London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East and have access to Premium Chat. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Did say yesterday I wanted to add more today if able to, but got too much on the go and tiredness has caught up, so that will have to wait some days/weeks, as will my posting in general too.
Discovered that Pentland, via the family that own it, are on record as saying they will never drop below 50% holding in JD. Very pleasing to read that after that big sale.
They have the controlling stake in JD and quite rightly the owner Andy Rubin (private now, no longer a listed company on the stock market) is, as you may know, on the board of JD as well, as a NED - and specifically overlooks the governance of JD by the directors. So he does actively work in the industry at the coalface to ensure his investment is protected.
Don't wish to add more 'new' notes that I have on the low net profit of H1 as too many posts on that subject can look like deramping. (One division in H1 reported not just losses but increased losses; wasn't expecting that).
- And on that subject I'm really keen to see the trading update soon, approx round about 13th January.
The SP today hits another 52 week high this month, and that's all anyone needs to know about the market's response to my concerns. New 52 week highs continue in the SP as they did in yesteryears. More and more it's looking like little of Finish Line's revenue and profit was in H1 with perhaps the major bulk of that contribution to be added in H2.
I just did last week on the dip I got lucky was watching the stock for a while my research could not find any negatives however a gap in the last six months performance had me wondering.
It was the potential election result rise in Stirling, a bounce in confidence to have an effect on retail and the company itself.
thanks for the if slightly cautious but informant posts i hope this investment continues to perform
Thanks Scooter - Only time to say I'm guided to follow the first para of my summary post as been travelling all day to day (m/way). Will get back to you tomorrow evening, hopefully.
" Does anyone understand the last 3 rns statements ref Pentland sales? 57 to 51 , then 55 to 51 and 55 to 51 restated? "
- That's what I've been looking at tonight but perhaps more time tomorrow night. Initially the Pentland sale reduced their holding from 57% down to 55%. Today's update appears to suggest a further reduction down to 51%. Confusing as pretty sure I saw only 51% as a core holding back in November. Limited time tonight so will look further tomorrow. Did spot a great increase by Vanguard - one of the world's best US funds - where they appear to have approx doubled their stake (back in August I think). But only 1%.odd by them. Will bring that one back up tomorrow.
Will try to find more time tomorrow evening, but off the top of my head looking like Pentland on 51% holding in JD.
Interestingly 78% of JD's shares are held by institutions so it's true - there isn't a great deal of free floating shares available. Always drives the SP higher on good news when shares are tightly held and hard to come by.
Does anyone understand the last 3 rns statements ref Pentland sales? 57 to 51 , then 55 to 51 and 55 to 51 restated?
ref company debt - no worries for me - the usa economy is in good shape and the likes of nike/adidas have recently said positives about their sales and JD's contribution - therefore profits from the us acquisition will cover the debt easily imv. I don't think there is a direct read across from spd because of their sprawling empire but their figures do us no harm.
Would I buy at current sp ? no because i am over invested here already but I would not sell either.
Would you buy at this price in view of what spd has achieved
Recent buying after Pentland reflects the current sentiment for this share. For me it is now a matter of whether the company has over stretched itself or not. Most analysts are expecting a good end of year profit again.
Thanks for your input. So what price would you buy JD sports at ? The recent rise of nearly 80p from the lows after the sale by Pentland is attributable to the FTSE rise ?
I have some concerns before investing this time where I had none in the past. So have decided to delay until the trading update is released approx somewhere about the 11th to 17th of January 2020, just a few weeks away - and before the full results are published in April, as I want to hear more on that net profit.
The utterly humongous Net Debt ( an historic first for JD ) is now on the books in this current trading year, but not any (or little) of F/Line's sales and profit (as far as I can see) to counter balance it.
So need more clarification on that matter straight from the horses mouth in January, before a final decision.
I've been looking casually at reinvesting in JD as it served me well back in the day. Not up to date with all previous RNS releases etc., but I instantly lit up when the Finish Line acquisition was mentioned below, as recall idly reading about that in passing. It could be that instead of a first by JD in net profit being down on last year - as it's a pure fact for H1 - that sales and profit from Finish Line might show up some contribution in H2. (I'm hoping that's all it is).
And that's it - I'm done posting :)
Have a merry Christmas and a happy new year, one and all.
- And I didn't even mentioned the 'B' word :)
And to round off, I did say I'd highlight what I was seeing as positive balance sheet metrics in JD.
First thing is, despite the v recent retrace in the SP due to the Pentland share disposal, the PE ratio never lost its premium rating that the market awards JD.
It has steadfastly remained well above the industry median which for specialist retail is quite low these days - at a forward P/E 11.9 thus showing confidence in JD the company, by the wider market.
As said, the Industry median is a lowly fwd P/E11.9 but as of tonight the P/E ratio for JD. stands at a fwd P/E of 20.2 That's approaching near double the value by comparison to the median in JD's industry!
A premium rating; the market's seal of approval!
Revenue continues as it has done for years to increases y-o-y at an astonishing rate (see previous posts below).
As has the Net Profit, but I have an issue for this year's alone (which I'll expand on in the summary).
The forward EPS growth (Earnings Per Share) stands at a fwd 12.1% which once again beats the industry median that stands at a lesser 4.03% growth.
ROE (Return On Capital) is an excellent 12.1% compared to the Industry median of only 6.36%
ROE (Return On Equity) -"- ditto, but even more so, at a magnificent 26.9% return whilst the Industry median can only muster 5.51%
Operating Margin you might think unimpressive at 7.03% but once again it leaves all in its industry in its wake who can only produce a median of 2.11%
There are several other metrics for measuring JD. but unfortunately they're not JD's strong suit, so not part of this post (Price To Book Value and Price to tangibles & more such as FCFlow etc., etc.,)
JD is 15%+ above its 200dayMA SP (moving average) and its 1 year relative strength is also excellent - so the SP has and still is, considered to be: 'motoring' despite recent zig-zagging.
Now on to a v short summary to finish off.
"Lots of rambling stats here!"
- Yes LOL! And hopefully an end to those - when I do a final post on the positive metrics within JD. and a closing summary. Then I'll be done :)
Lots of rambling stats here! FootAsylum was a £90m purchase. The debt is from the purchase of Finish Line in US, a huge acquisition.
Meant to add - All reports in the media refer to pre-tax profit being up on last year. The actual truth is NET PROFIT was DOWN on the corresponding period the previous year. Here's the figures:
6 months ending 4/8/18: .... 6 months 3/8/19
Revenue = £1845m ............ £2721m UP!
Gross Profit = £889.9m ...... £1275m UP!
Pre-tax profit = £121.9m ... £129.9m UP!
(This is all the media analysts are fond of reporting - the pre-tax profit as in, "Profit' is up"! But PI's should be more interested in the Net profit, so finally just look at this the bottom line for 1/2yr 2019 >
NET PROFIT = £97.8m ....... £94.1m X DOWN
And that's where the TTM method of calculation shows an unsatisfactory start to this current year, for the first time, Net Profit achieved is down on the corresponding 6 months compared to last year.
(And now I really am off for a cuppa to watch a little of the election results).
" . . . 'Quick Ratio' usually referred to as The Quick Ratio, . . "
Tsk. Doh! Should have been typed as -
" . . . 'Quick Ratio' usually referred to as The ACID TEST, . . . "
(Part 2 of 2) Concludes > > >
. . . Couldn't believe my eyes but instantly realised the cost of buying FootAsylum must be factored in.
In that case surely amortisation (not to mention depreciation etc.,) must be added to the Free Cash Flow metric and thus show a healthy position with all those years of surplus and no net debt? But it looked slightly disappointing at a ratio of 15.7 which is currently higher than its industry median of only 12.4 Not a major concern but it pushed me to look at gearing (leverage) where a shock awaited.
Gearing is currently at 184.3% (Anything over 100% leaves a company at the mercy of unplanned 'bumps in the road', so an undesireable position to be seeing).
So that pushed me on to look at liquidity.
There are 3 main metrics for liquidity that are most telling. Just having one looking acceptable may not be sufficient - the full 3 need to be singing the same song.
In JD's case 2 of them are v poor (the 'Current Ratio' and the 'Quick Ratio' usually referred to as The Quick Ratio, they both looked v unsatisfactory.
But the third, 'Interest Cover' was excellent and shows debt obligations can be met and paid with ease. Even so, I was expecting JD to get a minimum of 2 out of 3 singing from the same hymn sheet as added 'insurance' where liquidity is involved.
So my initial takeaway from this is, what price did JD pay for FootAsylum?
I thought they picked up that poorly performing company for peanuts? But from an always in surplus company, this year it becomes a company sporting a HUGE Net Debt for the first time ever in it's life since being floated.
Are these the things Pentland has become disturbed with, and decided to lighten its exposure somewhat? The high gearing, courtesy of the huge net debt have got me rattled a bit. But then again is JD moving centre stage to bigger things where maybe it needs to carry substantial debt if it's to attack international markets, yes/no?
Let's look at what metrics are shining brightly next and maybe a bit of perspective - in the next post (tomorrow; as it's gone past 1:00am now - so off to watch a bit of the election results).
(Part 1 of 2)
(It's late maybe should have left this until tomorrow?)
Trading Profit & Loss/Balance Sheet Fundamentals.
Not sure what I'm trying to highlight here. But some of the metrics I'm going to post I'm betting might surprise you. This is where I'm coming from, when I was in JD in these recent years - unbridled success and achievement. Just look at the record for Revenue achievement, nothing but consistent increase after increase:
y/e 2014: £1216m
- 2015: £1522m
- 2016: £1822m
- 2017: £2379m
- 2018: £3161m
- 2019: £4718m
Just a spotless record of y-o-y increase after increase. And for y/e 2020 analysts have pencilled in £5,925m. So what could go wrong? That's glorious. So, how about the NET Profit? The same story, look -
y/e 2014: £40.2m
- 2015: . £52.7m
- 2016: . £97.6m
- 2017: £178.9m
- 2018: £231.9m
- 2019: £261.8m
Good or what? The analysts even have net profit for y/e2020 showing as £317.9m
What's not to like?
- Only that using the TTM method of using the 12 month trailing figures based on the last set of interims to forward project the revenue and net profit for this current year, things look a little less exuberant. Could that be because as a retailer the bulk of it's revenue/profit come in the second half? Whatever, rather than showing anything near the analysts net profit of £317.9m the TTM method shows net profit could achieve in the vicinity of £258.1m which is marginally less than last year's £261.8m Net Profit. If so that would represent a poor historic first for JD.
Let's accept that retail is highly cyclical due to the Christmas and Jan sales effect, and the TTM calculation is too pessimistic, it started me looking more closely elsewhere. And straight away noticed a huge discrepancy for this year
- Net Debt.
Net debt has never existed in JD's history. In fact it's been one of continual surplus - not net debt. Just look at these surpluses (then look at the TTM calculation for this year)
(No Net debt)
y/e 2014: -£40.2m . surplus
- 2015: . -£52.7m . "
- 2016: . -£97.6m . "
- 2017: . -£178.9m . "
- 2018: . -£231.9m . "
- 2019: . -£261.8m . "
See? All surpluses! Cash is forecast to be excellent too at circa £346.6m the second highest in the last 6 years. Great! But then I saw the figure for this year ending and instead of a couple of hundred million surplus it was showing for the first time ever - actual Net Debt! And not just a couple of hundred million but BILLIONS. I'm seeing a forecast of circa £2,119m Net Debt - it's first ever!
£2.1b in Net Debt! Forecast for this year ending.
Couldn't believe my eyes but instantly realised the cost of buying FootAsylum must be factored in. In that case surely amortisation (not to mention depreciation etc.,) must be added to the Free Cash Flow metric and thus show a healthy tax relief position with all those years of surplus and no net debt?
. . . With that in mind ( conspiracy theory time :) :) I've relooked at the fundamentals to see if there's anything that could have spooked Pentland besides the Monopolies Commission carry-on, and think I've found some undesirable traits that were not present last time I was in JD.
I'm prepared to stand accused of being too risk-averse and over-thinking issues but see what you make of my next post.
Hee! Talking of Footlocker the last sentence of the second para in the Berenberg "News" button above for today reads:
" With some investors fearing JD has run its course, a common pushback is that the company is 'another Foot Locker', which is a global sports-fashion peer that trades at a circa 65% discount to JD."
But adds - " However, Berenberg argued that the JD premium is justified. "
Hope I'm not going to be haunted by this Footlocker albatross :)
Some fundamentals now. (In next post)
Last I was interested in JD, the fundamentals were beyond reproach - 100% Stellar! Can't say that as of looking at the fundamentals tonight. Will post the items that concern me; perhaps others might find I'm being too risk-averse, and overly critical in mentioning them. For balance will do a quick add-on post on the 'glowing' metrics I see that remain "stellar" within JD's accounts.
In trend364's link below, is a single sentence that chills me to the bone (on a personal level) due to the very same being said before being shafted on a stock in which I already had a 5 figure paper profit. The sentence by Pentland that personally chills me (you needn't be; it's a personal issue) is the charitable Mother Theresa bit, that they give as the reason for the sale of those shares. And it's this (capitals are mine):
" 'Today's share sale enables us . . . by realising a small portion of our shareholding in JD to fund future investment activity . . AS WELL AS INCREASING THE FREE FLOAT TO MEET THE INCREASING INTEREST EXPRESSED IN JD BY OTHER SHAREHOLDERS"
This year both the CEO and the chairman of a company I have holdings in, said the exact same charitable thing and each of them dumped 75% of their holdings at the same time, whilst telling shareholders it was out of the goodness of their hearts to increase the free float to help others buy the stock - just like Pentland give as an additional reason for selling. My concern is such that if Pentland are considering divulging themselves of further shares they're hardly likely to to be offerrd top dollar, would they? - Would be a bit like Gordon Brown did years ago, and announced to the markets - in advance - he was selling off the country's entire gold reserves. No guesses for what that did to the price he was offered for the gold.
In my case the SP went from £7 odd to £5 odd. Today it's back over £8, but still well short of the near £11 it was, as the market got wind of the sell-off before PI's.
1) Watch Pentland like a hawk from now on. Look out for things like "due to unforeseen circumstances we find ourselves having to sell a further one-off tranche of shares to meet our commitments" or some such. I think at this juncture it's an honest sale. But a second announcement after letting the SP rise for some months, and I'd start smelling a rat.
(Last para follows after this >>>)
Velo - I'm following the money on this one. The buys yesterday suggest all is well and Pentland comments are positive.
But you are wise to be apprehensive
I know. It's of little concern. Was going to post a correction but it had gone midnight so let the Footloose jibe stand next to it as didn't rate F/Asylum.
A company I worked for back in the day had a US parent division that bought Footlocker with grandiose plans to swamp the UK with its stores, hence the typo. :)
Will post some fundamental potential concerns later today if time.
JD did not buy Footlocker. FL is listed in US.
"...This is still a very quiet share chat considering JD is a FT100 share..."
Gotmiester - That's always - ALWAYS, the sign of a good stock!
I have history in this stock: briefly I was in this, back in 2016 or so @ £2.20's. Then a stock split occured (or before then, can't recall which) and whist I was paying it no attention as it was in one of my quieter ISA's it went and doubled in price before falling back to half that. I seethed in letting that gain escape me.
About a year later it doubled again!
Thanking my lucky stars I over reacted and sold the lot pronto at £4++ odd, locking in a double-bubble gain! Pleased with myself - prematurely as it turned out.
JD bought Footlocker/Footloose? and I thought that's it - it's bought a pile of ****; it'll be it's undoing - an aquisition too far.
But I began regretting not buying back in (it had already risen well past my double-bubble sell point before buying Footlocker) and have regretted selling ever since. So looking like potentially a re-entry point coming up :)
" I'm guessing these shares will recover in the next couple of weeks "
That's the question isn't? If it's an "innocent" cash raising exercise; then yes. But do Pentland know something the market doesn't?
I'm measuring it thus: First off, it's a bad close tonight and on candlesticks alone it's forecasting potentially worse to come. So drew a Fibbonnaci retracement level from the last significant low of last December 2018 and there's plenty of retracement levels as lines of suport to cross before worrying.
First up is the 38.2% at a £1 below here in the 620's. Now if you're right then it should theoritically NOT fall below that level AT WORST. If it does there are other supports - but cross that bridge if it ever arrives.
For the moment I'm going with the innocent cash raising exercise and expect the retrace to peter out somewhere between here and a pound lower. If the market suspects there's more to this sale than a cash raising exercise then 620's could fall.
It's nowhere near being oversold yet. JD has history of always reponding magnificently when in oversold condition and in this paticular stock is ALWAYS a buying opportunity. So which comes first - an oversold, over reaction condition to the sale - or the first Fibbo retracement support level? We'll see.
Just need to keep ears to the ground to deduce if there's anything sinister behind Pentland's sale. Normally a drop like this occurs when dumping the sudden huge surplus stock on the market but I understand Pebntland had already found a buyer or buyers. So as long as the new buyers don't go for a quick buck, the SP should (as you offer Trend364) recover.
If on the other hand, the new buyers ofload at every opportunity into the rising SP, holders will know about it, and how, via a continuing retracing SP.
Balance sheet fundamentals looking a bit iffy in places, terrifically good in others.
I'm guessing these shares will recover in the next couple of weeks
This is not correct. Pentland is a huge brand ownership company and entirely separate from Mr Cowgill.
AS I recall pentland is effectively Peter Cowgills share ownership company and as i also recall he has offloaded a few at different times in the past . These sales do not indicate anything untoward is happening in the company - it is just him reducing his holding from time to time. No worries to me but I do not like the market reducing my holding value!