Good Afternoon ,
Quiet day. Ireland closed down slightly having been range bound for the day but most of the trading was done at the lower levels. European markets opened brighter and range traded trying to escape higher than last nights closing levels but like a magnet was drawn bac and eventually finished effectively falt on the day. THe FTSE index also tried valiantly to rally but got no where and slipped back to just above last nights closing levels.
The Dow Jones has been up and down all day too. Crucial levels according to some now that we have had an effective 50% fall from the peak. Ireland has fallen by 82% from the peak and shows no sign of support being reached. The optimists say history suggests the market is due for a bear market bounce.
The market is not listening.
In Ireland AIB popped out a trading update unexpectedly , There’s obviously numerous moving parts, but one other point on the AIB trading statement is the pre-provision performance seems to be a bit stronger than anticipated. The increase in loan loss provisions to 100 bps from 75 would take about 325m off pbt. The statement indicates their EPS expectation declined by c. 6c to 114 vs 120 after the increase. On a pre-tax basis, this works out to c. €65m, so the pre-provision op profit looks a bit better than the €2.4B I have in for 08. In the short term, this is of course overwhelmed by the Loan loss provisions, but it’s not insignificant.
Market too knows that it is only a story of the speed and scale of loan losses but did give the market a little something to chat about this afternoon.
In the UK Grafton Peer Travis Perkins reported an 18% fall in adjusted EPS in FY2008 to 123p (slightly ahead of expectations of 121p), with group sales flat and adjusted operating profit down by 15%, while the dividend was suspended (no final dividend was declared). Travis notes that the speed and scale of the impact of the financial markets turmoil has been greater than expected and it expects that 2009 ‘is likely to prove a very tough year’. It sees ‘limited prospects for a return to growth in 2010. Not much to grasp at if looking for a bullish read across to Grafton.
Ladbrokes also had numbers today and their comments on Ireland were instructive. ;adbrokes added a net 71 shops to the estate, the majority of which were in Northern Ireland. While the like for like Northern Ireland performance showed good gross win growth of 21.3%, the shops in
the Republic of Ireland suffered an 8.8% like for like constant currency gross win decline. This reflected the more challenging economic environment and, with no machines, a greater reliance on Irish horseracing which experienced an unusually high number of abandonments.
The underlying gross win performance for Ireland was down 6.6% during the year.
Again not great reading but there is a chance that the market has already discounted this. My fear is that discretionary consumer expenditure in Ireland is likely to collapse from here and so I am firmly in the fence here at this point. Instinctively I fear the environment but I like the company and how they do what they do.
Overall an uneventful day , all eyes on the US which continues to slide. Tomorrows direction in Europe definitely at the merci of the US. And given the range bound nature of trading today , there is little conviction that we are in for any respite.
Do have a good evening , this story continues…
Liam
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Liam Boggan
Merrion Stockbrokers
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