Marben's Misc Bits

Monday, Apr 02 2012 by

Well, I've finally moved into the 21st century and have started tweeting @marben100 .

Seems like a great medium for exchanging brief investment notes. However, it's not so good where things need more explanation or tweets need to be discussed... So, I've created this thread as a place to post more detail that doesn't conveniently fit into another thread - e.g. economic/political topics and brief posts on non UK companies that S'pedia can't yet support.

If anyone wants to discuss my tweets,or ask questions about them, this would be a good place to do so.

Filed Under: Investment Strategies,


The author may hold shares in this company, all opinions are his own and you should check any statements that appear factual and not rely on them before making an investment decision. The author is NOT a qualified analyst nor authorised to give investment advice. Whilst the author is a director of ShareSoc, all views expressed are entirely his own and not necessarily those of ShareSoc.

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160 Posts on this Thread show/hide all

marben100 7th May '12 42 of 160

My week ahead. Busy week for me:

  • J Sainsbury (LON:SBRY) prelim. results on Wednesday. Fingers crossed for a juicy divvy & satisfactory business outlook. Historic yield currently 5.0%
  • HgCapital Trust (LON:HGT) AGM on Thursday. Look forward to hearing Ian Armitage's take on the Euro crisis and the impact on the ground - though I see that the portfolio is now pretty heavily UK TMT focussed. With financial turmoil continuing, I guess realisations are unlikely in the near term, but IMO that's where patience pays.
  • T Clarke (LON:CTO) AGM Friday. They need a grilling on their cashflow. I only have a token holding now, because of the grim cashfow and UK construction outlook.


Sainsbury and HGT are two of my larger holdings (especially the latter, which is currently my largest equity investment).



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Asagi 7th May '12 43 of 160

Last year's AGM statement from T Clarke (LON:CTO) was quite full. For me, the order book is the key figure as I expect it will drive sentiment on the share which is currently poor.

The forward order book stands at £180 million as at 30 April 2011 (April 2010: £200 million) of which £110 million is scheduled to be completed in 2011 having completed £45 million of work so far this year.

All that said, come the AGM we will be more than four months into the full year and Outlook will be important too. Shares are currently 51p to buy, with a forecast of 6.66p (Morningstar - Stockopedia has 6.80p) for 2012 and 7.39p (Morningstar) for 2013 (Stockopedia has 7.41p). Dividend for both years is expected to be 3p.

Looking at those numbers again makes me rather nervous for my holding... it feels like a good statement is compulsory at the current price.


Asagi (long CTO)

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marben100 17th May '12 44 of 160

It looks like Alan Booth & co are back in business! Per Premier's IMS, out today:

Premier has signed an exclusive arrangement with EnCounter Oil, a new exploration company set up by the former senior exploration team of EnCore, to seek additional exploration opportunities in the Central and Northern North Sea. 

Can't wait to hear more about EnCounter.

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StrollingMolby 17th May '12 45 of 160

Here's a little more on EnCounter:

UK independent Premier Oil has signed an exclusive co-operation deal with a new explorer, EnCounter Oil, to pursue new North Sea plays.

The new outfit is made up of the former senior exploration team of EnCore Oil, which has operated as a subsidiary of Premier Oil since January.

Former EnCore Oil chief executive Alan Booth and former geosciences manager Paul Young are among the directors of the new London-based company.

Under the agreement, Premier Oil and EnCounter Oil will jointly seek to identify new exploration opportunities in the Central and Northern UK North Sea for Premier to pursue.

Premier Oil said it “hopes to harness the proven exploration skills of the EnCounter improve the quality and materiality of its exploration programme in the UK North Sea”.

The independent has applied for 15 licences, ten of them operatorships, in the 27th licencing round.

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Isaac 19th May '12 46 of 160


Would Sharesoc consider merging with Stockopedia? Too many bb's to visit!

I think it will be a win-win for both parties.

What do you think ?

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marben100 20th May '12 47 of 160

In reply to Isaac, post #46


We are two very different organisations, with different objectives. ShareSoc is a not-for-profit, campaigning organisation, very much for our members, by our members. Our BBs are not intended for regular discussion (especially on companies) - I'll come back to that issue in a mo'.

Stockopedia OTOH, is a commercial entity. Stockopedia's founders share many of our aims, especially in creating a "level playing field" for private investors, as far as is possible. They also, quite reasonably, aim to make a profit and compete with other BBs. I and other ShareSoc directors find the features of Stockopedia's software and the responsiveness of their management to user raised issues excellent. So, there are certainly a number of matters we can co-operate on (and do) - but we do not explictly favour any one commercial service over another.

ShareSoc's remit is different to Stockopedia's. We are a campaigning organisation (and will also be developing other services, such as private investor education). We campaugn both in the cases of individual companies where our member shareholders feel they have been mistreated by a company's management and also at the level of government and regulators such as the FRC, to try to correct many of the weaknessess we find in the current regulatory regime. That is not something I would expect Stockopedia to get involved in, and it would not be so effective for a commercial organisation to do so.

Coming back to our social network, the "members network", it does not aim to compete with commercial BBs, such as Stockopedia etc. It is intended primarily for private discussion amongst our members of policy matters. For example, we post proposed consultation responses there for our members' comment.

The one, oddity, I suppose, is AGM reports, which I presume is what led to your question. I and other writers put a lot of effort into attending AGMs (primarily for our own benefit, as shareholders) and into writing them up afterwards - for the ebenfit of our members, without getting a bean in return. Unashamedly, we also use these reports as a marketing tool for ShareSoc, as we know that there is considerable interest in the reports.

Asking people that want to read them to join our organisaton doesn't seem too much to ask, especially considering that readers can do so free of charge, as associate members. if it weren't for that, I don't think I'd be particularly motivated to write such time-consuming reports (and I am looking at further ways of monetising my efforts on them).

If you want to read the reports, just join (assuming you haven't already done so). You'd then be notified by e-mail whenever a new report is posted (unless you turn that feature off) and can read or download it then. You don't have to visit the members network regularly (unless you want to), so this shouldn't take any significant extra amounts of your time.

One thing we haven't been very diligent about is flagging new topics that we're soliciting comments on here (or on other BBs). I'd be happy to do that here, so you and others would know when there's something new you might want to tune in to.



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Dave Brickell 20th May '12 48 of 160

Hear, hear, Mark! We think ShareSoc's a fantastic initiative and would encourage everyone to sign up and join them. It's free after all for Associate membership and registration is quick and easy, or it's less than £3 a month for Full membership, which is frankly very little in the scheme of things (the cost of a pint!), given all the good work they are doing on the lobbying front.

I think there are a lot of ways in which Stockopedia and ShareSoc can collaborate, and we'll be working hard on a number of them in the coming months, but that's certainly not a reason not to sign up to ShareSoc, as it's a different organisation with different objectives, as Mark notes. 

We'd love to help make the "Shareholder Spring" a reality. For that, there needs to be more bloggers, more lobbying and more instances of active investor self-organisation - the United States are ahead of us on many fronts, although it's a bigger market and they have RegFD. 

The power of greater numbers will make ShareSoc's lobbying efforts that much more effective, so the more people that join them, the better for all of us who care about a fair deal for private investors, so spread the word...

Website: Stockopedia PRO
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Isaac 22nd May '12 49 of 160

Halfords has been voted the worst shop on the high street

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marben100 22nd May '12 50 of 160

In reply to Isaac, post #49

Thanks for that Isaac. Looks like Roger and I are going to have to take a trip up to Birmingham again (or whereever they're holding their AGM this year, finals not out yet) and make their ears sting.

This is unacceptable performance. Halfords is supposed to pride itself on its customer service. Seems that something's gone badly wrong. I'd also better get off my backside & do some "mystery shopping" myself. Have to say, though, that I do get my car serviced by a Halfords Autocentre and a) was happy with the service (improved a bit since the Nationwide days); b) the manager (same guy as when it was Nationwide) said that the Halfords brand had increased volumes at the centre.

I'd very much appreciate hearing any other customers' views about Halfords' in-store service - especially whether they've noticed any changes (positive or negative) over the last couple of years.



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Roger Lawson 23rd May '12 51 of 160

Considering that Halfords rate "service" as one of their differentiating points from competitors (or the internet), this is certainly disappointing. Definitely a question to be raised at the AGM on this. And yes I hope they choose a more convenient time and place for it this year. Tesco have devised a cunning plan to avoid being mobbed by shareholders this year after their dismal performance - holding their AGM in Cardiff at 11.00 in the morning. I have been to an AGM in Cardiff once before, but the timing does not help.

Website: ShareSoc - UK Individual Shareholders' Society
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emptyend 23rd May '12 52 of 160

In reply to marben100, post #50

I'd very much appreciate hearing any other customers' views about Halfords' in-store service - especially whether they've noticed any changes (positive or negative) over the last couple of years.

I'm very surprised indeed at Halfords being picked out (unfairly? given that many seem to have scored similarly).

I've visited both the local branches and found the staff at both to be very friendly and helpful.

I'd also worry about the sample, given that Lush seems to come out top........

Halfords problem is simple - people aren't as interested as they might be in buying their product lines. I was the only customer in the store on both occasions - and one of those was one of their massive "superstore" units:


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SparksTrader 23rd May '12 53 of 160

In reply to emptyend, post #52

Halfords staff do tend to have a look of surprise when you enter the store, though by the worst customer experience and others I know have had is from Curry's/PC world. Sales boys and bimbos repeating what's on the sticker and looking blank if you ask further, and their supervisors ignoring you and explaining to staff what to do with the potential customer, whilst the potential customer stands next to both of them.

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Isaac 24th May '12 54 of 160


I don't agree with Soco directors taking a 100% bonus for their performance last year.

I am actually VERY ANGRY as I feel they are totally taking the p.

Can you please tell me what is ShareSoc's view on this? I have voted against their remuneration & I personally want to send them a message across that greed and excess for failure is unacceptable.

55,000 boepd at the end Dec 2011 was not achieved. If they did achieve it what kinda bonus would they get? 200%?

I mean seriously someone needs to put the execs of UK Plc straight.

Congrats on Faroe -

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marben100 28th May '12 55 of 160

This afternoon, swapped FTSE100 covered warrant puts that I hold to hedge my porty as follows:

  • Sold SY35 5700 strike, Jun 15th expiry
  • Sold SY44 5500 strike, Dec 21st expiry
  • Bought SY04 5250 strike, Sep 21st expiry


My rationale is as follows. Firstly, I wanted to take profits on the June expiry puts (bought in February when the FTSE stood at over 5900). They have now become rather risky in themselves, as wild market swings, in either direction, are quite possible in the short time remaining until expiry. What I want now is hedging that will last over the next round of Greek elections and subsequent events/market reaction. Hence the September expiry nicely covers that period.

As markets have fallen, I've been adding to my portfolio, so the amount of equity exposure I need to hedge has increased. By swapping to a lower strike and a shorter expiry than the December one I've had in place, I can buy a larger quantity of puts and free up a modest amount cash.

I can now feel comfortable to continue deploying cash, if opportunities present themselves, knowing that I don't have to worry about market crashes if the global economy looks like its going pear-shaped.

My intention is to review my position in a month's time (whilst there's still a decent amount of time-value left in the September puts). We (and the markets) should know a lot more about the European situation by then, but that still leaves concerns about China, India and the US. I will try to take those risks into account when judging what represents a real bargain, as opposed to an apparent one. A specific concern that I have (per the piece I wrote on TRY) is that banks have still not properly written down European properties that are now on their own books after the 2008 crisis. That presents a similar risk to that in 2008, that there could be a liquidity freeze-up, with banks scared to lend to each other. Hence refinancing needs for any indebted potential investments require close scrutiny. Those with significant debts may get sold off, but as long as the debt maturity is relatively long, the risk may be lower than the market judges (providing that there is a sound income stream allowing the debt to be repaid, ultimately).



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Isaac 31st May '12 56 of 160

Results looked awful for Halfords this morning Mark....

I still have'nt bought, I would be a buyer after a prolonged period of sideways movement followed by a slow and steady rise on the back of a positive trading statement.

The chart looks awful, amazing how the markets tell Investors to avoid the downtrending shares - people could have sold much earlier & still can whilst the direction is down :

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marben100 31st May '12 57 of 160

Well, I've added to my holding @ 237p today: nearly a 10% yield now, which appears sustainable to me. Still generating an FCF/share of 40p - not bad against an xd-equivalent share price of 223p. I'll be sticking to my simple strategy: buy things that I find cheap and sell when they're not or become overweight, rather that trying to read tea-leaves.

With put options in place, protecting against potential market crashes, I prefer to have my cash invested, earning beefy divvies. :0)

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Isaac 31st May '12 58 of 160



A quick Summary of Halfords results :

-Profit before tax down 27%
-Debt up from £103m to £139m - So they bought back loads of shares (£63m worth) whilst weakening the balance sheet
-Current trading 'very disappointing'
-Despite tough trading conditions they are growing their workforce by 1000 new employees
-Free cash flow generated last year was £70.4m vs Dividend payments of £44.4m so dividend was covered 1.58 times
-With increased debt = higher finance costs = lower cashflow to pay the high dividend, add in further weak trading & continued capex spend of £20m per year & the dividend becomes unsustainable. Finance costs are double last year.
-They won't recieve the one of interest income from 2011 in future years.
-Cost of Sales have increased but revenue slightly down

-Property rents are up

- Staff costs are up approx 10% to £155.8m, almost a third of the market cap

-Corporation tax down from 28% to 26% but profits still down on the year

I would also question the management on the following statement :

Capital Expenditure


Capital investment in the period totalled £19.7m (FY11: £22.8m) comprising £15.2m in Retail and £4.5m in Autocentres. Consistent with prior periods, management has continued to adopt a prudent approach with regard to capital investment and has focused on investments generating material returns.


Within Retail, £11.5m was invested in stores, and included £1.2m in three new London stores, together with two completed store relocations. It also included £10.3m of investment in 83 store refreshes, the rightsizing of two stores, other expenditure covering general maintenance and the investment in three laboratory store formats opened recently.  Additional investment in Retail infrastructure included a £2.4m investment in IT systems, including further development of the online customer proposition, £1.0m in logistics and £0.3m in central facilities.


A further £4.5m (FY11: £6.2m) was invested in Autocentres predominantly to drive the centre roll-out plan and upgrade centre equipment, especially in relation to the delivery of the tyre proposition.


Why is the value of the property,plant and equipment (PPE) down for the year if so much money is being spent on capex? Answer is ofcourse £21m worth of depreciation so in effect they seem to be almost  spending as much as depreciation. They spent about £17m on PPE.

Also a look at the cashflow statement shows a loss on the sale of PPE for the year, hardly prudent management!

One bright spark is management appear to have converted some of their short term borrowings into longer term finance that is due in over a years time, however I would urge caution, the balance sheet appears to be geared quite heavily and trading is in a downturn.

Let's not forget Halfords were voted the worst retailer for Customer Service recently.

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marben100 1st Jun '12 59 of 160

In reply to Isaac, post #58

Hi Isaac,

A few points on some of your points...

Debt up from £103m to £139m - So they bought back loads of shares (£63m worth) whilst weakening the balance sheet

I quite agree and Roger Lawson and I complained bitterly about the buyback programme at last year's AGM. Shame more shareholders didn't come to support us. ;0) The good news is that the programme is now stopped. What we will be asking tough questions about this year, is the "worst retailer" report and I intend to do my own "mystery shopping" to form an independent (though limited) judgement.


With increased debt = higher finance costs = lower cashflow to pay the high dividend, add in further weak trading & continued capex spend of £20m per year & the dividend becomes unsustainable. Finance costs are double last year. 

Yes, I do not deny that there is a risk. Note, however, that FCF is after a £24.6m tax payment. Obviously, lower profits would mean a lower tax charge. Finance costs, however, are low: even a doubling to £11m is low vs an operating cashflow of £89.7m in 2011. Debt of £139m seems pretty manageable against that sort of figure. IMO the "margin of safety" is better than the market is giving credit for.


-Despite tough trading conditions they are growing their workforce by 1000 new employees

Now, that I give management credit for. Note the following points in the prelims:

In-store service revenue rose by 22.6% as fitting penetration hit record levels 


Sales at our Autocentres grew strongly by c.6% LfL and c.13% overall, driven by the growing awareness of the Halfords brand in the garage servicing sector and recognition by motorists of the value we offer. This performance is especially strong when compared to the overall auto aftercare market.


Gross profit for the UK/ROI business at £399.8m (FY11: £419.9m) represented 53.1% of sales, a 140 bps decline on the prior year (FY11: 54.5%). This reflected the continued focus on the delivery of cash returns within the business, increased levels of promotional participation by our customers, reduced sales of higher-margin ranges and the impacts from our focus on efficient stock clearance. The effect of these, together with the adverse result from product-cost inflation, was partially offset by the continuing increased penetration of our unique, high-margin wefit and werepair propositions and continued focus on maximising product-sourcing efficiencies


There is a strong trend towards "Do it For Me" in Car Maintenance and Halfords has seen growing demand for our wefit services. The foundation of our fitting proposition is the fitting of Car Bulbs, Windscreen Blades and Batteries ("3Bs"), by our trained in-store colleagues. During the year some 2m wefit jobs were completed and 26.2% of all 3Bs sold were also fitted. This compares with 23.5% fitted in FY11.

The 3Bs market, selling both product and fitting, is estimated to be worth £950m and Halfords only has a small percentage share of the market while garages and dealerships have a 75% share. Our offer is unique, 7 days-a-week on demand fitting at the most competitive prices, so there is good potential to win sales and grow revenues. Fitting is also a high-margin revenue stream and an economically favourable one, as labour costs are based on retail wage rates as opposed to the mechanics rates that garages and dealers charge. 


I.E. the service side of the business offers high margins and is growing rapidly. Growth here can compensate for weak retail sales. Hence I fully support the strategy stated as:

In the year ahead we are investing in our key areas of growth, Cycling, Fitting Services and Autocentres. This will accelerate our transition to a contemporary solutions provider and will create up to 1,000 new jobs.

It may not generate profits in 2013, due to the additonal staff & training costs but I believe it will set the company in good stead for the future, beyond that, compensating for retail sales that are looking even weaker than I had expected.


Why is the value of the property,plant and equipment (PPE) down for the year if so much money is being spent on capex?

Sorry but that's nonsense. CAPEX of £19.3m is small vs PPE of £97.9m (and considering the operating cashflow). Bear in mind that PPE will mainly comprise store fittings and |AutoCentre kit that depreciate rapidly. Management's statement re prudent CAPEX seems entirely correct to me and reflects an expenditure that is less than the value of prudently estimated depreciation - which is why the book value of PPE is down. In this climate, expensive store refurbs probably won't yield many extra sales and can wait.


So, to summarise, my view is that you and many analysts are overestimating the risks and underestimating future improvements from the increasing proportion of high-margin service revenues Halfords will generate.

Time will tell who's right. Meantime, I'm happy to keep collecting the divvies. :0)



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Fangorn 1st Jun '12 60 of 160

Hi Mark,

Regarding your " What we will be asking tough questions about this year, is the "worst retailer" report and I intend to do my own "mystery shopping" to form an independent (though limited) judgement."

I have to say I found it surprising that Halfords secured this dubious award havign frequented the Elstree/Borehamwood branch and been pleasantly surprised on each of the five occasions I happened to venture in there. The staff were both friendly, helpful, and eager to please regardless of whether I was picking up some bits for the car, or getting my bike its annual once over.

Must be very much a case of some stores being alot worse than others.

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marben100 1st Jun '12 61 of 160

In reply to Fangorn, post #60

Thanks Fangorn,

Must be very much a case of some stores being alot worse than others.

...or maybe a case of misleading sampling by Which? ;0)

Useful to have independent views - but it doesn't do any harm to keep management on their toes and earning their hefty rem. packages. ;0)



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