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It is extremely common: most retail buy high and sell low. Or freeze when a moment comes to sell (especially at a loss), leading to bigger losses. No smugness here. I have been guilty of that myself a number of times. Am getting better and more disciplined I think, but no complacency either.
If it was easy to do otherwise, everyone would make money all the time in the stock market. And sometimes it is a toss of a coin whether company X will turn things around if given patience, or not. So luck plays a part too, definitely.
IMO, what we have in this particular example is a badly managed operation (as evidenced by the mirror-opposite performance, and thus SP history, of our main UK listed competitor), but a business that has a great moat and that sits within an essential sector. Unlike most companies on the stock market generally.
We have a large shareholder that has continued to increase its position on the roster and we have a current share price that largely (but not fully) has priced in the failures of late. AIMO anyway.
So, unless we get something that is really hair-raising on Monday, I will be ready to add here myself if we see a price that I think offers an appropriate risk to reward ratio.
I will also be following the early trading activity closely and might take a view then for a quick trade maybe.
Or it could be a case of taking a couple of small tranches over the space of the three day rule scenario. Eg setting a few buy orders and forgetting about it, for the investment pot.
But first things first. Let us see what the content involves! Good weekend all and fingers crossed for some Monday cheer.
JG- the only one of the metrics that could wipeout the headroom and more is the profit margin, which for 2023 has dropped more than the trigger point. However we don’t know whether that in itself effects the calculations as they will no doubt consider reasonable margins across the remaining life of the investment. And impairment only covers investments ie assets that were purchased such as Durham school bus etc….
We would need to know the workings of the calculations to know for sure. I don’t know if they are made public on request or not, but seems like an important metric. I assume analysts will have that information but Pi’s don’t. It’s one to be aware of and consider for the future in MCG and other stocks where long term assets are utilised.
As Hindy says we are now locked in and without the detail of how it’s calculated we can’t make an informed decision anyways. Just keeping fingers crossed.
Oh got you Hindy, naively didn't realise these are updated half yearly which is why I looked at FY22.
Thanks for updating.
Probably locked in a fair bit longer than Monday!!
Jg the 22 report is old news you should be looking at h23
The headroom has gone from 225m up to 371m now
The data points what would trigger an impairment have also increased (which is good)
Ie the data points have increased from 110 to 190
120 to 190 and 130 to 200
We did try work this out a while ago but there was only a couple of people interested, it’s kinda to late now anyway your locked in until results drop 😄
Wealthtransfer
Are there any pointers from HY 23 / or October profit warning to determine if any of the below are likely to be met resulting in the below stated NA impairment detailed in the FY22 report below?
The value in use of the North America division exceeds its carrying amount by £225.9m (2021: £812.0m); the reduction compared to the prior year being driven by the increased discount rate.
For North America, sensitivity analysis has been completed on each key assumption in isolation. This analysis indicates that the value in use of the North America division will be equal to its carrying value with an increase in the pre-tax discount rate of 110 basis points (2021: 250 basis points) or a reduction in the growth rates used to extrapolate cash flows into perpetuity of 120 basis points (2021: 270 basis points).
In addition, for North America, a reduction in operating profit margin of 130 basis points (2021: 360 basis points) will result in the value in use of the division being equal to its carrying amount.
Management has also performed sensitivity analysis to assess the impact that a combination of reasonably possible changes in the key assumptions would have on the recoverable amount of the North America division. In combination, a 20% reduction in the cash flows in 2023 and 2024, a 100 basis points reduction in the long-term growth rate and a 100 basis points increase in the pre-tax discount rate would lead to a £178m impairment in North America.
Always amazes me how the sentiment changes people's approach. When this was £1.50 people were starting to buy up saying how cheap it had become. 10000 shares at that price will now buy you 25000 shares but i sense far more reluctance to buy at the lower level than the higher one. While obviously the news on this share has been almost constantly negative since that 1.50 level i haven't actually seen any news which could be considered a total disaster (i.e. affecting this as a going concern). For me Monday will be a time to buy here for sure unless there's catastrophic news but even then if it's a tin hat day could be a great opportunity to get these dirt cheap as if they're not there already!
Cheers wealthtransfer
Will know where to look for that on Monday.
JG - the numbers you quote are the carrying value not including headroom.
The calculation is stated as being highly sensitive to changes in the pre-tax discount rate, long term growth rate and trading assumptions
around profit margin. Its the last part "trading assumptions" that will be key here as I think that the pre-tax discount rate is the same or similar as H1 update, long term growth rate is slightly improved but profit margin is obviously way off. That may be looked at over the remaining years rather than reflecting 2023 margin and using that as a forward view of recovery but to what extent I don't know.
Although improvements to headroom are not captured in the carrying value the more Ive tried to understand it, there does appear to be some limited circumstances where write down of the goodwill has occurred and the company can demonstrate a 'permanent' positive change has occurred there good be a limited recapture to previous written down values. So this could in theory be applied to Alsa if there was a recognised long term value creation. The more I look at it the more I realise its above my pay grade. If anyone on here is a specialist accountant with knowledge of the calculations I would be interested to try and understand it better?
Also...in 2022 Sterling as a headwind and a cost on the FX derivative .. which "should" see an improvement in 2023 as sterling recovered
"Other movements of £105.4m (increase to Net Debt) principally reflect the movement in exchange rates and
settlement of foreign exchange derivatives as a result of the weakening in the value of the pound which increased
the value of debt denominated in foreign currencies. In the previous year the pound had strengthened, which
had the opposite impact"
There are also investment costs into Morocco, Portugal which are now complete and not repeated ...with Portugal now producing revenue rather than set-up costs .. US Bus eligible for grants with EV Bus purchase costs
No further acquisition payments for WeDriveU in 2024 so again a further non repeatable comparison year on year...
Wealthtransfer
Thank you. Me too, I've written off this year again, not expecting significant visual recovery until HY 25 now.
Just praying that no other skeletons come out, or that any potential impairment doesn't start another downward spiral, and the sp at least somewhat stabilises.
One last thing, in the impairment section further down , where is the overhead value actually stated?
Is it the section / box stating the value after any current impairment?
When looking at 22, there was a box stating carrying value of each unit after goodwill impairment, UK 52, NA 743, Alsa was 560 ( previous year was 784), are these the values that include future headroom?
JG - I think because 22 was still a recovery year and although impairment was in Alsa that was actually doing quite well, it wasn’t such an issue. 23 is different as an impairment of US would come when looking to get the best price for the Us asset that might be impaired. It’s only the margin that I’m thinking could be an issue. The discount rate shouldn’t be an issue but we don’t have access to the exact calculations used so it’s guess work.
it doesn’t change my view of the potential recovery this year and I’m holding for the next two years anyway.
It’s just my top wish list of things not to happen in the results as it’s the main thing unknown and will influence investors decisions on whether to now come in with the worst behind us. Anyway it’s all speculation and Monday will spill the goods.
There’s going to be a lot to take in Monday morning and I would say to anyone holding longer than a couple of months to consider the detail and don’t react too soon if headlines don’t look good. We are close to H2 update which should be a better picture.
Probably wanted plenty of shares
Wealthtransfer
Naturally worried about a US impairment but looking back last year, despite the large Alsa impairment and impact on overall results, the market didn't react badly to it at the time.
Do you know why?
And it would seem that there was reduced headroom in NA last year, they referred to onerous contracts , driver shortages, less profitable contracts etc, surely this would affect the potential sale value?
Fy 22
Given that there is an impairment of ALSA goodwill and a reduced level of headroom in North America this year, as well as volatility in the discount rate (particularly interest rates, risk-free rates of return and equity risk premiums, including country-specific risk premiums), we consider impairment to be a key source of estimation uncertainty with respect to both our ALSA and North America divisions.
That's the ut not a purchase. But at least at the high of the day
@m097j…I told you I was adding 25% 😉…jk
Big buy order at the close - 632k bought at 60.05p. What is that all about?
JoseyWales - the likely hood of a US impairment is the great unknown and is possible due to the significantly reduced margins in that unit. That would be a real problem. Everything crossed that doesn't come about. It seems like a close call to me.
Let's hope the 100+ comments on here on Monday are all cheerful and content. GLA
"Welcome to Mobico Casino" actually sounds good Poker.
:))))
Chips on the table...last call at the bar...
the poker game is approaching Call ... prepare to show your hand
winner takes all
sorry ..no further credit allowed :-)
Another famous saying:
"Last top-up today at these prices before the results. Good luck to all holders. Some positive news and this will move very fast"
:))))
Of course it can go lower. When that impairment is put into the accounts, it will impact net asset value. If that then ticks the right box in a fund metrics, they could reduce and that could easily swing below 50 then. Very unlikely, but best account for both directions.
A lot of new faces a day before the results.
When the consensus between all of you is "this cannot go lower as its priced in" the opposite happens from past experiences. At least 90% of the time anyway :D
"For me a lot of this must be in the price "
Carrington
I would agree
The shorters and traders have carefully put it in an oversold position-- IMO ... ready to knock it if the BOD dont deliver ..but also ready to buy back , knowing they already over sold it anyway