Member Info for Velo

Thanks Scooter - Only time to say I'm guided to follow the first para of my summary post as been travelling all day to day (m/way). Will get back to you tomorrow evening, hopefully.

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" Does anyone understand the last 3 rns statements ref Pentland sales? 57 to 51 , then 55 to 51 and 55 to 51 restated? "

- That's what I've been looking at tonight but perhaps more time tomorrow night. Initially the Pentland sale reduced their holding from 57% down to 55%. Today's update appears to suggest a further reduction down to 51%. Confusing as pretty sure I saw only 51% as a core holding back in November. Limited time tonight so will look further tomorrow. Did spot a great increase by Vanguard - one of the world's best US funds - where they appear to have approx doubled their stake (back in August I think). But only 1%.odd by them. Will bring that one back up tomorrow.

Will try to find more time tomorrow evening, but off the top of my head looking like Pentland on 51% holding in JD.

Interestingly 78% of JD's shares are held by institutions so it's true - there isn't a great deal of free floating shares available. Always drives the SP higher on good news when shares are tightly held and hard to come by.

Summary:

I have some concerns before investing this time where I had none in the past. So have decided to delay until the trading update is released approx somewhere about the 11th to 17th of January 2020, just a few weeks away - and before the full results are published in April, as I want to hear more on that net profit.

The utterly humongous Net Debt ( an historic first for JD ) is now on the books in this current trading year, but not any (or little) of F/Line's sales and profit (as far as I can see) to counter balance it.

So need more clarification on that matter straight from the horses mouth in January, before a final decision.

I've been looking casually at reinvesting in JD as it served me well back in the day. Not up to date with all previous RNS releases etc., but I instantly lit up when the Finish Line acquisition was mentioned below, as recall idly reading about that in passing. It could be that instead of a first by JD in net profit being down on last year - as it's a pure fact for H1 - that sales and profit from Finish Line might show up some contribution in H2. (I'm hoping that's all it is).

And that's it - I'm done posting :)
Have a merry Christmas and a happy new year, one and all.

- And I didn't even mentioned the 'B' word :)

And to round off, I did say I'd highlight what I was seeing as positive balance sheet metrics in JD.

First thing is, despite the v recent retrace in the SP due to the Pentland share disposal, the PE ratio never lost its premium rating that the market awards JD.
It has steadfastly remained well above the industry median which for specialist retail is quite low these days - at a forward P/E 11.9 thus showing confidence in JD the company, by the wider market.

As said, the Industry median is a lowly fwd P/E11.9 but as of tonight the P/E ratio for JD. stands at a fwd P/E of 20.2 That's approaching near double the value by comparison to the median in JD's industry!

A premium rating; the market's seal of approval!

Revenue continues as it has done for years to increases y-o-y at an astonishing rate (see previous posts below).
As has the Net Profit, but I have an issue for this year's alone (which I'll expand on in the summary).

The forward EPS growth (Earnings Per Share) stands at a fwd 12.1% which once again beats the industry median that stands at a lesser 4.03% growth.

ROE (Return On Capital) is an excellent 12.1% compared to the Industry median of only 6.36%

ROE (Return On Equity) -"- ditto, but even more so, at a magnificent 26.9% return whilst the Industry median can only muster 5.51%

Operating Margin you might think unimpressive at 7.03% but once again it leaves all in its industry in its wake who can only produce a median of 2.11%

There are several other metrics for measuring JD. but unfortunately they're not JD's strong suit, so not part of this post (Price To Book Value and Price to tangibles & more such as FCFlow etc., etc.,)

JD is 15%+ above its 200dayMA SP (moving average) and its 1 year relative strength is also excellent - so the SP has and still is, considered to be: 'motoring' despite recent zig-zagging.

Now on to a v short summary to finish off.

"Lots of rambling stats here!"

- Yes LOL! And hopefully an end to those - when I do a final post on the positive metrics within JD. and a closing summary. Then I'll be done :)

Mornin' TL. I'm expecting the most telling change to be in the rhetoric coming out of the EU buerocrats dismissive slings and arrows to influence a weak UK govt/hung parliament scenario. That card has gone and being pen-pushers the sometimes hysterical "special place in hell" diatribes will dissolve too. Pointless when faced with a united, strong UK govt from now on.

... A second People's Election? Put it back to the people .

Uma Chukka and Gina Miller already signed up. Wanna join?

PS.

Meant to add - All reports in the media refer to pre-tax profit being up on last year. The actual truth is NET PROFIT was DOWN on the corresponding period the previous year. Here's the figures:

6 months ending 4/8/18: .... 6 months 3/8/19

Revenue = £1845m ............ £2721m UP!

Gross Profit = £889.9m ...... £1275m UP!

Pre-tax profit = £121.9m ... £129.9m UP!
(This is all the media analysts are fond of reporting - the pre-tax profit as in, "Profit' is up"! But PI's should be more interested in the Net profit, so finally just look at this the bottom line for 1/2yr 2019 >

NET PROFIT = £97.8m ....... £94.1m X DOWN

And that's where the TTM method of calculation shows an unsatisfactory start to this current year, for the first time, Net Profit achieved is down on the corresponding 6 months compared to last year.

(And now I really am off for a cuppa to watch a little of the election results).

Erratum:

" . . . 'Quick Ratio' usually referred to as The Quick Ratio, . . "

Tsk. Doh! Should have been typed as -

" . . . 'Quick Ratio' usually referred to as The ACID TEST, . . . "

(Part 2 of 2) Concludes > > >

. . . Couldn't believe my eyes but instantly realised the cost of buying FootAsylum must be factored in.
In that case surely amortisation (not to mention depreciation etc.,) must be added to the Free Cash Flow metric and thus show a healthy position with all those years of surplus and no net debt? But it looked slightly disappointing at a ratio of 15.7 which is currently higher than its industry median of only 12.4 Not a major concern but it pushed me to look at gearing (leverage) where a shock awaited.

Gearing is currently at 184.3% (Anything over 100% leaves a company at the mercy of unplanned 'bumps in the road', so an undesireable position to be seeing).

So that pushed me on to look at liquidity.
There are 3 main metrics for liquidity that are most telling. Just having one looking acceptable may not be sufficient - the full 3 need to be singing the same song.

In JD's case 2 of them are v poor (the 'Current Ratio' and the 'Quick Ratio' usually referred to as The Quick Ratio, they both looked v unsatisfactory.

But the third, 'Interest Cover' was excellent and shows debt obligations can be met and paid with ease. Even so, I was expecting JD to get a minimum of 2 out of 3 singing from the same hymn sheet as added 'insurance' where liquidity is involved.

So my initial takeaway from this is, what price did JD pay for FootAsylum?
I thought they picked up that poorly performing company for peanuts? But from an always in surplus company, this year it becomes a company sporting a HUGE Net Debt for the first time ever in it's life since being floated.

Are these the things Pentland has become disturbed with, and decided to lighten its exposure somewhat? The high gearing, courtesy of the huge net debt have got me rattled a bit. But then again is JD moving centre stage to bigger things where maybe it needs to carry substantial debt if it's to attack international markets, yes/no?

Let's look at what metrics are shining brightly next and maybe a bit of perspective - in the next post (tomorrow; as it's gone past 1:00am now - so off to watch a bit of the election results).

(Part 1 of 2)
(It's late maybe should have left this until tomorrow?)

Trading Profit & Loss/Balance Sheet Fundamentals.

Not sure what I'm trying to highlight here. But some of the metrics I'm going to post I'm betting might surprise you. This is where I'm coming from, when I was in JD in these recent years - unbridled success and achievement. Just look at the record for Revenue achievement, nothing but consistent increase after increase:

REVENUE
y/e 2014: £1216m
- 2015: £1522m
- 2016: £1822m
- 2017: £2379m
- 2018: £3161m
- 2019: £4718m

Just a spotless record of y-o-y increase after increase. And for y/e 2020 analysts have pencilled in £5,925m. So what could go wrong? That's glorious. So, how about the NET Profit? The same story, look -

NET PROFIT
y/e 2014: £40.2m
- 2015: . £52.7m
- 2016: . £97.6m
- 2017: £178.9m
- 2018: £231.9m
- 2019: £261.8m

Good or what? The analysts even have net profit for y/e2020 showing as £317.9m

What's not to like?
- Only that using the TTM method of using the 12 month trailing figures based on the last set of interims to forward project the revenue and net profit for this current year, things look a little less exuberant. Could that be because as a retailer the bulk of it's revenue/profit come in the second half? Whatever, rather than showing anything near the analysts net profit of £317.9m the TTM method shows net profit could achieve in the vicinity of £258.1m which is marginally less than last year's £261.8m Net Profit. If so that would represent a poor historic first for JD.

Let's accept that retail is highly cyclical due to the Christmas and Jan sales effect, and the TTM calculation is too pessimistic, it started me looking more closely elsewhere. And straight away noticed a huge discrepancy for this year
- Net Debt.

Net debt has never existed in JD's history. In fact it's been one of continual surplus - not net debt. Just look at these surpluses (then look at the TTM calculation for this year)

NET DEBT
Surpluses
(No Net debt)
y/e 2014: -£40.2m . surplus
- 2015: . -£52.7m . "
- 2016: . -£97.6m . "
- 2017: . -£178.9m . "
- 2018: . -£231.9m . "
- 2019: . -£261.8m . "

See? All surpluses! Cash is forecast to be excellent too at circa £346.6m the second highest in the last 6 years. Great! But then I saw the figure for this year ending and instead of a couple of hundred million surplus it was showing for the first time ever - actual Net Debt! And not just a couple of hundred million but BILLIONS. I'm seeing a forecast of circa £2,119m Net Debt - it's first ever!
£2.1b in Net Debt! Forecast for this year ending.

Couldn't believe my eyes but instantly realised the cost of buying FootAsylum must be factored in. In that case surely amortisation (not to mention depreciation etc.,) must be added to the Free Cash Flow metric and thus show a healthy tax relief position with all those years of surplus and no net debt?

(Contiues >>>)

Concludes:

. . . With that in mind ( conspiracy theory time :) :) I've relooked at the fundamentals to see if there's anything that could have spooked Pentland besides the Monopolies Commission carry-on, and think I've found some undesirable traits that were not present last time I was in JD.
I'm prepared to stand accused of being too risk-averse and over-thinking issues but see what you make of my next post.

Hee! Talking of Footlocker the last sentence of the second para in the Berenberg "News" button above for today reads:

" With some investors fearing JD has run its course, a common pushback is that the company is 'another Foot Locker', which is a global sports-fashion peer that trades at a circa 65% discount to JD."

But adds - " However, Berenberg argued that the JD premium is justified. "

Hope I'm not going to be haunted by this Footlocker albatross :)

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Some fundamentals now. (In next post)
Last I was interested in JD, the fundamentals were beyond reproach - 100% Stellar! Can't say that as of looking at the fundamentals tonight. Will post the items that concern me; perhaps others might find I'm being too risk-averse, and overly critical in mentioning them. For balance will do a quick add-on post on the 'glowing' metrics I see that remain "stellar" within JD's accounts.

In trend364's link below, is a single sentence that chills me to the bone (on a personal level) due to the very same being said before being shafted on a stock in which I already had a 5 figure paper profit. The sentence by Pentland that personally chills me (you needn't be; it's a personal issue) is the charitable Mother Theresa bit, that they give as the reason for the sale of those shares. And it's this (capitals are mine):

" 'Today's share sale enables us . . . by realising a small portion of our shareholding in JD to fund future investment activity . . AS WELL AS INCREASING THE FREE FLOAT TO MEET THE INCREASING INTEREST EXPRESSED IN JD BY OTHER SHAREHOLDERS"

This year both the CEO and the chairman of a company I have holdings in, said the exact same charitable thing and each of them dumped 75% of their holdings at the same time, whilst telling shareholders it was out of the goodness of their hearts to increase the free float to help others buy the stock - just like Pentland give as an additional reason for selling. My concern is such that if Pentland are considering divulging themselves of further shares they're hardly likely to to be offerrd top dollar, would they? - Would be a bit like Gordon Brown did years ago, and announced to the markets - in advance - he was selling off the country's entire gold reserves. No guesses for what that did to the price he was offered for the gold.

In my case the SP went from £7 odd to £5 odd. Today it's back over £8, but still well short of the near £11 it was, as the market got wind of the sell-off before PI's.

1) Watch Pentland like a hawk from now on. Look out for things like "due to unforeseen circumstances we find ourselves having to sell a further one-off tranche of shares to meet our commitments" or some such. I think at this juncture it's an honest sale. But a second announcement after letting the SP rise for some months, and I'd start smelling a rat.

(Last para follows after this >>>)

I know. It's of little concern. Was going to post a correction but it had gone midnight so let the Footloose jibe stand next to it as didn't rate F/Asylum.
A company I worked for back in the day had a US parent division that bought Footlocker with grandiose plans to swamp the UK with its stores, hence the typo. :)

Will post some fundamental potential concerns later today if time.

"...This is still a very quiet share chat considering JD is a FT100 share..."

Gotmiester - That's always - ALWAYS, the sign of a good stock!

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I have history in this stock: briefly I was in this, back in 2016 or so @ £2.20's. Then a stock split occured (or before then, can't recall which) and whist I was paying it no attention as it was in one of my quieter ISA's it went and doubled in price before falling back to half that. I seethed in letting that gain escape me.

About a year later it doubled again!

Thanking my lucky stars I over reacted and sold the lot pronto at £4++ odd, locking in a double-bubble gain! Pleased with myself - prematurely as it turned out.
JD bought Footlocker/Footloose? and I thought that's it - it's bought a pile of ****; it'll be it's undoing - an aquisition too far.

But I began regretting not buying back in (it had already risen well past my double-bubble sell point before buying Footlocker) and have regretted selling ever since. So looking like potentially a re-entry point coming up :)
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" I'm guessing these shares will recover in the next couple of weeks "

That's the question isn't? If it's an "innocent" cash raising exercise; then yes. But do Pentland know something the market doesn't?

I'm measuring it thus: First off, it's a bad close tonight and on candlesticks alone it's forecasting potentially worse to come. So drew a Fibbonnaci retracement level from the last significant low of last December 2018 and there's plenty of retracement levels as lines of suport to cross before worrying.

First up is the 38.2% at a £1 below here in the 620's. Now if you're right then it should theoritically NOT fall below that level AT WORST. If it does there are other supports - but cross that bridge if it ever arrives.
For the moment I'm going with the innocent cash raising exercise and expect the retrace to peter out somewhere between here and a pound lower. If the market suspects there's more to this sale than a cash raising exercise then 620's could fall.

It's nowhere near being oversold yet. JD has history of always reponding magnificently when in oversold condition and in this paticular stock is ALWAYS a buying opportunity. So which comes first - an oversold, over reaction condition to the sale - or the first Fibbo retracement support level? We'll see.

Just need to keep ears to the ground to deduce if there's anything sinister behind Pentland's sale. Normally a drop like this occurs when dumping the sudden huge surplus stock on the market but I understand Pebntland had already found a buyer or buyers. So as long as the new buyers don't go for a quick buck, the SP should (as you offer Trend364) recover.

If on the other hand, the new buyers ofload at every opportunity into the rising SP, holders will know about it, and how, via a continuing retracing SP.

Balance sheet fundamentals looking a bit iffy in places, terrifically good in others.

Busy elsewhere next week+, so putting in a quick post whilst I'm able, on SP expectations for the start of next week.

- And that is IMO, bullish for another blue day up.

Pretty sure the price closed on Friday as a Bullish Engulfing candlestick, and if so, that usually bodes well - short term at least. All other signs et al, remain 100% bearish.

So it's not the heralding of anything more than perhaps another single day move to the upside. No bullish confirmation from anywhere; but candlesticks are the canary in the mine, the lead rider in the Charge of the Light Brigade, the footstep imprints on the moon. If it does close up on Monday, other indicators may start twitching their hibernatory whiskers in confirmatory support. Weak volume, so I'm out on a limb (although weak, accumulation is looking flirty-ish).

The 200 day average has slipped to 192's so a nudge easier to attempt regaining that now. Only one occasion (well two really, with mid Oct to early Nov just gone) in the last near 4 years onslaught, that the 200 day average has been bettered, when the SP temporarily rode above it - so need it reeled in whilst it's so close at hand, as there can be no meaningful progress whilst the SP remains below the 200 day average (As the past near-4 years testify).

So my longer expectation is for the SP to hop back on it, or just above it, at 192/193p just for starters. Do-able from Monday on (or Tuesday). However the appearance of a single, unconfirmed, bullish candlestick is unlikely to break 192 on Monday alone, but we'll see. If no progress by mid week, then a case of: as-you-were.

(Just imagine; riding into the 12th with the 200 day scalp firmly tucked under the saddle of the SP).
Would be like the SP having a loaded weapon, primed and ready, waiting for 'the off'.

It's most likely because of a BT contract "win" in Scotland. It flew across my phone this morning.

Something about the Scottish Govt has awarded Openreach a final LOT1 contract to deliver superfast broadband to every single premises in Scotland by the end of 2021.

"Only" worth £600m but BT (Openreach) was deemed the best bid, the best provider, and got the contract.

Ahh. . . see something saying:

"BT to scoop LOT1 of Scotland's R100 Superfast B/band roll out"
- So Google that sentence if interested.

PS.
".... That would bring a whole new raft of people to the story and you’d still get a 5% yield.’

Yeah, if you buy in brand new at this area's SP of 180p-odd, yes it would make sense.
Shame about the ultra loyal, ultra long term holders in BT as they're in £££'s above this lowly SP - they won't see anywhere near 5% yield, will they?

" So the proposal is to nationalise the parts of BT involved in BB, basically Openreach."

It's a lot more than just "basically Openreach".

They said they want:

1) Openreach
2) Enterprise
3) Consumer
4) and parts of BT Technology.

Openreach has circa 33,000 employees

The total number of empolyees in the above divisions is currently - well over 65,000 - up to 70,000 so 2/3rds of all the employees in BT go over to work for the govt under Labour's proposals. Then there's another hit to consider.

This from Shares mag out today:

"... Then there’s the huge pension scheme issue. BT has previously highlighted pension costs as a material obstacle to a potential Openreach demerger while analysts at investment bank Jefferies believe that the BT pension scheme trustee would ‘logically demand very substantial upfront compensation’...."

I take that to mean as 2/3rds of employees flit over to a nationalised industry that BT will have to pay over to the govt 2/3rds of the outstanding pension deficit too.

The meddling poltical finger in the pie is set to increase even if Conservarives win with:

"Analysts at investment bank Berenberg believe BT could face being politically leaned on by a re-elected Boris Johnson, increasingly the political risk, ‘even in the event of a Conservative victory’. "

And that would lead inevitably to this:

" A tactical cut to dividends, perhaps 20% or 25%, would make a lot of sense.... . . .. Such a move would also send regulator Ofcom a message that the company is willing to be flexible in meeting the various demands of all stakeholders, playing its part in developing a faster broadband network for the nation while giving investors a return on capital. . .
. . . Finally, it would draw a line under an issue that has dogged the company’s investment case for several years, namely provide some certainty over the future dividend policy.....
‘We think it would be the right thing to do to take some dividend off the table, potentially a 30% to 40% cut, and reinvest that money into Openreach,’ says Adrian Gosden, head of Strategic UK Equities at fund manager GAM. ‘That would bring a whole new raft of people to the story and you’d still get a 5% yield.’

"his distatste for the few not the many"

Was trying to do a short post. Should have been:

" his distatste for the few in 'for the many not the few!' "

I actually, unintentionally, watched live, Labour's initial lunchtime big reveal on free fibre broadband for all, whilst trying to get a timecheck and news update.

After Corbyn spoke (He cracked a corker at the govt's expense saying "Old copper cables? Rewminds you of the Tories doesn't it?") to a hall full of laughing media. Fair play he made a good joke. 1-0 to Labour on jokes.

Eventually he handed over to John McDonnell, who in defending the decision to nationalise broadband highlighted where the blame for lack of financial progress really lay with (by implication).
- Just Googled to make sure what I recall tallies with what he said, so from Labour supporting Guardian newspaper, here's the pertinent bit:

" Since privatisation, £54bn has been paid out in share dividends. That is twice as much as full-fibre rollout would have cost!"

Doesn't that reveal his distatste for the "few not the many" so-called rich in society? Otherwise why highlight greedy shareholders unless you actively despised them?

Does such an attitude auger well for a fair price paid to 'greedy' shareholders, after pointing the finger at them and revealing his thoughts towards shareholders as part of the problem?

I personaly don't think a decent price paid to shareholders is high on his list of priorities at all. They're politician's. You'll be TOLD what the fair price is.

Besides, he doesn't want the whole of BT - only the bits mentioned which I've tallied up in a post way down below. So a fair price would be only a portion of the share price. As shareholders would still be left with a company called BT, Labour is not going to pay you the full current SP for BT, are they?

Their argument is: We're only nationalising some parts of BT, so we only have to recompense shareholders for "some parts " of the share price value.

(Can't yet put a value on those assets he wants, but the assets he wants, employ 2/3rds of BT's current employees on the books -so go figure, but it'll be different from Labour's, I'll wager).