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Markets Live: Friday, 24th February, 2017

11:03 am BE11:04amHey! Hello, hi, good morning, welcome. man from dunoon morning erlkin top of ye morn A. M. Good morning. Patience Happy Friday. Don good morning Soundbuy Morgen..... BE11:04amThis is Markets Live, FT Alphaville's daily thing that other media struggle to explain in a short phrase. BE11:04amPaul's officially off this morning. Otter Hello Internet Friends DutchBrat good morning Longandwrong Ohayo gozaimasu!! Pseudonym Subax wanaagsan

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Hey! Hello, hi, good morning, welcome.

man from dunoon morning
erlkin top of ye morn
A. M. Good morning.
Patience Happy Friday.
Don good morning
Soundbuy Morgen.....

This is Markets Live, FT Alphaville's daily thing that other media struggle to explain in a short phrase.


Paul's officially off this morning.

Otter Hello Internet Friends
DutchBrat good morning
Longandwrong Ohayo gozaimasu!!
Pseudonym Subax wanaagsan
wayneJ Is this another edition of the Ethiopian Investors Chat?
DutchBrat any comments on this gents: *RECON ALSO IN TALKS TO ACQUIRE U.K., U.S. INSURERS, XIA SAYS

Unlike yesterday, when he went awol. He has a cold.

Longandwrong Bit of man flu BE?

Which means I get to choose a picture!


Here's a manatee.


Markets Live: Friday, 24th February, 2017

pfd Alex Masterly's City career began 30 years ago today.

Whose status has been downgraded by the US Fish and Wildlife Service from "endangered" to "threatened".


No thanks to the Financial Times!

man from dunoon i nearly drove over one of those in Marco Island some years ago
Residual Paul's holiday snaps?

We've mentioned manatees in print exactly zero times since July 2015.

Pseudonym @BE Does that mean we can eat them now?
Soundbuy Thought he was re-thatching his hut......
Otter I like the Manatee's mossy little coat.
wayneJ @BE - does that count as a downgrade or an upgrade?

(There was a letter to the editor in November, from Dustin Dehez, Managing Partner of Manatee Global Advisors.)


(But it was about Nato. Not manatees.)


(Also, I don't think Manatee Global Advisors advises global manatees.)


Apologies also to anyone who's set their MyFT for email alerts on manatee stories


They won't have had a thing since 2005!

Soundbuy manatees - they live the life eh!
erlkin i like the hunter green ....much better than the red

Manatee is now seen as having gross reserves of 1,300bn-1,600bn cubic feet of gas.

markopolo whats the purpose of those odd looking front paddles - not ideal for swimming surely?

That was our last story.

Lemmy Maybe the paper's mentioned Dugongs?

And it's about a Trinidad oilfield, to be clear. Not an actual manatee.


Though it is true to say that manatees produce a lot of gas.

Waterloo Pearsons. You know you want to.
Otter @Marko they are for cuddling I reckon



Let's assume that a manatee expels the equivalent amount of gas as two dairy cows ....

markopolo an otter should know!

As in 220kg of methane, which is 3 cubic feet or thereabouts.


To get a gross reserve of methane that's equivalent to Manatee, the Trinidad oil field, you'd need 7.3bn manatees.

Soundbuy BE - short news day? :)
BBOC Has PM gone to repair the roof on his house in Moz?

But we don't have 7.3bn manatess.


There are only 6,000-ish off the Florida coast. Which is good, but not enough.

Lemmy Trying to work out which FTSE-100 exec it looks like?

So the conclusion here is that, though trends are moving in the right direction, manatees are not yet a viable fuel source.

Pseudonym Tasty apparently:

Or to put it another way, it's a Friday and I'm bored. Welcome.


FTSE down, then.

A. M. @BE 3 cubic feet is 220Kg? What sort of density is that?
Residual @Lemmy - Quite round relative to its length - Sorrell?

Off 0.6%, or 45 points at 7,225.

Soundbuy Pearson and Rightmove swinging about this am.

(@AM: don't go questioning my maths. I used a website for calculating oven dimensions.)

Lemmy Residual: not bad, he's certainly swimming in it. Was also thinking of a certain founder CEO who is both sporty and direct
Scalper FTSE taking a hit over the last hour

Choppy sort of pullback, really, mostly financials.


Led by STAN.

Soundbuy Think your manatee would be slightly rare then.
Standard Chartered PLC (STAN:LSE): Last: 714.30, down 36.7 (-4.89%), High: 754.30, Low: 710.30, Volume: 3.94m

Upshot of today's numbers is that costs are running hot

A. M. @Lemmy: surely manatees are herbivores
Residual @Lemmy :-)

Up 12% quarter on quarter, even before the UK bank levy.


So, underlying $359m loss against a consensus of -$31m.

Residual Wonder how many cubic feet of gas that one produces

"Underlying" in this context means excluding cost of running down its liquidation portfolio, which this time around was $102m.

Legbreak Bryce did we miss Glencore yesterday?
Hamster on a Piano anything on telegraph TALK story?

Can writing off duff loans really be considered an exceptional expense for a bank? On what basis is the underlying performance the right measure?


Because regular impairments, also, are not good. Ongoing loan losses 17% worse than consensus.


Outlook not great. Challenging.


While “some headwinds are easing”, “significant further improvement in financial performance is required.”


And "the turnaround of the profitability of the Group is at a relatively early stage."


Which translates to "no divi" now, nor soon.


You'll remember some excitable stuff earlier in the month about StanChart paying a token divi this time around and making a firm commitment over 2017.


Turns out, not.


I think it's fair to say, Goldman called that one a wee bit wrong.

Soundbuy TALK rises a few percent and cue story.

Perhaps relatedly, GS's post-result comment is .... brief and to the point.


Markets Live: Friday, 24th February, 2017


That's it, apart from the disclaimers. That's yer lot.


For something more substantial, here's Morgan Stanley ....


STAN reported 4Q16 adjusted loss at USD 360 mn compared to our expectations of USD 280 mn and consensus of zero profit. Revenues were higher than expectations (4% beat) driven by better C&I (details below) while costs were much higher (11% higher) and impairments increased to USD 800 mn compared to consensus expectations of USD 630 mn.


Revenue beat was driven by C&I, but process of normalisation will be long - This was about 11% higher than our estimates and up 8% QoQ. The big driver of this increase was the pickup in revenues from financial markets with FX being especially strong. Credit & capital markets also showed good pickup. Cash management & custody and corporate finance were also strong QoQ. While C&I was strong, other segments struggled with revenues. Retail missed by 2%, commercial banking revenues were weaker by 6% and private banking was off by 13%. There was weakness among almost all key segments like credit cards, personal loans, deposits (despite the sharp rate rise in 4Q16), ALM etc. Among the major products mortgages were up 4% QoQ. The weakness in these segments suggests that it will take a long time for revenues to normalise.


Expenses were higher by 12% QoQ, 11% ahead of MSE - This drove down PPoP sharply on a QoQ basis. We need to see details to assess the underlying expenses trend.


Gross NPL's stabilised, impairments were higher - Overall gross NPL's reduced to USD 9.7 bn from USD 12.8 bn in 3Q16. Of this the bank had already guided for USD 2.6 bn of reduction due to some resolutions effected in 4Q16. NPL's in the ongoing portfolio were slightly down QoQ to USD 5.9 bn (from USD 6.1 bn) and CG-12 balances were broadly stable. Coverage ratio improved to 67% from 55% last quarter (likely helped by the loan which was resolved where coverage would have been lower).

Scalper @Soundbuy: Spot on

CET1 Ratio was 13.6% compared to our estimate of 13.4%, TNAV down 5% h/h to $11.64 - This was helped by lower than expected RWA at USD 269 bn.
Maintain UW - While the profitability will improve from current levels - sharply lower impairment charges - and some pickup in revenues, we struggle to see the bank's earnings more than 6% ROE even in 2019. At 0.7x book - this looks expensive.

Golly Galoshes You say manatee, I say dugong

And RBC.


STAN Q4 16 results show better income than expected but with much higher costs. Longer term we are concerned by the rising trend in CG12 accounts given consensus expects a decline in 2017 impairments of -20% versus 2016. We rate STAN Underperform, currently trading at 0.78x latest TBV (at 0915) - TBV fell 4%hoh.


Adjusted revenues increased 2%qoq and 8%yoy, which is 1% better than consensus. The revenue growth is driven mostly by CIB increasing 14%yoy and helped by the corporates centre (+41%yoy). Commercial and private banking are weaker declining 1%yoy and 6%yoy and retail banking is flat yoy.

Operating expenses (ex regulatory costs and bank levies) increased 7%yoy and 32%qoq, reflecting investment spend in the retail bank. Compared to consensus, total costs missed by 11%. This lead to a pre-provision number of $374m compared to $644m in consensus.

Impairments increased 16%qoq (falling 39%yoy due to liquidation portfolio top up in Q4 2015), which is 8% better than consensus. Consensus was too bearish in Q4 but expects significant declines in 2017 to 2019. STAN reports rising CG-12 accounts of 14%hoh, but the company reports that inflows to CG12 slowed in the second half. NPLs fell presumably due to the Essar deal and coverage therefore increased substantially from 53% in H1 to 67% at FY 16.

Capital is better than we expected at 13.6%, an increase of 60bps qoq, compared to 13.2% in our estimates. The better result is due to a substantial decline in RWAs of 8%hoh.

chopper bear @hamster what was the story ?

@ROTR: we heard nothing yesterday on Talktalk.

Hamster on a Piano @chopper TalkTalk the subject of bid speculation, Chinese and European bidders said to be interested. Telegraph

The Telegraph's market report is a downstory mention

BE11:20am rumours of bid interest from European and Chinese players swirled the City.




..... In terms of stuff we have heard .......


Vodafone seems to be popular right now, for reasons we might or might not already know.

Vodafone Group PLC (VOD:LSE): Last: 202.17, down 0.08 (-0.04%), High: 204.30, Low: 202.10, Volume: 14.10m

(Live price slightly positive.)

Mouselet A.M: about the same density as aluminium
wayneJ @Mouselet - biggest co. in Ethiopia (and only one in Africa's top 500) is Ethiopian Airways
PeterC anything on Rightmove? Down quite a bit on CEO leaving, or are there other reasons too
A. M. @Mouselet: perhaps Brice was thinking of LNG, then.

Note the Softbank denial yesterday that it's interested in taking a stake in a merged Idea-Vod.

Mouselet I marvel at Softbank saying that it is not buying something. Is not Softbank's goal to buy the world?
BornCynic Morning - Gillian Tett on tv last night. CNN documentary on the 80's "Greed is good" was the title.

Note also the noise around since the start of the year about whether the Dutch JV structure can be replicated in other problem markets.


As in, the UK, Germany and Ireland.

Mouselet I think I have been successfully talked out of Ethiopia, and will stop going on about it. Is anywhere else in Africa interesting for a backpacking investor?

Or whether Liberty might intervene with something more dramatic. We've been over this what feels like a million times.


Anyway, Morgan Stanley was pushing Vod overnight.


Vodafone India - better news ahead? Vodafone has confirmed that it is in discussions with Idea Cellular about 'an all share merger of Vodafone India and Idea'. 1. We estimate that potential Vodafone/IDEA merger synergies could be worth ca 12p per Vodafone share (as outlined in Vodafone India: Discussions with IDEA (30 Jan), based on synergies targeted by TEF D / E-Plus in Germany). 2. The Economic Times (12 Dec 2016) reported that Vodafone might examine the divestment of Indian towers. Vodafone owns two portfolios of Indian towers (42% stake in the 120,000 Indus portfolio & ca 11,000 proprietary India towers - Exhibit 16). Vodafone did not comment on this article. 3. We believe there is scope for further Indian M&A to transpire. 4. Jio has announced it will start charging for its mobile services as of April 2017.

Mouselet Nairobi has a tech industry but is also "do not walk in the city centre after dark" levels of unsafe

Vodafone Italy (+10%), Vodafone Germany (+3%), Vodacom in South Africa (+4%) and Vodafone Spain (+5%) all saw strong EBITDA growth, in H1. We expect Vodafone UK to see EBITDA growth improve from -6.5% (H1a) to -3.0% (H2e).

Kreditkid also note barcelona telco conference kicks off next week , so likely to aid the european consolidation noise
BornCynic Hello Mouselet - many weeks ago you were asking about Thanet Earth. The greenhouses. Owned by a Dutch family. My sister sat at the next table from them in a local restaurant. She said they looked very happy and wealthy.
Mouselet I trust that I have not irritated any of you enough for you to want to recommend Lagos
Mouselet borncynic: Thank you!

Vodafone has never been an aggressive cost cutter. However, we believe that its Fit for Growth (Phases 1 & 2) cost initiatives highlight a change in the scale of the Group's cost cutting mentality. This change has been triggered by necessity (Indian pressure, EC roaming), benchmarking with peers (Altice, Telefonica, TI and Orange have been more successful at cost cuts) and low dividend coverage. With €37bn of annual opex – and €27.9bn of non-SAC opex – the scope for cost cuts at Vodafone looks very significant.

wayneJ @Mouselet - mPesa is a big positive impact in Kenya - a Vodafone affiliate (Safricom) runs it - funded by UK DFID - developed (initially) in Cambridge - and now, in their infinite wisdow, development has been given by Vod to Huawei.....
Mouselet I hadn't realised it was a bit of Dutch FDI, though that makes a lot of sense given their experience and competitive advantage in the greenhouse sector
Golly Galoshes Mouse; Nigeria and Ghana are spoken of well amongst a small circle of people I know familiar with matters in those countries - if two people can form a circle
Mouselet M-Pesa and a couple of competitors were pretty visible in touristy-back-country Tanzania though much less so in Addis.
Pharma @Mouselet, if you plan to take a backpack full of cash in order to invest that does tend to limit your options. Many of us use the internet, so after-dark safety is less of a concern.
Mouselet Ghana's on the list, though of course they have oil which makes governance awful
BornCynic @Mouse - the greenhouses appear to be growing as well as the vegetables inside. It appears to be going well.

.... doesn't really kick around the M&A idea except in India. And I have a doubt that the people currently taking an interest in Vodafone are excited on the prospect of a defensive merger to try and fix a deeply dysfunctional market. But .... well ..... we wait.

Mouselet I quite carefully never had more than $50 in my pocket.
wayneJ Vodafone has done its best to claim credit for mPesa ever since - despite the executives who really launched it having long ago left.....

Speaking of M&A, as we weren't ....


Big strategy piece out of Citi this morning.

Golly Galoshes I know of two people who speak of Zimbabwe in hushed but positive tones too.

Animal Spirits Are Back


Omg smile


Brace yourself for some big numbers.


Global M&A announced in 2016 amounted to $3.0trn, down 16% from 2015 record highs but still the 3rd best year ever. After a slow start to the year, animal spirits picked up in 4Q16, which was the third strongest quarter on record. But deal making does not yet look especially frothy. 2016 M&A activity amounted to 6% of global equity market cap, below previous M&A/market cap peaks at 8-10%. Cheap borrowing rates, a pick-up in global economic growth and rising CEO confidence should boost activity further in 2017. This should provide further impetus for this global bull market.

Punter @mouselet - Ghana is a lot more civilised than Nigeria, always punched above its weight particularly when Nkrumah was president but I guess interesting today too
Golly Galoshes I personally think Zim is for the very brave
BornCynic @BE - you seen the price of Noble recently :)

Bids everyhere! Nearly.


On a strategy view they say buy UK, sell Japan.


Buy consumer staples and consumer discretionary. Sell financials.

Pseudonym Can you actually own anything in Zim?

How should investors tilt their portfolios to this increasingly important theme. For an M&A exposure at a regional level, it would make sense to tilt towards the US and UK where M&A/market cap is traditionally higher than elsewhere. M&A bulls should probably avoid Japan. We suspect that Europe has the most scope for M&A catch-up. Within sectors, Consumer Staples and Commodity sectors are Overweight M&A. Style wise, M&A is short value and long quality.

wayneJ - I love the complaints about light doubt the Brexiters will have a field day on that - foreigners come and pollute our darkness whilst offering us jobs....

Do fund managers ever say things like "I'm short value, long quality"?

Mouselet Ah yes, Tigo was the other one. A friend of mine was on the mPesa team at Vodafone for a year or so; good guy, doing good work.

And if they do, how do they sleep at night?

Mouselet (though now an enterprise architect at Thales E-Security Cambridge)
BornCynic @waynej - the best objection was that Thanet Earth was going to pollute the local water supply..........

(Under 300 thread cotton in very expensive houses in Holland Park, to answer my own question.)


More big numbers.


Global M&A announced in 2016 amounted to $3.0trn, down 16% from 2015 record highs (2) but still the 3rd best ever year. After a slow start, animal spirits picked up in 4Q16, which was the third biggest quarter on record. October alone was the strongest M&A activity month in history. If 4Q16 trends (c$1trn) persist, then 2017 could be a record year. Indeed, January 2017 activity was 18% higher than January 2015 and 49% higher than January 2016.

wayneJ @Mouse - Scientific Generics was the main co. who developed mPesa - together with various others - some of whom I know

Despite this, M&A activity does not yet look especially frothy. Figure 2 also shows that 2016 deals amounted to 6% of global equity market cap, below previous M&A/market cap peaks at 8-10%. Figure 3 shows 12m rolling global M&A activity against the MSCI AC World price index. There have been $3.1trn deals announced in the last 12 months, down 13% on the previous 12 months. With stock markets moving higher, a $1trn gap has opened up in the historical relationship between M&A activity and equity market levels. We saw something similar at the start of 2015. Back then it took 9-10 months to close the gap.


Markets Live: Friday, 24th February, 2017

Golly Galoshes Pseudo - the two I know have legacy assets that have not yet been 'applied for by those who don't own them'

What is driving this M&A activity? Record low interest rates make debt financing cheap and cash hoards dilutive. The economics of debt-financed M&A look compelling. Even given the post-Trump price moves, 18 suggests that US companies can still borrow at 3.8% in the bond market to buy an earnings yield of 4.3% in the equity market. This carry trade looks even more attractive in Europe (2.1% versus 5.0%, 19). Most debt/cash-financed deals are accretive to EPS even if we include a bid premium.


Another factor encouraging the current pick-up in M&A is that the market is still forgiving of the bidders (Figure 21). In 2016, the median share price of the predator was up 0.06% two days after the deal is announced and 1.1% one month afterwards. The share price reaction for acquirers has also been positive so far this year (0.6%). That makes the investment banker sales pitch so much easier.


Markets Live: Friday, 24th February, 2017

wayneJ And then failed to retain the team which is now spread to the four corners; ditto the Vodafone execs who built it - other than Michael Joseph who was head of Vodafone Money globally last I checked.

0.06%! Awesome.

wayneJ (Which was a long time ago)

(I'm editing this back to highlights. There's lots more.)

Mouselet Nkrumah and Nyerere are quite interesting characters - would love pointers to good biographies, all I've got is Martin Meredith's 2005 "The Fate of Africa"

Want the sector view? I don't see why you wouldn't.


Consumer Staples have seen some of the biggest deals in the last 2-3 years and the attempt by Kraft Heinz to acquire Unilever might suggest there is more to come. Our US analysts have been highlighting big M&A could be in store for 2017 with Kellogg, General Mills and Mondelez all potential targets for Kraft Heinz (2017 U.S. Food Manufacturing Outlook - Solid EPS Growth and M&A Potential Drive Optimism). Our European analysts suggest that all European Food & HPC players with a margin below 20%, and a market cap below USD140bn with no controlling shareholder, could feel the urgency to work on their portfolio and/or cost structure to avoid an unsolicited offer.

doodle Mouselet - isn't the cliché that Rwanda is the darling of the tech sector (maybe with a budding despot, but not Mugabe level).
Mouselet we seem to have diverged from the ROTL, I should probably be quiet and let it reconverge.

Buy all the staples!

wayneJ @BE - would that be 300 thread *Egyptian* cotton? (Just trying to continue the African theme)

Our Beverage analysts think M&A could be a meaningful driver of share prices in the next 12months. They highlight that the global beer landscape is changing fast, creating challenges and opportunities. Heineken has been active on the M&A front for the past few years and there have been several press reports in recent months about potential deals it may consider. On this basis, they think there is a realistic chance Heineken will do more deals going forward.


Buy all the beverages!


Our Health Care analysts are expecting a significant round of industry consolidation in 2017 assuming the new US administration supports a bipartisan repatriation tax plan. They believe Pfizer, Novartis, Sanofi and Merck need to engage in major M&A to bolster organic revenue growth.

BornCynic @waynej - when they demolished the local power plant towers the objection there was that the local seals would all have abortions due to the loud noise........

Buy all the drugs!


In Tech, our US analysts also highlight tax reform (lower corporate tax rates and repatriation tax holiday) could boost stock buyback and M&A activity. They see F5 Networks, Electronics For Imaging, NetApp and Benchmark Electronics as potential targets. Expectations of increasing corporate activity might explain why IT has been the best performing sector so far this year.


Buy all the tech!

doodle can you have a rabble of 1? :P
wayneJ Half of Holland Park is owned by billionaires who have forgotten they have property there. And some of it in shocking state of disrepair.

In Energy, our analysts highlight that Big Oil has started 2017 with renewed confidence with a flurry of M&A deals to finish 2016 – BP (Zohr/ADCO/Senegal), Total (Brazil and more recently Uganda). They see greater divergence across the group with some companies (Royal Dutch Shell, BP, Total) more active in the M&A market during the year. They also think Exxon Mobil might have an appetite for international assets at a time the rest of the industry is more risk-averse.


Buy all the oil!


In Media, our US analysts highlight 2017 can be the year of wireless M&A and the challenge for investors is trying to assess the most likely combinations. In Europe, our analysts think these groups are fairly active behind the scenes, and as the agencies have looked to build up digital/data capabilities via M&A, the consultancies are clearly building up digital marketing/creative capabilities. In the UK, they highlight there appears to be no M&A premium priced into ITV despite reported interest.


Buy all the ITV!

Golly Galoshes Can an animal have an abortion, or does it miscarry? (Farmer's son showing his true colours here)
erlkin Buy til your head caves in......

Chemicals is one sector where our analysts think the M&A deal levels of 2016 are unlikely to carry into 2017 due to higher valuation multiples and fewer obvious opportunities. Regulatory hurdles remain as well. We see a ~2/3 chance of the Dow Chemical-E. I. du Pont de Nemours deal closing, a c50% chance the Monsanto-Bayer deal closes and less than a 50% chance of the Praxair-Linde deal being consummated. However, we think a lack of organic growth opportunities and relatively cheap financing may motivate bolt-on deals to continue in 2017.


Buy all the gunk! Buy buy buy!

Soundbuy Thanet Earth = hydroponics?
Mouselet It's probably because I was reading a biography of Bismarck at about the same time, but when I read about Rwanda I get quite strong thoughts of Prussia.
BornCynic @golly - don't know. The towers came down and the seals are still there.......
Pharma @doodle, you need(ed) 12 or more to read the riot act.
Mouselet Though the world is not in a state where Rwanda can annex half of east DRC and present it as a fait accompli

@DutchBrat, some time about half an hour ago, mentioned Recon Insurance Group.

wayneJ @BornCynic - does Middle England embrace anything beyond the 19th Century?
BornCynic @soundbuy - they are not in soil, more like loft insulation type stuff.
Punter @mouselet - they were good pals. Can recommend Panaf Books biography Kwame Nkrumah by June Milne, can buy online from website. A lot of nonsense written about Nkrumah but not this one. Someone else will have to help on Nyerere.
Golly Galoshes Wayne - you have hit a nail there. I reckon a new political party called NIMBY and opposing absolutely everything everywhere all the time would sweep the boards. (No - I don't think the Tories fit that label)
BornCynic @wayne - personally I think that there is some chemical in the Thanet water supply driving everyone nuts :) Maybe the CIA are experimenting on us.................
Soundbuy @BornCynic - cheers, not so yummy then....
DutchBrat @BE certainly when the CEO says they are in "TALKS" the Panel will want to hear some more

Sorry - Recon Group. Recon Insurance is an unrelated Russian company.

wayneJ @BornCynic - from RED - Frank Moses: Well, he thought he was the subject of a secret government mind control project. As it turns out, he really was being given daily doses of LSD for 11 years.

Recon's Tony Xia.

doug43 Pearson

............ Now, we've heard nothing to link Xia to any names over here.


I'd note in passing that the punters have been showing speculative interest in a few insurance stocks of late.

Mouselet punter: thanks!

QBE, for one.


And Admiral, on which we've written repeatedly.

Punter Stating the obvious I guess but money has been very cheap for a while and Corporates have held back because of "uncertainties", but now world growth prospects look a bit better one can expect loads of M&A
wayneJ Serious point / question - great stuff in the Economist on renewables - putting it together with the FT coverage of wood pellets etc - am wondering if renewables are at risk or whether the integrated large generator model is at significant risk. Also how many of these large scale generators have invested on models extending out 30 years with the wrong assumption on average price, demand growth and wrong interest rate / tax assumptions?
Admiral Group PLC (ADM:LSE): Last: 1,873, down 23 (-1.21%), High: 1,896, Low: 1,873, Volume: 145.74k

Beyond that, nothing to add.

DutchBrat thx
wayneJ Indeed - more generally - how big could the loss of tax deductibility be for eg PE firms - and does that impact the 'bid premium' embedded in some stocks?

"Pearson", says @doug43.


If we must.

Pearson (PSON:LSE): Last: 681.34, up 35.34 (+5.47%), High: 687.00, Low: 625.50, Volume: 5.10m
wayneJ Is there a degree of 'model complacency' in some long duration stocks / investors etc - and is infrastructure a bubble?

Cash beats, as does debt.


There's no 2017 warning either.


There's not a lot of detail on cost savings, nor on whether the divi will be defended .....


......... but a beat's a beat. Hence the rally.


Here's JP Morgan.


In its 18 January trading update the company pre-
announced that it expected to report an -8% organic revenue decline, c£630m of adj operating profit and c57p adj EPS. Our estimates were in line with these preliminary expectations. Today the company announced that group revenues declined organically by -8% (in-line with JPMe), with total revenues of £4,552m (+2.7%/+2.4% vs JPMe/Bloomberg consensus), outperforming as a result of a lower than expected impact from asset disposals in North America as well as a slightly higher FX benefit across the group. Adjusted operating profit came in +0.8% higher than JPMe/consensus/preliminary company expectations at £635m while adj EPS of 58.8p was +3.2%/+3.5% ahead of JPMe/consensus, helped by the higher EBITA as well as a lower than expected tax rate. More importantly today, the company has revealed strong cash conversion of 104%, with net debt ending 2016 at £1.09bn, much better than our £1.25bn estimate. The company has reiterated its FY 17 guidance (which includes adj EPS in a range of 48.5p to 55.5p assuming end 2016 FX rates and no change in the portfolio of assets), and stated that so far early trading for the year is in line with expectations. Last, the company has announced that it will repay $550m of bonds early, and that it is exploring partnerships for Wall St English and the possible sale of Global Education. On our estimates, the shares trade on 13.3x/13.7x 17E/18E P/E




The promise of some small disposals is the only new factor
here. Pearson says it has initiated processes to explore a potential partnership for the English language learning business Wall Street English (WSE) and the possible sale of the English test preparation business Global Education (GEDU). These processes are at an early stage and there is no certainty that they will lead to transactions. In 2016, these businesses contributed £253m of revenues and £3m of adjusted operating income. WSE was purchased for $145m (£116m) in April 2009 and Global Education for $155m (£124m) in November 2011, jointly £240m. The advantage of selling such businesses is that they simplify Pearson and because they are so unprofitable can be sold without eps dilution. We value the whole of the Growth businesses (bought for £1.2bn, but with a £600m write-down in 2015) in our base case at £209m, 11x EBITA .


Overall this statement looks like a holding pattern. The market is most likely to be disappointed that there is no new cost saving plan.

man from dunoon any further news in Boohoo after yesterdays fly-by??????

Which broker made the point last week that Pearson's spent more on cutting costs than it's cut costs?


Was it Berenberg?

wayneJ Selling a loss making business (Pearson) at a big discount to the purchase price - is this a confession that management has failed. Why would a buyer buy unless (s)he thinks current management is poor?

Yes ....


Pearson has already spent £610m on restructuring since 2013, to net cumulative savings of just £586m even before reinvestment

willosaurus @Mouselet - Namibia? No idea of the investment possibilities, but I had a great time there (many years ago) and felt very safe.
chad_john Anything on Cloudtag and what looks to be an implosion?

Given that, perhaps the good news is that there isn't a new cost-saving programme. It's a net saving for them not to save.


@dunoon, nothing to add on Boohoo beyond what was said yesterday, sorry.

man from dunoon ta x

And sorry, @chad_john, I haven't looked properly at Cloudtag as I was too busy researching the gas capacity of manatees.

CloudTag Inc (CTAG:LSE): Last: 3.17, down 1.71 (-34.97%), High: 3.42, Low: 3.09, Volume: 56.92m
A. M. @willosaurus: also useful for CEOs on the run (provided that they invest enough in the local economy).

Looks bad, tho.


Cairn Financial Advisers LLP, the Company's nominated adviser, has served notice on the Company that it will resign as the Company's nominated advisers with effect from 10 April 2017.


Let's not speculate live on that.

willosaurus @A.M. Interesting. Anyone we know?

Cripes, there's not a lot around even for a Friday.

doeswalk rocket yesterday

Sellside company specific, maybe National Express?

Lefevre Going back to yesterday, I can't quite get my head around purple bricks - Woodford owns 29%, isn't there something significant about 30%? With Woodford having so much money to invest, is he just creating share price bubbles in his favourite smaller companies?
National Express Group PLC (NEX:LSE): Last: 352.00, up 2 (+0.57%), High: 361.10, Low: 351.00, Volume: 985.64k

Investec positive.

A. M. Old news from a decade or so ago, I think.
willosaurus Premier Oil having a bad week.

We turn positive to reflect higher expectations from Alsa, increasing capital allocation to more attractive international markets, particularly North America and Germany, and FX tailwinds. We had previously failed to reflect the consistent level of acquisitions in our valuation and the scope to redeploy capital from the challenging UK market. Our SOTP valuation rises from 335p to 385p implying a forecast total return of 17% and we therefore upgrade to BUY.


FY16 Results: Results were better than we forecast at almost every level, due predominantly to outperformance at Alsa, acquisitions and FX. Specifically, we had anticipated that Alsa would lose market share in Spain and that the routes that were retained would see margin erosion. This has not materialised, with routes retained at attractive margins, resulting in a margin of 14.2% compared to our 13.2%. North America was also ahead, predominantly due to FX but also due to 8 acquisitions adding 1,110 school buses and 450 transit vehicles. Underlying EPS were 27.3p including the discontinued C2C franchise in the UK, 7.6% higher than we forecast.
Changes to Forecasts: We increase our operating profit forecasts by 4.0% for FY17e and 2.6% for FY18e. We strip out C2C as it has been sold, knocking about 2% off our operating profits and cut UK Bus by £4m, another 2% negative. We upgrade by 2.3% for FX with the remainder reflecting a more optimistic profile for Alsa, where we now assume a much more modest level of margin erosion of 30-40bps per annum, a full year effect of the North American acquisitions at a ROIC of 15-20% and slightly better UK coach margins. Debt refinancing results in FD EPS upgrades of 7.7% and 5.9% respectively.
Valuation & Recommendation: Our SOTP methodology failed to reflect the potential for increasing market share in newly liberalising rail markets like Germany, Spain and Northern Europe. We also did not reflect the potential for acquisitions, and whilst we do not include them explicitly in our forecast, we now ascribe a terminal market share in Germany, increasing our SOTP to 385p from 335p and therefore upgrade to BUY.

LS @lefevre - company has to submit a takeover offer at 30%
Boncoeur Ello
bones30 Mouselet, you a fan of Xilinx?

......... @Lefevre: in the hope of having a quiet Friday afternoon, I'm going to steer away from saying anything about Purplebricks and-or Woodford.

Lefevre @LS, thanks - a little rusty on the rules. Now that Woodford has less money coming in, as his fund has performed less well recently, does that mean he will stop buying purple bricks? Who else will now?
doeswalk Didn't a payment card services provider have some news yesterday

Though I guess we can mention its sector ........ peer? I guess? Kinda?

Rightmove PLC (RMV:LSE): Last: 4,042, down 203 (-4.78%), High: 4,209, Low: 3,911, Volume: 341.86k

Nick McKittrick's off.


Having done 16 years.

Lefevre @BE, sorry if strayed a little - they do have a funny advert, girl falling into cake...
alewis2005 @chad_john CTAG has been a mess forever, it's just a question of time

Figures looks okay, though you can find a few data points for a bear case if you need one.


Fewer client leads, for example.


Shore's not fussed.


Rightmove has published very strong results for the year to end December 2016. This morning’s release shows revenue, operating profit, and EPS ahead by 15%, 18%, and 18% YoY respectively to £220m (SCF £214.9m) £16m (SCF £159m) and 142.8p (SCF 134.6p). Year end net cash stood at £17.8m (SCF £10m) despite £131m of dividends and share buy-backs reflecting characteristically strong cash (

100% conversion from operating profit) and the full year dividend is being increased by 19% to 51.0p (SCF 46.5p)

Average monthly ARPA for the year rose by a better than expected 12% to a record £842m (SCF £829) and agent / new home numbers increased by 2% to (SCF +1%) – another highly impressive performance given the group’s already dominant market position. Specifically, RMV’s is now listing c.1m properties (1/3 higher than any other portal) and has seen a 10% increase in visits to over 120m with time spend on site ahead by 5%. Further product, software and data innovations have also been introduced to male the property marketplace more efficient and transparent for consumers and customers.

Outlook comments indicate confidence in continued success in 2017, although there is unexpected news that CEO Nick McKittrick (who has been with the business for 16 years) has decided retire. Mr McKittrick will stay with the business until June and will be succeeded by Peter Brooks-Johnson who has been COO since 2011 so a high degree of continuity is expected.

We are long-standing bulls of RMV’s market leading position, subscription driven business model, impressive record of EPS growth and upgrades, and its cash generative qualities. We also expect it to benefit from further structural growth in digital property advertising as the (still surprisingly substantial) proportion of agent spend garnered by off line media continues to diminish. We will revisit our financial forecasts in light of this morning’s results (on a first pass basis we see scope for a mid single-digit FY2017F EPS upgrade). We note that the group’s share price has appreciated by 16% since we upgraded our recommendation to Buy in mid November (+8% rel. over three months), but believe its valuation (FY2017F / FY2018F P/E and DY ratios of 28.9x 1.2% and 25.6x 1.3% respectively based on current forecasts) still offers scope for further upside in light of the trading performance and momentum highlighted evident in today’s results. Buy.

alewis2005 @Lefevre he will have stopped buying purple bricks as soon as he hit 29.x%

Neither's Exane.


In terms of today's weak share price reaction (-5%), we see 3 key contributors.

1/ management change brings risk and well liked CEO Nick Mckittrick is stepping down. Per our earlier comment we see disruption risk as low with PBJ effective deputy CEO for the last 4-5 years (with parallels to the Williams/Mckittrick transition).
2/ negative H216 and Jan-17 lead growth raise concerns over cyclical/competitive momentum. Management argued lead weakness phasing rather than fundamentals. i) Q116 rush for buy to let customers, ii) deliberate changes to drive lead quality (low quality leads hinder agents iii) overall number of customers giving leads remained flat (BTL rush led to more leads per customer). We note traffic growth remained positive.
3/ small fall in estate agent numbers in H216 (-0.4% vs h116) - RMV management argued this almost entirely related to one customer (we suspect Countrywide) and see limited risk going forward (guidance for flattish)
Additionally opex guidance of cGBP60m is c7% above our forecast (in-line with consensus).

Overall, we see scope for low single digit upgrades to consensus EPS from new guidance (with scope for further upgrades if Optimiser continues to perform) and see management transition disruption risk as low. We would buy on weakness.


Hey, look at the time!

LS @lefevre - good question! I have heard others who still think the prospects of purplebricks are still worth buying. @alewis2005 - He could continue to buy in primary market to maintain 29% though.

I think we're done. Thanks for joining us this week.

Boncoeur Bye

We'll be doing the same again on Monday, same place.

alewis2005 @LS good point@BE thanks! good weekend

Perhaps we'll have less trichechidae-related content, but I guarantee nothing.


Until then, ta. Afternoon all.

Longandwrong bye
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Bryce Elder
Bryce is a sporadic Alphaville contributor and has been the FT’s UK equities reporter since 2008. Before that he wrote about UK equities at Morningstar. Before that he wrote about UK equities at The Times. Before that he wrote about UK equities at Bloomberg. Before that he wrote about UK equities at AFX News. Before that he did not write about UK equities.

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