http://personalfinance.iii.co.uk Syndicates the latest Interactive Investor Articles via RSS 2.0. Unysen RSS Feed Generator - v2.0206 Interactive Investor Fiona Bond

Coal producer Western Coal felt the sharp end of the recession, with revenues plummeting by 33% year-on-year in its third quarter, but the firm remained upbeat for the future.

Western Coal (WTN) felt the sharp end of the recession, with revenues plummeting by 33% year-on-year in its third quarter, but the firm remained upbeat for the future.
Revenue slid to CAN$118,662 million for the three months ended 31 December, compared to CAN$176,561 million seen in the same period of 2008.
Net income also fell to CAN$24,030 million - or $0.9 per share - compared with CAN$62,478 million and $0.29 per share seen at the end of 2008, as a steep drop in sales prices, coupled with lower sales volumes drove its profits lower.
The AIM-listed group said further drops had been halted by the sale of 175,000 tonnes of coal at 2009 prices which were considerably higher that fiscal 2010, and helped fiscal third quarter revenue jump 10% on the preceding quarter.
Coal contract prices for fiscal 2010 dropped to CAN$126 per tonne for coking coal and CAN$90 per tonne for ultra-low volatile PCI (ULV-PCI), compared to $300 and 248 per tonne respectively for fiscal 2009 prices.
The weakening of the US dollar against the Canadian dollar also adversely impacted prices, the company added, with the average US dollar/Canadian dollar exchange rate for the three-month period clocked at $1.06, compared to $1.23 in the comparable period in the prior year.
Its Canadian production rates fared little better, falling by an overall 76,000 tonnes in the quarter, as a result of the economic downturn. While coking coal managed to up its rates by 74,000 tonnes year-on-year, production of ultra-low volatile PCI from the Brule mine tumbled by 150,000 tonnes due to lower demand.
For an alternative investment view on the firm, watch Edmond Jackson and iBall TV look at Western Coal.
Nevertheless, there was hope that the company's recently acquired US operations might help to ramp up production rates going forward. Western Coal acquired Maple and Gauley Eagle coal properties in July 2009.
Shipments out of the country in the fiscal third quarter of the 2010 financial year climbed 25% on second-quarter levels, which the company put down to "improving market conditions".
During the current quarter, the company kicked off operations at the Maple coal property, which will increase the marketable reserves on site to over 10,000,000 short tonnes of thermal coal - a 67% increase in the property's surface reserves.
Despite a sharp drop in profits, the company maintained that it had seen a "strong recovery in the demand" for its metallurgical coal product, resulting from renewed strength in the steel sector worldwide. China was the jewel in the crown, it added, with imports of coking coal soaring seven million tonnes to reach 35 million tonnes in 2009.
For the remaining three months of the fiscal 2010, the company expects to produce between 600,000 and 700,000 tonnes of metallurgical coal from its leading Canadian operations. All of the company's fiscal 2010 coal production from its Canadian operations is under contract for sale to international steel producers, the company said.
"In the longer term, the market fundamentals for metallurgical coal are expected to remain strong, which will provide continued opportunity for the company," Western Coal said.
Its shares were down 1.8% to 195p. ]]> Markets Tue, 09 Feb 2010 10:59:00 GMT http://personalfinance.iii.co.uk/articles/articledisplay.jsp?article_id=10077695&section=Markets http://personalfinance.iii.co.uk/articles/articledisplay.jsp?article_id=10077695&section=Markets Rhian Nicholson and Chris Thomas

The chief executive of the Financial Services Authority, Hector Sants, has announced that he is to step down from the helm of the City watchdog.

Hector Sants shocked the City by announcing he is stepping down in June from his role as chief executive after three years in the job.
Politicians and city commentators today applauded his time at the top but expressed doubt over his reasons for leaving.
John McFall, chairman of the Treasury Select Committee, told Interactive Investor: "I think it is rather unfortunate. Hector Sants was leading the FSA at a time when it was making real progress.
"Discontinuity at this time is perhaps not helpful to financial stability, but he has made his decision."
David Buik, market commentator at BGC Partners, adds: "The announcement was made in a rather nonchalant fashion, suggesting that it was routine and in the grand scheme of his career.
"I have my doubts. Mr Sants is very highly regarded and enjoyed an excellent career at Credit Suisse First Boston before taking up this appointment."
However, Sants, been a major figure in the massive shake-up of banking reform following the global financial crisis, played down any background factors influencing his decision.
"When I was appointed I told the board that I planned to serve as CEO for three years, and I intend to stick to that timetable," he said.
"Of course, those three years have encompassed the most extraordinary circumstances for a financial regulator, and I am very proud of the manner in which the FSA rose to the challenge of dealing with such unprecedented turbulence across global financial markets."
However, in some quarters, it was mooted that Sants' decision came ahead of the expected Conservative win in the general election - with the Tory party set to dissolve the FSA if it gets into power.
It wants to hand banking supervisory powers to the Bank of England, claiming the watchdog was asleep on the job before the financial crisis. ]]> Markets Tue, 09 Feb 2010 10:43:00 GMT http://personalfinance.iii.co.uk/articles/articledisplay.jsp?article_id=10077681&section=Markets http://personalfinance.iii.co.uk/articles/articledisplay.jsp?article_id=10077681&section=Markets Edmond Jackson

Despite bad news over European finances and the possibility of a double-dip recession, Edmond Jackson sees small cap share RSM Tenon as an attractive long-term prospect.

 
Previously known simply as Tenon, this AIM-listed group is involved in accountancy and financial advisory services to entrepreneurs - both in the corporate and individual sense. Growth prospects derive from companies and entrepreneurs alike needing to adjust to new circumstances and taxation, for example, and there is a fair chance of dependable earnings because entrepreneurs (being very busy) are less likely to shop around for new advisers.
 
Last December's acquisition of RSM Bentley Jennison for £76.3 million evolved the group's name to RSM Tenon (TNO) and its ranking among UK accountancy firms from number nine to seven, by way of fee income. The rationale involves improving the overall quality of the business with a broader UK geographic reach, a wider service offering and scope for further cost savings in years ahead.

Group services are spread broadly across taxation and business advisory (25% of revenue), corporate turnaround and recovery (21%), personal finance and taxation (21%), risk management (14%), basic accounts and audits (9%), outsourcing (7%) and corporate finance (just 3%). After some refocusing on the corporate side to turnaround and recovery from corporate finance, it is an appropriate revenue split currently.
 
Looking at the historic rating on Tenon, company REFS shows a historic price-earnings (P/E) multiple of about seven to 13 times - this rating nearly doubling from 2006 to 2007 as the price soared from about 20p to 67p a share. So the market has always had a qualified sense for earnings growth, this not being a rapid growth industry, yet the 'pro-forma' numbers involved with the merger suggest a substantial jump in profit with limited dilution.

From a company making £10 million to £15 million pre-tax profit, brokers project nearly £25 million in the current year to end-June and £36 million in 2010/11. Placing 88.9 million shares at 45p last December increased the total issued to 319 million, such that earnings per share (EPS) can grow by about 8% in the current year to end-June and by 22% in 2010/11.
 
At 47.5p currently the shares are a tad above the placing price on which management would have needed to convince institutions last December. This is low in the recent historic range, the price having hit 63p last October, although the placing has likely pulled it back. In a sluggish stockmarket investors may also be cautious at trusting forecasts even if five brokers publishing notes in January were united on a "buy" stance.

Yet they seem quite closely aligned on numbers, as if representing management's guidance, such that earnings per share may rise to 6.6p this year and 8.1p in 2010/11. A low, forward P/E multiple of seven below six times appears to make the risk/reward profile attractive at this level.
 
At least the businesses have established profit records, which improves the chances of management being realistic with its budgets. RSM Tenon shares is therefore a patient tuck-away on the basis trading updates will continue to affirm trading reasonably in line with expectations - and even if they were to fall modestly short, intrinsically the shares already allow for this.

The P/E multiple only needs to rise to nine times the projected 2010/11 EPS outcome for the shares to rise about 50% and there is also a proven record of dividend payments, well covered by earnings, such that the prospective annual yield averages about 3.5%.
 
The last update on 19 January, cited the group's recovery service side achieving like for like organic growth over 20% during the second half of 2009, with management confident of expansion in the first half of 2010 (the group's second half year) as it continues to reallocate resources from other activities.

Other areas of the group are expected to be second half-weighted, given the emphasis on tax and financial planning in the current quarter to end-March ahead of the 5 April tax year-end. So there is an aspect of wait and see, also regarding how numbers for the merged group will prove.
 
The 2008/09 year results showed a ninth year of underlying profit growth, with underlying operating profit up by 8% to £19.0 million and adjusted EPS by 6% to 6.59p. Despite achieving cost reductions which improved the operating margin from 11% to 12.6%, continuing operations revenue slipped from £160.3 million to £150.8 million, there only being a small £2.1 million acquisition during the year. So Tenon effectively needed a big deal to inject some financial dynamics otherwise growth prospects may have looked pedestrian.
 
The acquisitive approach to "people businesses" means a goodwill weighted balance sheet. The end-June 2009 balance sheet showed goodwill representing £79.1 million of 98.2 million non-current assets and £163.9 million total assets, although was 88.5% of net assets. Borrowings were £9.4 million short-term and £25.8 million long-term with the interest charge representing £2.1 million against £14.6 million operating profit after amortisation.
 
Management owns over 15% of the company and invested in last December's fund raising, so their interests are aligned with outside investors. After January's trading update the next significant news will be interim results, likely mid-March. Given the scale of the recent acquisition, it seems unlikely there will be further material deals in the foreseeable future, but management has plenty to work with to unlock value.
 
You can learn more by visiting tenongroup.com which offers thorough insight into group services. ]]> Share Dealing Tue, 09 Feb 2010 10:11:00 GMT http://personalfinance.iii.co.uk/articles/articledisplay.jsp?article_id=10077673&section=ShareDealing http://personalfinance.iii.co.uk/articles/articledisplay.jsp?article_id=10077673&section=ShareDealing Fiona Bond

Victoria Oil & Gas, the oil and gas exploration company, is charging ahead with its Logbaba gas and condensate project after spudding its second well on the site.

Victoria Oil & Gas (VOG), the oil and gas exploration company, is charging ahead with its Logbaba gas and condensate project after spudding its second well on the site.
Well La-106 was spudded on 6 February - in line with expectations - and will twin well La-101, which was drilled back in 1954 by Elf Serepca.
The AIM-listed group expects to drill the latest well to depths of roughly 8,700 feet, with the operation taking up to 60 days to complete.
"Logbaba remains the only onshore discovery in Cameroon and is ideally positioned to supply natural gas to industrial customers in Douala," the company said.
The well will be drilled from same well pad as La-105 and following the results of the seismic survey announced earlier this month, will be deviated to a location around 390 metres north west of La-101 in order to access the most prospective areas of the existing discovery.
Just earlier this month, chairman Kevin Foo delighted investors with the promise of a major potential hydrocarbon discovery at the Douala-based project. Data indicated major potential for hydrocarbon discoveries just two kilometres from the current drilling location which are "substantially larger" than the existing discovery.
As a result, well La-106 will target the sweet spot unearthed by the seismic survey, which could penetrate better reservoir that any of the wells previously drilled on Logbaba.
The company, with assets in Cameroon and the former Soviet Union, said the findings had only just been made due to a previous lack of geophysical data.
The company added that while La-106 is being drilled, the company will also undertake testing of La-105 expected to kick off this month.
Fox Davies Capital commented: "La-106 was spudded on time and operations at Logbaba seem to be running smoothly now. La-106 should penetrate better reservoir that any of the wells drilled previously on Logbaba. If this is the case then the prospect to the North of Logbaba would be materially de-risked and become the next drilling target.
"Hence, the Logbaba project is turning out much better than expected and reserves in the licence could be a multiple of initial expectations. As such our target price of 9p is very solid and the unrisked potential is considerable higher with a prospect of an equivalent size to Logbaba contributing an additional 8p of value."
Investors discussing the news on the Interactive Investor Victoria Oil & Gas discussion board were vocal in their take on matters.
Temujiin begrudged the lack of news: "We knew the sixth well was intended to spud and there was a reasonable possibility VOG would target the new zone. Not a bad RNS, just not the real news we want - licence etc. I don't think the news will have any effect on the share price."
However, others were more enthusiastic, with Snooker boy commenting: "Slowly but surely it seems the potential is beckoning," while the Aussie commented: "All looking sweet for Victoria Oil and Gas. I can see a great investment when one comes along and this is great value.
The company's shares were down 0.5% to 3.85p.
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Broadcasting giant BSkyB last night sold the majority of its controversial stake in ITV ending its long-running legal battle.

BSkyB (BSY) last night sold the majority of its controversial stake in ITV (ITV) after a long-running legal battle.
The pay-TV group had been ordered to reduce its shareholding in ITV from 17.9% to 7.5% after rivals complained it was harming competition. Morgan Stanley placed the 10.4% stake, raising around £196 million.
Shares in ITV closed down 2.3% at 51p yesterday, Sky's shares standing at 48.5p.
A source close to the sale told City AM that no single buyer bought the entire tranche of shares.
And an industry insider said Sky decided not to sell the shares to a single bidder, which could have attracted a premium, in order to prevent one of its rivals launching a takeover bid.
The sale represents a massive loss on Sky's original £545 million outlay, although the firm will post a £119 million accounting profit because it has written down the value of the investment over the last two years.
Sky has appealed several times against the ruling that it must sell its shares in ITV. NTL Telewest, which now trades as Virgin Media, was particularly irked by the deal, which it said was a blatant attempt to block its proposed bid for ITV.
Suitors that were thought to be interested in Sky's stake include Virgin Media and Channel Five owner RTL. But neither party bought shares from Sky yesterday. ]]> Markets Tue, 09 Feb 2010 08:59:00 GMT http://personalfinance.iii.co.uk/articles/articledisplay.jsp?article_id=10077653&section=Markets http://personalfinance.iii.co.uk/articles/articledisplay.jsp?article_id=10077653&section=Markets