Cobus Loots, CEO of Pan African Resources, on delivering sector-leading returns for shareholders. Watch the video here.
As the dollar has strengthened significantly against STG since the half year results, and given their huge forward hedge on FX, I expect further large loss provisions in the next financial update. Any dollar orders for equipment are probably loss making if the dollar remains at these elevated levels. We have never had a full explanation from RR. about the FX forward contracts on this massive c**k up nor someone’s head (which probably means the c suite/bod approved the positions).
A tough operator like the new CEO starting January will want all dirty linen out in their yearend results so I’m expecting a loss for this year after exceptionals.
Despite all the rampers on here explaining the difference between the IPT deal being signed and how the sp would spike to £1 when the cash arrived, you look pretty foolish now.
More and more the new CEO looks like a great choice but it will be a year+ before we see the impact.
LiquidSky
Thank you for your well reasoned and considered response. I don’t necessarily disagree with anything you say. I am glad of our exchanges and would hope the forum is the better for it.
If you read back over a few of my posts, you may get a ‘feel’ for where I am coming from. I believe in Rr and I like (and am proud of) it as a company. I am a strong buy and hoping to increase my holdings.
It is the relentless, unrealistic ramping on here (£1.50 by August etc, etc) that causes me concern especially for people who get sucked in and I want to counter that by outlining some of the potential risks.
If I were to say ‘there could be a war between the West and Russia (or China invades Taiwan) in the next 6 months’, that does not mean, (a) I want a war, or (b) I expect one. Nor does it mean I must be shorting the market.
With Rolls, there are parts of their accounts that irritate me like taking a loss on hedging in 2020, booking a profit on FX in 2021 and then taking another massive loss on hedging in H1, 2020, as an example. This smacks of massaging and an indicator of how desperate they were in 2021. But things have improved enormously since then and overall I believe Warren East has done an excellent job saving the company during the pandemic. Also I am hopeful in Tufan , the new ceo, as (a) he has something to prove being passed over for the ceo position at BP, (b) he is required to hold a higher number of shares in rr than his predecessors, (c) he is taking a gamble accepting so many shares in compensation for the loss of awards at GIP and (d) he has a reputation for cutting costs/restructuring and getting results quickly. (And with a Scottish chairperson known for being good with money!)
In summary I am hoping for £1.50 end of 2023 or early 2024, I think the sp will jump after completion of IPT sale and any DOD contract award, to around £1 (maybe £1.20) but then drift back down till the results in early 2023. That’s all a guess, and I won’t be upset if it hits early 70s or, heaven forbid the 60s, … all that is just a topping up opportunity.
People may not like what I say (or prefer I didn’t say it) but at least they’re getting an honest, unvarnished personal opinions.
Hi Liquid,
So the reasoning is as follows - H1 includes a hedging loss of £2.2B which at the moment is a) only on paper and b) assumes a particular exchange rate to calculate the loss.
These hedging contracts start to expire over time and when they do those hedging losses turn from paper losses (already provided for so not an issue) into cash losses.
Second, as the dollar is a haven asset in times of uncertainty and recession, if we head into recession the dollar is expected to strengthen from here, so causing both further paper losses and cash losses.
In addition you have to upfront cash expenses of building the manufacturing facilities to produce the SMRs. These have to be built quickly if the timetable of 2030 is to be met. This is investment but requires cash or borrowing to fund. Lastly you may have further inventory build up due to supply chain issues and further capital investment needed to ramp up production for all the orders in both power systems and defence.
If civil aero flying hours continue to increase and provide positive c/f then rr can cope with the other cash requirements but if there is a another lockdown in China, US etc this winter, war or deep recession then that’s where the risks arise.
One other point is the American activist investor who knows rr is worth more in the short term if broken up, so may apply pressure after year end results, if they are poor.
As it say it’s a worst case scenario to all the super positive posts on here.
BDC
Are we not talking semantics here? Rr SMR generate electricity at a frequency of 50Hz and this can not be adapted easily or efficiently for the US distribution network hence the need to redesign their SMR to generate electricity at 60 Hz.
The important point is that Rr will not be initially selling their SMRs in American. Do you disagree with that?
BDC
I can only tell what the nuclear RR people said at their exhibition in Whitehall a few months back. I am not an electrical engineer but he explained something about the electricity being generated at different Hz frequencies in the Europe and US and would need a redesign/readjustment of their SMR product.
As such that’s why I suspect they are supporting NuScale in the US with their different designed SMR and not pushing their own.
If you think I am wrong, (and I could be) why don’t you email investor relations and ask?
I can only reiterate I am a strong buy on Rr, have a significant shareholding holding and am not hedging or shorting.
There are lots of upsides with Rr but I am posting some of the risks, to add balance the desperate, blinkered, over exuberant posters on here.
BouncyDeadCat
I agree with you completely. China, as outlined in the recent unprecedented FBI & MI5 joint press conference, are the greatest longterm threat to our economies and security.
It is orders in Turkey, Africa, ME and the Far East, that could be the issue.
Btw RR are not currently planning to sell their SMRs in the US because the Electrical Distribution Systems are different between the US and Europe.
Convb
Sorry to burst your bubble.
Still waiting for the ‘inaccuracies’ to be highlighted and for them to be ‘corrected’ by you? I will bow down to the excellent ‘in your research and conviction’.
Perhaps if you spent more time welcoming alternative views to your own, that might be more helpful than incoherently attacking posts and throwing insults. It would encourage other responsible posts and this board might be a better place?
Or perhaps you prefer posts from Mike1234567?
Oh golly convb, you are such a fool. Do try and keep up!
First if you re-read my post in relation to NuScale you will see I was responding to Phill111 in his comparison of the power output of the Rr design v the NuScale design. Everybody on here is aware Rr and NuScale are working together, especially if they were reading the links posted.
Secondly, and here is where you really made a fool of yourself, the 2nd link you posted is to a completely different Rr nuclear technology and has nothing to do with SMRs. Not sure how you got that one wrong?
So just to remind everyone and keep our feet on the ground,
1) 16 x SMRs are over 28 years (excluding overseas sales)so maybe UK sales of £1b a year starting in 8 years, based on 50% for manufacturing the modules etc.
2) SMRs on land are completely new, still under development, using an untested onsite construction method, still to receive regulatory approval (not due for 2 years) and the manufacturing site locations have yet to be finalised (as well as the actual generating sites), need planning permission and have to be built. And we will all be praying there are no radiation leaks, terrorist attacks, or natural disasters which sway public opinion. Game over if there is.
3) Highly likely something so new will experience delays, cost overruns, changes is design, and/or design flaws, once in operation.
4) Phil111 - NuScale modules, though much smaller in size, they are designed to be grouped in 4s, 8s, and 12s, in one building so comparable is size to RR output.
5) Selfsufficient - FX losses - correct me if I’m wrong but the losses are closer to £4B … (£1.7B 2020 & £2.2B H1, 2022) and still rising. Let’s all hope the dollar doesn’t get stronger … for longer!
6) Rr are not the only player in SMRs (unlike wide body engines) and given the huge sums of money involved, the French, Americans, Chinese etc will fight tooth and nail for every overseas order. Lots of politics involved too.
7) the new CEO, as per usual practice, will want to clear out or over-provide for, any losses or skeletons, so we may well have only a small profit (or loss) for the full year.
I am a strong buy on Rr but we all need to understand it is a long term play (3 years+) and given the risks, you shouldn’t have more that 20% of your total portfolio is them.
I know the above is all very boring and not what people want to hear, but please take it into consideration.
Lol, Dazpink, I have read it in full. I suggest you do.
I know some may not be used to reading accounts but what flashed up for me were the margins dropping over 50% and the FX hedging.
The department head of hedging needs to be sacked. Taking FX contracts at avg of $1.50 out to 2026, unbelievable … first $1.50 is historically at the upper end of the range, second with the incoming recession, the dollar is only going to strengthen from here as a safe haven (and even higher losses on the hedging!) and third, after the Brexit vote years ago, who thought $1.50 was a good price!
They need to try poach the Ryanair guy who does their hedging. I’ve been a shareholder for years and they have a very impressive track record on hedging.
‘What a load of rubbish
They need to get the SMR on the move on ! What’s happening there ?
They seem to be taking there time.’
At this rate, RR will not be able to borrow the huge sums of money, at a reasonable interest rate, to build the manufacturing plants to produce SMRs. Nuclear projects are notorious for being massive loss makers and we won’t know if RR can deliver them profitable for 10 years! And the v-280 contract, if we win it, is about the only good news we can expect in the short term. If RR report a full year loss, then it’s either a RI or we have to flog one of the divisions… defence is probably worth more that the total capitalisation of rr atm!
Ppl here need to understand what they are getting into … this is not some capital light software company that’s scalable, … it’s an old fashioned, capital intensive, R&D intensive, engineering multinational subject to the vagaries of multiple powerful governments.
And btw while it’s a British registered company, the majority of its shareholders are American, who will be ruthless if the sh*t hits the fan.
My strategy is to load up if it gets into the 70s and wait 3 years+. But it is still a gamble.
‘ WTF, seriously it is funny, analysts reckon RR is a broken business, most definitely NOT, who employs these muppets’
Ffs …. are you living in cloud cuckoo land? Rr just posted a H1 £1.6b loss!!! Greater than the total proceeds from the IPT sale!
Hi convb
I think you may have missed my point. We will transition much quicker to SMRs and renewables because Russia invaded Ukraine. Do you disagree?
Not sure American have invaded anyone recently for a land grab.
As I posted before, oil demand is what it is. Russia will divert its supplies to China/India etc and those countries currently supplying there will divert their supplies to the EU at a vastly higher price. The readjustment is happening with the main delay being the Middle East trying to scr*w the highest possible price from us while deliberately keeping supply tight. Lots of angst is the short term but amazing how quickly businesses adapt. This won’t be a problem winter 2023.
‘Time to cut a deal with Putin is long overdue’
Convb, an alternative view.
1. The longer gas & oil prices are elevated, the quicker we will transition to SMRs and renewables. And the better Rr does.
2. With electricity costs so high, the quicker we invest in substantial reducing the kWh we use and the better for the environment. A business I invest in where I am a shareholder and director, they have managed to permanently reduce their electricity consumption by 30%+.
3. Capitulating to the Russians will be a disaster. Give in to a bully and he will come back for more.
Botbot, you seem like a decent guy. Really admire your self deprecating posts today is the face of all the abuse. No hiding. You told us your trades in advance, got it wrong this time .. and held your hands up. It’s happened to us all, albeit on a smaller scale.
I am interested, if you don’t mind me asking, will you hold or will you take the hit?