William Hill 2012 Interims: Top ranked Apps and online business.

William Hill @ 311.1p, +20.70p (+7.13p).

William Hill surged to new 52 week highs of 316p on Friday before settling back to close at 311.1p.

The catalyst on this occasion being the company's interim results announcement:

Key points:
- Group net revenue +11% and Operating profit1 +14% with innovation and investment driving market share gains by William Hill Online
- Good Retail performance drives +5% net revenue growth in both over-the-counter (OTC) betting and gaming machines, and Operating profit1 +6%
- Outstanding William Hill Online performance with Sportsbook turnover 33% ahead of H1 2011, overall net revenue +30% and Operating profit1 +23%
- Mobile Sportsbook turnover up +390%, 28% of total Sportsbook betting in June via mobile
- Basic adjusted earnings per share and dividend +17%
- Nevada licences awarded to William Hill and William Hill US formed through completion of three previously announced US land-based acquisitions
- International expansion continues with award of online licence in Spain, launch of Spanish regulated site (www.williamhill.es) and expansion of Italian regulated site (www.williamhill.it)
- Continued strong cash flow from operations reduces net debt for covenant purposes by £61m to £355m against 27 December 2011.

Very positive increases to revenue (+11%), and profits (+14%) but of significance is the continued increase in online revenues which advanced 30%.
Coincidentally, online revenues now contribute about a third of overall revenues (Online £198.4m and retail £417.4m), with CEO - Ralph Topping commenting that "The William Hill Sportsbook app, which has been top-ranked since its launch in the Apple App Store in mid-February, has delivered more than 40,000 new customers".

With cash balances jumping to £197.3m in the six months since the company's Dec year end (2011 FY: £114.3m), and borrowings remaining steady (remember that there have been acquisitions), the resulting net borrowings figure is £274.2m giving a net gearing figure in the region of 28.44% (2011 FY: 39.01%).

Pleasingly this maintains a very strong debt reducing trend and highlights the strengths and profitability of the company's cash flows.
Putting this in perspective, the 2008 full year reported £1.154bn of borrowings and a net gearing of 464.99%.
So the borrowings figure represented almost 5 times the company's net assets in 2008 whereas today the company's net assets are almost 4 times the borrowings figure.

This growing financial strength has also enabled the company to announce an increase of 17% to the interim dividend which in the 2011 full year results was covered 2.52 times by earnings.
As with Rolls-Royce it is disappointing to see such a long timescale from the declaration date (27 July), to the ex dividend date (24 October), before finally becoming payable on the 7 December.

A strongly improving trend then which has seen the share price gallop up to 311.1p.
311.1p rates the company on a forecast pe of 11.5 times consensus earnings and a yield of 3.7%.

Looking ahead the company continues to invest in its burgeoning online operation as well as expand internationally through acquisitions in the US (Nevada), Spain, and Italy.

Of course there are risks, not least of which is the economic situation in Spain and Italy. But the Nevada move in particular could prove significant giving the company a foothold in the US ahead of any online de-regulation.

But, to date, William Hill has performed handsomely in my portfolio (June 2012: Portfolio Update.), with a 31 month share price gain of 81.94% and a further 13.39% in dividends. Total gain - 95.33%.

So a share on the gallop with some racing left in it... I hope!

Related article links:
- www.williamhillplc.com: William Hill PLC - Interim Results
- www.williamhillplc.com: William Hill PLC

Related posts:
- June 2012: Portfolio Update.

- 2012 Dividend bull period update (to the update!).

- William Hill still running.

- William Hill - first past the post?

Rolls-Royce powers up the half year with 2012 interims.

Rolls-Royce @ 875.5p, -9.5p (-1.07%)

Rolls-Royce added its own jet powered boost to the FTSE's bounce on Thursday with a 56p gain on the day to 885p.
And despite a little breather on Friday when the share price gave up 9.5p to end the week at 875.5p it demonstrated a positive reception of the company's half year statement and the counter cyclical strengths of the aerospace industry with its established long lead times for investment.

Group Highlights:
- Order book of £60.1bn, up four per cent.
- Underlying revenue of £5.8bn, up five per cent.
- Underlying profit before tax of £637m, up seven per cent.
- First half payment to shareholders of 7.6 pence per share, up ten per cent.
- Completion of sale of share holding in International Aero Engines AG (IAE).
- Full year Group guidance confirmed.

Despite a seemingly subdued Farnborough, the company announced an increasing order book which now stands at £60.1bn!
This is reported net of the IAE stake sale.
Given current annual revenues of £11bn, that is approximately 5.5 years worth of orders give or take some movement between divisions: Civil; Defence; Energy; and Marine.

Revenues up 5% but profits were up 7% suggesting some benefit to profit margins which the company explains as "reflecting revenue growth, revenue mix, unit cost reduction and the contribution of Tognum".
My favourite net cash figure came in at £869m up from the 2011 year end figure of £223m following cash inflows from the IAE stake sale and the usual ebbs and flows of capital investment etc.
£869m is down on the 2011 half year figure though, which was £1451m, but this looks to be the result of the cash purchase of Tognum (50:50 joint venture with Daimler).
The company also suggests that Balance Sheet cash and equivalents is in the region of £3.15bn giving it plenty of opportunity firepower and control over its credit needs.

A 10% increase, to 7.6p, for the interim dividend which will be distributed in the form of C shares and the C share Re Investment Program (CRIP).
7.6p per share is estimated to cost just £142m.

The one bugbear being the length of time spanning declaration, ex-dividend, and payout which is as follows:
- 26 July declaration date
- 24 October ex-dividend date ie. shareholders need to be on the register at this date
- 4 January payment date.

In excess of 5 months.

On the news front the company has now completed the IAE stake sale and, through its 50:50 joint venture with Daimler, 100% of Bergen and 99% of Tognum.

All told, at 875.5p, and based upon consensus earnings growth of 17%, the shares stand on a forecast pe of 15.4 times 2012 earnings with a forecast yield of 2.3%.
Fair to say that there is a premium in the share price but not as much as has been the case in the past.
The shares have already hit an all time closing high of 897.5p this year which is beyond my full year target of 880p (Rolls-Royce Powers through the £1bn Profits barrier for the first time.), so unless the shares re-establish previous premiums I would expect the shares to consolidate this years performance until the full year results come into focus ahead of them being reported in February 2013.

In expectation, the company has re-iterated its full year guidance.

My investment in Rolls-Royce represents my portfolio's largest holding at around 33%, and over 31 months, is ahead some 79.42%, with further dividend income of 11.1% over that same period (June 2012: Portfolio Update.).
A total gain of 90.52% then.

Despite the over weighting of 33%, I have no plans to change my investment in Rolls-Royce. 
So the shares are a very strong hold for me, supported by my view that they will be a corner stone of my portfolio for many years to come both in terms of share price gains and dividend contributions (My first dividend of 2012 (and 2011 dividends in profile).).

Related article links:
- http://www.sharecast.com: Rolls-Royce beats profits forecasts, maintains full-year guidance - UPDATE
- www.rolls-royce.com: ROLLS-ROYCE HOLDINGS PLC HALF-YEAR 2012 RESULTS
- www.rolls-royce.com: Group highlights
- www.rolls-royce.com: 2012 Half-Year Results Data pack

Related posts:
- Rolls-Royce Powers through the £1bn Profits barrier for the first time.
- June 2012: Portfolio Update.
- 2012 Dividend bull period update (to the update!).
- My first dividend of 2012 (and 2011 dividends in profile).

Apple revenues increase by 21% in Q3 2012 but iPhone sales disappoint.

Apple @ $578.9, -$22.02 (-3.66%).

So(apparently), Apple's Q3 results were a disappointment with:
- just a 21% uptick in profits to $8.8bn v. the corresponding quarter last year.
- Gross margins of 42.8% (41.7%).
- International sales accounted for 62% of revenues.
- 17m iPads sold (+84%)
- 4m Macs (+2%)
- 6.8m iPods (-10%)

but the concerning number was an unexpected decline in iPhone sales:
- 26m iPhones (+28%).

Analysts had been expecting revenues of $37.2bn with iPhone sales of 28m.
But as far as the revenues go the company appears to have beaten its own guidance from Q2 where:
"Peter Oppenheimer, the CFO..... added a company Q3 Revenue expectation of $34bn" (Apple Q2 Results lead bounce back in after hours trading.).

However, Wall St appears to have got used to Apple busting its own guidance and analysts inflations.

It also seems like we have been here before (Apple update: record breaking 4th quarter results disappoint!). 

Most headlines have gone with this being only the the company's second disappointment in a decade but just who is deluding who, I wonder?

Last years 4th quarter numbers were also record busting with a 28% increase in revenues but again fell short of analysts expectations along with disappointing iPhone sales of 17.1m. A miserly 21% increase on the previous years Q4.

I would suggest (as many analysts already are), that the issue, other than inflated expectations, is one of competition, and media speculation on the specification and launch dates for iPhone 5. 

And, once again in these difficult times I would expect a proportion of potential purchasers/upgraders to hold off until the latest model is announced.

Worryingly for me is the fact that this "huge" disappointment is a full quarter earlier than last year which was strategically important because it meant that the launch of iPhone 4S mainly fell into the most significant first quarter, and one that included Christmas.

So if the company follows last years roadmap then it might be that expectations for the next quarter need to be carefully managed if they don't include iPhone 5.

As expected the company also declared its dividend to be $2.65 per share payable on the 16 August to shareholders on the register as at 13 August.

Looking forward, and considering how this might affect my investment in Apple, the company is on a forecast pe ration of just 12.26 times with access to cash and equivalents of approximately $100bn.

At yesterday's close, the company was valued at $537bn so you can see that 18.6% of this valuation is actual cash.

Just for a bit of fun then, taking this out of the equation leaves a pe ratio of just 9.98 times for the company's prospects.

Compare these numbers to my previous question of: Apple: Cheap at 11.4 times 2012 earnings?, when the shares stood at $395.

As at the end of June when Apple stood at $599.41 (June 2012: Portfolio Update.), the shares had given me an individual gain of 217% but the company's ongoing task, to keep beating previous comparables, is now a huge challenge given the company's success of recent years.

However, whilst the numerical valuation is modest, and even with that cash pile, the company probably has very little room to manage disappointment for too long given the level of hyped expectations that follow it.

As the biggest company in the world by capitalisation it has put itself into an enviable position but, if it does stumble, commentators will no doubt point back to the loss of the company's visionary founder and saviour, Steve Jobs.

They're still a hold for me though.

Related article links:
- http://www.apple.com: Apple Reports Third Quarter Results
- http://www.independent.co.uk: Apple not immune to the economic pressures in Europe as shares dive following Q3 results and iPhone 5 gossip
- http://www.guardian.co.uk: Apple disappoints analysts despite posting a 21% rise in profits
- http://www.telegraph.co.uk: Apple shares dive after Q3 results miss expectations

Related posts:

- Apple Q2 Results lead bounce back in after hours trading

- Apple update: record breaking 4th quarter results disappoint!

- June 2012: Portfolio Update.

- Apple: Cheap at 11.4 times 2012 earnings?

Vodafone falls 1.16% following Shammu comments.

Vodafone @ 183.05p, -2.15p (-1.16%).

No news is bad news for Vodafone today particularly when it involves any dividend from Verizon Wireless, the company's joint venture with Verizon Communications.

As it is Verizon Communications communicated their Q2 results today but in the question and answer section were asked about the timeline for the Verizon Wireless "distribution" by Jason Armstrong, Goldman Sachs.
The response (on transcript) from Francis J. Shammu, Executive Vice President and Chief Financial Officer - Verizon Communications looks quite brusque on transcript as follows:
"On the Verizon Wireless dividend, I know there has been a lot of press lately out there, and I'm not sure where this idea is coming from. But I can tell you right now -- the only thing I will say is that there is no distribution on the agenda for the upcoming Verizon Wireless Board, and that is probably all I am going to say at this point in time."

So doesn't sound too promising and sounds more like a "no comment" defence. 

The inevitable result being a fall in Vodafone's share price during afternoon trading given that there is already expectation that the company's own announcement will detail slowing growth in Europe with Italy providing the drag.

Related Article links:
- http://www.sharecast.com: FTSE 100 movers: A tale of two companies, Vodafone and Hermes
- http://www.marketwatch.com: Vodafone falls 1.5% after Verizon earnings
- http://www.sfgate.com: Vodafone $10 Billion Dividend Quandary Draws Investor Ire: Tech

Project Verde: Lloyds Banking sells 632 branches to Co-op.

Almost a nightmare to have a picture of Gordon Brown come to mind again but today's business headlines' include reports that Lloyds "Banking Group" has sold 632 branches (Project Verde), to Co-op as required by EU Regulators.

So that's a regulatory requirement then.

I can remember back in the day (2001), when the UK had similar concerns over LloydsTSB's expansive acquisition plans as it strove to become a European size banking giant with the acquisition of Abbey National as it was then called.
I also recall that the proposed acquisition was blocked by the UK's Monopolies and Mergers Commission as it would have given the enlarged group a 27% share of UK Current Accounts (Lloyds TSB/Abbey tie-up blocked), with 25% being seen as the water shed.

Roll the clock forward to 2008 and Caveat Emptor, Trojan Horses, hospital passes, greed and any number of similar terms come to mind as Lloyd's walked straight into what appeared to be Gordon Brown's and Mervyn King's desperate attempts to sell them a "cut and shut" used car in the form of HBOS.

No mention was made at the time that the BoE had been making secret loans to prop up the bank and Gordon Brown seemed to imply that any anti-competition fears would be steam rollered on the basis of National Interest!
Then Lloyds, under CEO, Eric Daniels and Chairman, Victor Blank (I know, if it was fiction you'd think the name too obvious), failed to follow due diligence in their greed driven stampede to take over HBOS and ended up with...wait for it...an estimated 30% market share of UK Current Accounts.

Then, after having apparently been duped into paying £12bn for this dodgy used bank with no warranty and no get out clause, Lloyds itself went back to the same used car salesmen for a £21bn loan!

Even more laughable (you really couldn't write it as no-one would believe it), the enlarged organisation was then informed by the EU Monopolies Commission that the combination of increased market share AND the £21bn bailout gave Lloyds too much of a competitive advantage so they would have to sell 632 branches/4.8m customers (3.1m Current Accounts), which would bring its share of UK Current Accounts back down to 25%!

On the face of it, it even looks like they, and tax payers have lost out on that deal as well with just £800m being raised (£400m of which is dependent upon performance up 2027), as opposed to the £1.5bn equity capital valuation.

Just what was the point!

For me at least, it appears that Brown and King failed to undertake their accountable responsibilities on the grandest scale.
For National Interest read self interest.

HBOS should have taken the bailout directly, so maintaining a big five whilst ring fencing some of the worst contagion risk. 

As it is they allowed a further well to be poisoned.
Further like any pseudo-takeover in the real world, seats on the board should have been taken to ensure that shareholders interests (i.e taxpayers), were suitably considered in what was and continues to be the Banking industry's flawed decision making and pyramid remuneration schemes.

To be fair it has been stated that Lloyds would have required some form of bailout without HBOS but given that the bailout totalled £21bn and Lloyds paid £12bn to take on HBOS's toxic assets, I personally find that difficult to believe on anything more than a minimal scale.

For example £21bn of bailout less £12bn paid equals £9bn.
But if the bailout was even remotely related to the level of bad debt in the combined group it could be argued that 50% of the £21bn might have been Lloyds and 50% HBOS (and I have read nothing to suggest that the majority of the "toxic" debt wasn't HBOS's).

So without the purchase of HBOS lets say the sum "could" be £10.5bn of bad debt existing on the Lloyds book's but then (without HBOS), Lloyds would still be able to raise/call on £12bn that it wouldn't have paid out to HBOS shareholders.

Taking the scenario further if Lloyds could have covered its own share of the bad debt of £10.5bn (50% of £21bn), then the taxpayer would only have had to support HBOS for the other half, £10.5bn.
Any change to the 50/50 assumption would obviously increase/decrease one side or the other.

The missing bit would have been absorbed by the HBOS share price which had collapsed but in turn this would have found a new level given that a bailout (from any source), would have re-established the bank as a going concern and reduced uncertainty about its future.

So it could be suggested that Mervyn and Gordon have probably wasted £10.5bn of taxpayers monies that they could have avoided if they had been decisive rather than secretive and underhanded as history suggests!

For shareholders in Lloyds, a retail bank relatively unexposed to the "instruments of wealth destruction" of the credit crunch before HBOS (if not the liquidity issues in the aftermath), it has been a nightmarish destruction of value and betrayal by Blank, Daniels, King, and Brown (and extended sycophants/advisors).

Its really galling that there seems so little consequence in the world to those involved who continue to be well rewarded despite their obvious, and very public, failings, and their betrayal of those they were/are in place to protect.

Really galling!

Related article links:
- http://news.bbc.co.uk: Lloyds TSB/Abbey tie-up blocked
- http://news.bbc.co.uk: Lloyds TSBHBOS deal
- http://www.lloydsbankinggroup.com: Moodys_LBG_15Jun11.pdf
- http://www.sharecast.com: Lloyds and Co-op agree on a price for Verde branches

IG Group beats forecasts. What storm clouds?

IG Group @ 450.70p, -11.80p (-2.55%), as at close 17 July 12.

IG Group reported back to the market yesterday with its full year results for the year ending 31 May 2012.
The company improved its profits to beat consensus estimates on sales that matched expectations.

Reported highlights:

• Net trading revenue up 17.3% to £366.8 million (2011: £312.7 million)
• Profit before tax (1) up 13.8% to £185.7 million (2011: £163.2 million)
• Diluted earnings per share (1) of 37.54p up 15.3% (2011: 32.57p)
• Cash generated from operations of £140.7 million, after tax (2011: £136.7 million)
• Final dividend per share of 16.75p. Total dividend per share for FY12 of 22.50p, up 12.5% (2011: 20.00p)
• Dividend per share represents 60% of diluted earnings per share
• Strong, debt free balance sheet, with a 330% excess over regulatory capital resources requirement (2011: 294%)
• Solid growth in active clients and revenue per customer

(1) The comparative profit before tax and diluted EPS and the percentage increases calculated thereon are based on an adjusted measure excluding the amortisation and impairment of intangible assets associated with the Group’s Japanese Business. Both profit before tax and diluted EPS have been presented for the continuing business, excluding the discontinued Sport business.

Interesting to see the shares fall as they always seem to despite meeting expectations and maintaining a very strong balance sheet with a growing cash holding that now stands at £228m (2011: £124m).
Against this the company has zero long term debt and the total of liabilities repayable within 12 months amounts to £155.8m, significantly less than the current cash holding.

Revenue increased in 4 of the company's 5 trading regions with just the problem child, Japan, falling behind. The company states a belief that Japan has now started to stabilise within a new regulatory environment having achieved 3 successive quarterly revenues of £4m.
The company has previously written down the value of its Japan based operations as reported in its interim statement for the period ending 30 November 2010 (Has the sun set on IG Index?).

Through its business managing financial transactions the company is exposed to a number of regulatory requirements one of which is the Financial Services Compensation Scheme levy.
Which seems ridiculous given that it is clearly more related to advice giving/investment selling companies and is in place to protect investors against institutions failing, the most recent trigger being the Keydata bond mis-selling scandal (IG Group: FSCS sticks the boot in!).
Anyway regardless of the justification IG is exposed to the levy with an annual liability estimated to be £5m.

Elsewhere the company also has a Tier 1 Capital Resources Requirement (CRR), of £100.4m. So based upon its assets less liabilities figure of £331m the company has a healthy positive surplus of £231m, or 330.5% of the CRR.

The company also recognises an ongoing risk of a Financial Transaction Tax as discussed by members of the EU. 
Although theoretically possible the company believes it to be unlikely.

Jonathan Davie also announced in his Chairman's Statement that 2 long serving Directors are due to step down these being: Deputy Chairman, Nat le Roux and; Director of Corporate Strategy, Andrew Mackay.

Tim Howkins - CEO, commenting on the current trading outlook stated that:
"Revenue in the first six weeks of the current financial period has been lower than the same period last year, as dull markets in this period have presented our clients with fewer trading opportunities. As we have previously commented, comparatives are increasingly challenging for the remainder of the current quarter and the beginning of the next. Against this backdrop revenue this year is forecast to be more weighted towards the second half than historically. Under normal market conditions, we continue to expect modest growth in revenue for the year as a whole. We remain committed to investing appropriately in the capabilities of our business, in technology, marketing and geographic and product development, to position the business for long-term growth. I remain confident in the prospects for the business going forward."

Not just sure I would have called the current environment dull but there you go that's obviously how some see it. But it is a heads up on the start to the current year.

So the World's largest Spread betting company has had another successful year despite setbacks and increasing regulatory fallout.

Significantly it has increased the annual dividend by 12.5% to 22.5p which represents 59.4% of the basic eps figure of 37.9p. 

22.5p also represents an 87.5% increase to the dividend since 2008 when the payout totalled 12p.
The company has a stated intent to maintain a payout ratio of 60% based upon the "diluted" eps figure of 37.54p (adjusted for amortisation and impairment of Japan based assets).

As mentioned previously cash balances have also jumped to £228m, +83% (2011: £124m), as cash generation improved, and there is no long term debt.

With the 2012 total dividend payout amounting to £81.628m (2012 Interim: £20.859m + 2012 Final: £60.769m), the current cash balances add a layer of support should there be further short term headwinds (and despite the 60% payout ratio).

All looks quite conservatively managed then even allowing for the regulatory tightening (FSCS levy, CRR etc).

Further to this the company now stands on a forward price to earnings ratio of 11.63 times which seems very, very reasonable to me. 
It also gives little or no premium given the company's eagerness to be transparent (write downs on Japan), and manage itself into a zero net debt position.

The question over the company these days seems to be one of growth and the forecast 2% increase in earnings per share for the current year doesn't yet satisfy this despite the CEO's remarks that recent success creates tough comparable.

But shareholders' interests seem well represented and the dividend returns seem well supported with the 60% payout ratio and growing cash balances.

The forecast yield stands at an attractive 5.08%.

So despite the growth/no growth question, the company is looking very much like a cash cow. The net debt free Balance Sheet is strong and could be viewed as conservative but these are difficult times and the company looks well prepared to weather it.

The dividend is attractive and the 60% payout ratio gives it a dividend cover in the region of 1.65 times which doesn't seem as conservative as the Balance Sheet would suggest.

The shares seem to have been range bound between 400p and 500p since it reported the write down of its investments in Japan ( Has the sun set on IG Index?), that prompted some analysts to suggest that the company had gone ex growth.

More recently analysts seem to be holding tightly to company statements that the volatility of recent times has increased company turnover (as opposed to dull markets which have not).

But, at 450p,and slap bang in the middle of £4 - £5, the company is starting to look like a steady, attractive proposition with a higher than average dividend yield.

My personal view is that clients will adapt their thinking and strategies to whatever markets prevail and that sustained growth across the breadth and depth of the company's client base will be more dependent on economic recovery rather than periodic volatility.

IG has been a long term holding in my portfolio (June 2012: Portfolio Update.), which, taken individually has given me an overall gain of 64.51%. 49.8% on the share price plus a further 14.71% from dividends.
But, given that the company has put a strong financial foundation in place and has been range bound for some time now, there is a strong argument suggesting that any doubts and headwinds are sufficiently discounted in the share price.
Which would seem to make it worth considering adding to my holding at 450p (or lower).

As ever patience will be key (range bound with ex/ growth question), whilst the well supported dividend will still reward investors.
That being the case, range bound IG might also be a suitable candidate in an alternative strategy of monthly pound cost averaging (Investment tools: Pound cost averaging approach.).

Food for thought then.

Related article links:
- http://www.sharecast.com: IG Group beats profits forecast
- http://www.iggroup.com: Results Presentation
- http://www.iggroup.com: IG GROUP HOLDINGS plc Results for the year ended 31 May 2012

Related posts:

- Has the sun set on IG Index?

- June 2012: Portfolio Update.

- Investment tools: Pound cost averaging approach.

How is my Globally Diversified Technology, Growth and Hedge portfolio getting on?

Thought I would take a quick look at my "Globally Diversified Technology, Growth and Hedge portfolio which currently consists of Apple, Microsoft and General Electric.

Of course it isn't really a separate portfolio, more a branch of the strategy, as all 3 investments reside in my portfolio (June 2012: Portfolio Update.).

It has been a mixture of fortunes since its inception with a clear runaway success in Apple being followed by investments in Microsoft, Cisco, and more recently General Electric.
Cisco in particular led me on a roller coaster of multiple promises and disappointments which "eventually" spurred me to get rid. 
But the decision was not fully made until a more attractive replacement was found in General Electric (August 2011: Portfolio Update.).

Thankfully this decision appears to be justifying itself with GE's subsequent performance and dividend payouts which has seen it put on 33.01%.

Having used Friday's closing prices this isn't a formal month end analysis but this is how each investment currently stands.

			Capital	Divs		Total
Current Port. holdings	Price		% gain	% gain		% gain
Apple **	$604.97		220.51%	0.00%		220.51%
Microsoft **	$29.39		22.25%	4.29%		26.54%
General Electric **	$19.77		30.34%	2.67%		33.01%
Former Port. holdings
Cisco ***	$15.59		-27.76%	0.47%		-27.29% 61.35%

Notes:
*       US Dividends adjusted for exchange rate and 15% withholding tax **     Sterling : Dollar exchange rate = £1: $1.555 as at 12/07/12 ***   Sterling : Dollar exchange rate = £1: $1.633 as at 30/08/11

So the current investments do look to be justifying their inclusion but as with any other investment its not just a case of picking an obvious winner from their market position, as Cisco has shown.
Cisco remains a leader in its field and should be an obvious beneficiary of the anticipated investment required to maintain and increase data carrying capacity for smarthphones et al.
Unfortunately, reined in spending and hard chasing by rivals to catch up, has hit the company's margins in recent years when it appears to have failed to innovate and adapt to clients changing needs and budgetary constraints during a period of global economic woe.

Apple of course, has been a huge success but it remains to be seen if they can maintain anything resembling recent performance given that it is up against an army of competitors with Samsung and Google leading the pack.
Steve Jobs untimely passing has also seen the elevation of Tim Cook to CEO and an announcement that the company will this year resume paying a dividend.

Microsoft remains Microsoft. the company has matured into a cash cow on the back of its Windows OS and Office Suite, but the company has struggled to stay in touch with each emerging generation and innovate beyond PC's.
It has had recent success in XBox and its Kinect system which has shown it can challenge the industry incumbents in Sony and Nintendo.
But it has struggled to establish a foothold in smartphones and tablets although there is still hope given the critical acclaim for its latest incarnation and the possibility that it might yet take control of Nokia's smartphone division.
Similarly Windows 8 is readying for launch which will show how well the company understands tablet computing with its intuitive and tactile touchscreen experience.

GE is also a recovering industrial giant that makes things with a hugely diverse spread of products and resources. 
The company has significantly streamlined and restructured following the "credit crunch" in order to reduce reliance and capital requirements from its GE Capital cash cow.
GE Capital itself is also fast recovering and ready to pay dividends to its parent company.
Energy, Infrastructure, and Medical Instruments are also part of the portfolio as well as Aerospace where the company is the No 1 engine manufacturer in one of my favourite sectors.
Due to its long cycles of investment and return Aerospace remains a globally important sector with just 3 major players and huge barriers to entry.
As such GE continues to be heavily engaged and invested in new airframe programs such as Boeing's 787, the Airbus A380, Boeing's 737 Max, and the Airbus A320 Neo.
Jeff Immelt - CEO, has also stated that the company looks set to resume double digit sales increases (GE Update: Double digit earnings growth in 2012!), with analysts also suggesting healthy increases to the dividend.

All quite pleasing then with a cumulative net gain of 61.35% from the 4 investments.
Looking forward then I'm also not averse to adding more diversity to my portfolio with further US investments such as: United Technologies, Google, Teva and Berkshire Hathaway, and I'm also still interested in some potential European investments with Pharma's, BMW and VW also appealing to me.
In all cases the tax situation is slightly more complicated with some countries like Germany applying a 30% withholding tax to its dividend payouts to non nationals whilst the US retains 15%.

As ever there is an additional note of caution required due to the risk posed by volatile exchange rates as well as the different rates of currency exchange commission applied by your chosen broker.
As with your holiday money stronger sterling obviously gives you more purchasing power.

With strong recognisable brands and extensive global reach these 3 investments also have an obvious gearing to any US/DJIA inspired recovery. 

So, for me at least, all 3 remain long term holdings for my portfolio and (fingers crossed!), look set for ongoing gains into the future.

Related posts:
- June 2012: Portfolio Update.
- Globally Diversified Technology, Growth, and Hedge portfolio update.
- Globally Diversified Technology, Growth, and Hedge portfolio!!!
- August 2011: Portfolio Update.

Britvic "Recap!"

Britvic @ 273.10p, +12.4p (+4.76%).


I've been taking a look at Britvic following the recent forecast impact to earnings that stems from its Fruit Shoot recall and recap issue (ROBINSONS FRUIT SHOOT AND FRUIT SHOOT HYDRO PRODUCT RECALL).

Following the recent introduction of a new cap to its Fruit Shoot range the company has subsequently found/been made aware of a possible choking concern and as a result has undertaken a precautionary recall.
The initial accompanying statement suggested a possible profit impact of £1-£5m in the current financial year.

However, further investigation and a second statement has raised this possible financial impact to £15-£25m across the current and next financial year (UPDATE STATEMENT ON ROBINSONS FRUIT SHOOT AND HYDRO PRODUCT RECALL).
So thats a longer than 6 month resolution then!

As a result the shares have fallen from 335p on the 2nd July to 304p then 260p before joining in Friday's global rally on (very) speculative takeover talk.
Britvic has previously been touted as a take over target for private equity buyers, following a pair of profit warnings in 2006, but the Pepsico licensing deal was seen as a potential obstacle (http://www.scotsman.com: Britvic braced for £600m takeover bid from Permira). 

But that aside, I was interested to see what the underlying business looked like and whether this might present a medium term opportunity to buy into the UK's largest still drink manufacturer, through such as its Robinsons brand, and the UK's second largest second largest supplier of carbonated drinks through Tango and its exclusivity agreement with Pepsico.
The company was originally floated in 2005 at 230p, and was born from a demerger of assets by Whitbread, InterContinental, Allied Domecq and PepsiCo

As of close of play on Friday the shares (prior to any downgrade of estimates), stood on a forward price to earnings of 8.2 and a forecast yield of 5.9%.

But it doesn't yet look as if the revised guidance numbers have filtered through into consensus estimates given that on Digitallook the revenue forecast for 2012 remains in the region of £1.3bn with a pre-tax profit forecast of £109m.

So if the full £25m impact came through at this point it would drag the forecast profit figure down to £84m which would still be an increase on 2011's published figure of £79.9m.

Looking at the historical trend, revenue has increased in each year from £716m in 2006 to £1290m in 2011.
Profits have fluctuated somewhat though with dips in 2008 then a loss in 2010 of £28.8m following net exceptional costs of £137m.
In the main this looks to be related to write downs in the Ireland business following that country's economic woes.

On the face of it, it should feel like quite a defensive business given its position within the branded consumer still/soft drinks market.
And the Pepsico agreement was extended to 2023 following the company's flotation and listing on the LSE.

The company's strategy is built upon:
- low single digit improvements to margins and revenues in its mature markets.
- mergers and acquisitions in Europe
- international export e.g Fruit Shoot was launched in the US in 2010 through retailers Coles and Woolworths.
- licensing and franchising outside of Europe

However, as a result of ongoing write downs and the acquisition element of the strategy, I've found the financials a little difficult to understand given the resulting huge net debt gearing figure of 2356.44% (no I haven't got the decimal point wrong!).

Operating margins (ignoring the loss in 2010), have hovered below 10% since the global economy deteriorated and commodity prices increased.

The big concern is the £1bn or so of short and long term liabilities which quash the net asset position to just £22.5m. The bulk of which, £600m, appears to be made up of loan notes. The interest paid was just £14.8m (in the 6 month interim) though, as opposed to the full year figure £31.4m in 2011 so that would be just over 5% in interest payments.

There appears to be a pension deficit as well which, following the company's most recent efforts has been reduced to £16.7m (in the interim results), from £45.1m (2011).

The nature of international business these days also means that the company is operating with a currency hedging strategy which had a negative impact of £3.9m in the interim results.

The 2011 full year dividend returned £40.3m to shareholders which equates to 17.7p per share and about half of the reported £79.9m pre-tax profit figure. So that's somewhere close to a twice covered dividend.

Heavily indebted then with low margins but having a twice covered dividend, the company is heavily dependent upon the continuation of its cash flow which, at 52p per share (2011) was comfortably higher than the 2011 earnings per share (pre-tax profit/shares in issue), of 33.41p per share. 
This would normally be enough to comfortably alleviate any short term credit requirements but, in this case, the financial impact from Fruit Shoot needs to be considered alongside the reduced cash position that has been reported.

Looking at the asset side of the balance sheet, there is a relatively high intangibles figure of £337.9m (2011). Not desirable but much as you would expect given the company's stated intent to acquire to grow.
2011 stocks stood at £88.5m v £45.3m in 2007. 

There is also some kind of "trade and receivables" categorised in both assets and liabilities, which has also doubled over the same period.
Given the 80% increase in revenues from 2007 to 2012, these would all seem to be volume related and, therefore, assumed to be in control.

It initially looks like cash has also increased in a similar manner to £43m (£27.3m: 2007) but it also looks like this has been used in the acquisitions strategy and stands at just £2.9m in the latest interim presentation for the period ending April 2012.

So not a straight forward investment decision. It looks attractive on previous consensus forecasts and has been pulled back from 52 weeks highs of 398p by the Fruit Shoot issue.

The company is in an attractive consumer segment with access to recognisable brands and, historically at least, has had a strong cashflow to service its debt mountain as well as an attractively growing dividend.

But it is the debt mountain that is a concern to me and whether this outweighs the "future" value, strengths and appeal of the brands that the company markets.
The cash flow seems to service it but as shown with the current Fruit Shoot issue (shooting itself in the "fruit"), the company is not immune to creating its own problems and it remains to be seen if this becomes a more expensive issue than the company has estimated. 

Will customers defect to another brand in the time that the company is taking to resolve the issue. 

On the positive side it appears that the company has "capped" off the issue before anyone was hurt so could well have limited the damage to replacing the caps and further R & D to resolve the problem cap.

The dividend and discount to its 52 week high is also attractive and the question over the invisible value of the brands might well have been answered by its current share price weakness immediately leading to analysts touting the weakness as a possible opportunity for rivals to acquire the company.

I like the pros but given the cons I'm still not sure if it appeals to me despite the obvious value in the brands.
It seems to be yet another company leveraged up against future (potential) profits so it comes down to belief in the strength of the brands, the future cash flows that can be derived from them, and the company's ability to maintain cash flows in the short term in order to continue servicing that debt.

I would continue to hold them if I had them but they don't yet look like a straight forward buy for me without recognising, rationalising, and mitigating (to my mind), the risks identified.

Hmmm, I will have to think on it a bit longer and if it recovers in the meantime, c'est la vie!

Related article links:
- http://ir.britvic.com: ROBINSONS FRUIT SHOOT AND FRUIT SHOOT HYDRO PRODUCT RECALL
- http://ir.britvic.com: UPDATE STATEMENT ON ROBINSONS FRUIT SHOOT AND HYDRO PRODUCT RECALL
- http://www.scotsman.com: Britvic braced for £600m takeover bid from Permira 
- http://ir.britvic.com: Britvic plc Interim Results - 24 May 2012
- http://ir.britvic.com: Interim results 2012
- http://ir.britvic.com: 2010 Annual Report

Rolls-Royce - CRIP v. share price fall!

Need to make a note of yesterdays fall in the share price of Rolls-Royce as it doesn't seem to be related to the positive newsflow (albeit reduced), related to Farnborough Air Show.
However the shares fell from an all time high closing price of 890p to 867.5p yesterday and have continued to fall today.

But the only other affecting newsflow that I can see are the various Directors' announcements showing C share re-investment (CRIP) in R-R shares .
Which as purchases should be positive news particularly when they seem to have taken place on the 5th July at 888.027p.
And, if the CRIP program was enacted on the 5th for Directors then that would also suggest the program was enacted for other shareholders.
I don't think the company issues new shares towards the CRIP but even if it did then the dilution should have taken place on the 5th.
So I am wondering if this pre-empted a wave of profit taking and subsequent marking down by market makers managing their working capital/shareholdings (ie. not wanting to buy anymore until a buy v. sell equilibrium is restored).

I don't have access to level 2 data so looking at a chart with some volume data. It does look like there has been a couple of days selling (red columns) but not at any substantially greater than normal volumes that might justify a 22.5p (-2.5%).
A fall of 2.5% also doesn't feel in line with the enveloping economic woes either.

Click to enlarge, close to return (Chart courtesy of Digitallook).

Obviously not concerned at this point more curious and wanting to understand a pattern that might be down to the CRIP.
I also have a vague recollection of it happening before.

What "Next" for Marks and Spencers?

Marks & Spencers Group @ 325.2p, +4.2p (+1.31%)
Next @ 3188.72p, +18.72p (+0.59%)

Intriguing to see the soap opera that is Marks & Spencers.
Same old, same old would seem to be the mission statement as the latest CEO, Mark Bolland, unveils another disappointing set of figures, a new store concept roll-out, and another restructure with the revolving door of retail stars joining and leaving (QUARTER 1 2012/13 INTERIM MANAGEMENT STATEMENT).

Poached from Morrison's, the supermarket chain, Bolland appears to be struggling to get to grips with the complex retail beast that is M&S and the ongoing image problem.
His background is Sales and Marketing but his experience has been quite niche, namely Heineken. And, sorry to say it can never be said that Heineken has a confusing image problem.

So difficult to justify his leaving Morrison's after embarking on an acquisition and catch up strategy there which has yet to bear fruit but his ambitions and the rewards offered by M&S were obviously too much to refuse.

As it stands today's 2nd quarter update saw:
- group sales down 0.7% comprising:
- UK sales down 0.9% comprising
- food sales up 2.9%
- non-food down 5.1%

On a like for like basis (ignoring new openings/closures):
- UK sales were down 2.8% comprising
- food sales up 0.6%
- non-food down 6.8%

A real horror show in the UK non-food segment then which, speculation suggests, has resulted in Kate Bostock, (once of Asda: George and Next), leaving the company by "mutual consent" (www.sharecast.com: GM director Bostock pays the price at Marks and Spencer).

Coming in will be Belinda Earl (once of Debenhams and most recently Jaeger), as Style Director, reporting to John Dixon, the soon to be appointed Executive Director of non-food.

Bizarrely, Dixon is currently the Executive in charge of food which looks to be the one success story here. So its a good job that food is exactly the same as non-food in order to guarantee success... not!

What a strange decision and no reflection on Dixon who despite a previous role in food buying served as Stuart Rose's executive assistant whilst also looking after Home and M&S Direct before being put in charge of food retail.
Food retail is itself a hugely competitive market but M&S has managed to grow sales in a difficult market under Dixon.

Most of the blame has been put on the weather but the deteriorating share price of M&S has now seen its market capitalisation fall below that of rival retailer Next.
Next is now valued at £5.265 bn v. M&S's £5.214 bn!

A bizarre situation given that:
- Next has sales in the region of £3.5bn v. M&S's near £10bn.
- Next has £56m in the bank v. M&S's £196m
- Next has 276% net gearing (debt v. net assets) v. M&S's 74%
- M&S's property portfolio is valued at circa £2.5bn, almost half of that market capitalisation.

However:
- Next is generating a pre-tax profit margin of 16.8% whereas M&S is generating a lowly 6.6%.

In 2008 M&S generated £1.1bn of pre-tax profit on sales of £9bn (12.2% gross profit margin) whereas today sales have increased by circa. 10% to £9.9bn but pre-tax profits have fallen 42%.

In contrast Next sales in 2008 were £3.2bn and profits were £428m so have continued within a similar range over 5 years for revenues but pre-tax profits have increased slightly.
More significantly that high % debt figure was much higher still in 2008 when it stood at a whopping 456%.But the share price is now 3185p. 

That seems a lot of recognition for what is still a high debt figure in the fickle fashion and home retail markets. The Next business model has also changed somewhat as the company looks for maintaining/increasing sales and profits.
It used to be that Next only sold Next branded items but today it sells all manner of fashion and electrical brands throught its "customer database" particularly its subscribers to the Next Directory.

So 2 key points here for me: Next is potentially overpriced and; M&S is potentially underpriced.

In the case of Next, at 3185p they stand on a a current pe ratio of 12.6 times falling to 11.9 times if profits come through as forecast. Pre 2008 this would not seem to be too much of a premium but in light of the economic climate and the fact that Next no longer has a particular differential to other retailers (selling non-Next brands) it is open to competition from newer cooler specialists.
Its success with the Next Directory demonstrates that catalogue shopping is still viable but, from my experience, there are now so many coming out that they are no longer that originally conceived coffee table item.
Many, many customers have cottoned onto the the "Next" sale so the probablitity of finding a bargain is diminishing and "waiting" for these events could yet impact new season sales despite the experience being more like a riot.
The goal of every new season retailer has to be to sell out of its stock at the beginning of the season rather than the end.

But then again, in the case of M&S, the assets and financials are solidly in place but the retailer is just not able to attract and hold onto enough customers so trying to buy for recovery could see one holding for a very long time. It has waves of interest: Per Una; Autograph etc but appears unable to capture and hold the next generation of customers due to an ongoing identity and image issue.
At 326p the shares stand at 9.34 times current earnings.
The twice covered 5.5% yield adds some attraction but I would still want some faith in management and strategy. The company seems to eat up Executives with only Stuart Rose seeming to have shown any longevity in recent times.

Another opportunistic approach might come from Philip Green perhaps but I wouldn't hold out for this or expect that it would be any more value enhancing to shareholders.

So interesting to see M&S on a forecast 5.5% yield and a valuation that puts it behind Next despite a property portfolio covering half of it.
Perhaps that would be how to look at them, as a solid high yielding asset with some as yet unrealised potential for capital gain. Sounds much like a utility though but without the utilitarian sector's defensive qualities.

As for Next, the share's seem far too expensive and not for me given the current climate. There may be far too much emphasis being placed on its Next Directory subscriber base as customers can be fickle and once turned, even the most loyal can take some convincing to return as M&S, Tesco and others can vouch for.

Related article links:

- http://www.sharecast.com: GM director Bostock pays the price at Marks and Spencer
- http://corporate.marksandspencer.com: QUARTER 1 2012/13 INTERIM MANAGEMENT STATEMENT
- http://corporate.marksandspencer.com: MARKS AND SPENCER GROUP PLC ANNOUNCES BOARD AND SENIOR MANAGEMENT CHANGES

Vodafone "swiss army" signal booster!

Okay a bit of light heartedness today.
I'm assuming that this isn't a joke but I'm laughing my socks off anyway (http://www.upi.com: Umbrella charges cellphone, boosts signal).

Basically the article suggests that Vodafone are looking to introduce a "booster" aerial for your mobile phone that also has a little "swiss army" in it as it charges, provides a hands free element, and possibly, just possibly, keeps you dry!

The additional frame of the umbrella basically serves as a focal point to capture radio waves, and solar panels are stitched into the canopy. I would be concerned at the additional "charge" available from a lightning bolt though and as for the hands free (strapped to the frame), its a good job as your hands would be full with an umbrella.

Invention at its most eccentric and coming to a festival near you!

Related links:
- http://www.upi.com: Umbrella charges cellphone, boosts signal
- http://blog.vodafone.co.uk: Meet Dr Kenneth Tong: The brains behind the Vodafone Booster Brolly

2012 Dividend bull period update (to the update!).

Starting to reach the end of this 3 month dividend bull period for my portfolio now having received pay-outs from Rolls-Royce and Tesco this week.

But still 2 attractive ones to come though.
The last of which, National Grid's 2011 final dividend, being the most attractive of all.

01 Jun - BAE @ 11.3p per share - Received
08 Jun - William Hill @ 6.7p per share - Received
13 Jun - Centrica @ 11.11p per share - Received
14 Jun - Microsoft @ 10.97p per share (est. based on $1.5491:£1 and 15% withholding tax) - Received
20 Jun - Morrison (Wm) Supermarkets @ 7.53p per share - Received
27 Jun - BP @ 8c per share - Received
04 July - Rolls-Royce @ 10.6p per share - Received
06 July - Tesco @ 10.13p per share - Received
01 Aug - Vodafone @ 6.47p per share
15 Aug - National Grid @ 25.5p per share

Of course, looking forward, there are more payouts to come its just that, based upon last year, this period proved to be the most lucrative period for dividends received by my portfolio, particularly as it included final dividend payments from what are still my 2 largest holdings, Rolls-Royce and National Grid (My first dividend of 2012 (and 2011 dividends in profile).)

Currently, this year's contribution from dividends stands at 2.37% which is more than enough to add an investment tranche to the portfolio. 

Dividends form a key element of my current strategy as they provide a return of capital that once paid, can't deflate with the share as markets turn choppy and dismissive of company prospects.
They also give me much more choice of what to re-invest them into allowing me to diversify and grow my portfolio.
Putting them in context, 2.37% is a reasonable contribution to the 12%+ gain that my portfolio is currently showing for this year.


Long may they continue to grow.

Related posts:
- Dividend update: ex dividends to roll in.
- My first dividend of 2012 (and 2011 dividends in profile).

Aviva to raise £318m from increased Delta Lloyd placing.

Aviva @ 292.70p, +8.10p (+2.85%).

Following yesterday's announcement of a new strategic plan from Aviva's newly installed Chairman, John McFarlane, the first piece appears to have placed on the board with a further announcement of its intention to sell a further stake in the Delta Lloyd Group.
The disposal, of 25m shares would leave Aviva carrying a reduced stake of 27% in Delta Lloyd.

However, things appear to be moving fast and following interest the company has upped the number of shares being sold to 37m from 25m originally. Which would further reduce Aviva's holding to 21%.
At Eu10.75 per share the proceeds amount to £318m which will be used to strengthen the company's balance sheet (Aviva announces pricing of offering of Delta Lloyd ordinary shares at €10.75 per share).

Despite yesterday's appreciative initial response the shares retreated from their midday peak (following MPC decision), as analysts began to absorb and assess the announcement against the company's recent track record under the previous CEO, Andrew Moss, who resigned following what amounted to a no-confidence vote at the AGM when shareholders voted against the company's remuneration proposals.

The general consensus yesterday and today is that the strategy will take time to enact but there is an appreciation of McFarlance honest assessment of the situation and the moves to address the weak share price and shareholder concerns.
As such the shares have bounced above yesterday's peak in early trade following the swift early move to capitalise on Delta Lloyd interest.

I have to say I like the fact that after just 2 months in the company the Executive Chairman appears to have moved quickly to outline his strategy, and has moved even quicker to enact it.
Although the unexpected loss of Andrew Moss means that there is an urgent need for direction and leadership it is still refreshing to see a Chairman step up to the plate (unlike BP, Barclays etc).
Its also positive to see such a swift early move and to maximise the opportunity.

By their very nature strategic plans are long term and as such provide a reference road map as to the company's direction. If bought into fully almost all company decisions can be matched up to the strategy so as to determine their viability, go/no-go.

So fair to say that the strategy will take time to reach its fruition but time is the company's most critical constraint given that the goal is to strengthen its capital position against financial threats. Unfortunately its difficult to see a bigger threat to the company than what is happening in Europe currently.
However, the Chairman has begun to establish a credible direction for the company as well as build some much needed positive momentum given the strategic review, announcement, and successful first disposal.

If Europe can hold itself together then the company has a fair chance of success.

Related article links:
- http://www.aviva.com: Aviva announces pricing of offering of Delta Lloyd ordinary shares at €10.75 per share
- http://www.guardian.co.uk: New Aviva chairman reassures City with radical overhaul of insurer

Earlier post:
- Aviva: Chairman John McFarlane announces new strategic plan.

Aviva: Chairman John McFarlane announces new strategic plan.

So the newly appointed Chairman and interim Executive, John McFarlane, has today announced a revised strategy for Aviva, along with the first identified steps to enacting it (Message for shareholders from Mr McFarlane, Aviva’s new chairman).

"The new strategic plan has three main objectives:

- Narrow Focus - Focus on fewer business segments where we believe we can produce attractive returns and with a high probability of success

- Build Financial Strength - Achieve target economic capital levels in line with our industry peers, reduce capital volatility, and bring leverage down to a conservative level

- Improve Financial Performance - Aim to deliver a higher level of revenue growth, a lower cost-income ratio, lower losses and claims and higher return on capital, notwithstanding the subdued economic environment in developed markets."



Under these 3 banners Aviva intends to:
- Narrow Focus through the closure/disposal of 16 business segments that are seen as non-core. Whilst seeking to improve the performance of 27 more deemed to be undeperforming.
- Build Financial Strength by targeting an improved capital level of 160-175% through disposals, reduced spend/cost reductions.
- Improve financial performance by increasing revenues through reduced spend/cost reduction/restructuring/productivity improvements.

In addition McFarlane has expressed an appreciation of shareholders' concerns that the current performance might lead to a fund raising or cut to the dividend.
And, as such the execution of the strategy is intended to head this off.

Interestingly he also stated that Aviva had reduced its Italian sovereign debt exposure by Eu2bn, as a result of reducing its holdings to Eu5bn from Eu6bn.

The Broker Jefferies has already voiced a little sceptism over another restructure given its track record whilst stressing the likely timescale of execution and expectation of benefits suggests a 2 year turnaround (http://www.sharecast.com: Aviva leaps on plans to slimline operations).

For my own portfolio, Aviva is now the 3rd largest holding (June 2012: Portfolio Update.), and, as you would expect, the weakest performer given the increasing concern about its weaker capital position (in comparison to peers), and exposure to European sovereign debt.

Positive for me to hear that the company is not looking to raise capital or cut its dividend but is instead looking to address this through a core/non-core strategy with efficiency measures.

It is going to take time to change things for the perceived better and I think the most significant weight on the shares is the the elevated risk to the Euro and Sovereign debt. Its exposure to Spain, Greece and Portugal (Eu100bn bailout for Spanish banks! Sovereign debt. Aviva exposure.), seems small in comparison to the Eu5bn exposure to Italian debt so the noises from Italian Prime Minister Mario Monti that Italy would not require a bail-out are welcome ones. 

Although the caveat remains Italy's ability to raise debt at a sustainable level hence its support of any facility allowing the ECB to purchase bonds as a means of keeping them at sustainable levels.

Of course, only time will tell if Aviva, Italy, and the EU have the time needed.

Related links:
- http://www.sharecast.com: Aviva leaps on plans to slimline operations
- http://www.aviva.com: Aviva announces senior management changes
- http://www.telegraph.co.uk: Aviva to cut staff and sell 16 businesses
- http://www.sharecast.com: Broker snap: Jefferies not convinced with Aviva's new strategy

Related posts:
- Eu100bn bailout for Spanish banks! Sovereign debt. Aviva exposure.
- June 2012: Portfolio Update.

Barclays, Bob Diamond, and what's to come?

So where will this tale lead us next.

Like a tale from the fall of Rome, Marcus Agius initially fell on his sword in an attempt to save the empire, if not the emperor Bobus Diamondus but then Diamondus also fell with the outcry of et tu!
Or is it Darth Diamond?

Anyway, no doubt with a substantial addition to his millions Bob Diamond has resigned but the stage is now set for a huge revelatory expansion of the circle of trust (or blame), as the questions and answers kick off at today's Treasury Committee.

It could yet be hugely damaging to accountable persons in position then and now I would have thought.

Will it hasten the protection of our deposits by splitting off the casino banking from retail?
I would hope so.

But it remains to be seen whether or not it will address the obscene remuneration packages of those inside the circle of trust, or the fantasy gambling with other people's money to maximise their individual gains.

The industry appears to have used our money, and taken the benefit, been bailed out by our money, and taken the benefit.

Contribution to society? Recession, depression, inflation, deflation, which leaves little other than years of austerity to balance our books whilst the industry has continued on its merry way.

Related article links:
- http://www.bbc.co.uk: Barclays boss Bob Diamond resigns amid Libor scandal
- http://www.guardian.co.uk: Barclays blames 'senior Whitehall figures' for Libor scandal as Bob Diamond resigns - live