GG now spends rainy days trading equities and currencies. He likes to use a combination of technical analysis and news flow to make trading decisions.
Bloomsbury and Woolworths
What exactly does a publishing house do after it has published the most sucessful book of modern times? We may find out on Tuesday when Bloomsbury, publisher of the Harry Potter books, reports.
Pre-tax profits are expected to show a surge in the wake of the last JK Rowling blockbuster, to about £18m. However for the current year expectations are more modest with around £10m expected.
The company has built up cash reserves of an estimated £35-45m, and given at the last results presentation the Chairman indicated that he would be on the lookout for ‘larger acquisitions’, investors will be keen to learn what progress is being made.
The company has some new ‘high-profile’ titles which should generate some interest and additional sales: ‘Poppy Shakespeare’ is debuting tonight on Channel 4 in the UK, ‘Gossip Girl’ is currently on ITV, whilst new novels by Michael Ondaatje (The English Patient) and Khaled Hosseini (the Kite Runner) have attracted decent reviews and high sales. In non-fiction, cookery books by Heston Blumenthal and Hugh Fearnley-Whittingstall have been in the bestseller lists.
Going forward, the company has almost 1200 titles under contract with a future cash commitment of about £18m, so even if another JK Rowling doesn’t appear for a while, there is plenty to keep the company occupied. One of the most interesting recent developments was a long-term agreement with the Qatar Financial Centre Authority for an online database-giving the company a visible revenue stream over a number of years.
Investors will be anxiously awaiting results from retailer Woolworths on Wednesday. The shares have rallied strongly from a low of under 8p in January as hopes grew that the group would be broken up and value could be extracted for shareholders.
Although the group is expected to have returned to profitability, (market estimates about £25m) some suggest this is on the back of some clever deals on property, rather than an improvement in underlying trading at its stores. Increased debt following a couple of acquisitions and higher interest rates following a ‘credit crunch’ refinancing may have added an extra £30m to its annual interest burden-leading to a possible 50% cut in the dividend. It also has a £60m hole in its pension fund that needs to be addressed.
The company has a joint venture with the BBC called 2Entertain, a DVD publisher. Woolies’ 40% stake has been valued by some analysts at £160-200m; more than the market cap for the whole of the Woolworths group-which is why some investors have been arguing for a break-up.
Icelandic retailer and activist shareholder Baugur has already been behind a number of takeovers or restructuring proposals for a number of familiar names on the UK high street. Although it is currently bidding for Moss Bros, it is unlikely to remain still for long with Woolies as it nurses an estimated £30m loss on the 10% shareholding it and its consortium members have built up.
April 1st, 2008 at 11:59 am
Bloomsbury figs came in broadly in line @ £17.9m, although cash generation was excellent, leaving the group with £47.5m in net cash, although half-yearly royalty payments are due.
The last Harry Potter Book was a significant contributor; although not broken down an increase of 261% in Children’s book revenue to £98.9m alludes to its significance.
Market has not upgraded 2008 numbers (£10m) despite decent Q1 trading. Jury still out on where the company goes from here although small educational acquisition yesterday. Agreement with Microsoft to digitise backlist.
Stock down a penny or so after couple of strong days.
April 2nd, 2008 at 1:40 pm
Woolies has chopped its divi by a greater than expected 87% as it moves to conserve cash in a tough trading environment.
It also annouced a tie-up with Somerfield to use up some of the excess space in about 80 of it stores. So soon you will be able to buy a sarnie or ready meal with your pick’n mix and Power Ranger!
Analysts believe that some modest progress was being made at the retail chain despite l-f-l sales being 3.2% lower. However, a breakup of the group looks some way off-not until ’sustained profits’ are obtained within the core retail division.
Market a bit disappointed on this news; stock down about 6% on this and news of the cut in the divi.
April 2nd, 2008 at 3:41 pm
Hi GG,
Interesting times at your pick, SIG. After blasting through 900 yesterday, it pulled back today then had a lovely bounce up off the old resistance around 888 on some decent end of day volume.
Onward and upward?
April 2nd, 2008 at 4:07 pm
Afternoon ken how’s it swinging?
Yeah-an old sage told me never buy the first breakout, wait for the pullback and see if it holds-which is what I did! MMs playing silly b*ggers at about 1530 trying to shake a few loose ones out
Noticed a ‘one day drop’ on Signet the other day to about 59p-just enough to take a load of stops out and then the mm’s whacked it straight back up again.
Not quite sure where we go from here; far too much optimism about for my liking (same school of thought as you and FT) but I’m not going to wee into a rapidly filling urinal!
Was having a look at Savills earlier today. Big recovery (+50%) from lows, ‘challenging’ market conditions & Knight Frank bleating about City bonuses dwindling (more with UBS you might think) and £1-5m London properties not shifting -sales down 20% in Q1-shame!
Big saucer on dailies, and relatively cheap on PE basis, but just think enough might be enough
April 2nd, 2008 at 5:12 pm
Yeah, that drop to 59 on Signet was enough to tempt me into a now silly-looking short. Despite the strong market, it hasn’t gone past its high prior to the dip, so my stop is still intact (just).
And, yes, I’ve opened another RightMove short — but just a small one. How much bad housing market news does it take to get this one moving down past the 480 resistance? Like Signet, the strong market hasn’t been enough to take this up and over old resistance at 500.
But not — so far — a week for shorts. I’ve a 2-month old long position on Glaxo, which has today moved up close to a resistance level from back in Feb and with a cross through the 50MA. So a retreat or a breakout (back up to 1400?) on the cards.