Member Info for Velo

Part 2 Concludes >>>

Free Cash Flow was reported as 38% down by H1 yet tonight the Price to FCFlow metric has come screaming back down under control and is down from 34/35 to just 12.0 !!!! Eh??? Are computers wrong? 12.0! October had the FCF improving but it was back to worse before the H1 results. In fact it's now better than the industry average. I don't get it. FCFlow is 38% worse yet Price to FCF has improved to "good" after pumping in H1 updates. So started checking around and the not so good news. Knew net debt was £6b worse as Jansen said so, and gave the increased amount of debt in his statement - but that applied to the full year and I'm seeing an utterly astonishing potential £19.6b net debt forecast for the year end. (Last year was 'only' £11.966b) Blaady L! Shocking too. But necessary with all this fibre talk.

And it's showing up in net gearing too (leverage). It's appalling at 190.1 (was down to a 'damn good' 108.2 a month ago) With pension added it jumps to 249.8 This is only bad if an unexpected "bump in the road" occurs outside of the company's control. So as long as nothing "recession-ary" or "adverse interest rates" occurs it's okay, but leaves the company at the mercy of uncontrollable events beyond it's control - to a bad degree.

So looked at liquidity and delighted to say 2 out of the 3 metrics give a good reading. So really good Price to FCF and liquidity. So that ties together and matches nicely.

The dangerously high net gearing is reflected from the large increase in debt. A bit shocked by the large debt - never ever seen a jump like that in BT's accounts - over the last 6 years at least. Concerning. And yet BT after all that is a master at increasing net profit, year after year.

But I am going to write to all the analysts about net profit - but will let them sort themselves out over the Q3 forecasts (due imminently) and see if they apply the terrific improvement of Q2 to the rest of the year first, and save them getting a letter from me :)
It's not the content that will upset them - it's the number of pages to read through, they lie in fear of :)

Aww sheet done it again it's gone well past 1:00am. Tsk!

Aw bugger sigh it's ended as (1 of 2 parts)

Only posting this to let off some steam. Will keep it short. (Fat chance!)
All my subscription algorithms have got their act together tonight, and pumped in the H1 numbers to enable a) A forward estimate using TTM (Trailing 12 month calculations) which uses only the latest interim results alone, to give a full year reading (usually different to the analysts and often more accurate because analysts being human, will take account of BOD's jam-tomorrow initiatives and build that in too).

And it's left me seething. Hence this late post when I should be preparing in readiness for tomorrow afternoon. I have some excellent news.
Some most definitely NOT-excellent news.
And some puzzling news that requires further investigation but will wait for the shortly to arrive Q3 estimates from the analysts first.

I'm so hmm. . . not angry, not frustrated. Agitated? Because upon pumping in the H1 figures to update all the metrics and seeing the results, my only option left is to write a multi-copy email to all 20 House-analysts for BT, (I have their names - and I know where they live :) AFTER they compile the Q3 update - and not complain but ask for an explanation.

Because the latest net profit projection (TTM method) for the full year, based on the contribution of Q2 brings to the H1 to a decent level and then to calculate a far greater full year net profit - and bears no relation to the analysts full year forecast as these updates, eventually, will be a cause for celebration towards net profit AND all being well, most definitely WILL produce a terrific INCREASE in net profit over last year for the full year ending 2020.

So my excitement in posting last week of a great improvement to net profit has just gotten even better for the full year end forecast. H1 net profit was £1.068b But you won't read a word of such in the MSM. It's all Pre-tax crap.

(Pre-tax profit was £1.33b as the MSM keep reminding, but down on last year - hence that's ALL they're reporting in the MSM, pre-tax profit as "steady" only).

However TTM calcs now, as of tonight, show to expect a full year of £2.175b net profit which is decently UP on last year! NOT what they're leading you to believe in the MMS is it? And the analysts themselves are missing it! And now the media are too. Not a dicky bird of what's likely or possible by Y/end - only instead a paltry "steady" as in a slightly down as they're only reporting on Pre-tax Net Profit. It's most annoying.

(Full year Revenue shows as continuing to decline but another time for that)

- Because they're blinded by PRE-TAX Net Profit. Defo going to write to them; I'm only referring to net profit here, but it would appear it's a metric dropping out of popularity in favour of pre-tax metrics. All I, or any average investor really wants to know is how much revenue has come in and what's left after paying all the bills, all the tax - and sod pre-tax navel gazing!

Part 2 >>>

Erratum:

Apologies.
In my haste, mistakenly referred to the closing price of the day (26th) of the price crash instead of what it gapped down to on opening (1925) as the most probable maximum high area that might only be ever be visited over the next 12 months before being rejected in that time period, so not £18 but low £19's.

So exchange £18 in my posts below for low £19's as the maximum probability of attainment before being rejected.

All those posts of course it goes without saying, as only IMO. Your opinion may vary as they say :)

Clearing out everything and might as well post this, it was published a month or two back. Capitals are mine.
IMB - and 100 years of tobacco dominance.
---------------------

Sin stocks are supposed to outperform the market over time. Four years ago, London Business School professors discovered THAT TOBACCO HAD OUTSHONE ALL OTHER SECTORS SINCE 1919.

But the old certainties have been stubbed out. Deathstick makers’ share prices have dived over the past three years. That of UK-headquartered Imperial Brands has almost halved. Its shareholders’ loyalty is being stretched to breaking point, the FT reported on Monday, 19th August.

The stock has been hammered by the threat of tougher regulation, slow innovation and a stretched balance sheet. The shares are priced at 7.3 times next year’s earnings, less than half the sector mean. The dividend yield is a full-strength 9 per cent.

The company is doing at least some of the right things. It will shortly sell its cigar business as part of plans to rake in £2bn from disposals by May 2020. That should allow it to reduce borrowings and undertake earnings-boosting share buybacks. It has dropped its 10 per cent dividend growth target in favour of a more flexible approach.
------------------------

(Don't recall if there was more as it appears to finish abruptly).

( Concludes part 3 )

Also, statistically, they advise that the number of profit warning stocks that go on to file for bankruptcy is so small as to be insignificant so rate them all as not in danger of that.

A recent article in Shares magazine quoted 10% of them do file for insolvency but my research is from here in the UK, on the continent, and from the US and includes small and large stocks. Amazingly they all behave the same and all say insignificant chances of insolvency, just in case you read that recent Shares mag article.

To sum up:

1)
£20+ won't be seen for at least a year.

2)
Highs likely - at most - to ever visit a near low £18-ish for at least a year.

But #2 is my direct, personal experience alone and not the researchers.
They say treat the SP as unreliable for the nexr 12 months, regardless).

Your mission should you accept it, is to make it through the next 12 months in one piece.

Personal experience tells me at least 50% of you won't make it back to barracks and just won't be here when I look in, in a year's time. Sentiment see, it gets to you.

Best wishes.

(Part 2 of 3)

I'm going to depart with some warning areas based on my personal observations of key areas in previous profit warning hit stocks to look out for, that the SP is unlikely to overcome, the duration of the 'hit', and what happens (from academic researchers) in the second year after, and which I can personally attest to, if there should only be the one profit warning, which should lift spirits.

If the key areas I now list are breeched and held and built upon, then dismiss this post as I'd be in error of the market continuing to treat IMB as a profit warning hit stock.

Here they are:
First off, The price close on the night before the profit warning is highly unlikely to be seen again - at least for the next 12 months from the date of the Profit warning.

The SP on the close of the night before the day of the profit warning announcement (25th) was £20.65

So call it Velo's Curse if you like, but I can say with at least some confidence that IMB will NOT revisit 2065p or higher for at least the next 12 months. After then it is only 'safe', not guaranteed to rise away, only 'safer' to do so.

And from personal experience - not the researchers - I've found that the price close of the price crash day is approx as high as the SP can "sometimes" achieve but not higher over the next 12 months.

In IMB's case that's the 26th with £17.98 (Call it £18).

Statistical deviants like IQE have disproved that, but continue to unimpress generally (a multiple profit warn'er).

So it's said the SP for first time profit warnings will alternate from delight to disappointment over the next 12 months with highs in IMB's situation of only as far as 1798-ish. So £18 would only ever be seen for 1 or 2 days at most before retracing. But in general leaning to more dissapointment than delight.

(The second year, statistics show, usually have the profit warning stricken stocks respond by increasing 22% on average over the market average. That's not add 22% - but 22% higher than whatever the market achieves.

So, say the FTSE100 grows by 10% after the end of the second year, then it's 22% higher than the FTSE100's 10% so not 32% but 12.2%. I have personally found similar to be apparent but have usually sold out before the end of the second year completes. In GNK's case just as I thought to myself you scaredy-cat, I've gotten out too soon and greedily returned to look for a suitable re-entry it promptly on the very same morning got taken over and shot up to 849p a clear further £pound or two!)

I think that's enough for here. One other thing. The researchers say that if you've deeply researched the stock and are convinced it's future is assured and regard it as nothing more than a sticky spot, then use the opportunity as a topping-up exercise along the way. But there's no guarantees for the second year. You have to be a serious long, long, term holder.

( Continues to final part 3 >>> )

(1 of 2/ or 3 parts)

Well that's me done here.

Initially returned to post on my progress on my top-up's and sells and perhaps rebuy. Was ready, but wanted to see the trading results and decide further. Could easily buy here as several pounds below where I sold out and if fortunate and the SP rolled back up to £20+ I possibly could have cashed-in and cleared the greater amount of my losses.

But now convinced IMB will not see £20's+ for the next 12 months at least, as utterly convinced now that the market is treating this as a, profit warning hit stock.
It's what the MSMedia are saying - not just my opinion - but as shown here, they can't even announce Cooper's departure in the title without adding she quits
". . . after profit warning"

https://www.cityam.com/imperial-brands-chief-executive-steps-down/

I have a wealth of research data on profit warnings so when the one day 13% price crash occurred I wasn't convinced all the market were in agreement. I'm used to seeing 22/25/28% and higher etc., one day crashes after the warnings. With a 16% first day drop being the minimum for the average outliers. Now I am.

What an inefficient way to publish a trading update by including guidance on 3 issues that they claimed would impact this year's results - just 3 days or so before the year closed! It made no difference whatsoever to the revenue. None! Yet that action robbed private investors of a 13% reduction in the capital value of their investment in one single day - and still after today have not had it returned to them. In fact the 'panic' that caused in the market continued to rob investors of £pounds more. All because of a "profit warning" that was not going to effect the year's revenue. Okay it impacted the net profit and increased net debt (so it was a genuine profit warning you could say) but if the update was released just days away from the 5th Nov publication day last Thursday or so, after falling the aforementioned said 13% might the further accelerated drop not have occurred once the market had been reassured by seeing the revenue at least, was seen to be 'all there'?

The message is clear to me. The market having seen the revenue, have responded with a half-hearted humph by close. Does the market fear the impact will be harder felt in this new trading year? As the RNS of the 26th said the reduced guidance in business progress had occurred only in "recent weeks"
- "weeks" that's what was said - weeks!

So that 'bad' reduction guidance has really to show it's face in full glory as it's only coming through now just in time to bugger up the new trading year.

( Continues to part 2 >>> )

" Jansen is doing his covert kitchen sinking very well, when he slides away there wont be much left. "

- That's a very pertinent and astute point, apropos to what I was looking at the other day when looking at several MSM reports on capital disposals in order to add to a reply to a question about how I compiled the net profit.

I got the updates but what remained in my mind long after posting, was the sheer incredible energy and workloads Jansen appeared to devote in the reports into virtually selling everything that he could lay his hands on.
If you're sitting in a chair and get up to go the toilet get someone to look after it for you - because the impression I was left with, is that if Jansen was passing through - he'd grab the empty ofice chair and have it away - and when you came back, he'd be striding back beaming:

"Got £2.50 for that down the local boot sale. It all adds up you know! What else you got?"

I decided not to add anything about his energy in selling capital assets as my posts can be long enough as is, but I gained the distinct impression unlike Gavpants that if you saw a light on late at night, it wouldn't be security in a CCTV room, but Jansen alone in his office working late into the night. I was impressed with his replies to the all round the world sale disposalss. He's on the ball.

When someone gets in that mode it's hard to stop and wouldn't be surprised if he finds he's still short of cash and says to himself "What else? I just need another £billion to finish".

I can see him in my mind's eye - his eyes lighting up in recognition and thinking out loud: "

"Dividends Yeah! Dividends that's where. I need it! I need it!"

He's on a roll. No stopping him.

Park round the corner out of sight and don't leave your Openreach vans with the keys in when he's about.

Ugh, God my posts sound full of good cheer this morning.

I have a holding in BATS too. What do you make of the pending law suit that the media is touting as potentially the largest lawsuit of its kind ever to be seen in the courts - (huge payouts if the claimants win; be wiser to settle out of court but BATS contesting the law suit at the moment) something about illegal child slave labour in the tobacco fields)?

" Am I missing something regarding the divi, no suggestion of it being cut, quite the contrary, and the funds are available are they not......?"

Yes, the incoming CEO.

And that is - What the new CEO views will be of the divi, for the future of the company in his or her now customary "kitchen sinking" after their initial top to bottom appraisal review.

It's not what the new rate they will apply to the future divis that matters - but of more concern is what the new CEO advises/ proposes to the BOD in their findings for their initial "kitchen sinking" review; will he or she agree with the current policy for the longer term? It would be a panic move to do so immediately but they like to say things like 'under review' in the next financial year - then it's time to be concerned or not whether there's to be a cut.

All cuts follow a similar pattern. From 10% "guarantees" to now adjusted to "progresive" and in VOd's case - cut whilst still sporting a greatr FCFlow as it still does today. And in BT's case from 10% to progressive to fiddling with the interim payments to reduce the whole payment bill, but still calling it "progressive.

Then in came the new CEO and a declining FCFlow and now statements of the divi policy being under review in the next financial year.

So what stage have IMB reduced the divi status to? - "Progressive"
Why if the FCF is so great and can green light over every obstacle (and it is - seriously. IMB's FCFlow is still exemplary!)

That story sounds familiar to me. Let's hope IMB write their own story and not follow the "progressive" script that curses others.

Ratty here - click the news link up above:

"(Sharecast News) - Imperial Brands posted a decline in full-year profit on Tuesday despite a rise in revenue, amid "tough" trading in its next generation products, as it announced the appointment of a new chairman.
In the year to the end of September, reported pre-tax profit fell to £1.69bn from £1.82bn the year before, while operating profit ticked down to £2.07bn from £2.28bn, despite a 5.1% jump in revenue to £31.59bn."

It rather supports my evaluations and not yours, does it not? But it's only the first. This could swing in any direction in later hours.

"Work it out yourself if you’re that smart mate. I’m done with you."

Hee I already have - don't you read my posts to the end then?

HA! You know why I asked you that? - BECAUSE I KNEW YOU DIDN'T KNOW.

And if anything shows up a know-it-all braggart more it's staying to face the music and admit simply "I don't know the answer to that question".

Don't worry Ratty I'm not long for here, then you'll be free to victimise some newbie who's less able to defend themselves.

" What is not right is people predicting things like debt increasing by a billion, based on what calculations exactly?

Based on? It was based on TTM calcs - often but not always, more reliable than analysts guesstimates as they build in the jam tomorrow stories into their forecasts. TTM uses only interim actuals to derive a forecast no stories of vaping will produce this and that are included - just the interims. Google it, if it's the first time you've ever heard of TTM calculation forecasts.

Net debt is UP over last year. Amoroitise that away into thin air then.

Morning Ratty,

What do have as a net profit figure without amoritisation and tax deductons added back in, then? Go please tell us.

If you've arrived at the FCFlow net profit figure then clearly you have a pure net profit figure (that I refer to often) before you - what is it? Can you bring yourself to reveal it?

Morning all. Having trouble finding an entry that specifically states NET PROFIT. So had to deduct tax from PRE-TAX NET PROFIT to arrive at it -which I dislike doing as much prefer Imperial to actually state it clear and loud themselves. So what I make of actual net profit is provisional in case I've missed it somewhere.

Revenue has come in at £31.594b which is greater than my forecast - and makes you wonder why they even bothered to rush out a profit warning in the first place in the few days left before the year end close - as that is an actual increase over last year's revenue!

Can only see the PRE-TAX NET PROFIT of £1.690b and therefore have deducted the tax charge shown of £609m to arrive at a provisional net profit after tax of £1.0816b which is considerably less than the TTM (Trailing 12 month calculation) I used to arrive at a guesstimate net profit of £1.556 (as I stated below).

Quite shocked at that low Net Profit as it is way, way, below my guesstimate figure and more importantly below last year's too. So I will hold on evaluating the Net Profit until I receive further clarification.

More importantly NET DEBT has risen over last year and is now reported as £11.376b.

Curiously the reported net debt which then goes on to deduct accruals makes it even worse at £11.970b.

Whatever that increase in net debt is most unwelcome, but less than I was expecting.

The increase in revenue over last year is most welcome and a big plus. And that's why I'm witholding fully accepting net profit as seriously lower at £1.081b until further notice.

Now let's see what the market makes of:

a) Increased revenue :)
and unfortunately
b) Increased net debt :(

A bit rude. I was polite when showing your £2b net profit was incorrect. Only when held to account did you own up to lifting it from FCFlow calcs.

I'll explain why I'm here after the results, just for you then, if you're that interested in my life.

You perma-bulls don't half get the huff when one of the flock step out of line. Can't tolerate an opinion that doesn't reflect your own? You a practising Islamic Mullah or something when not posting on here, then?

Want a signed photo?

Out of curiosity just checked the timeline, that the TowerCo announcement came out at and the change in trend of the intraday SP, of how it came to close from a low to finally up for the day.

- Get this: The press release of that TowerCo announcement came out @ 9:22am.

Now look at the intraday chart on this site and hover over that time. The SP was sinking down for yet another attack on 157p. No question about that, it would have had 156 if it had its way.

3 minutes later by 9:25am it had reached 157.34p as the SP barricaded itself behind the doors of the Alamo when the descent stopped abruptly at 9:25am
- and then the SP zig-zagged up, consistently and without any question of doubt, all the way out of 157 and up through 158,159, and closed on 160 for the day.

It's not the results the market is waiting for next week. It's more news on TowerCo!
Nick would be well advised to also pack that H1 trading release full of positive news about TowerCo. The market is clearly more interested in TowerCo than Vodafone per se.

More news on TowerCo, Nick - More, more, M-O-R-E !!!

Ahh - You're way into FCFlow. I'm looking at the 2 big headers - the top line and the bottom line.

FCFlow will of course produce entirely different net profit figures. I'm going with the headliners on the day - as Imperial present them.

FCFlow is for afterwards, other posts. I'm posting on the bare basics first. But I intend making tomorrow my last day here, as I said previously, I no longer hold a position in IMB.

Just been to Imperial's own website to hear direct from the horses mouth and they're showing net profit for last year as £1.427b

And they're showing PRE-TAX net profit for last year as £1.823b