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Just as a matter of interest, does anybody know how Centrica accounts for income. Specifically, when they send out estimated bills, is there any discount applied in the revenue number in the final accounts to allow for overestimation of consumption?
(I fully understand that over time over-estimations are replaced by actual consumption figures. I am interested in the year end cut off procedure. )
I sincerely hope that Carnival is taking the relevant steps while the ships are laid up to upgrade its aircon systems and maintenance procedures. The existing systems must be a contributor to the spread of infection (not just Corona). I have been on a Princess ship in the last three years when an obviously faulty air conditioner was left unfixed for at least four days.
I think Carnival could create a bit of reassurance if they were to publicly guarantee that the air conditioning systems on these ships are the best they can possibly be. Inside cabins are totally reliant on air conditioning which is not good news if the system is not in a perfect, hygienic state.
First of all, let me say that I have no position in CCL and do not intend to take one. Secondly, I like cruising (with Princess, part of CCL) and even have future cruise credits on my account with them.
But the reality is this great company is dead in the water, not down to bad management but entirely due to events and the devastatingly stupid way western governments have turned a very serious situation into an absolute catastrophe with the most incompetent management of the economies possible (and society in general for that matter).
Virtually overnight, billions of dollars of assets in all the cruise companies became liabilities and their previously successful business model became toxic. Any company that has to pay over 10% just to fund fixed costs (albeit slashed fixed costs) with virtually zero revenue is headed straight for the rocks, no matter how big they are. It makes no jot of difference if the y are to be permitted to sail again within the next few months and a vaccine is miracled up in the next few weeks. There is no way these ships are going to sail anywhere near full for years and where are they going to sail to? Just because a cruise liner is sailing doesn't mean it is going to generate cash if it is sailing half empty. The profit (cash generation) is made at the margin so it is highly probable that, given the increased operating costs for crew and fuel, etc, they will actually lose more money, at least to begin with, than with the ships at anchor.
Liking at the volatility of the share price, one cannot help but get the impression that institutional investors are just stringing out the inevitable in order to recover at least some of the huge losses they have made on cruise line stocks. But be in no doubt, the business model of Carnival, so successful until this year when "events happened", is completely broken.
" ...and expecting an overseas big investment !!"
And you think that will be on such favourable terms to benefit existing shareholders? When a company has to shell out 9% to fund revenue expenditure when general interest rates are close to zero, that is a sure sign the company is in a death spiral. This company is having the blood sucked out of it. This is not a case of mild anaemia.
It was obvious at least two months ago that the facts made it touch and go whether Carnival would survive let alone recover to anywhere near its trading position last year. What nobody seems to be looking at is Carnival's massively expensive order book for new ships which, when you look through all the smoke and mirrors, is where the the new financing will be eaten up, let alone financing empty hulks currently on the water. If I read the announcement correctly, they are raising 5-year finance at an eye watering 9% cost. This seems very much like banks, at least one of whom is a major stockholder in Carnival, are trying to recoup at least some of their mega losses on this stock by sucking CCL dry.
I really do not see how Carnival can avoid receivership (Chapter 11) and I say this as someone who has no financial position in CCL and do not intend to take one. I am also a good customer of Carnival (Princess) and will be very indeed if my prediction comes to pass. Bang goes the future cruise credits.
I know in desperate times needs must, if you were a cruise line catering mostly to well-educated, liberal leaning Yanks and Brits, which country, apart from probably the Chinese, would you most like to be rescued by? No doubt about it, the Saudis.
I like cruising, and when we do, Carnival's Princess has us captive because of the fantastic onboard benefits we get due to having cruised with them so much. I would not even consider cruising for at least twelve months to see how they manage the undoubted risks of cruising (God forbid that this present wave of Covid19 is not a mild rehearsal for the real thing as in 1918 when the real killer was the second autumn wave) and, even then, I'm damned if I am going to contribute one cent to the coffers of one of the nastiest regimes on the planet. I won't be alone in this thinking.
Another thing to consider about Carnival is that most of the refinancing will go to the stonking order book for new ships, most of which will probably be the biggest white elephants in the history of commerce. (Same applies to the other cruise companies.)
What it all points to is a massive oversupply in the cruise industry for at least three years caused by demand falling dramatically and new ships coming down the slipway. For companies that make their money at the margin, it is difficult to see ships sailing anywhere near full for quite some time and they probably burn cash even if the ship is sailing with what appears to be a healthy (no pun intended) number of passengers. As I said a few days ago, this is an existential crisis for all the cruise companies, not just Carnival, but I think the Saudi involvement with Carnival may not be such a good thing as it first appears.
I think Carnival is literally dead in the water.
At the moment they have no assets, only cash burning hulks that will eat through their refinancing in no time. What seems to have escaped the notice of people is that a very sizeable chunk of the refinancing is going towards new ships and they are going to be the biggest nd most expensive white elephants in the history of man. (Exactly the same applies to Royal Caribbean et al.)
Some people seem to think that once this Corona Virus crisis is over and these ships start sailing once again, everything is going to be hunkydory. Wrong. I am no expert on the cruise industry but I do know they make their money at the margin and I would bet money that a ship sailing half empty of passengers will lose just as much money, if not more, than a ship laid up with a skeleton crew. It is going to take an awful long time for people to regain the confidence
in the overall safety of cruising and I write that as someone who enjoys cruising a lot. Their primary market - old codgers like me - are going to take an awful lot of convincing to get out the deck shoes again.
Another fundamental mistake was the purposeful decision to rely increasingly on the Chinese market. That was an understandable strategy on the part of the cruise companies' management but one that will come back to haunt them.
FN - don't misunderstand me. I am not criticising Carnival - I am a good customer of Princess as I said in my post but they have been caught up in the perfect storm. Not even the best management on the planet could have avoided what's hit Carnival and, of course, hundreds of thousands of other businesses as well. But in the case of Carnival, it's their very success which is now their Achilles' heel. One hundred plus ships costing eye watering sums money to mothball, the very structure of their business and the problematic return of their base load repeat customers (like me and my wife) makes this a very serious situation indeed. Much worse than, say, the big airlines.
I have been on a number of cruises - 95% with Princess as we are now locked in with the onboard perks for repeat cruisers - and every single time we have ended up with either my wife or myself contracting an infection, sometimes quite severe infections. Notwithstanding the fact that we like taking cruises on Princess, I would not dream of taking a cruise in the next twelve months. This actually is not a criticism of Princess which has always maintained high standards of hygiene and cleanliness, more an indictment of quite a few passengers who have no compunction about coughing and spluttering in enclosed crowded spaces and who never use the hand sanitisers before polluting the food outlets. I think you will find that quite a few of the experienced cruising community feel the same way and would not risk contamination, not from the ship or the crew but some completely inconsiderate fellow passengers. It only takes one to cause a major problem.
Carnival has over a hundred ships in its fleet, with quite a few on order. Most, if not all, are going to be major liabilities and cash burners over the next few months. Major cash burners. What do they do with the crews, for example, on these ships, most of whom are third country nationals? Leave them onboard or ship them home? In the former case, money down the plug hole. In the latter, huge repatration costs and then how do you get them back en masse when the ships are ready to sail again?
This is an existential crisis for Carnival. End 2019, they had about $500million in cash. That will disappear like a lemon ice lolly under a Saharan sun. It would be a pretty foolhardy banker that would be prepared to offer liquidity to finance a fleet of ships burning cash, let alone paying for the new ones coming along at a hefty price. In addition, Carnival at the end of 2019 saw the majority of its stockholders being large institutions. Those institutions, at least one of which must have lost hundreds of millions unless they managed to unload their holdings in an exceptionally clever manner, can do the math.