meeting, we hope to get more details on the
synergies with Tognum which could lead to further estimate revisions.
been more resilient than expectations. For 2012 we are raising our estimates in
this end-market by 3%. At the FY11 meeting, we hope to get more details on the
synergies with Tognum which could lead to further estimate revisions.
BE
RR cash generation has been lower than Safran’s historically. We model RR
FY12 op. cash conversion at 73% vs 58% at Safran given respective investment
cycles. RR should be net cash in 2012, whereas potential M&A for Safran
indicates their gearing could rise. At 738p RR trades on 10x 2012E EV/EBITA and
13x P/E which we don’t consider demanding for 9% 2012-15E EPS CAGR.
FY12 op. cash conversion at 73% vs 58% at Safran given respective investment
cycles. RR should be net cash in 2012, whereas potential M&A for Safran
indicates their gearing could rise. At 738p RR trades on 10x 2012E EV/EBITA and
13x P/E which we don’t consider demanding for 9% 2012-15E EPS CAGR.
BE
On a side note ….
BE
The world and its dog seems to think there’ll be more engineering bids to come this quarter
BE
After ABB
BE
Now, Rolls is obviously unpurchasable
BE
Because of the government golden share.
PM
goodness — taht golden share stil exists
BE
Yup.
BE
So, at least in a UK context
BE
We’d be looking at the usual old names like Invensys and Fenner.
BE
As I say, that’s merely a sidebar. Not a rumour. Just noting for noting’s sake.
11:33AM
PM
cheers for taht
PM
Banks birefly
PM
briefly even
PM
RBS up 4%
PM
barc up 4%
PM
is this europe wide?
PM
Mediobanca up 6% i see
PM
across the board
PM
rebound after yesterday on “upbeat greek news”
PM
PM
Where’s the blinking Greek deal?
BE
Fair question.
BE
Who knows.
BE
(@JoP, on Capita: missed out on several big contracts, and deals such as the BBC have required a fee cut. Consensus has fallen as a result.)
PM
This struck me as interesting
PM
On the negotiations over the bailout funds, Greek MPs have objected to demands by the troika for further wage cuts and reductions in the minimum wage.
“The troika doesn’t appear to be willing to accept any concessions whatsoever on reducing the minimum wage and scrapping bonuses,” said the government aide. “No political party is willing to move either, saying wage cuts are a red line they are simply not going to cross. You tell me how this is going to be resolved. We have no idea and we’re very worried.”
“The troika doesn’t appear to be willing to accept any concessions whatsoever on reducing the minimum wage and scrapping bonuses,” said the government aide. “No political party is willing to move either, saying wage cuts are a red line they are simply not going to cross. You tell me how this is going to be resolved. We have no idea and we’re very worried.”
PM
Feels very frayed
PM
That’s an unamed official
PM
unnamed as well
BE
Seems to me it’s impossible to get an agreement by consensus
BE
So the only resolution is to punish someone.
BE
And I’m going to assume that Greece are the most likely whipping boys here.
11:38AM
PM
Should mention Ocado in passing
An internet food retailer that many believe is the second coming of Webvan. Loss making yet valued at close to £1bn on flotation.
PM
Look at that van go!
PM
95p this morning
PM
After yesterday’s figs
BE
Only one note I’ve seen on it today.
BE
Which is a sell.
PM
PM
off-msg
BE
So, sorry number 1.
number 1.PM
Felt No1
BE
Ocado’s Prelims couldn’t miss their pre-announced target (and didn’t) but the
current trading news was poor and expecting a material pick up in sales
growth is grossly optimistic. The shares’ brilliant but unjustified run is a great
opportunity to build short positions: we stick with the SELL.
current trading news was poor and expecting a material pick up in sales
growth is grossly optimistic. The shares’ brilliant but unjustified run is a great
opportunity to build short positions: we stick with the SELL.
BE
This is Oriel.
BE
£28m of EBITDA. Ocado told the market it would make about £28m of EBITDA with
the profits warning just before Christmas, and so it proved at the Prelims. The
company got to this level of profitability in a slightly unusual way however. Gross
margins were down by 90 bps in H2, as Ocado invested into price to compete with the
likes of Tesco, but the slack was made up by ‘other income’, which is largely the cash
paid by advertisers on the site, and suppliers. This line of the P&L has moved
pleasingly, which is fortunate given that the underlying picture has been so far away
from that promised at the float. Most of the key KPIs went backwards in what was a
bad year for the company and whilst some of the solutions are within management’s
grasp, fundamental questions remain. We are downgrading numbers today, we can’t
see Ocado making PBT in 2011/12, more a loss of £5m. It may break even in 2013.
the profits warning just before Christmas, and so it proved at the Prelims. The
company got to this level of profitability in a slightly unusual way however. Gross
margins were down by 90 bps in H2, as Ocado invested into price to compete with the
likes of Tesco, but the slack was made up by ‘other income’, which is largely the cash
paid by advertisers on the site, and suppliers. This line of the P&L has moved
pleasingly, which is fortunate given that the underlying picture has been so far away
from that promised at the float. Most of the key KPIs went backwards in what was a
bad year for the company and whilst some of the solutions are within management’s
grasp, fundamental questions remain. We are downgrading numbers today, we can’t
see Ocado making PBT in 2011/12, more a loss of £5m. It may break even in 2013.
PM
tut
BE
2012 has started slowly in sales terms: Christmas trading was strong for Ocado.
Sales grew by 16% to £59m, but the implication of today’s comments is that growth will
slow to 7% in January and February. That’s disappointing, and whilst the comparative
is the toughest of the financial year, this almost undoubtedly suggests that Ocado is
losing market share in online food retailing. This is also the lowest rate of growth that
we have seen from Ocado since records began. Basket size continues to fall in the
industry (in and out of store), as cash-strapped customers retrench and the focus
remains on removing waste. The competition from the other superstore majors remains
intense and will get no easier, especially as Waitrose.com gets its act together within
the M25. Management expects growth to return to double digits from Q2 onwards, but
that seems overly optimistic to us, even if the comparatives get easier. History has
shown that it has been right to assume guidance is too bullish so far.
Sales grew by 16% to £59m, but the implication of today’s comments is that growth will
slow to 7% in January and February. That’s disappointing, and whilst the comparative
is the toughest of the financial year, this almost undoubtedly suggests that Ocado is
losing market share in online food retailing. This is also the lowest rate of growth that
we have seen from Ocado since records began. Basket size continues to fall in the
industry (in and out of store), as cash-strapped customers retrench and the focus
remains on removing waste. The competition from the other superstore majors remains
intense and will get no easier, especially as Waitrose.com gets its act together within
the M25. Management expects growth to return to double digits from Q2 onwards, but
that seems overly optimistic to us, even if the comparatives get easier. History has
shown that it has been right to assume guidance is too bullish so far.
BE
SELL (or short): the shares have enjoyed a very strong run since the Christmas
trading statement. We think that the majority of the move has been down to investors
closing their short positions. Some of it will be linked with the fanciful notion that
Morrisons will bid for the company. We believe this to be unlikely as Morrisons has yet
to genuinely to commit to online food retailing. The investment implied by a 90p share
price would be restrictive to Morrisons, and there is no guarantee that the systems
would be compatible (nor the customer willing to swap Waitrose product for
Morrisons’). We can’t help but remember what happened when the latter bought
Safeway either. We would happily short the shares at these levels. SELL.
trading statement. We think that the majority of the move has been down to investors
closing their short positions. Some of it will be linked with the fanciful notion that
Morrisons will bid for the company. We believe this to be unlikely as Morrisons has yet
to genuinely to commit to online food retailing. The investment implied by a 90p share
price would be restrictive to Morrisons, and there is no guarantee that the systems
would be compatible (nor the customer willing to swap Waitrose product for
Morrisons’). We can’t help but remember what happened when the latter bought
Safeway either. We would happily short the shares at these levels. SELL.
BE
Market not listening today.
11:40AM
PM
What’s happening with Man Gorup
PM
Meant to ask eaarlier
BE
Well, 
has been in touch to tell me it’s going to 160p.
has been in touch to tell me it’s going to 160p.BE
I’m not sure why, or how, or what that’s even based on.
PM
Course it is
BE
I’ll assume it’s based on nothing beyond blind hope and a long position at IG Index.
BE
Still ….
BE
Okay figures from AHL last night.
BE
Up 0.5% on the week.
BE
Leaving it 2.7% down over the year.
BE
And 10-11% off the high water mark.
PM
fare enough
PM
man took such a beating early jan
BE
And a story we’ve obsessed over enough in recent times, I feel.
11:44AM
PM
TTT mentions the LSE bomb plot
PM
Here’s the news
PM
The men were among nine defendants facing trial in London over an alleged plot to attack the exchange and several other high-profile targets in December 2010. All had initially pleaded not guilty to all the charges against them.
But on Wednesday four of the defendants pleaded guilty at Woolwich Crown Court to involvement in the Stock Exchange plot, and the five other British citizens to lesser charges.
But on Wednesday four of the defendants pleaded guilty at Woolwich Crown Court to involvement in the Stock Exchange plot, and the five other British citizens to lesser charges.
BE
Security at LSE is a pain
BE
Suspicion of guilt as soon as you walk in the door.
PM
A handwritten target list found at one of the defendant’s homes listed the names and addresses of London Mayor Boris Johnson, two rabbis, the American Embassy and the Stock Exchange.
BE
Ah, right.
BE
The American Embassy as well.
PM
Sound like clowns
BE
Yeah – if you so much as breathe near the American Embassy, the security will shoot you and put the body into the Hammersmith Flyover.
BE
I question whether this was a credible threat.
BE
Still, what do I know.
BE
(@nick1212: it’d take out Numis Securities.)
BE
(Which I guess may further reduce midcap broking capacity.)
BE
(Albeit in a more drastic way than the usual method of mergers.)
11:48AM
PM
Now look
PM
We need some engagement from the ROTR
PM
We have the CFO of Unilever on here tomorrow
PM
And we need some questions
PM
Add em to that post
PM
Or send direct to me — paul.murphy@ft.com
BE
Yes – it’s exciting times for FMCG
BE
For some exciting ideas, here’s Panmure’s Unilever preview.
BE
We expect Unilever to deliver a resilient set of results on Thursday (2
February), combining impressive (6.4%) LFL sales growth with flat (or only
slightly down) underlying EBITA margins of 15.0%. This is despite
challenging trading conditions and steep input cost inflation. We have moved
our headline EPS forecasts to Unilever’s new preferred measure of ‘Core’
earnings. Unilever is currently trading on 14.7x P/E and 10.7x EV/EBITDA
for 2012E, and our 12-month price target of 2400p assumes this year-1
multiple is broadly maintained, implying 20% total return. Buy.
February), combining impressive (6.4%) LFL sales growth with flat (or only
slightly down) underlying EBITA margins of 15.0%. This is despite
challenging trading conditions and steep input cost inflation. We have moved
our headline EPS forecasts to Unilever’s new preferred measure of ‘Core’
earnings. Unilever is currently trading on 14.7x P/E and 10.7x EV/EBITDA
for 2012E, and our 12-month price target of 2400p assumes this year-1
multiple is broadly maintained, implying 20% total return. Buy.
BE
Q4/FY results due 2 February: For Q4 we forecast 6.6% LFL sales growth (consensus
6.8%), split 0.9% volume and 5.8% price. With net acquisition of +2.9% and currency
-1.9%, we forecast sales rising by 7.7% to €11,649m. For the full-year, this means 6.4%
LFL sales growth (1.8% volume, 4.6% price), with 5.3% sales growth in total to
€46,625m. We expect growth in Western Europe to be 0.8% for the year, 6.3% in the
Americas and 10.3% in Asia/Africa/CEE. We expect some reclassification of these
geographies going forwards.
6.8%), split 0.9% volume and 5.8% price. With net acquisition of +2.9% and currency
-1.9%, we forecast sales rising by 7.7% to €11,649m. For the full-year, this means 6.4%
LFL sales growth (1.8% volume, 4.6% price), with 5.3% sales growth in total to
€46,625m. We expect growth in Western Europe to be 0.8% for the year, 6.3% in the
Americas and 10.3% in Asia/Africa/CEE. We expect some reclassification of these
geographies going forwards.
PM
You can ask Jean-Marc Huet about all sorts of stuff
PM
Remember Unilever huge across developing world etc
PM
Get his china take
BE
Big play on comms inflation as well.
BE
All eyes on margins: Unilever has guided that underlying EBITA margins will be flat to
slightly down for the year, and the range of expectations is from -20bp to +10bp, with
our forecast flat at 15.0%. In the context of €2.5bn of cost inflation in 2011E, we would
define even a modest decline as a resilient performance. Our headline EPS forecasts
have so far assumed a ‘normalised’ level of RDIs (restructuring, disposals, impairments)
of 75bp of sales, but we are moving to Unilever’s new preferred measure of core
earnings, including all business restructuring costs (130bp for 2011E), but excluding
disposals, impairments and integration costs. As such, our EPS forecast for 2011E
moves from 133.3p to 126.3p. On a Euro basis, this implies 7.0% growth from €1.36 in
2010A to €1.45 in 2011E, and 8.2% growth in sterling terms.
slightly down for the year, and the range of expectations is from -20bp to +10bp, with
our forecast flat at 15.0%. In the context of €2.5bn of cost inflation in 2011E, we would
define even a modest decline as a resilient performance. Our headline EPS forecasts
have so far assumed a ‘normalised’ level of RDIs (restructuring, disposals, impairments)
of 75bp of sales, but we are moving to Unilever’s new preferred measure of core
earnings, including all business restructuring costs (130bp for 2011E), but excluding
disposals, impairments and integration costs. As such, our EPS forecast for 2011E
moves from 133.3p to 126.3p. On a Euro basis, this implies 7.0% growth from €1.36 in
2010A to €1.45 in 2011E, and 8.2% growth in sterling terms.
BE
Do we know about Unilever’s hedging policies? Would we like to?
BE
2012 outlook: The consumer environment looks unlikely to improve in Western
Europe, thankfully just a quarter of Unilever’s sales, although the US economy looks
slightly more encouraging, and we expect emerging market growth to remain strong,
albeit slightly below last year’s levels. However, cost inflation should return to a more
normal level (1-2%), and with less pricing we expect LFL growth to moderate to 5.2%
(consensus 5.1%) in 2012E. With the benefit of a full-year of Sara Lee, Alberto Culver &
Kalina, we expect margins to improve by 30bp to 15.3% (the range is flat to +30bp), and
with business restructuring costs slightly lower (100bp/sales), we expect core EPS to rise
by 15.6% to €1.68 (consensus €1.64), or by 11.6% to 141.0p in sterling terms.
Europe, thankfully just a quarter of Unilever’s sales, although the US economy looks
slightly more encouraging, and we expect emerging market growth to remain strong,
albeit slightly below last year’s levels. However, cost inflation should return to a more
normal level (1-2%), and with less pricing we expect LFL growth to moderate to 5.2%
(consensus 5.1%) in 2012E. With the benefit of a full-year of Sara Lee, Alberto Culver &
Kalina, we expect margins to improve by 30bp to 15.3% (the range is flat to +30bp), and
with business restructuring costs slightly lower (100bp/sales), we expect core EPS to rise
by 15.6% to €1.68 (consensus €1.64), or by 11.6% to 141.0p in sterling terms.
BE
We believe Unilever proved itself in 2011 to be a more resilient and
consistent company, generating strong top line growth, good market share progression
and protecting margins despite weak developed market consumer environments, intense
competition, steep cost inflation, natural disasters (Japan/Thailand for instance) and
geopolitical disruption. The skew of the business continues to improve with Personal
Care accounting for 40% of EBITA in H1, and emerging market’s accounting for 53%
of sales. The balance sheet remains robust with net debt/EBITDA at 1.3x, and Polman
has demonstrated an appetite to leverage this more assertively. The shares are not as
cheap as they were a year ago, but we still expect 20% total return over the next 12-
months. Buy.
consistent company, generating strong top line growth, good market share progression
and protecting margins despite weak developed market consumer environments, intense
competition, steep cost inflation, natural disasters (Japan/Thailand for instance) and
geopolitical disruption. The skew of the business continues to improve with Personal
Care accounting for 40% of EBITA in H1, and emerging market’s accounting for 53%
of sales. The balance sheet remains robust with net debt/EBITDA at 1.3x, and Polman
has demonstrated an appetite to leverage this more assertively. The shares are not as
cheap as they were a year ago, but we still expect 20% total return over the next 12-
months. Buy.
PM
And we’d rather you didn’t come along with comments like NiceButDim…
BE
Do we know how many Dove bars Mr Huet eats per week? What’s his favourite Reckitt Benckiser product? Come on, rabble.
BE
Don’t make us do all the work.
11:53AM
BE
Ok
BE
To requests
BE
And, starting with Weir
BE
Which @yogabba mentions.
BE
Been volatile
BE
On the idea that lower gas prices will mean less fracking
BE
And less fracking will mean lower pump sales to the frackers.
BE
Which is all arguable.
BE
And has been argued a lot, to me, by the sellside after I wrote the story
BE
The folk who are positive on Weir don’t seem awfully receptive to a bear argument.
BE
Anyway, the rally today is thanks to Merrill
BE
Which is saying gas doesn’t matter.
BE
All in the price.
BE
Whereas mining isn’t.
BE
While a low US natural gas price is a sentiment risk for Weir, we remain confident
in our Oil & Gas forecasts given Weir’s exposures (14% of profits to shale gas, vs
25% to shale oil), the ongoing switch from gas to oil rigs (with stable rig count
forecasts) and very high utilisation (130%+). Gas price sentiment may continue to
move the shares, but we would view any overreaction as an attractive entry point.
in our Oil & Gas forecasts given Weir’s exposures (14% of profits to shale gas, vs
25% to shale oil), the ongoing switch from gas to oil rigs (with stable rig count
forecasts) and very high utilisation (130%+). Gas price sentiment may continue to
move the shares, but we would view any overreaction as an attractive entry point.
BE
There has been some confusion regarding pressure pumping capex at the oil
service companies. Weir has indicated they expect a decline in OE sales in 2012
(BofAMLe -15%), which we think looks cautious given flat/modest capacity
increases planned by BHI, HAL, SLB. On our forecasts, 2012 SPM growth will be
driven by 40% aftermarket growth following the installed base growth in 2011.
service companies. Weir has indicated they expect a decline in OE sales in 2012
(BofAMLe -15%), which we think looks cautious given flat/modest capacity
increases planned by BHI, HAL, SLB. On our forecasts, 2012 SPM growth will be
driven by 40% aftermarket growth following the installed base growth in 2011.
BE
While the market has been focused on shale markets, the outlook for Weir’s
largest division, Minerals (50% of sales) looks increasingly positive. Our mining
team forecasts 19% capex growth on average for 2012 and recent industry news
flow has been equally positive. We forecast 9% Minerals sales growth in 2012 -
every additional 500bps of growth would add 3-4% to group profit forecasts.
largest division, Minerals (50% of sales) looks increasingly positive. Our mining
team forecasts 19% capex growth on average for 2012 and recent industry news
flow has been equally positive. We forecast 9% Minerals sales growth in 2012 -
every additional 500bps of growth would add 3-4% to group profit forecasts.
BE
We have increased our forecasts by c.2% in this note on the back of the recent
Novatech acquisition. Following a de-rating relative to the sector, Weir is trading
on 2012E EV/EBITA of 9.9x inline with the sector (vs an average 15% premium),
which we think is attractive given our confidence in estimates, medium term
growth exposures and Weir’s high returns business model.
Novatech acquisition. Following a de-rating relative to the sector, Weir is trading
on 2012E EV/EBITA of 9.9x inline with the sector (vs an average 15% premium),
which we think is attractive given our confidence in estimates, medium term
growth exposures and Weir’s high returns business model.
PM
thanks for that
BE
Shares up 85p at £20.40 at pixel time.
PM
(Thank you Brien 
)
)BE
(Though can you duplicate these questions in the ULVR thread please?)
BE
(Even the ones about apostrophes.)
BE
Oh, should also mention that Berenberg’s positive on Weir.
BE
Same argument.
BE
Focusing on gas prices misses the point: The gas rig count has
been dropping since the peak in August 2008 (1,606 rigs) and it
continues to fall (-14% yoy in January). Chesapeake Energy (CHK) is
the no.2 net natural gas producer in the US and the largest rig
operator (165 in 2011). Despite cutting gas drilling capex by around
75% (23 January 2012), we estimate CHK still needs an incremental
686,000 horsepower (hp), or 13% yoy, to cover its oil-related drilling
plans. Our model currently assumes OE pump deliveries decline 10%
in 2012E.
been dropping since the peak in August 2008 (1,606 rigs) and it
continues to fall (-14% yoy in January). Chesapeake Energy (CHK) is
the no.2 net natural gas producer in the US and the largest rig
operator (165 in 2011). Despite cutting gas drilling capex by around
75% (23 January 2012), we estimate CHK still needs an incremental
686,000 horsepower (hp), or 13% yoy, to cover its oil-related drilling
plans. Our model currently assumes OE pump deliveries decline 10%
in 2012E.
BE
What does it mean for Weir? All else equal, 5% in horizontal rig
count equates to around 2p on our 2012E EPS forecast, or +/-1%.
Consensus estimates remain at 156p for 2012E, suggesting any
choppiness in short-term rig counts will be more than offset by
Seaboard and Novatech accretion (combined more than 12p/share).
count equates to around 2p on our 2012E EPS forecast, or +/-1%.
Consensus estimates remain at 156p for 2012E, suggesting any
choppiness in short-term rig counts will be more than offset by
Seaboard and Novatech accretion (combined more than 12p/share).
BE
Everyone loves Weir.
11:59AM
PM
Quick run round before we close
PM
Anything on BHP — was mentioned earlier?
BE
Oh, this big asset swap.
BE
Must admit I read the statement and forgot what it said nearly immediately.
BE
Though I’m sure our new Australia correspondent will turn it into sizzling copy.
PM
With Rio
BE
Yup. BHP exercised its option to divest its non-operating 37% interest in Richards Bay Minerals to Rio.
BE
No numbers mentioned.
BE
And no-one seems that interested.
PM
Titaniam
PM
titanium as well
BE
That’s right. Here’s Citi.
BE
Following the deal Rio, the operator of the asset, will see its holding rise to 74% with the remaining holders Black Economic Empowerment (BEE) parties (24%) and employees (2%). RBM represents BHP’s full interest in Titanium Dioxide (TiO2) production with expected attributable EBITDA in CY2012 of $644m. The announcement follows on from the news in November that the Ekati diamond business is up for sale and marks another step for the company in divesting non-core assets.
BE
Though since we mention BHP …..
BE
Deutsche has one of its epic think pieces out on the company this morning.
BE
It’s a bit “wither mining” and open ended.
BE
And far too granular to share here.
BE
But this is what the cover page says.
BE
We believe that one of BHPB’s key
challenges in 2012 is convincing
shareholders that investing in capitalintensive
projects over an extended
period will deliver “acceptable” returns.
The differing timeframes of investors and
a capex-intensive company such as BHPB
are highlighted by four “Mega projects”
that will require some US$120bn of capex
(over 50% of group capex) over the next
15 years. All projects should beat BHPB’s
cost of capital, but it is only from FY23
that they should augment returns (ROA of
19%). Nevertheless, we would Buy on
valuation
challenges in 2012 is convincing
shareholders that investing in capitalintensive
projects over an extended
period will deliver “acceptable” returns.
The differing timeframes of investors and
a capex-intensive company such as BHPB
are highlighted by four “Mega projects”
that will require some US$120bn of capex
(over 50% of group capex) over the next
15 years. All projects should beat BHPB’s
cost of capital, but it is only from FY23
that they should augment returns (ROA of
19%). Nevertheless, we would Buy on
valuation
BE
So. There you go. DB buy BHP.
BE
And that’ll do for that.
PM
cheers for taht
12:04PM
PM
We are done
PM
Thanks for joining us
PM
And do leave your questions for Unilever here: http://ftalphaville.ft.com/blog/2012/01/30/857721/one-brave-unilever-executive/
BE
Oh, and on a sidenote, if anyone can explain this …..
BE
Plant Impact notes some speculation in the press regarding the position of
Michael Panteli, the Company’s Chief Financial Officer, and confirms that Mr.
Panteli remains employed by the Company and is a director of Plant Impact.
Michael Panteli, the Company’s Chief Financial Officer, and confirms that Mr.
Panteli remains employed by the Company and is a director of Plant Impact.
BE
Do email. Bryce.elder@ft.com
BE
So cheers for your comments. See you all tomorrow.
BE
(Milky.)
(@Milky: yellow.)
PM
Seeya