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Newsid... in reply to your query here is a copy of a post of mine re the tie-up with three, from May of this year which explains(I think) why Vod is trying to extricate itself from Spain and tie up with three in the uk. Those are the two "challenging markets "
Reposted from 4th may
"This long-awaited development seems finally upon us and there are a couple of points worth making. First I expect that the parties have been in touch with UK authorities and have tacit agreement that the deal will be approved, there may be conditions but essentially it will IMV, be approved in its current form.
Second an examination of VOD's last annual accounts for FY 22 show that its international revenues were : Germany 30%(of total revenues) margin43%, UK 13% margin21%, Italy11%, margin33%, Spain10%, margin23%.......(sorry for the formatting- I have tried formatting tables on this site before and they come out unintelligible)
However, I hope it is clear that VOD make decent margins in Germany and Italy and much less so in the UK and Spain.......guess why they are planning to rationalise the UK market to one less player!!!"
See
https://www.londonstockexchange.com/news-article/VOD/sale-of-vodafone-spain/16188396
Vod will receive 5 bn euros , (4.1 bn cash plus 0.9bn Zegona prefs)
this long-awaited news is another step in simplifying and reducing Vod's mish-mash of holdings.
The net effect should be to reduce Vods enormous debt pile of 33bn euros by about 10%. all else equal that should reduce annual debt service costs by about 150-200 mill euros pa. Not enormous(last year's figs showed debt service costs of 1.7bn euros) but at least (at last?) heading in the right direction.
Effect on SP this am - who knows? but should be a positive if only for the recognition that current management are tidying up an unholy mess.
I hold, largely as a significant divi payer, may add.
Https://markets.ft.com/data/equities/tearsheet/charts?s=LLOY:LSE
How much patience do you need?
Clued ..... absolutely, I have no doubt that the negotiations that proceeded the $497 mill settlement made it clear to RR that the likely outcome from prosecution would have been more severe for RR , maybe bans from operating in certain countries or sectors(ie government contracts)a fine much heavier than £497 mill or even, heaven forbid, jail time for some of the senior staff involved.
If you are a serious investor it's worth reading some of the background, it appears to have been widespread, involving hundreds of millions of " bungs" to secure contracts. That said, It is also clear that RR were not the only guilty ones, other countries turned a blind eye to such practices (and still do).
In simple terms, the Telegraph article points out that RR bought off the UK government by paying £497 million to avoid prosecution, this article outlines a claim being brought by UK institutional Investors seeking compensation because RR " misled the market" ie lied to investors who lost money because of that.
It is strange that it has taken 6 years to be brought forward, my guess is that the II's now think RR is only now in a position to compensate without going bust.
Upfront I am not currently invested here....having exited a few months ago at a price 20p below current.
BUT I watch this share and have been doing some work on the impact of the proposed job cuts, so here's some rough analysis.
Last year RR's results showed an "underlying operating profit" of £837 mill, which after adjustments (primarily the £2.4 bill of debt offset by a tax refund of £308 mill) led to an "operating loss " ie the REAL figure of £1.2 bill
This year TU is still predicting an"underlying" profit of £1.2-£1.4 bill. Given that they are restructuring debt, and will incur additional redundancy costs but will have significantly improved "civils" revenue it's hard to disentangle the numbers to get a true figure for the "real" operating profit/loss. My guess and it is only a guess, is that RR will still show an operating loss for the year after all the conflicting additions and subtractions. I cannot see how last year's £2.4 bill of "net financing cost" can have come down much, RR is still heavily indebted, and interest rates are rising. In addition in the short term, they will have to bear several hundred millions of cost associated with the latest staff reductions.
I won't be buying back unless/until the financial situation clarifies or the SP plunges.
RR has been "Mckinseyed" I used to do consultancy and it's easy, if the organisation is split on product lines with separate "back office" functions for each business stream you recommend that they integrate functions such as procurement, personnel, invoicing,.. etc to reduce overheads and duplication.
If they run an integrated back office, you recommend that they form discrete units that better understand the specific needs of the division and closer integration with the front end.....
I said when I watched the recent presentation that Urgenbilgic was obviously an accountant and not an engineer and he is implementing an accountant's view of how a business should run. I don't know whether it will be an improvement and nor does he, BUT he has done something and justified his appointment. The outcome of these changes will be felt in the short term by those made redundant but the exercise will be cost-negative for a year or two and by the time it is clear whether it has worked TU will be long gone.
......having bought and sold these several times over the last few years and still holding some at a ~650p average I'm in the market again.
WHY?
Because I think long-term (even despite my opening sentence!!) and in the long term I am convinced that grocery delivery will grow, it is more environmentally friendly, it's convenient and we have generations growing up who will pay for convenience, who value their time more highly than my generation does/did. As and when it reaches a critical volume it will become the Defacto way of grocery shopping. I have said before that the nonsense of stores spending staff resources, time, and money to stock shelves and then more time and money for staff to pick from those shelves will become so costly that ALL major grocery chains will drive their customers towards on-line shopping delivery. It has happened to a great degree with clothing, household goods, white goods, tech products ......groceries are the last bastion of inefficiency in the shopping arena.
Automation is and will continue to be, the single biggest driver of change in the world, think the growth of data centres , AI, animation, robotics.....staff costs are being driven down in all areas and OCDO's technology facilitates this.
If I have a concern, it is that the market thinks less long-term than it used to, every day we see knee-jerk price action often reversed in hours or days in response to news, caused by high-speed trading bots which react quickly but don't think, I accept the need to ride out such short term vagaries and to judge when to buy and when to sell using applied logic, not instant reaction.
I have no doubt I will find myself in a position where the SP rises sharply and I'm in profit and take it, but until the day when I perceive that the SP FULLY reflects OCDO's value I will continue to invest.
(Reuters) - GSK on Wednesday said it agreed to settle another lawsuit in California alleging its discontinued heartburn drug Zantac caused cancer, as the British drugmaker sought to end costly litigation that has weighed on shares.
The company, which has so far only settled cases in California, did not give the financial details of the settlement but said it was a "non-material" sum.
Citi analysts estimate GSK will settle all the Zantac cases against it for a TOTAL OF ABOUT $5 BILLION ( my caps) in the first quarter of 2024, clearing what it called a "still relevant" overhang for its investment case and a distraction for management.
The trial for the Cantlay/Harper case, which was set to begin on Nov. 13, will now be dismissed, GSK said, adding it had also settled three remaining breast cancer cases in California related to the same drug.
The latest settlements in California were related to cases due to go to trial in November, with a further set scheduled to begin in Delaware courts in January, GSK said. The company still faces about 79,000 cases related to Zantac in the United States, with 73,000 of them in Delaware.
By closing these cases before the bigger cases in Delaware in January, GSK takes away the potential risk of losing the California cases and being subject to greater settlement demands from the plaintiffs, a GSK shareholder who declined to be named told Reuters
See this RNS
https://www.londonstockexchange.com/news-article/GSK/zantac-ranitidine-litigation/16161207
Slightly worrying for holders in that GSK has NOT said what it cost them to have the cases dismissed. Money will have changed hands, how much? is the key question.
I made the point in posts on this board some time ago that the threat of this action in US courts would take some time (and money) to dissipate. Unfortunately, whether Zantac does or does not cause illness is almost irrelevant, what does matter is how long and how much it will cost GSK before the matter closes.
I do not currently hold and will not until this is resolved and Walmsley goes.
My lovely.....
Useful link, I have highlighted a couple of para's that support the views I offered in a post on 27 sep
"All other things being equal, we expect that if trustees use a discount rate to calculate liabilities that has the same margin above gilt yields at the previous valuation, schemes as at 31 December 2022 and 31 March 2023 will have a significantly lower reported value for their liabilities than they were expecting."
"Overall, the changes in market conditions and aggregate pace of schemes’ funding plans mean that deficits on a TPs basis as at December 2019 and March 2020 are expected to have turned into surpluses as at December 2022 and March 2023."
As and when The BT pension fund reports we should see much better news, tho' it's in the pipeline and hasn't impacted the SP yet, to my surprise.
Formal announcement
https://www.londonstockexchange.com/news-article/GSK/gsk-completes-sale-of-shares-in-haleon-plc/16155443
"GSK to sell £900m stake in British consumer goods giant Haleon
GSK is poised to sell its £900m stake in British consumer goods giant Haleon.
The pharmaceutical giant announced on Thursday plans to offload 270m shares in Haleon, equivalent to approximately 2.9pc of the company’s listed stock. "
From today's Telegraph, as I suggested a few months ago, 335 or thereabouts is an upper boundary for HLN as the committed sellers ie GSK and Pfizer are keen to offload their major interest here .
Holders should recognise this and consider their positions accordingly, remembering that GSK and Pfizer between them hold about half of Haleon stock.
HI Iain.. it's impossible to predict SP reaction to trading updates, largely because so much trading is automated these days, minor moves in either direction are magnified as the "bots" mindlessly follow the trend, after all that's what they are programmed to do, and is largely responsible for the erratic behavior of stocks in the short term. As a sensible investor, the best plan is to use your own judgment and occasionally to buck the trend, it works for me.
Today's figures are the usual picture of steady well-managed growth for a company in a sweet s[spot in the market. If the SP falls sharply I will add, otherwise, I will sit quietly not panicking, safe in the knowledge that despite an extended P/E there is much more mileage here.
Or possibly a year or two.
Upfront .. I sold my RR stock a little while ago in the 190's,realising significant profits, on the basis that it had come so far in a short time that it might plateau or fall, well Ok I may have sold too soon BUT the facts are that RR had risen 40 % in three months and 300% over a year. For a FTSE company that is astounding volatility and my thesis was , and still is, that there would be a pause or a pullback. Recent minor SP falls are just that, minor ,and may not presage significant further falls BUT as asset managers come to tidy up their portfolios for the end-year analysis (and the calculation of their bonus!!)they might be inclined to take and book profits here.
The other factor to be aware of is that RR is valued at £18 billion and for company that has barely broken even for the last six years that includes an awful lot of optimism (not the stuff generated here but the stuff that has propelled bigger investors to buy)
I still believe that RR's future is likely to be much brighter than it's past, but also that the SP has got a long way ahead of reality.
I'm comfortable on the sidelines , but will re-invest as/when? The SP is sharply below today's.
HI Fleccy , thanks for your usual thorough research all of which is IMV perfectly sound with the exception of your last sentence-
"Hopefully the rises in interest rates will feed through dramatically as a reduction in both the IAS 19 and actuarial deficits, but much will depend on the reduction in asset values along with the fall in liabilities."
My point is this:
It's best to think of the asset values as you would of an annuity, ie at the point of taking the annuity you effectively surrender the capital in favour of a lifetime revenue stream, that revenue stream then remains constant (or will appreciate by the rate of inflation depending on its terms).
For the duration of the annuity the capital value no longer matters, your only concern is the maintenance of the revenue stream.
Now I know that's a simplification but it's essentially how life insurers manage their business and IMV renders the consequences of a fall in capital values as of low significance.
As an aside your point about the longevity swap is well made, and again with my positive hat on is an opportunist strategy to fix at a point in time when longevity had, in fact, fallen. The BT pension trustees are clearly pretty shrewd.
However, I hope we both agree that the news on the pension front for BT is better than it's been in decades and this will eventually filter through to the SP.
Hi Fleccy
I don't really share your concerns , the sharp reduction in the deficit last year was, I Suspect primarily down to the very large funding top ups, Interest rates then were just about 1%, and would only have had a minor effect. As you no doubt know they are very much higher now and the effect of that on investment returns is enormous . Without knowing the duration split of bonds in the fund it's impossible to calculate, but it is not unreasonable to assume that a fair portion of the bonds held by the BT pension fund can be (or already have been) turned over to generate much, much, higher coupons now and for future years.
Any actuarial assessment must be based on a reasonable assumption that we have a window of opportunity to lock in higher returns for many years to come.There is also the unfortunate but significant effect of a reversal of the recent longevity increases, for the first time in decades lifespans have shortened.
I am adding to my bond/prefs holdings and I cannot believe all pension fund providers aren't doing the same.
It's also why I have added to my holdings in LGEN and MNG.
In the hope of (yet again) turning the discussion here to the merits of BT as an investment, I set out a few thoughts on the skeleton in the closet, which may by now have stopped rattling... or in more prosaic language to discussing BT 's pension fund deficit.
Prompted by a piece in today's FT on the rapidly improving state of pension funds generally, I thought I would return to the specifics of BT.
A brief summary first:
As of March 2021 the deficit had fallen from £5.1 bill to £ 1.1bill, partly due to significant top-up payments (funded out of revenue) and the beginnings of the interest rate rises which continue, however even then, BT had committed to further top-up funding of £1.3 billion in three installments in 2022/3 and a residual series of payments of £10 mill pa out to 2035.
Now we await the findings of the June 2023 evaluation and it will be no surprise if that evaluation finds that the pension fund is now fully funded or very nearly so. I would guess that the outstanding balance of funding of about £1.4 billion will be deferred or more probably cancelled.
IMV it is highly probable that BT is in negotiation with external pension providers , many of whom will be dying to take on board the UK's largest pension fund which is now fully funded.
The obvious first-order effect of that would be to lift the millstone that has hung around BT's neck for decades, secondly to free up over £1billion for funding the fibre rollout, thirdly to get rid of the jibe-a pension fund with a telecom business attached.
Finally, and for my part as a shareholder most importantly, to give a significant fillip to the SP .
The publication of the triennial review may not be imminent but I am happy to await , the very positive news it will bring.
Cheap... yes, once you have bought a bond the return(the rate of interest) is fixed, whatever happens to the capital value of the bond. If you sell the bond after a period in which interest rates have risen you will get less for it than at purchase, if you sell after rates have fallen you will get more(all else equal). As you say, if a bond matures you get back the "face value" and if interest rates have risen you can buy another bond at the same face value but offering a higher coupon (i.e. interest rate).
Meco... greyg is wrong, in a short- term market crisis, bonds which are the most liquid market on the planet will hold their value better than other assets, after all, if you have a liquidity problem it's pretty hard to sell an airport, or a water company or an office block and hence you are more likely to get a price near the market value in selling bonds than in selling any other asset.
There is legislation being proposed to relax the rules on the type of assets held by banks, insurers etc to encourage the holding of "infrastructure" much of which is in the hands of private equity who benefit from having few short-term commitments to clients.