Thursday 26 May 2011

BP Directors' dealings: "Elevator man buys BP shares" (Sharecast)

Only just noticed this piece of news reported on the 24th May that:


"LONDON (SHARECAST) - Non-executive director George David bought more than £800,000 of shares in BP yesterday, the oil giant announced today.

He bought 30,000 American Depositary Receipts (ADS), which is equivalent to 180,000 ordinary BP shares. He paid $43.99 each for half of the ADSs and $43.98 for the other half.

David, an American, joined BP in 2008. He is a member of the chairman’s, the audit, the Gulf of Mexico and the remuneration committees. He has previously worked with management consultant The Boston Consulting Group and elevator manufacturer Otis. Following Otis’s merger with UTC in 1977, he moved up the ranks, becoming chief executive in 1994 and chairman in 1997, before he retired in 2009. "



Quite interesting from a timing point of view and given Mr David's memberships!
Is there any significance to the purchase? Well, it does depend on what your view of Directors' dealings are.
The theory runs that:- Directors are much closer to a business than you or I and should have a strong business acumen to apply to their understanding of the business and its metrics.
There are also some timing advantages as they are privy to period performance reporting that we might not see until published in quarterly trading statements or interim and full year accounts.
And, if already drawing a salary and executive share scheme benefits (Mr David is a non-exec), why would they place more of their personal monies at risk without expectation of reward.
It is obviously a difficult line to tread though, in order to steer clear of "insider dealing" accusations.


Looking at the timing of his last purchases:
- 29th October 2009: 30,000 shares @ 585p, and
- 29th March 2010: 112,890 shares @ 569p
these were made during a sustained uptrend which saw BP shares rise to their approximate 650p peak just prior to the Deepwater Horizon disaster.


So, coming back to the purchase then, its a positive for me that such a significant investment (£818,000), has been made by a non-exec Director at the current time.


Now, if just a few more of the Board would follow suit.



Article links:
www.sharecast.com: Elevator man buys BP shares

Monday 23 May 2011

Weekend rumours: Morrisons to raid Iceland!

Thats the store not the country although it is the Icelandics who are selling their 67% stake.


Morrisons @ 298.3p,-10 (-3.24%)


Not much enthusiasm for Morrisons today albeit on a bad day for the FTSE100. 
Probably more to do with market falls rather than the weekend news that the company is mulling over a possible £1.5bn bid for Iceland which, makes it difficult to see how the market views the news.


The group has 750 stores and 22,000 employees, and last year made profits of £184.3m on £2.2bn of sales.


The founder and former CEO of Iceland, Malcolm Walker also retains a 26 percent stake and is thought to be planning a bid of his own as the current 67% owners, Lanbanski, seek to raise funds.
There is also the possibility of a management buy-out as the chain's existing management will have the option to match any offer.


Its early days yet but I have read comments like:
- aggressive move by the new CEO Dalton Philips to increase the company's 12 percent market share.
- expanding beyond Yorkshire roots (strange I thought that eating the elephant that was Safeways achieved that?)
- it being a means to accelerate its smaller format roll-out.


A few worries for me which centre on another "bold" bid by Morrisons to increase market share. The last one took years to absorb and destroyed the reputation of "Master grocer" Sir Ken Morrison. 
I also wonder how much of that learning experience has been retained? The last CEO, Marc Bolland, was given plenty of credit for finally turning it around (right place, right time perhaps) but his replacement, Dalton Philips has only been in place for "5 minutes".


The risks need to be properly considered for me. 
I understand the opportunity to cross sell, or even cherry pick the best sites, but I would suggest that Iceland has its own distinct customer base (do Morrison's understand them?), and then there is the problem of integrating 2 distinct supply chains.
Morrison's has only recently announced its plan to trial a convenience store format with its preliminary results (Morrison's Preliminary Results: "Different and Better than Ever"?) which, to me, seemed quite a prudent approach when you are late to the party so to be now considering such a big splash would seem to reckless to me.


I know that there is always pressure (sometimes self imposed), to make an impression and justify your appointment but I also think that many of Morrison's long term shareholders would be grateful for some stability and organic growth (in the Safeway portfolio) based upon Morrison's "traditional" values particularly given the unforeseen roller coaster of the last few years and the loss of 2 CEO's in that time.
The company should already have plenty on its plate with its recent acquisitions and declared plans to create an online offering. 
I appreciate that this is a on a smaller scale to Safeway's but, will they now stretch resources further and risk destroying shareholder value again?


Finally, and most striking for me, it again calls into question the £1bn share buyback announced in the preliminary results. 
With just £245m on its books, will Morrison's now turn around and call on shareholders with a rights issue? or increase its moderate gearing of 20% with more borrowings?
Different circumstances but a rights issue would call to mind RBS announcing increased profits; upping its dividend; and then asking for the cash back with a rights issue!


To date, Morrison's have declined to comment on the speculation.


For me, I am hoping that it is a rumour (with little basis) being put around by deal makers fishing to find a buyer for Landbanski by appealing to vanity.


Fingers crossed.


Related Articles:
www.guardian.co.uk: Morrisons weighing up takeover bid for frozen foods chain Iceland
scotsman.com: Morrisons 'eyes up bid for Iceland chain'
www.dailymail.co.uk: Iceland bid in southern expansion push


Related Posts:
Morrison's Preliminary Results: "Different and Better than Ever"?
Supermarket Sweep: Tesco; Morrisons; or Sainsburys?

Scottish & Southern Energy Preliminary Results

Scottish & Southern Energy @ 1327p, - 14 (-1.04%)


Down today (with the markets) but, Scottish and Southern (SSE), another UK utility from the Virtual Portfolio, also revealed preliminary results last week.


- Revenues of £28.334bn (+31%)
- Pre-tax profits of £1.3bn (+1.6%)
- Cashflow per share of 183.5p in excess of earnings per share of 162.2p
- Cash at bank of £476.9m (2010: £261.7m)
- Full year dividend of 75p per share (+7.1%)
- Dividend cover of 1.5 times
- Stated intent to increase this years dividend by RP+2% and RPI plus going forward.


- Average net debt of £5.891bn (2010: £5.292bn)
- Net gearing of 98% (2010: 185%)
- Net interest payments of £256m (2010: £265m)
- Interest cover of 7.3 times



"Its corporate credit ratings are now:
'A-', with a 'stable' outlook (Standard & Poors; reaffirmed in June 2010); and
'A3' with a 'stable' outlook (Moody's; reaffirmed in July 2010)."


Nice and clear corporate objectives:
"SSE's key financial objective is to deliver above-inflation increases in the dividend every year, and this has again been achieved. SSE is one of just six FTSE 100 companies to have delivered real dividend growth every year since 1999, when the company paid its first dividend," trumpeted Lord Smith of Kelvin, the chairman of SSE. 


The results do seem to celebrate the company's record on dividend returns for shareholders (this being the 12th successive year of above inflation increases) but balances it with efficiency, the environment and customer service targets.


Slightly concerning is the drop in powers station availability on:
- Gas stations - 88% from 94%
- Coal powered stations - 84% from 92%


and, lost minutes to customers from:
- Scottish Hydro 78 minutes from 74 minutes
however, Southern Electric improved slightly to 64 minutes from 65 minutes


The company also announced two acquisitions related to the generation of wind power: the first a manufacturer of towers; and the second a wind farm. 
Wind power still seems to be a questionable technology (for large scale generation) to me based upon its not so green credentials (rare earth metals mined in China for Neodymium magnets).
Is future growth really going to come from wind power?


Lots to like about the company with its clear objectives and commitment to shareholders. Finances seem to be going in the right direction: gearing down; interest cover up; cash up; dividends up.


Some concerns about future growth then (will it just come from volumes?); and wind power which now contributes 1,900 megawatts to SSE's 11,000 megawatt capacity.


SSE has often been touted as a target, as most UK utilities are, due mainly to the UK's inability to "protect" its key industries. As it stands most of the UK's utilities have already been taken over by foreign companies (I wonder what that says about UK margins as well as the lack of protectionism).
Is there a takeover premium in the SSE share price? At a forecast price to earnings ratio of 11.6 times there doesn't seem to be.


There isn't a published ex-dividend date as yet but, taking last year financial calender as an estimate, SSE's shares went ex-dividend on the 28th July (payable on the 24th September).


The shares are forecast to yield 5.8% for the current year, climbing to 6.1% in the year ending 2013. So, from a dividend point of view I am still happy to hold. 
And, at the current price of 1327p, the shares have so far produced a 15.3% capital gain and a dividend return of 8% - making a total gain of 23.3% for the portfolio which, for 16 months, I am quite pleased with.


www.sharecast.com: SSE trumpets its dividend growth
- preview.bloomberg.com: Scottish & Southern Profit Rises on Regulated Network Sales
www.sse.com/Home

Millionaire for a weekend!

Well, for a whole weekend there I was a millionaire!
Not through any skill or luck of mine (chance would be a fine thing) but logging on to my dealing accounts on Saturday I noticed my account showing a total in the millions which after a quick look at the detail was down to a fault (yes I know but one can hope), with the share price of Rolls-Royce to do with a decimal point.
In this case Rolls' share price was 63500.00p instead of 635p. But hey, whats a couple of decimal places between friends.
Unfortunately, logging on this morning it looks like the fault is being corrected as I write so I am a pauper again. Left with only the memory and a screen shot of my former wealth.
I suppose that I will have to give back the yacht and cancel that order for a Rolls-Royce!


On top of this disappointment, I see that the FTSE100 is under pressure with a 94 point fall this morning.
Whats behind it? (apart from fear and speculation of a quick buck). Sounds like falls in the oil price are dragging commodity stocks down with it and elsewhere, continuing (rather than more), concerns around European debt (I notice that mass protests were starting in Spain in the weekend news).


One piece of good news is that Gordon Brown is slipping down the list of contenders to replace Dominique Strauss Kahn, the former IMF President. 


FTSE 100 @ 5854.09, - 94.4 (-1.59%)

Sunday 22 May 2011

National Grid preliminary results y/e 31 March 2011

National Grid @ 632.5p, +10p (+1.61%)

Lots of momentum with National Grid in the last week as the company released its preliminary results for the year ending 31 March 2011. Nice to see new 52 week highs on Friday as the shares topped out at 635p intra day.

Written under the banner of Solid performance:
- Revenues of £14.343bn (2010: £14.007bn)
- pre tax profits were up 25% (earnings per share are only up 4% as a result of adjustment to the previous year to reflect the rights issue and the issue of scrip dividends).
- returns from the US up to 8.2% (+130 basis points).
- Operating cashflow up by 12% to £4.7bn
- Cashflow per share of 138.36p well in excess of earnings per share of 711
- a record capital investment of £3.6bn
- net debt now stands at £18.7bn (2010 £22.1bn) following the £3.2bn rights issue. Interest cover has fallen slightly to 3.8 times but is still comfortably higher than the stated target range of 3 - 3.5 times
- a dividend increase of 8%  to 36.27p per share for the full year
- dividend cover of 1.95 times


The company did point out that part of the boost in profits was contributed to by the timing of payments which carried over into the last financial year from previous years which might help to explain profits being ahead of expectations despite revenues being below expectations.

Good to see that the £3.2bn rights issues has reduced net debt and financing costs as per its objective. I would normally like to see more cash on the books but this is a company in a regulated industry so is more dependent upon cash-flows than companies in other industries and it is this surety of cash-flow that enables "utilities" to take on borrowings to hopefully re-invest at a better margin.
That regulated element (RPI + X regulatory allowance) is predicted to add £180m to UK revenues in the coming year (UK regulated being 58% of total revenues). 


Unfortunately, US revenues are not index linked.
And, as a result, the US, with its state by state politics has proven to be much more difficult for National Grid to work with and returns remain below what the company can achieve in the UK.
Consequently, the company recognises that it must now focus on efficiency savings to increase US returns and continues to take steps towards this with $200m achieved ahead of plan and a further $200m targeted for this financial year through management and administrative reductions.

The preliminary results seem to underline a commitment to the US operations but a segment in this weeks Mail on Sunday suggests that the company is considering the sale of its Niagara Mohawk Power subsidiary (serving New York) for £1bn (see article: www.thisismoney.co.uk: National Grid eyes £1bn US sale). 
Niagara Mohawk forms approx. 25% of the company's US portfolio.

For some time now, the company's struggle to make suitable returns from its US investments have been a concern for shareholders. As a result, there are those who have previously suggested that the company divest itself of its US operations rather than pour excessive amounts of time, energy and investment into them with the risk that it might not achieve the desired result.
In turn the proceeds could be used to reduce the company's debt


Looking forward the company is looking to maintain its strategy and expressed a positive outlook for the year although comparatives might be affected by the timing differences that boosted this last financial year.


For the Virtual Portfolio, National Grid is a big player. At 18.6%, it is the second largest holding in the portfolio (April 2011: Portfolio Update), and has delivered a capital gain of 16.54% and a further gain of 7.9% in dividends. 
24.44% in total.
I also see them as a significant element of the Value and Income side of the portfolio for the next few years, with a forecast dividend yield still in excess of 6% at the current share price.


The shares are also due to go ex dividend on the 1st June, with actual payment on the 17 Aug. 
At 23.47p for the final dividend this is a further 4.3% of gains although this will initially come off the share price on the morning of the 1st June.


National Grid @ 632.5p
Final dividend of 23.47p payable on the 17th August (Ex dividend 1st June)

Related articles:

Related posts:


Saturday 21 May 2011

Finally some good news for BP.

Some good news at last for BP as one of the company's "partners" in the Deepwater Horizon disaster has reached a settlement with BP.
The company, Moex Offshore, a subsidiary of Mitsui, held a 10% stake in the venture, and the settlement will see them pay $1.1bn to BP.
BP made clear in its announcement that the settlement is not an admission of guilt but goes some way to recognising the findings from the presidential commission that identified a number of separate risk factors that contributed to the overall disaster.
It is also being speculated that the settlement is about half of what BP might have been seeking in its lawsuit (itself a counter suit to a Moex lawsuit) but obviously heads off what might have been years of suits and counter suits between the two companies whilst also starting to rebuild bridges between the two.

BP went onto announce that the $1bn would go straight into the $20bn trust raised by BP "to meet individual, business and government claims, as well as the cost of the Natural Resource Damages from the explosion on the Deepwater Horizon rig."

BP's CEO, Bob Dudley applauded the Moex decision by saying that "Moex is the first company to join BP in helping to meet our shared responsibilities in the Gulf, and Mitsui, through Moex USA Corp, is showing great corporate citizenship in standing behind its affiliate and making a contribution to meet the costs of this tragic accident".

Dudley also took the opportunity to reference its remaining partners in the venture and called on them "to follow the lead of the Moex and Mitsui parties.”



Elsewhere, but along the same lines, Anadarko shares also moved up on Friday on speculation that they might also be considering a settlement of claims with BP at a level less than current estimates. 
Anadarko, owner of a 25% stake in the Macondo well, have previously refused to participate in clean up costs standing behind their claim that the disaster is down to BP's negligence.
Hopefully, this might signal some thawing towards BP from its venture partners which, as mentioned earlier might go some way to rebuilding bridges, whilst also contributing to the financial settlement, and recognition that, potentially, BP is not solely responsible for the human and environmental disaster that took place in the Gulf of Mexico.

Finally, it is always interesting to understand FTSE100 weightings and a report from Reuters on Friday ( www.reuters.com: BP pushes FTSE up on spill payout) suggests that a rise of 3.7% in BP on Thursday (about 16p), added 13 points to the FTSE 100.
Its also nice and very positive to see the various broker/analyst upgrades now that some of the uncertainty has been removed from the shares with the Moex settlement (and possibly more); and an assumed sum of the parts valuation of 600p.


The only way is up then. Lets hope so but don't hold your breath!

Thursday 19 May 2011

Renishaw and Global Economic recovery!

Renishaw @ 1650p, +5p (+0.3%)


Just taking another look at Renishaw. A company at the forefront of metrology (the science of measurement) and serving major industries such as Aerospace; Automotive; Science; and Medicine.

The company released a 3rd quarter interim statement yesterday which seems to further underline the company's recovery that was initially highlighted in their 2nd quarter statement in January and led to a significant 1 day jump in the shares.

Highlights were:
- Revenue of £75m up some 60% on last years 3rd quarter
- £32m of sales in March alone
- sales up 95% in the 9 months year to date
- net cash balance of £35.3m
- significant demand from the Far East and China
- forecasting profits slightly ahead of expectations.

One has to remember that the comparables are weak having just come through the recession of the last few years.
But, if it was my company I would be looking to surprise on the upside so by modestly stating "slightly ahead" will the company now proceed to delight the city and its shareholders!

Looking back Renishaw ploughed a trough of 273p in March 2009, as its global markets imploded in the aftermath of the credit crunch, but has since made a steady recovery that has begun to accelerate over the last 6 months and the share price now stands at 1650p.
Management took some tough decisions to survive that period and to their credit the workforce appear to have supported them.

Recruitment is also worth noting with the company's headcount having increased by 285 to 2384 and there are a further 293 vacancies to fill.
In March 2009, the company released 500 of its then 2240 staff.
Similarly, with strong activity levels being seen in its markets the company has also increased its working capital/ inventory.

There is an obvious risk in this jump in headcount and inventory but the company can only plan/invest in what it has confidence in, and the rest is down to capable management.
Has the company got capable management? It seems so to me: the company has grown strongly; tough decisions have been made in the last few years; and the company does have a level of prudence in its accounts.
Cash balances are increasing and there are no "borrowings" showing in the balance sheet. There are increasing liabilities but these are not shown as borrowings and no interest payments are running through the profit and loss.
However, other liabilities (both current and non-current) are increasing and it would be useful to understand what they are and the risk that they pose should they be called in.
The 2 founders: Sir David McMurtry (Chairman and CEO) and John Deer (Deputy Chairman) retain a strong majority stake in the business and it could be that they themselves are the "other liabilities".

Like one or two other companies, Renishaw is an essential to the markets its serves but by the same token when those markets contract, Renishaw also suffers. In this way it is often seen as a gauge to recovery in those markets and sectors it serves as investment in capacity generally comes before customers can increase production to meet global demand.
As a result, one can often "speculate" the future based upon optimism in the global economy in much the same way as commodity prices are based upon "speculated" future demand from such as China and India. Increasing demand against supply limitations pushes the price up as it does with any "marketplace".
Charter International, with its leading ESAB welding and cutting business, is in a similar category if not quite at the same level of uniqueness as Renishaw. In the case of both companies, any expectation of recovery and growth in their global markets will significantly boost the speculated "prospects" for profits and the share price.

The reason for my talking speculative is to highlight the risks involved as at 1650p the company is on a forecast Price/Earnings of 19.5 times and that itself is in expectation of a profit increase of 166%.
Renishaw has generally been a desirable, high flying company so I wouldn't be too concerned (or too excited) about the forecast 166% increase in profits (due to the weak comparables) however, looking at a different comparable, a 166% jump in profits would be approx. double the levels achieved in 2006 and 2008.

But, with 9 months of the current financial year now accounted for the company is giving guidance that it will slightly exceed expectations!

Looking beyond the current financial year, it depends where you believe the global economic recovery is. 
China, India, US, UK, Japan, and Aerospace, Automotive, Scientific, and Medical; are all recogniseable high growth sectors and regions that have, and will drive economic recovery and Renishaw's prospects.
At 1650p, and a P/E of 19.5, recovery and current year profits growth would appear to be priced in but what happens beyond that? 
The current consensus if for a 12% increase in profits for the year ending 2012. 
I would suggest that this in itself is not enough to support the share price at these levels, but also speculate that the company has the potential to exceed this as customers re-invest and replace older technology.

Renishaw is in a unique position of rendering its own technology obsolete as it develops new ones. As one would expect, It maintains ongoing support for its technology but eventually replacement/updating is required.
However, the key factor is whether there is enough global demand to ensure that customers "invest" in new capacity and/or replacement.

So lots of speculation beyond the current financial year but Renishaw's recovery does potentially give a strong indication as to where the global economy is in its recovery cycle.
If investment in capacity/replacement is taking place at a significant level in the markets Renishaw serves then these industries could have turned a significant corner in their own recovery and are potentially stepping up investment to meet an anticipated increasing demand.

As to Renishaw as an investment, it is a desirable company for me with patented market leading technology, and capable management, but I have probably missed out on the opportunity presented over the last 12 months by not recognising the strengths and qualities of the company; and its position as a forerunner in the economic cycle of the markets it serves. 
From a growth point of view, the current 2 year picture that I have isn't enough of an enticement either although it is going through its own investment in capacity and working capital which, once supply catches up, might still lead to improvement in its other metrics such as: profit margins; Return on Capital Employed etc.
The threats continue to be around any slowdown from its markets (and China in particular as they combat inflation), or in the timing (and success) of R & D spend which has historically averaged 18% of turnover (2011 forecast turnover is £272m. 18% of which would be £49m).

What I should also have recognised as a strength was its take-over potential should the company not have been able to manage its way through the downturn.
The company's net asset value is only 178.61p per share but it is the unquantified potential and demand for its patented technology, and its in-house manufacture (retained knowledge and capability), where the value really is (but this is speculation again).

In summary then, on a 2 year view and at the current price, an investment in Renishaw wouldn't fit into either: the Value and Income side of my portfolio; or the Growth side. 
And, even though I think that Renishaw will continue to grow and maintain their position, they aren't a share for me yet. But, I do also think that the company's recovery is a strong signal that global recovery may be entering a new phase.


Wednesday 18 May 2011

Rolls-Royce A380 update.

A Reuters article published today (link: www.reuters.com: Rolls-Royce pulled 53 engines after blowout-report), suggests that Roll-Royce removed a total of 53 Trent 900 engines from service following the Quantas A380 incident.


The article sourced from the interim report published by The Australian Transport Safety Bureau's (ATSB), does not state for certain that the determined fault was present in the 53 engines only that it could not be determined that the fault wan't present.


Elsewhere, for interest, I stumbled onto this video clip: news.ninemsn.com.au: Video shows lightning bolt strike Airbus A380 of a news report focussing on an A380 being hit by lightning which, apparently, is a common event (to all aircraft). It is also a more probable occurrence than being struck by lightning whilst on the ground although, I guess that would be obvious when you are flying around in a storm!
Slightly strange how an Australian news station has a video clip of an A380 flying into Heathrow though. I don't recall having seen, or heard anything of it until now. 
I must not be watching the right channels or perhaps, it just hasn't come up on one of those £250 for a home video programmes yet.


Elsewhere, Rolls-Royce and Daimler announced yesterday that they had upped their joint offer, for the diesel engine maker Tognum, to 3.4bn Euro's (£2.97bn). 
As a result, with management backing now in place the deal is expected to go through.


Personally, I am still not sure how this fits into the Rolls-Royce portfolio unless there are applications to the marine side of the business with its own successful diesel engine on the market. 
Similarly, a joint ownership with Daimler?
And, with the shares falling 13p yesterday there are probably one or two other shareholders wondering about the deal, or the increased offer.


Addendum (added at 18:37pm).
Just looking on the Tognum website: www.tognum.com, where it seems they have quite a varied portfolio of products: engines; propulsion; and distributed energy systems. 
These are distributed through into 2 business units: Engines; and Onsite energy.
In addition, the Engines unit supplies to: Marine; Industrial; Oil and Gas; and Defence.
So there does seem to be a fit into some of the "potential" in Rolls-Royce's less documented markets.




Related articles:
www.reuters.com: Rolls-Royce pulled 53 engines after blowout-report
news.ninemsn.com.au: Video shows lightning bolt strike Airbus A380
www.express.co.uk: ROLLS-ROYCE RAISES TOGNUM OFFER
www.telegraph.co.uk: Rolls Royce snaps up Tognum for €3.4bn




Aviva update

Aviva came back to the market yesterday with an interim management statement for its first quarter period ending 31 March 2011.


All seems to be good news at this point with:
- a 20% rise in sales to £1.09bn (over the same quarter last year) which represents the 5th consecutive quarter of increased sales.
- 580,000 new motorist customers added in those 5 quarters bringing the car insurance client base to 2,000,000.
- average premiums increased by: 24% on car insurance; 6% on home insurance; and 10% on commercial business.
- an extension to 2016, of its UK distribution contract with HSBC along with the added bonus of being the banks preferred strategic partner across mainland Europe.


Apparently, the Paul Whitehouse led advertising campaign has been a success as well.


I also assume that the increase in premium is not isolated to Aviva as the industry has for some time now warned that premiums would be increasing particularly after a number of natural disaster and trends affecting claims. 
Alongside the obvious natural disasters, I am thinking new entrant price wars, and the growth of the claims (particularly with motoring) related to organised fraud.


Highlighting one decreasing number, the company did declare a fall of 14% in its new life insurance business as the company executes its strategic intent to rotate out of less profitable areas/regions into its established core marketed regions.


Strangely the company did also refuse to comment on the progress of its plans to sell the RAC, which it purchased in 2005 for £1.2bn.
Does that suggest that there are few takers in the current climate, or that the sales may not recover the £1.2bn that Aviva paid for it? 
We shall have to wait and see.


Another spot of good news came with the statement that Aviva "has no exposure to the recent natural disasters in Australia, Japan and New Zealand, which have landed the insurance industry with a $30bn (£18.5bn) bill."

Possibly more by luck than any powers of prophecy I would suggest, but it is good news nonetheless.


So, with Aviva @ 436.4p, +0.8p (+0.18%) the share price is:
- up 48% on its 52 week low of 294.2p
- 9.5% away from its recent 52 week high of 477.9


The shares continue to trade on a forecast Price to Earnings ratio of 7.5 times with a forecast yield of 6.2% and the cash balances, closing at £25.455bn for the last financial year, have almost doubled in the last 5 years.


In the last Annual accounts, the Cashflow per share at 64.91p was higher than the declared earnings per share of 55.1p (but with insurance premiums generally being collected prior to services being delivered I would have expected this).
The dividend is more than twice covered by earnings which gives some comfort that they will continue to pay it.


So, the investment in Aviva seems to have performed as expected without ever seeming to have become overextended. In fact, with the potential for more capital gains and a chunky dividend, it continues to look like an opportunity to buy some and lock them away for the next 5 years.
There will always be the risk of exposure to market declines; increasing financial regulation; and natural disasters (the nature of the industry I'm afraid), but, if the management is capable then then it will manage its cashflows and cash reserves through these dangers.
As it stands, premiums are increasing, and with this just being the 1st quarter, there is potentially a solid increase to full year profits to look forward to. One step at a time though!


How has Aviva performed for the portfolio then?
Well, at 436.4p the shares are currently showing a 16.23% capital gain in the virtual portfolio.
And, having just paid out another dividend today, they have also yielded a further 5.5% which gives a total gain of 21.8%.


Should we see a pull back in the market over the next few months I might actually be tempted to add some more to the portfolio although my preferred option would still be to diversify by picking up some other quality blue chips (with good yields) providing essential products or services, such as pharmaceuticals, telecoms; and consumer goods.


Related articles:
www.guardian.co.uk: Aviva raises insurance premiums – but gains customers
thescotsman.scotsman.com: Aviva continues sales successes
www.independent.co.uk: Aviva's UK sales motor ahead


Related posts:
April 2011: Portfolio Update
Arriba Aviva

Tuesday 17 May 2011

New Template and Indices Gadget

You may have noticed a few changes to the site with a new template and a new indices "gadget" on the right hand side of the page.
Hopefully, the site is still readable for everyone but I thought that the gadget might need a little explanation:
The tabs:
- UK for the FTSE 100; 250; All share; Small cap; and AIM
- World for the Dow; Nasdaq; Dax; and Nikkei
- Forex for £/$; Euro/ £; Euro/$; $/Yen; AuD/$


Selecting an index by clicking on the numbers (not the index name) brings the relevant chart up (if available).
The charts themselves are live and moving the cursor over the plotted data will display the value at that point.
There are also coloured tags showing:
- green - period high
- grey - period starting point
- blue - current value
- red - period low


In the top right hand corner, the chart period can also be changed between: 1 day; 1 month; 6 months; and 1 year, with the same functionality available.


Finally, clicking on one of the index names will bring up a new page on the Markets section of The Telegraph website where the same indices are shown but where there is functionality to view the constituents of the UK indexes with various functionality such as:
- Summary - daily price movements
- Prices - the price change over various periods up to 6 months
- Trade data - current bid offer spreads
- Fundamentals - P/E; yields etc
- Financials - Reported profits etc
- Broker Recs - Consensus of broker recommendations
- Directors Deals - value of directors deals in various periods up to 12 months (assume that the value is net?)
- Broker views - current recommendations


There are also some other toys along the tabs such as stock screeners; heat maps etc


Might be useful as a quick reference point.

BP: Rosneft deadline not extended.

BP @ 442.65p, +4.2p (+0.96%)


Interesting to see BP up on confirmation that Rosneft have elected not to extend the deadline for he exploration and share swap deal (see: www.sharecast.com: BP-Rosneft deal off, but talks continue.)
BP's CEO Bob Dudley also confirms BP's commitment to Russia and desire to extend the relationship with Rosneft with ongoing negotiations
Meanwhile, the Chairman of AAR (the aggrieved partner in TNK-BP) Mikhail Fridman, also commented that they wish to continue collaborative discussion with BP and Rosneft.


All a bit too little, too late and continues to leave me wondering about a CEO that might not be up to the job. 
Depending what your view is on the leaking of information: on the 13th January (the day before the Rosneft tie up was first announced) the share price of BP was 503.7p which was just about its highest level since the Gulf of Mexico disaster. 
The company also had a nice shiny new CEO that hadn't been tried out.


The subsequent events and performance since the 14th January announcement also serve to confirm that markets really don't like uncertainty. 
But, although its not certain that BP will soon retrieve those levels seen prior to this saga, given the questionable performance of management, at least Rosneft have resolved one uncertainty.




Related articles:
www.sharecast.com: BP-Rosneft deal off, but talks continue
www.guardian.co.uk: Deadline expires for BP and Rosneft to save Arctic alliance


Monday 16 May 2011

BP's Russian Roulette.

Fingers crossed but there looks to be a slight optimism that BP might finally resolve the Rosneft tie-up and the fall-out with its Russian partners in the TNK-BP joint venture.
Various snippets over the weekend suggest that Rosneft could still agree to a new deal that includes TNK-BP and therefore the Russian Oligarch partners or, as reported on Bloomberg this morning: www.bloomberg.com: BP Said to Seek Buyout of TNK Billionaires to Save Rosneft Share-Swap Deal, BP is possibly lining up another bid to buy-out the TNK-BP joint venture.


It should still be noted that this would hinge on BP being allowed to own more than 50% of the venture as it is a non-Russian company!
Still not sure why no-one seems to be considering Rosneft to buy-out the 50% share of TNK-BP owned by the Oligarchs. Although, that would still cost Rosneft £30bn that wasn't part of the original agreement.
As it is the popular view is that the subsequent fall in BP's share price since the agreement will now cost the company around £1bn if the share swap goes ahead due to the lower valuation.


Lets hope that BP's CEO Bob Dudley stays away from the current negotiations although he seems to me to be a bit of publicity seeker for all of the wrong reasons.


BP @ 439.6P, - 2.6 ( -0.59%).


Related posts:- 
BP 2011 1st quarter results.
BP: Gulf of Mexico Anniversary; lawsuits; and 1st quarter results due.
BP AGM Thurs 14 Apri