Member Info for londoner7

ps I didn't catch the bottom but I caught 477 and got out at 508. Cheers, Londoner7

I'd guess the concern is whether the tax payer subsidy to the house builders will continue. If it doesn't then valuations would collapse. But that wouldn't be good for the general economy so have no fear, the chancellor will find something to keep this nonsense going. Londoner7

�Historically, Dignity has prioritised price over volume to drive strong margin expansion,� said Berenberg. �However, increasing competition means that the company�s ability to continue raising prices at 5-6 per cent per annum looks uncertain. With management now examining various new pricing and service options, we see a risk that it is forced to moderate its pricing to chase lower-margin business.� Consensus expectations for this year and next look safe but, with upgrades increasingly unlikely, a valuation of �23.50 or 18 times 2018 earnings looks fair, said Berenberg. In response, Dignity slumped 9.2 per cent to �19.65.

An interesting article. I didn't understand the logic that this equates to firmer prices. The comments suggest I wasn't alone, but a response from the author adds clarity - worth a read. Shame he didn't include the follow up comment in the original article. Londoner7

I was in an M&B bar a few weeks ago. They had 3 real ale pumps, one with GNK IPA, one with Doom Bar and one empty. I told the landlord that I had enjoyed his guest beers on previous visits but I wasn't a fan of either beer on offer. I had a Stella instead. He told me that M&B required him to shift a certain amount of the two established beers before he could stock a guest beer, but he was somewhat peeved because he had been making his targets for several weeks but M&B still refused him a guest beer. As I recall GNK IPA and Doom Bar are the best selling real ales in the country. Based on my experience perhaps it doesn't translate that they are the most popular. Londoner7

Conkersdeep, you misunderstood my opening remark. The FT agrees with you. Not sure about your 2nd point. I'd have thought that the GKN CFO (and team) would examine all sets of accounts for consistancy of accounting. But I'll be delighted in the issues in the US aerospace accounts do not translate to the rest of the group - whatever the reason. Best, Londoner7

Good post from Huwie on the GNK board drawing attention to Young's results and commentary out this morning. The commentary is more confident than we've had from the sector lately. Before investing in Marston's I looked at Young's but decided the PE multiple was too high. But maybe Young's better balance sheet warrants the rating. If consumer sentiment picks up over the next next six months (the jury is still out) and, as a result, the market is more relaxed about the balance sheet then Marston's could be inline for a decent rerating - a PE in the low teens would be a nice result. Londoner7

Conkersdeep, you might be right - that is how it's reported in FT. But up until about 5 minutes ago, when the page was taken down, KC'c bio listed him as CEO of US aerospace. Hans Butheker was listed as CEO of GKN Focker. He has now been promoted to CEO of GKN aerospace. I don't mean to be petty, but their relative sphere of responsibilty may be an important factor if KC's removal is linked to a failure in US aerospace's accounting. Pure speculation on my part, but perhaps the issues in the working capital accounting in the US accounts were revealed in a comparison with Focker accounts. If there is a 3rd shoe to drop I guess it will come with the finals, although GKN have been quick to report on their findings. To another posters point, I'm more relaxed about the possibility of any upheaval while the leadership role is resolved. In the short to medium term I believe the day to day business of industrial production will contine unabated. But of course the stock market may see it differently. Londoner7

Foxykiwi, Regrets - I've had a few! Berenberg has been a supporter of Dignity for many years, I've been looking out for an update from them following Monday's results and thought they has passed on this occasion, but this morning they came out with a downgrade from buy to hold citing increased competition. Nothing new in the update but enough to give the share price another kicking. Every share has it's price. I still see Dignity as a stock growing its earnings and throwing off lots of cash. I added another parcel of shares below 2000p (never thought I'd ever say that) to bring my average down to 2080p. I'm happy with that. There are many riskier places to be invested. Londoner7

Pearls, I agree these issues can take time to come out. I took a modest profit on my opening stake. Looking at this morning's update I agree with gurney on the board shakeup. The CEO designate was in charge of US aerospace so is taking the can for the latest accounting issues that were uncovered. Seems a sensible move. I would like to think that all parts of the business has now undergone a similar review - I repeat, I'd like to think so! I also find it encouraging that they haven't amended their trading guidance one month on from the last update. So based on that I've decided to reinvest my returns for a 2nd leg. Can I be fortunate again? I hope so because another trade of mine isn't doing so well. Londoner7

In my last post I said, "I'll manage my holding against market sentiment." Well it's fair to say that the market did not take kindly to Monday's Q3 update. As has been the pattern over the last few quarters results came in slightly below my estimates - they are still running (buying funeral homes) to stand still. �28m spent year to date. But that said, with market sentiment pulling the shares to a 2.5 year low I upped my holding at the close. Londoner7

moves closer has management given any guidance on impact? While I can see the trading opportunities why would anybody hold this share long term? The industry is ripe for disruption. Londoner7

Continued Recently Dignity has reweighted towards crematorium. I like this as the barriers to entry are higher than for funeral homes. I also like the move to low cost, no service, crematorium services. This has rightly been flagged as possibly the thin end of the wedge to lower overall revenues. However, I view this as a very different market to Dignity's normal offering. If the existing offering can be maintained then with essentially fixed costs additional low cost offering should help overall margins. But to your main point, what's the point of owning a share in this company? I like the risk reward ratio. I believe earnings will continue to grow and I'll manage my holding against market sentiment. Near term I see two possible favourable catalysts � the biennial long term mortality projection from the ONS, and another round of capital refinancing. Londoner7

Manofleisure, you raise very good questions. Ones I ask myself from time to time. Until a year ago Dignity was a very good investment, but there's no doubt it has gone into reverse lately. I've posted my views here for the last couple of years. My predictions on the market have been considerably more accurate than Dignity's management, no doubt driven by ONS predictions, which I've considered overly pessimistic. It isn't that I have any special insight. I use the same ONS data and while I have expertise in processing statistical data I would not claim anything above that available to the ONS. However, I believe the ONS has been very conservative in identifying a reversal of the trend in declining mortality. I believed this reversal was evident in 2014 but disguised by mild weather and I anticipated a rebound in 2015 � my investment profited accordingly. But that's history. Where are we today? Outlook commentary from Dignity�s August interims The Group continues to expect the number of deaths in 2017 to be slightly lower than in 2016. Our financial expectations for the full year remain positive and unchanged. �Long term expectations are for the number of deaths to reach 700,000 by 2040 �It is too early to conclude if the last two years marks the start of that trend Latest update - ONS data, year to date (mid Oct) 2017 mortality is 1.8% above 2016. I think Dignity has struggled in two areas: market share and central overheads. Take market share over the first half. Inspite of a 3.2% increase in funeral locations and flat mortality rates (-0.2%), the number of funerals performed was flat. In my book that represents a 3% loss in market share. After a similar loss in market share in 2016 that was my red flag to significantly reduce my holding on the results 2nd Aug. The growth in capital costs is due to the very generous long term bonus management has paid itself over recent years. While performance in previous years should be rewarded it appears to me that bonus targets for the coming years have been nicely timed in the managements favour to the detriment of shareholders. I don�t like the over generous bonus arrangements or the fruitless attempt to buy market share with free cash flows I rather than paid out as dividends. So why am I still in the share, albeit with a reduced holding? The recent reduction in the share price reflects the reduction projected by management of 8% growth against a previous 10%. The reduction in the share price by the market seems fair. The question now is will there be a further reduction in growth rates? Continued

There has been talk of a split for years usually fuelled by investment bankers looking for a cut. I don't think the recent trading update is a game changer so I�m not invested on that basis. Is supplying parts to the likes of Airbus or Volkswagen really so different? Londoner7

I believe the aerospace supply chain is coming through an unusual transition period with significant upgrades to the workhorses of the sky supplied by Boeing and Airbus. The aerospace market generally has a level of growth going out more years than almost any market I can think of with few disruptors on the horizon. Perhaps hyperIoop and spacecraft will impact in decades to come but not in my investment time horizon. I returned to this market earlier in the year with an investment in Senior, because I know it well from the previous cycle, but I�ve also followed GKN over many years for additional insight into the market. The recent trading update from GKN prompted me to consider an investment in GKN. Listening to the Q&A audio call it seems to me that the nature of the claims is not unusual for the industry, but the scale clearly warranted an RNS. While management assured the claims are not systemic of a wider problem it must be a worry that two similar scale claims arise at the same time. As an investor in Senior I was pleased to hear that the claims and Q3 margin pressures are company specific. However, it seems to me that these pressures only represent a delay in achieving margin targets. The affirmation that profits will still be ahead of last year indicate a current and prospective PE below 10. Alongside a dividend yield of 3% this looks like a tempting entry point. While I don�t expect 300p to be a floor at the current time I�ve decided it�s a suitable level to open a stake, while building my knowledge of the company. Unless the latest reported problems are systemic I expect to be adding to my stake on further updates. I think this talk of insurance is overblown. We have a �40m claim on a �5.2B company. Many facets of the business require insurance, but I�d hate to think that any significant management time is taken weighing the merits of insurance on the minutiae of the business. Modern business already supports too many parasites - no doubt a factor in the lack of productivity growth we hear so much about. Londoner7

Following the trading update broker forecasts for EPS are now around 17.26p, up from 16.5p, for a 17% gain on last year. Londoner7

I guess that should read 30% attributed to cash. Cairn's share in Kraken should be considered a producing asset, as will Catcher later this year. SNE first oil expected 2021-23 - industry jargon for 2025 ... maybe! Londoner7

In throwing together some numbers in a recent post I mixed some half year data with full year data and used an OP number rather than the EBITDA, and OP rather than operating cash flow. For completeness here is the corrected data based on 2015/16 full year numbers for MARS: Interest / operating cash flow = 39% Enterprise value / EBITDA (excl property) = (675+1029)/213= 8 Net debt / EBITDA = 1029/213= 4.8 PE 7.6, Dividend Yield 6.8%. With the 2016/17 numbers due in November net debt may inch up but I'm expected each of these ratios to improve. However, any improvement in PE will be a close call due to the placing to acquire Charles Wells Brewing. Londoner7

Andyagogo, discussion and comment is good. Thanks for your view point. �When I first mentioned cutting 2018/19 CAPEX many disagreed.� I don�t recall any such disagreement. Perhaps it was before my time � I�ve only been following MARS the last few months. JDW is a good comparison � a well run company and has been the better investment. But, which is the better investment today? Here are some financials: Interest v operating profit, JDW 22%, MARS 46% Enterprise value/EBITDA, JDW (1316+696)/131=15.3, MARS (675+1061)/164=10.6 (excl property) Net debt: EBITDA, JDW 3.4, MARS 5.0 Latest PE and dividend yield, JDW PE 17.6 DY 0.96%, MARS PE 7.6%, DY 6.8%. JDW is clearly the more conservatively run business, but its stock is priced accordingly. I�ve said before that if the current blip in UK consumer confidence is ongoing then MARS it not a place to be, (then neither would JDW), but if world growth continues then I believe this will keep the UK economy out of the weeds and MARS could prosper � I�m holding back from a full stake in MARS until I see evidence of this outcome. I like the big dividend but like you not happy with the negative free cash flow, but believe this will turn two years out. If so a dividend growing at 4% pa would support a substantially higher share price. �The market is focussed on free cash flow/debt as we are likely late in the cycle.� The view that we are late in the cycle is reasonable. The question is are we months from a turn or still years away. Typically, recessions are triggered by a tightening in credit and based on past credit cycle durations we are well into this one. First let me make it clear that I don�t believe in an end to boom and bust. Easy credit will reverse either due to tightening or a policy error. The FED is tightening in terms of raising interest rates and running off QE but the view expressed on CNBC this morning is that after 3 increases in rates this year credit is still easier that it was at the start of the year. At home I�m of the view that the BOE will be VERY slow to raise interest rates because of the high level of household debt and will continue to �look through� currency driven inflation. Brexit is an unknown but past evidence suggests that consumer sentiment recovers from the occasional political fright. Of course, if another UK election was in prospect then all bets are off. Just seen the IC update posted earlier. It seems to support my view that an investment in MARS is about valuation and current consumer sentiment. All the best, Londoner7