Member Info for steph

head above the parapet time:

I really think this Brexit turmoil is temporary. We are not going to exit on March 29th 2019 without some orderly process to follow -although it is in the interests of a number of players to pretend we might. Thus markets in the short run will be lower and more volatile than need be due to the doom and gloom headlines being generated. Whether TEF dips a bit from here on volatility is impossible to say. This might well be bottom. What is knowable is that TEF is likely to rise significantly when political conditions are more stable. So if yo have faith in our Parleamtary system to find a way forward -buy.

By end of 2019 whatever is gone to happen will be much clearer. It might be a relatively hard brexit or no brexit at all. Clarity will help the SP considerably. Probably more important to have clarity and predictability than what type of Brexit between hard and soft. Hard Brexit already priced in.

SO I predict 4.50 by end of 2019. Not my 5 quid which requires a resolution so I am still expecting negotiations are ongoing but around a more stable framework agreement that can pass parliament and the EU.

https://www.thetimes.co.uk/spon/big-money-debate-stock-market-uncertainty/?mvt=i&mvn=963b0cc3f91e48f0bc3b9d97aa5f6227&mvp=NA-TIME-11236249&mvl=Homepage+-+Sponsored+rail

Whatever our personal views are on the merits of Brexit it is a material fact that the markets don't seem to like Brexit and the harder the Brexit the more the market don't like it. My posts identified this link before the referendum and sadly for our SP and my net worth they have come to pass.

A soft Brexit, or no Brexit, will, therefore, lead to a TEF SP major correction upwards. Markets can be wrong (non predicted that printing money in 2008-9 would not lead to inflation) and in the long term Brexit might work out from an economic point of view swimmingly. However in the here and now there is an undeniably large mathematical relationship between the degree of Brexit expected and our SP.

I think without Brexit we would be at or above my 5 quid right now with London HP inflation running at 3 or 4% pa. Enough to flatter TEF profits but not fast enough to be unsustainable.

yes TEF must be a tempting target for a full or partial take over by a fund knowledgeable of t the sector. We once had a rumour of a staff buy out but never a fund. Don't no why.

Brexit mess our government is in is at least helping hold the EU together. Apparently opinion polls in all EU nations have swung decisively in favour of remain over the last 2 years. If semi detached Britain can't make a sensible go of Exit what chance Belgium? So we have taken one for the team. Doubt if we will get thanked for that.

Greeve amendment and ECJ ruling quite significant. May's best chance of getting her deal through parliament depended on the line "it's my Brexit or crash out" . Now other Brexits and no Brexit at all are possible so seems impossible for her to get the votes now. Was always a stupid strategy to blackmail us with the prospect of flights being grounded and medicine not delivered into voting for her version of Brexit. Dreadful politician. She should have stayed in her Dad's parish running the local parish council. Massively over promoted.

End game not clear. Alongside the parliamentary majority against May's Brexit the ability of the UK to unilaterally cancel article 50 before march 31 is a game changer. Not that it will be used. There will be no need. EU nations will vote to extend article 50 if requested to do so by UK government as Uk can force the extension by simply cancelling the current article 50 and unilaterally starting all over again with anouther article 50 notice in a few months time.

Pound (indicator of Brexit impact) was up on the ECJ ruling and down on the 3 defeats yesterday. Markets don't know what this all means. Uncharted territory.

My prediction is this all means we will more likely than not end up with a softer brexit or no Brexit at all. But a lot of uncertainty before this becomes clear. It is a sign of extraordinary weakness of the central argument for Brexit that some well known Brexiteers are seriously looking at Norway plus. I thought the softest Bexit possible was Norway neutral (no customs union just single market thus allowing independent free trade deals). But Norway neutral does not solve the Irish border problem. Only Norway plus and remain do. IN substance Norway plus and remain are nearly identical except for the long term ability of Norway plus to become Norway neutral once new technology allow UK to come out of customs union without creating a hard Irish border

https://www.mirror.co.uk/news/politics/breaking-britain-can-end-brexit-13683861

that will put significant pressure on Parliament to make up their minds by March 31.

a unilateral stop followed by a referendum is now a viable option. It needs a minister to propose it and that gets complicated if May is opposed.

people are a strange lot we are perfectly capable of saying we want x and then blaming whoever gave that to us when it does not work out. At the family level it pays out with my 9 year old blaming me for not stopping him (after many tears shed) to spend all his allowance on a toy helicopter that lasted only 24 hours before it broke.

Immigration was a number 1 concern at the time of the referendum but has dropped dramatically in the rankings as EU immigration has naturally tapered off and the problems of labour shortages (particularly but not exclusively the NHS) have become apparent.

The astute politician anticipates shifts in public opinion that will in time result from shifts in material circumstances. The stupid politician tries desperately to solve yesterday's headline. Chasing their own tail until they collapse. That is May.

A second referendum to determine which Brexit (without remain on the ballot) after a white paper and a national debate would have made a lot of sense and had wide public support had that been put forward instead of the insulting black box "Brexit means Brexit" we were given. It would have given us a proper process to make difficult national decisions with losses as well as gains.
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Too late now and any referendum will need to have remain on the ballot. If our politicians are clever they will put all the credible leave options on the ballot as well and then let the people decide. That will give us some closure no matter what the vote is.

May's deal leaves almost everyone dissatisfied that their voice has been heard. She is spectacularly stubborn (not in a good way) and incapable of seeing just 2 moves ahead. A good employee perhaps (assuming the task is very clear) but not a leader for times of change and boy oh boy do we need a good leader right now.

Can't give a parable. although there must be one in this political mess.

IN what is about to be a fast moving situation I am getting a bit more optimistic of a market friendly outcome. I might even add a bit on my spread -which is optimism indeed.

My odds are now:

1) chance of a plan b Norway plus option (see Nick Boles) -rising and now maybe 25%, very good for market maybe the strongest short term boost as can deliver immediate certainty.
2) chance of Mays dogs dinner plan being implemented -falling and less than 5%
3) referendum followed by cancelling Brexit 35% -best in the long run for markets but turbulence before referendum and not a
4) no deal crashing out =5%
5) some other hard to predict option or sub option emerging including a referendum confirming a brexit option such as Mays' -30%

In other words a lot of uncertainty but the odds of an outcome really damaging to the market TEF operates in is receding. Hard Brexiteers such as Gove willing to look at the mildest of brexits such as Norway plus is quite telling. There would be a Parliamentary majority for that -unless Labour is really stubborn and whips against.

Was always my expectation Norway was the end destination of Brexit but May's red lines on immigration prevented consideration of it without any real debate in Parliament or the nation.

As immigration we can't control (EU) has been falling and immigration that we can control has been rising she has painted a very costly red line for no net gain. If immigration was so bad for us why have the Tories after 7 years in power been letting non-EU immigration rise? They are either incompetent or immigration is actually not the central problem.

Britons will lose their front place in the queue for travel, work and retirement in Europe for no benefit whatsoever. I suspect this is why the immigration white paper is being delayed as it will show we will "voluntarily" accept about the same EU immigration as we are currently "obliged" to do. Gove seems to understand this and thus is more open to Norway than May -who has a narrow and damaging home office mentality.

https://www.telegraph.co.uk/business/2018/12/02/bank-crisis-italy-may-spark-doom-loop-uk-warns-bank-england/

With Trump backing away from a trade war with China Italy is the black swan (outside of Brexit) that could have the most impact on our tiny TEF share.

My indicator of Euro risk is 10 year bond yields. 3.15 is not too bad on the 10 year bond Italian debt yield. It is down from 3.5 just 2 weeks ago. If it ever hits 7 panic.

Spanish yields are 1.49 which is great and well down from 5 years ago when it was above Italy's now. Throwing separatists in jail seems to be good for economic stability.

Yes whatever the volatility we have to deal with it is not the same as bitcoin. Personally I think bitcoin can go to zero if regulators kill it off and they can and might. Being the favorite currency of the black market is hardly a good place to be.

We will have volatility over the next 2 weeks but I hope/expect that we have a bit more bad news baked into the SP than will be the outcome. Anything can now happen with Brexit.

Incredible mismanagement by May insulting us all for so long with the vacuous "Brexit means Brexit" that all possible Brexits and no Brexit at all is still possible at this late date. She tried to "own" her Brexit treating this large shift in national policy as some secretive business negotiation. That was a stupid thing to do. It's politics in the end and required a political process.

Should have been a white paper on which Brexit and a parliamentary majority behind a single option before triggering article 50. No majority on which Brexit, no Article 50. Labour was culpable on that as well but they are only the opposition so less culpable.

What a mess we are in. I've battened down the hatches. I have a large position in TEF but it is 100% fully paid for. Not a time for a leveraged position in spite of a very tempting buy in point. I'll probably kick myself in a few months for not being more aggressive at around 3.00 but I don't have the extra cash to lose.

Terr I don't think it will be as bad as flat earnings for 3 to 4 years.

This Brexit nonsense is a downer and it is easy to feel that the low level of confidence will last for 3 or 4 years but the economy is not that bad and the job losses are not catastrophic. Any Brexit stability will see a bounce and some repressed demand will kick in.

We will have some scary no deal planning headlines until Dec 10th as May tries to scare MP's into voting for her deal. It will be a daily drip drip of catastrophe. But after that something will happen short of no deal and stability and confidence will return.

https://www.theguardian.com/uk-news/2018/nov/29/eu-net-migration-uk-falls-lowest-level-almost-six-years

Well we seem to be losing our accession EU 8 country accession low paid workers but still adding skilled EU and non EU workers which is good for TEF market. Surprised skilled immigration holding up as much as it is. I suppose our unemployment rate is still very low and we are still adding jobs.

If we can achieve this with all this bad news in the papers every day imagine what we could be doing with political stability.

As Teibout said in 1954 "people vote with their feet".

Below the headline look scary but it only takes 3 staff to manage 800bn these days. The job losses mentioned don't look too bad and may well be backfilled in London. The inefficiency of equivalence over passporting actually creates some London jobs in the short run and a few in the long run as well.

Go round any city office and ask how many want to move themselves and families to Frankfurt or Brussels. Easer and cheaper for firms to book work in Frankfurt but to keep the main staff working on it in London.

https://www.theguardian.com/politics/2018/nov/29/london-to-lose-800bn-to-frankfurt-as-banks-prepare-for-brexit

Would TEF not be a bit better than that?

TEF can make money with no HP inflation. It's calculations are not HPI dependent. HPI is treated as windfall.

retention of 2/3rds of healthy profits should in theory mean at least slow growth within the existing buy land, build flats and sell flats model. Capital retention means some more land can be bought each year over what is used so long as there is not land price inflation. Capital retention can be leveraged by low interest loans so in a zero HPI environment meaning the land bank available each year should be growing by 10% or more. Not spectacular growth but steady enough.

shift to institutional rental partners means growth in volume in a flat market as not capital constrained. This can be growth as fast as 25% per year (the speed limit of increasing skilled workforce). TEF will make strategic decision based on the deals offered on whether to push the speed limit or not but the option to do so open to it.

Even if institutional rental partners have tighter margins the volume increase within a couple of years can more than make up for that.

" Mr Di-Stefano said: “I can understand why people don’t want to buy big assets right now – why would you? You’re being told anything can happen in the next few months.”

While some businesses might be tempted to oppose Theresa May’s draft Brexit deal in the hope of better terms or avoiding Brexit altogether, its failure could alternatively lead to a no-deal scenario, he warned.

The deal would “create the certainty that we need,” Mr Di-Stefano said."

Funny world where the CEO of a midsized UK only builder feels a need to pontificate (as we do on this blog al the time) about our basic international institutional constitutional arrangements. It just right now it has so much impact on consumer confidence.

My odds of different outcomes has changed.

1) mays deal passes parliament with no major amendments and is thus pre approved by EU and is implemented starting March 31. 5%
2) no deal crash out of EU March 31, 2019 10%
3) some messy alternative Brexit (close to Norway) a successful request for more article 50 or transition time to negotiate it. 20%
4) some messy alternative Brexit (close to Canada) and a successful request for more article 50 or transition time to negotiate it. 15%
5) a new referendum with Mays brexit and remain on the ballot and perhaps one or tow other leave options. 50%

As an investor I just want stability as quickly as possible. While approving mays deal gives us some short term stability and freedom from a crash out scenario it does mean years of agro as we negotiate our new trading relationships so will act as a drag on our SP for years. Only a referendum and a vote for remain gives us a quick route to political stability and even that takes 6 months.

Personally I think crash out and Canada should be on the ballot and the public trusted to consider them. Risky but if as McDonald says "too risky" that will be seen as not trusting the man in the street to decide (after they were asked to decide in 2016 when it was a cynical party political way of neutering surging UKIP) We have through a referendum gotten ourselves into this cul de sac and only a referendum with all the options on the ballot can get us out.

Yes as a nation we might vote to drive off a cliff but as a nation we have a right to do so and it is not really such a big cliff. A 8% GDP drop is not catastrophic. TEF would survive and would likely trade profitably throughout. GDP dropped 50% in the war.

If as a nation we voted for that there would be all sorts of mitigation anyway. Planes would fly and medicines would be delivered. We are chugging remarkably quickly through the process of getting the independent WTO schedules needed. Even if we crash out ahead of WTO being ready (likely) nations can freely decide to shadow the draft schedules with us. Will likely mean some confusion at the borders of our main trading partners (what tariff to charge, health an safety , etc) but not insurmountable.

called TEF and got the definitive answer from John of accounts.

The costs of land and construction are held in the accounts "as work in progress" and not costs as I imagined. On legal completion the gross profit is booked.

Thus yes they do need to sell 60 units by March 31 to book 10m additional profit to the 40m already secured.

However there may be some already in the process of legal completion just as there will be some where a sale is agreed in Feb and March but can never compete in time to book by March 31). Anyway 4 months left to sell (or complete) 60. Also 60 is not all they are selling at the moment. The number being marketed is significantly higher so many can remain unsold. They just need to sell 60 across all sites. Hard to know how many being marketed at the moment as it is lumpy by release.

My impression is it is very much a doable task and they will hit target.

in an area I am ignorant but does that 2008 quote not say that profits can neither be deferred nor booked in advance of the tax year of actually occurring for tax purposes. No smoothing between years allowed to reduce tax.

What I don't know is when costs are booked in accounting land. I assume that in the year end accounts TEF has no profit units for tax purposes linked to individual developments. Thus for annual accounts purposes there is no profit margin at a development level -useful as this may be. All developments are in the accounting mix whether early days and incurring large land costs or final days with final sales coming in with few costs.

Thus only 20 sales needed to hit and exceed 2018/2019 targets so long as the money comes in by March 31.

I am clearly pathetically ignorant on company accounts but I thought in the production of company accounts that costs were booked in the year they occurred and revenue by year achieved -which is normally different. Sales will still help the year end accounts reach profit forecasts independent of the profit margin -or lack of.

So a new company with all costs and no sales will in its year end accounts look like it is losing money for a few years. A rapidly expanding company will have buried deferred profits as land bank and early constriction costs will be larger than the flow of current year sales. A builder growing by 20% volume per year will have

So the now historic land and construction costs of the 60 homes yet to sell are behind us in different years and the full selling price (net of ongoing selling expenses) will fall in H2 of 2018/2019.

Thus only 20 homes to sell to hit 50m profit for 2018/2019. I note terr's point that it is legal completion not in principal exchange so the sales have to be wrapped up by end of feb to fall in 2018/2019 accounts. I imagine due diligence on a new flat is quick. Some sales might be cash and fast. Some that involve a mortgage or chain might take longer to complete. Just don't know.

Please correct me if I have it wrong.

I did not read that as 60 needed to sell by March 31 to achieve 10 m unsecured profit. If selling price is booked as H2 profit that would imply an absurdly low average selling price of under 200k. Average is around 500k.

I don't know how or when profit booked when an open market sale is completed. Is it legal completion or when the money is deposited.

NO doubt if I am right this will get clarified later in the day through pod cast and briefings.

I did not read that as a profit warning at all. Just being transparent on what they need to do to meet and exceed target.

30 sales over the next 4 months when they have sold 30 in the last 7 weeks is not difficult in spite of the December slow down. I'd expect by year end a 10% exceedance of target likely. This will likely come out in the web casts later today.

They only need to sell 30 of the 60 remaining open market units by March 31 to significantly exceed target. They have sold 30 since the Oct 10th update. Very doable and I'd guess probable.

So with 6 minutes to go until open I will hold my breath.

https://www.telfordhomes-ir.london/media/1819/telford-homes-interim-results-nov-2018-rns-final.pdf

I hope this puts to bed some of the doom and gloom that greeted our update and we get a modest but significant SP correction upwards.

from an investor's point of view stability, predictability and certainty is golden even if not what we prefer with regards to eh UK's relationship with the EU.

We have the worst of all worlds right now. Lots of uncertainly for years ahead.

As an investor I'd be happy with Canada plus if it had been negotiated and could be transitioned to in an orderly way. As a citizen I don't like Canada plus even if orderly. May is not giving us a clear roadmap for our future. The 2 year negotiating period given after triggering article 50 has been wasted with her negotiating with her own party not with the EU.

Labour is very tribal and will, except for only a handful of rebels, vote against the government. SO DUP plus only few Tory rebels dooms the deal May has negotiated (or anything similar to it). Too late for may to pivot to a much softer Brexit that might pass the commons She has staked all on this dogs dinner and will die as a politician on it.

I think May is too narrow and rigid to go for a government of national unity and Corbyn just not interested to prop her up even for a taste of ministerial posts. Look what happed to the Lib dems. The deal she would need to offer Corbyn would need to be so attractive it would not pass her own party.

Labour front bench are a hair shirt lot quite happy without the trappings of power and unlikely to be easily seduced by the ministerial car. They want real power as they have real agendas they want to implement -like those agendas or loath them they are intrinsic to understanding Corbyn and McDonald. COrbyn/McDonald want power and Brexit chaos it is the means of getting to power. So keep strapped up for a few more weeks.

I suspect even Corbyn has been convinced by many of his fellow travelers that his old Eurosceptic stance is well out of date. That said the official UK communist parties are Eurosceptic still so his old views have a small following. However, the daily parade of far right supporters and dearth of any modern prominent more intellectual hard left supporters (no Tony Benn or Eric Hobsbawm) must make even Corbyn think twice. He is not himself a big thinker but is loyal to the hard left. He will be led rather than a leader on this and Momentum is his power base and Momentum is in favour of remain and a peoples vote. End of. It is just a matter of timing.

Kind of leaves going back to the people to break the parliamentary log jam. Labour is just biding their time to make sure the Tories own the mess and tear each other apart for a few more weeks before they make a move. May could if she is nimble endorse the referendum idea but she might go down fighting for her Brexit san endorsement by the people.

Personally I prefer no deal on the ballot alongside May's deal and remain with a transferable vote. Risky but in the end better for the nation to test the willingness of the public to contemplate that. I think it would struggle to break 30% first preferences but you never know. Once you open up the Pandora's box of referendums you need to use the same instrument to shut down the debate it is causing. Only way to get closure is to ask the people to arbitrate over the Parliamentary factions.