The latest Investing Matters Podcast episode with London Stock Exchange Group's Chris Mayo has just been released. Listen here.
Hi Crossley....jason w spent a few minutes playing down the divi prospects among quotes were"long term sustainability of divi......No overdistribution...., divis must be WELL COVERED....and sustainable." He also said that last June's 110p cost PSN £350 mill and that current cash was £700 mill... so my assumption is 2X cover £300mill on divis..... ergo £1 +/- 20% last the total payout for next FY.
All depends upon the state of the market , cost of cladding, volume and value of sales!!!!
I listened to this AM's analyst call and summarise the main points below:
This was as near to a "kitchen sink " call as I've heard in ages, the board members were brutally honest about the state of the market , the compromises being made, the allowances for the building safety bills arising out of Grenfell... the slow down in mortgage approvals,price cuts to clinch deals, the impact end of "help to buy"and risaaing mortgage rates (latest figs reducing from 6.99% to 6.19% in the last week or so) .........
Specifically they are forecasting a sharp reduction in land purchases, a significant cash allocation for the remedial fire safety work, price cuts (currently ~2%) to clinch sales,50 cancellations per week, sales running at ~200-220 per week , half of last years averages.
Still they quoted an average house sale price of £350k which achieves a 30% margin and confidence that they were on top of issues and foresaw a sticky period over the next six months before a return to normality.
I was reasonably re asssured by their grasp of the situation as were most of the other guys on the call.
I don't expect further sharp sp falls from here unless we have some major bad news, net cash is around £700 mill and tight cash control and a sharply reducued divi mean that PSN's medium term outlook is fraught but not critical. I hold and will continue to hold and add at these or lower levels , confident that the sp will progresss, if not over this winter then within 12-18 months . i expect annual divi's in the range 80-120p next year, fully covered.
Cross-posted from a post on the OCDO board.
A major piece in ST business news on Sunday about Johnlewis/Waitrose's problems with a recently introduced stock management software system causing shortages on shelves and delivery issues(failure to deliver on time and substitutions), it also says that Waitrose have gone back to picking from stores and they are suffering from management frictions. Given that Waitrose is the obvious main competitor for the OCDO/MKS tie up the implications are good news for OCDO(and MKS). The piece also quotes OCDO stats of 95.7% of orders delivered on time and 99% without substitutions. I suspect that's at least in part the cause of today's rise.
A major piece in ST business news on Sunday about Johnlewis/Waitrose's problems with a recently introduced stock management software system causing shortages on shelves and delivery issues(failure to deliver on time and substitutions), it also says that Waitrose have gone back to picking from stores and they are suffering from management frictions. Given that Waitrose is the obvious main competitor for the OCDO/MKS tie up the implications are good news for OCDO. the piece also quotes OCDO stats of 95.7% of orders delivered on time and 99%without substitutions. I suspect that's at least in part the cause of today's rise.
The last para of today's RNS essentially says that wef the end of this month the company will be insolvent. That is a position of weakness and any(or no) solution to the problem will be catastrophic for shareholders. If Joul is to survive it will almost certainly be with different ownership.
Gary... cost saving for BT is achievable almost exclusively by manpower reductions, made easier by the reliability/durability of fibre . Without redundancies they can allow natural wastage as the workforce retires, with a workforce of 100,000 it is not unreasonable to see a low single-figure percentage retire every yearwith a concomitant reduction in the wage bill.
My summary of the positve elements of the results is this:
They were surprisingly boring , no great alarms or issues, fibre rollout progressing on target (or slightly above)at 62k per week ie 3.2mill pa.
Wholesale pricing cut aimed at squeezing out inefficient competition and many altnets will work unless Gov. orders them to keep prices high!
ANNUAL savings of £1.7bill at a one-off cost of £0.9bill, intended Annual savings raised to £3bill at a one-off cost of £1.6billwill drop through to the bottome line for this and succeding years.
Agreed pricing structure of CPI +3.9 % will have significant effect on cash generation going forward for at least one year and possibly two.
As expected on a down day market reaction is negative, IMV this is a positive report , I have added this am and will do so more at levels below 125p
Ocado are still saying that their build capacity is currently about 10-12 CFC's(average 5 modules)per annum and the costs are let's say £12-13mill each so that's about £120 -£140 mill expenditure pa(that ties in quite well with the last half-year results). From the same half year, it looks like OCDO's revenue per cfc is between £6-8mill pa. which means that build costs are recovered in less than 2 years. It also means that with a revenue stream of ~£200 mill next year and much more in subsequent years, IS can self-fund a 12 CFC per annum roll-out for the future. If we also assume that despite the complexity of CFC creation OCDO can sub-contract some of the work locally , then not only is IS profitable from FY 2023 but it can fulfil the current order book within revenue.It is also fairly clear that OCDO's customers are happy with timescales as no doubt they have similar complexity to manage. I have said before that I am here for the long-term promise of IS and that the MKS tie-up is predominantly a test bed/demo unit.
I listened in to the analysts call this am and it was , as you might expect pretty positive.Numbers all as reported but these are my observations of new/ adjusted info;
Revenues from this deal have been agreed at slightly higher rates than previous ones because OCDO Re-imagined provides lower user costs/more efficiencies and so OCDO earn a greater revenue on sales.
This contract and other prospective deals are within OCDO's current funding plans so no need for more cash.
Each CFC(of 5modules) costs "low double-digit millions to build(new number to me at least!).
EOY revenue guidance remains unchanged.
Finally the rumour I heard last thursday (on which I added) turned out to be accurate!
I have taken an interest in SAE for several years in the belief that tidal will, eventually, be a significant provider of green energy. However, I sold out shortly after the link-up with GFG, who was even then a known crook, since then I have posted occasionally here when the SP was in the mid-teens, around 5p and then maybe 2p always seeking to point out that this company was and is essentially broke, it is money pit which has consumed IIRC over £100mill in its lifetime.I fear that we are nearing the end of SAE's time as a quoted company. To translate the latest news into clear language it means this. SAE have sold off the IP which was their one most valuable asset(which they owned outright!!) for £0.5 mill and a minority share in proteus, their only justification is that it reduces the associated opex though not directors salaries!
SAE is currently losing £16m pa of which £6mill is staff costs and the latest despairing gesture gives management the ability to pay themselves an extra month of undeserved salary. An analogy for this is that management are sitting in the office, selling off the office furniture and computer hardware to pay themselves until they finally lock the door and walk away.
There is IMV, no foreseeable hope of any return for shareholders.
I doubt that I will bother posting here again(and no doubt many here will heave a sigh of relief!)
Further news(from today's DT)
"TalkTalk is now in detailed talks with BT’s infrastructure arm Openreach about a deal to move its four million customers onto its new faster and more reliable full-fibre network in the coming years."
Results are good but carefully massaged to minimise the media and political furore over a windfall tax. As I suggested in a post in May the provision of an easement of windfall liabilities if offset against North sea spending seems to have been taken up fully, see:
"Finance chief Sinead Gorman told reporters that the company had done enough over recent months to avoid the tax, which allows companies to obtain tax relief in exchange for investment. She said:
Heavy capex [capital expenditure] has meant that we haven’t had extra tax coming through in this quarter yet.
I do expect to see that extra tax ... to happen quite early in the first quarter of 2023, but we’ll see what plays out with prices as well."
I also have a sneaky suspicion that BVB actually saw my spoof post on 1 May and has acted IMV, sensibly to try to play down the hysteria which always flows from "excess profits " tho' oddly enough never from losses!!
Bear in mind that an annuity is an irrevocable decision, if you want the security of a lifelong guarantee of a fixed level of income but with the option of exiting your commitment at a later date,(important if, at any stage, inflation/interest rates rise) there are alternatives.
..on the subject of LLOY as an investment ....I have sold out today in the light of LLOY's recent decision to stop funding new developments in oil and gas. To choose to forgo an area of profitable business in order to score few points with the ESG brigade is not only foolish but IMV a dereliction of responsibility as a board.The world needs and will continue to need hydrocarbons for decades, not just as the most effective energy source currently avilable but as a feedstock for thousands of materials without which society cannot easily function. I have held since the lows of 2020 and exit with a profit but am increasingly disillusioned with this company's board (and this board!!!)
GLA all those still owning LLOY stock
Fats... if you haven't already, I recommend you watch the presentation done on 12 Oct, both co-CEOs were very clear on the direction of travel. In the last A/R for 21/22 the figures were clothing up 3.9% food up10.1%, the clothing sales showed online up 55% (from, I assume a low base,) and in-store down 11%. There was also comment about the vast space requirements for clothing, the number and range of sizes needed in stock and the fact that supplying clothing from stock is much cheaper than from store.High street store floorspace is expensive cf out of town retail parks and the former will reduce while the latter increases. The energy costs of stores were also addressed, heating and lighting are going to be much more expensive in future and although they talked about lower level lighting, LED lights doors on coolers......I am sure that they have no intention to reduce clothing sales but the emphasis is definitely changing, recent years have seen the proliferation of slicker competitors leveraging cheap manufacturing, short concept to product times, near- disposable clothing, which M&S admit they have no intention of emulating. Their strategy is IMV a realistic acknowledgement of where they now stand and what they do well, easing back on clothing where their market is no longer the fast fashion scene.
Can we stick with the real purpose of this board, ie to discuss the merits of RR as an investment. For those of you who wish to play political insult tennis , I suggest you head over to the LLOY board where you can join the polarised and paranoid who spend all day and most of the night in unarmed combat.
Hi I have been a MKS watcher for a considerable time (like a decade or so!)and through all of that time have thought it just too expensive as an investment , though in 2020 as Covid broke I was tempted, but there were just too many other distressed companies with better short-term recovery prospects.Still I kept an eye on MKS and have finally started to buy with a couple of tranches bought below the psychological (but otherwise irrelevant ) level of 100p.
Why?
Well, in strictly numerical terms there seems less downside than for ages with the SP at near all time lows (on figs back to 1994!!),a P/E below 7 ,stable revenues of ~£10bill,a return to profitability last year with hopes of continued improvement, no divi (but likely IMV to be re-instated soon(ish)).A long delayed recognition that they cannot compete with the fast fashion , online , teens and twenties market and a similar acknowledgment that their future is in food, online delivery and an abandonment of their dated, no longer relevant, high streeet emporia in favour of out of town , parking friendly, newer food- led stores.
I watched last weeks presentation and was, if not totally impressed, at least re- assured that their co- ceo's ( a nonsense I know) had a grasp or what is needed and the makings of a plan to get there. it seeem sto have the following components :
A rigorous control of cash,(£400 mill. off the cost base and debt-reduction, particularly important as debt service costs rise) less clothing and home , more food and the endless repetition of the "omni-channel " mantra,utilising their brand name and their suite of tools to sell partners product, a drive to add to and make better use of their sparks card customers and the trove of data that provides, suggests that they are at least(at last?) moving into the 20th century.
Thus , for my part, I am expecting/hoping that this is a multi-year low and that progress in a variety of ways including the SP, is in prospect. I shall add in the 100p region over the next few months.