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Longish - Have you formed an opinion of Nick Read yet; or perhaps waiting to see what he reveals tomorrow?

I'm asking because, not seen much on here about him, but ever since THAT interview I've become conflicted by some of his replies.

I'm not sure if he's the right man for the job - based solely on that September interview. I'm prepared to give the man a chance, so to speak, and change my mind should he deliver tomorrow, or at least impress the market.

I posted last night of how he gave the impression of either blame-shifting on the question of dividends or instead maybe disagreeing with the BOD and giving way to slippages in his speech pattern of the BOD 'owning' the policy., and "they say the dividend is covered" - Eh - They say? What does HE say? Only he never does. Evasive, I thought.

But the confirming giveaway for me was his self-admittance to at the very least being economical with the truth, either that, or revealing a disturbing tendency to lean towards cooking the books.

Cooking the books? Just read this exchange and decide for yourself:

-----------------------

(Interviewer) A.Lee:
"....EV to IC? Vodafone has one of the lowest returns in the sector and trades on one of the lowest EV to IC's in the sector. How materially can you change that and how quickly can you?"

Nick Read:
"We haven't really published our return on capital employed and there is a number of reasons why we do that. Sometimes we feel that maybe from a conversation with regulators etc., it doesn't always end up being a positive one.... So, but our return on capital employed for our controlled businesses, pre-tax, is about 5.6%

About? It was 4.03% back then, which is low for the industry sector (even lower if you use ADVFN) but he says "we haven't really published" yet quotes a more acceptable percentage.

But that's not the issue I have. He ADMITTED to being at least economical with the truth on Return On Capital Employed, in order to mislead and HIDE it from the regulators! If he's prepared to lie to regulators then it could be a pattern. Of course he'd never hide things from investors....... would he?

Thanks Jack.

.

Summing up -

1) Dividend is not THE problem but a side issue problem.
It's having the effect of focussing the company's lack of resolve in attending to future debt rising to unacceptable levels. If debt was acceptable to the market, then the failure of the dividend to be fully met from earnings for the next 2 years would not be an issue.

It's just signalling undesirable financial housekeeping practices to a market seeking the opposite - reassurance that no stone will be left unturned in attending to the future debt problems. Borrowing money to finance a shortage in meeting dividend payments is not sending the right signal to the market. Fixing the dividend alone, would do next to nothing to alleviate the market's concern over its perception of not the current debt - but the future rising debt.

2) This whole year long decline in the SP, is IMO all about FUTURE rising debt. That's the problem at the heart of the matter, not the current debt - that's serviceable. Not dark pools nor market manipulation, nor conspiracy theories - but the market being convinced that planned future debt may not be serviceable.

3) A plan of future action by Nick Read tomorrow is essential to reassure the market. If it's not forthcoming, whatever the interim results, then just where does the market intend taking the SP?
Is it to, no more than rob VOD of its premium rating? Is it more?
Was going to post a fuller analysis of all the goodies still in VOD's balance sheet (yes there are a few industry peer beating metrics in there) - but might wait for the new landscape and post those after the trading update.

If all fails to appease the market tomorrow - just what has the market got in store for the ultimate destination for the SP?

I was hoping to show, that it might not be as far, or as deep as some might fear, due to some commendable metrics in the balance sheet - but may not have to post those, if tomorrow turns out to be a successful day for Mr Read's inaugural presentation.

(Follows on from previous post below)

"Current" leverage in VOD to my untrained eye looks okay (confirmed by that Telegraph article last night).
The lower the leverage percentage the better the position a company is in to handle it's debt affairs.
The higher it is, often signals trouble ahead.

I'm comparing VOD's debt in percentage terms to a known offender, BT.

One of the two companies has a much lower (perceived as good) leverage than the other.
However, it is being punished for having a perceived too high a debt, that although is not yet currently visible on the books (see below) - will be visible in the near future.

The other has currently terrible leverage metrics that spell big trouble if left unattended but has produced a plan that will take until 2030 to solve matters and has been met with wide market acceptance and rewarded with a recent rise in its share price.

Here they are:

Leverage -

(A high gross gearing makes a company more vulnerable to any future undesirable operational or economic events)
VOD Gross Gearing = 59.1%
BT Gross Gearing . = 156.2%

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(A 15% net gearing is considered prudent. 50% warrants further investigation. Over 100% is risky)
VOD Net Gearing = 39.2%
BT Net Gearing . . = 121.5%

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(Below 2.5 and a company is deemed incapable of meeting its interest payments obligations; both pass but one with distinction)
VOD Interest Cover ratio = 10.7
BT Interest Cover ratio . = 6.04

---------------

One has mostly, on current form, unacceptable debt leverage metrics, but because it's delivered a plan to the market that promises to fix things, it's been given the benefit of the doubt and has seen a nice SP rise since this summer from 201 to 250's.

The other has current acceptable debt leverage metrics but because the market believes debt in the future is scheduled to worsen and has not yet received a credible plan to deal with that future debt, the market has punished the SP. It's waiting for, and needing to see, a plan that will knock their socks off. To date all it's received has been repeated assurances, ad nauseam, that free cash flow will solve everything. The market, via the SP, wants more detail and action before it's convinced.

Was ready to commence a little post on the debt leverage for VOD in comparison to a 'known' offender such as BT (that many reference on this site) just to show that current debt leverage for VOD is not the problem currently but - it's the market's perceived view of the forecast FUTURE debt yet to come that will be the problem - that they're concerned about.

Even that Telegraph article posted here last night, admits that CURRENTLY the debt is still manageable, but questions whether the future planned debt (Liberty) will alter that. (Capitals are mine):

"....Vodafone’s debt is too high and getting higher.... fuelling concerns among bondholders and lenders about how manageable the burden is.... AT THE MOMENT, IT STILL IS, but the forthcoming takeover of ...."

So, still manageable at the moment - then came the 'but'. However, was blown into confusion by Jack D's reply to Grabster in reference to ADVFN's take on debt - it was double what I was looking to post!

Here's ADVFN's definition of their calc of net debt:

ADVFN:
Net Debt, is defined as total liabilities minus cash & equivalents.
= total liabilities - cash & equivalents

= net debt of (ie., £63.6 bn)

-------------------------
My subscription source uses:

+ Total of all short term debt
+ notes payables
+ Long Term debt
+ preferred equity minus

- total cash
- equivalents
- recent short term investments

= Net Debt of (ie., €26.5 bn at y/e March 2018)

Actually sounds much the same in formula but massively different amounts in monetary terms.

As Jack D says - " I merely wished to highlight that I've seen a number of variations about some VOD's fundamentals. Not least their debt. Circa £32bn,
ADVFN's net debt £63,6bn,
£46bn quoted elsewhere
& yet other numbers.
A confusing picture."

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In the next post (to follow) I'm comparing VOD's debt leverage to Bt's - and applying identical methodolgy to both.
So using the same system to compare and contrast, should I hope, level the playing field

Many thanks Longish. Appreciated.

- The article focuses on debt. Hmm, on paper leverage (which includes a cash calculation) in VOD is but a fraction of BT's by comparison. In fact there is no comparison, BT's in percentage terms is far, far, worse. Yet since BT announced a 'plan' to deal with debt, in particular pension deficit over the next decade, the SP has prospered.

Perhaps that's what might placate the market - perceptions - anouncing a new and really decent, credible long term plan to deal with the issue?

It's behind a subscription pay wall. Anyone by chance, got the premium subscription to the Telegraph? If so, would be grateful if you could copy'n'paste it here. Wouldn't mind a gander before Tuesday dawns.

The article's title is :

"Vodafone boss has big call to make on its future"

-----------------------------

All I can get before getting cut off is:

"Hopefully Vodafone boss Nick Read managed to catch yesterday’s epic international rugby clash between England and New Zealand at Twickenham. Read has big shoes to fill, both literally and figuratively, but he could do with some tips on how to deal with a hospital pass from his predecessor. Vittorio Colao’s departure from the telecoms giant earlier this year represented the end of an era. The world’s second largest mobile operator was undoubtedly reshaped during a decade of deal-making under the towering Italian. The question is whether it was for the better or worse: did he leave behind a digital communications powerhouse fit for the 21st century? Or a below-par utility over-exposed to Europe’s….."

Kellogs - You're missing the ultimate, beautifully succinct, and very quoteable get-out-of-jail for free card, when being held to account by one's own words being quoted back at oneself and that is - the quote attributed to John Maynard Keynes of:

.

"When the facts change, I change my mind. What do you do?"

:) :)

I think it's more than pretty clear from that interview (held as recently as September) - that there's no way the dividend policy is being cut down. In fact I expect it will be raised again to 4.5p

Maybe, just maybe, on the current fantastic % yield, they might take advantage of that, and this time freeze the interim dividend to match the same as last year's interim, which was 4.23p (on past performace it should be increased this interim to approx 4.5p). Just a thought.

You could then argue (rather weakly) that a freeze, was not a cut, and pacify the critics of divi policy somewhat AND still keep investors happy as Larry.

Analasister - I don't for a minute dispute what you say, but just re-aquaint yourself with the interview Read gave in September. You say he would have a key role in advising a sustainable dividend to the BOD - I agree!

Only thing is, no one knows, apart from insiders, whether he advised differently to what investors have become used to, or even if his advice differred to what the BOD chose, or even if he then tamely acquiesced against his better judgement just to 'stay in' with the power brokers to secure his own future.

If he did disagree, somewhere along the line it would slip out psychologically in his speech - and it's there in that interview.

Here's a clip. The interviewers' words and Read's are copy'n' paste, no interpretation by me. (Apart from where I've Capilalised certain words to highlight the alarm I felt upon first sight of his answers).

Read the following exchange and see what you think. I've come to the conclusion he's a natural born blame-shifter
- just watch how he distances himself from his part in the dividend decision, then right at the end clumsily inserts "we" lest 'the powers that be' turn on him?
Here you go:

(Interviewer) A.Lee:
..... And it brings us on to the dividends..... Some investors have got nervous about sustainability of your dividend, the dividend cover and the dividend growth. I wondered if you could talk about your confidence in covering and delivering the dividends?

.

Nick Read:

Yeah, I think it's important to understand how the board think about the dividend CAUSE THE BOARD OWN THE POLICY......

...And THE BOARD have a very specific view

.....They look at WE, WE every year announce how much the cumulative free cash flow long-term incentive plan of management is......

...So the midpoint of that range is €17billion for the next 3 years. So THEY SAY the dividends are covered.....

.......WE'RE confident in the dividend policy that we have.

=================
Either that's a man gearing up to blame others if any trouble brews up over dividends, or it's someone doing the "blink twice in public" act, signalling that the dividend policy is nothing to do with him, and that the BOD won't listen to him on dividends, and that he's just the patsy.

Your view may differ.

ALWAYS?

Please prefix that with the word 'ALMOST' :)

"Lets see how Nick read comes back with his inaugural statement on Tuesday."

Yes, one thing no one's mentioned is the new CEO's inaugrual "kitchen-sinking" clear-out after conducting his own review.

Could be that it's too close to the previous CEO departing as new CEO's like a clear field in case of ruffled feathers. Although this BOD sound like they've got him by the balls. In his September interview he completely disowned the dividend question saying it was entirely the BOD's decision and nothing to do with him. (Blame-shifting?)

If it is too close to this interim and outgoing CEO departing, then a 'real' kitchen sinking perhaps awaits further down the line, but at this juncture he's running out of time as the market ALWAYS forgives a new CEO's first kitchen-sinking review.

If there's any shock unexpected cuts or redundancies then that would be his work under the 'kitchen-sinking' and would most likely be welcomed by the market.

"- The share price is consistently undervalued."

Woah there! What?

- Could not disagree more. In no way, shape or form - from a comparatative ratio is PFG undervalued to any of it's peers.

Even at this lowly price it's still more or less fully valued and level to it's industry peers in Price to earnings comparisons with perhaps the ever so slightests of hints of beng no more than twopence less to its industry peers in median P/E ratio terms. Consider:

Currently -

PFG forward P/E ratio is P/E8.9

Industry median forward P/E8.92

These are v low P/E's but then again so is the whole industry for PFG 's peer group.

You can post PFG is undrvalued - but you'll have to define your parameters ie., gut feel, compared to pre-crash yesteryear, whatever.

PFG is not undervalued per se. In fact the balance sheet is a right mess. Atrocious! PFG has to prove itself to the market with upbeat interim results and full result after result, again and again - until,finally it proves in pounds and pence it's worthy of higher adulation.

It's a dog right now and no mistake - the balance sheet metrics show that.

PFG has got it's work cut out that's for sure.

Undervalued? Tsk! Tsk!

PS. I've never posted my satisfaction of using the two on any survey but you can be damn sure I'd belly-ache loudly if everything was continually going t!ts up.

Well my personal experience is out of synch with the ratings. I'm pleased with my in-home Virgin reliability and service - and more than happy with my Vodafone serviced portable devices. Based on my ersonal experience with Vidafone I recommend Vodafone for portable device service to almost everyone.

Having two service providers means I'm never left high and dry stranded when working from home.

Notice they have Virgin in bottom place. I'd agree with that if it was based only on costs.

Got a great "secret" deal (in £££'s) the best ever for me, with Vodafone which they mostly keep hidden from the public. And it's been running for years now. Ace :) I'm pleased with my set-up and service despite the ratings.

- I must come in the lower percentages; because if that's the national average then it's the average, and I'm just out of synch with the survey in general.

No, you are as you claim: Will Fleccy here.

- You have to change your ID now 😅

"..Usually when the big gun mainstream articles open the scare factory, it indicates the bottom. ... Just my opinion."

- Yes agree, it's a well founded phenomenon, observation.

Here's the link to that piece that came out yesterday:

https://www.theguardian.com/business/2018/nov/09/embattled-high-street-retailers-call-for-help-as-closures-soar?CMP=share_btn_link

Note how Pubs and inns, top the losers board as the worst hit of all for closures in the retail sector.

Now if that update on the 29th is bullish and bucks the trend of doom and gloom in pubs then IMO the SP could fly in December.

Thing is the CEO has announced his departure BEFORE this update - could that be an attempt by the BOD to protect the SP if it's a bearish update?

Last heard from updates that all was pretty good-ish
so not expecting a poor update.

So big day on the 29th. Will GNK buck the bear trend in pubs???

Hi Sxx,

Yes, the SP looking bullishly sporty by this weekend close sonewhat.

Couple of concerns.

1) Trading update due on 29th of this month I believe. It's expected to be positive so my window of topping up on the cheap opportunity is closing fast.

2) CEO resigning appears to have been subsequently welcomed by the market. (Kitchen sinking opportunity next year on new CEO's review after he/she gets their feet under the table; take a look at what RMG's kitchen-sinking did to their SP by the new CEO's review in October).

3) Google this :
"Embattled high street retailers call for help as closures soar"

Look how Pubs and suchlike have come out as the worst casualties this year for closures (will post link and figures next as will lose this phone text if I flip to go-get now.

" Let's pray..."

Hee hee, unfortunate choice of euphemism there, Suf :) 😄

This came out approx 10pm last night, so don't know if it's in Sat's paper editions or just the online only snippets.

- The opening headline is a sensational shocker and is designed to be panic inducing. But read it slowly and you quickly realise there's absolutely nothing new that they're reporting, just a rehash of known concerns that are already out there.

Still as sensational headlines go it's well up there with their best. Best just to focus on that £9.3m maximum salary of Nick Read and curse quietly that no way is he worth that much, under your breath.

Have your breakfast first before reading the opening headline :)

https://www.dailymail.co.uk/money/markets/article-6373389/amp/Fears-Vodafone-dividend-shares-collapse-grapples-46bn-debt-pile.html