by Nick Louth
Wednesday 23rd April: Deutsche Bonk
Hell’s Bells share club this week is devoted to K.P. Sharma showing us how to work out rights issues. As he says, companies don’t explain what such things as ex-rights prices mean, nor make explicit that dilution usually means a dividend cut.
“The RBS announcement doesn’t say that it’s going to cut the dividend,” says Martin Gale, looking through a hefty printout. “It just says they will pay out 45% of earnings in dividends, about the same as 2007, which was 33p.”
“Ah,” says K.P. “But those same earnings will be spread over a lot more shares. So if you got 33p in 2007 and there’s an 11/18 rights issue, what are you likely to get per share in future, assuming the overall earnings are stable?”
Martin, sucking a pencil, looks stumped and scratches his head. Chantelle, today resplendent in pink eye shadow to match her hair and a new lip piercing, is the one who’s on the ball. “It’s 33p, times 18 divided by 11 plus 18, ain’t it?”
“Yes, but you express it most easily by summing the denominator, so 33 x (18/29). The answer is 20.5p,” K.P. says.
I struggle with the maths, but it’s clear that even with the average price of the shares being lower because of the rights issue, dividend dilution is going to cut the yield to 7%.
“Now K.P., I remember that you wanted us to buy RBS,” notes Chantelle, as she munches through some scampi fries. “But if we did, we’d have lost money on the share price fall, have to stump up more cash for extra shares, and get lower dividends. All for a bank with poorer growth prospects than we were led to believe after the over-priced takeover of ABN-Amro.”
“You summed that up lovely, darling,” says Harry Staines. “Here’s another reason not to buy banks,” he says, stabbing a finger at the crumpled Financial Times on which he’s been resting his pint of Adnam’s. “It seems Deutsche Bank will no longer reimburse the cost of brothel visits for staff’,” he chuckled.
“Good grief,” I say. “So what was the old policy?”
“Just imagine,” he said. “You know what Germans are like for recording details: a separate expense claim code for every sexual position, and maybe a Hamburg-weighting allowance. If travelling abroad you’d have to share your totty with a colleague unless you were entertaining clients, and do the currency translation yourself. You’d have to work out the VAT so they could claim it back, and those bods in Health & Safety would want not only receipts for the condoms but a written declaration that they’d been used, to avoid HIV impairment charges on the bank’s human assets.”
Friday 25th April: Looking After Nasdaq
Jem has dropped in to tell us that she and Toby are off on holiday to Mikonos. Oh yes, and would we be kind enough to look after Nasdaq for them for two weeks? This is a typical example of my daughter’s thoughtlessness. Their black labrador, as energetic as his stock index namesake, is only six months old and needs vast amounts of exercise. They have only left enough of his dry food for two days, so that’s another subsidy I’m making.
Saturday 26th April: Ga-Ga Over Grangemouth
Got a phone call from my mother, terrified that Britain was going to run out of fuel because of the impending strike by refinery workers at Grangemouth. Found it very hard to shut her up.
“Really, Mum, what are you worried about? You don’t have a car and you’ve already hoarded enough food to supply a nuclear bunker full of Sumo wrestlers.”
“But what about Maurice?” she says. “I depend on him.”
“Maurice runs on batteries, not petrol. Don’t you remember I showed you how to recharge him?”
Frankly, I’d be happier if my mother got rid of her mobility vehicle altogether. She’s a liability to herself and to all road and pavement users. Only last week I was walking with her along the Great West Road when she veered off the pavement to inspect what she thought was a packet of smoked salmon lying in the bus lane. My shouts that it was in fact a flattened pigeon fell on deaf ears, and might have been on dead ones had I not leapt into the carriageway to wave my arms like a lunatic to warn traffic.
Close of play: The new Jones family commodity fund investments are going rather well. BHP continues to climb, at 1800p from the 1666p purchase, Unilever is essentially flat, but BP is the real star, having climbed to 580p ahead of next week’s results, giving me a 10% profit already – about £500. Now that is really something to celebrate. So now I have decided we shall call the fund DotCom, from my mother’s name as chief funder, and from commodities, which is the mast we have nailed our investment flag to.
Tuesday 29th April: Best Estimates
Narrowly escaped a hippopotamus manoeuvre this morning. Pinched a well-honed tactic from the enemy: feigning a headache. Of course, with Eunice this meant having to needlessly subject myself to a detailed cross-examination, down several Nurofen, lie with an ice-cold cloth on my forehead and rub some revolting camomile and horseradish gunge (that Irmgard recommended) into my neck. Only after I’d won an Oscar for my 40 minutes of unrelenting moaning was I signed off marital duties.
While Eunice was in the loo, I escaped downstairs at 8.10am, grabbed a coffee and logged on to the PC to see what the world of shares had to offer. Astounded to see that BP has beaten all forecasts with a 44% rise in profits, with $6.6 billion in the year’s first three months compared with the $5.2 billion that analysts were expecting. Stayed to watch the shares, constantly refreshing the price page and urging the chart ever higher. I have to admit this financial voyeurism gave me more ecstasy than anything that happens to me while pinioned underneath my wife. Does this make me odd? Not if you’ve seen her, it doesn’t.
My reverie was interrupted by Eunice bursting into the den, in bathrobe and towel-turban. I immediately threw my hands to my head. “Ow, ow, ow. Why doesn’t it stop?” I crooned. “It’s like a rusty nail from one ear to the other.”
“Bernard, you obviously can’t expect to throw off the pain if you’re looking at a computer screen. They’re notorious for eye-strain. Come back to bed. I’ve got some feverfew and milk-thistle lotion which should help. And no caffeine.”
She and I both grabbed for the coffee, and in the collision that followed it tipped over the keyboard. There was a hiss and crackle and the screen went blank.
“Oh well, solved two headache problems at once,” she said.
Wednesday 30th April: A Company By Any Other Name
After weeks of debate, the share club has finally decided that it is today going to spend its accumulated fund of £2837.14, come what may. However it is only when K.P. Sharma gives us each a print out of where we stand that we notice what has happened to some of our previous investments.
“Blimey,” says Chantelle. “BT’s down by a third from when we bought. Have people stopped making phone calls?”
“And what about this Fairpoint. When did we buy that?” asked Martin Gale. “What happened to Debt Free Direct?”
“You lot never listen do you,” K.P. said. “I told you before that Debt Free Direct changed its name.”
“But look at the price!” Martin squealed. “It’s only a quid and we bought it at three. Am I the only person with an IVA to support this industry?”
Chapter Fifteen: Car Alarm
Thursday 1st May: Goodwill Over-Paid
Hornby has just bought Corgi, maker of die-cast models. Ah! I well remember my 1950s collection of milk float, Scammell low-loader and Bentley, with which I used to manufacture level crossing disasters during the days when I still called my layout a train set. I really can’t see what today’s PlayStation and X-Box generation would want with them, but as Hornby says it is really a collectibles market, for nostalgic old buffers like me. However, before going too misty-eyed, I’m amazed that for £7.5 million Hornby is getting only £1.4 million of assets. Trademarks, intellectual property, goodwill and so on do have a value, but there’s a limit to what you can do with them when a collectibles market depends on scarcity. I’d never have fallen for that one. When I bought Four-eyes Filton�
��s pram-dragster in 1955 for one-and-six, I didn’t fall for that nonsense. He wanted an extra thruppence because it had an early version of ABS brakes (powered by his sister’s knicker-elastic) but I wasn’t having any of it until I had the chance for due diligence, which involved being pushed down Tall Hill on it. Pulled bleeding out of the nettles at the bottom, and minus one molar, I declared that I was keeping my thruppenny bit.
Elevenses: Tentatively bit into an ancient Netto fig roll, one of many hidden in the layout’s big tunnel upstairs, during the biscuit wars. In recent months they have been used on my goods trains, one per truck, to simulate a cargo of concrete. Indeed, having bitten into it, that is what it has become. I return the item to its truck, and go downstairs in search of softer fare.
Saturday 3rd May: Renault Lost
Elevenses: Quietly munching away on a bar of Toblerone while Eunice is out. I thought I’d be safe for several hours as she has gone on a single-handed Barclaycard-funded mission to drag Britain’s retail sector out of recession. Now that she knows I have money from Dot, she’s lost all sense of restraint. However, the phone rings and it’s a breathless Eunice on the line.
“Bernard, the car’s been stolen! I left it in the multi-storey and when I came back with my first few purchases from M&S, House of Fraser and Debenhams, it was gone.”
I’m almost as alarmed about the idea of successive waves of purchases too big to be carried about as I am about the loss of the car. Further questioning reveals that she’s certain that she’s got the right floor, despite not making a note of it, because it was between a silver Golf and the fire exit, and now there’s a blue Mondeo in her spot.
“So, would you be good enough to come and pick me up, Bernard? I’ve got more bags than I can carry.”
“Please just check the other floors. Just to be sure.”
“Bernard, there are seven floors in this car park, plus the half ones on the other side, and I parked the other end from the lift.”
“But I’m not going to drive all the way there if it turns out your Clio is just a floor away from where you are.”
“Well it’s really come to something in our marriage if you don’t trust me anymore. The car’s been stolen, I’m lost and alone in a strange place...”
“You’re in Bromley for Christ’s sake, not Faluja.”
“But I saw a hoodie outside Next. Anything could happen to me and you just don’t care.” The telltale signs of snivelling began, so I finally relented. And guess what? When I got there she was in the wrong bloody car park. The Clio was just where she left it. But whose fault was it? Of course, you guessed. Mine.
Wednesday 7th May: Medical Appointment
Just about to head off for share club at the Ring o’Bells, when Jem arrives. She breezes past me with barely a hello, and gets into an earnest and apparently medical conversation with Eunice. I return to the den, somewhat baffled, and only emerge when the sound of car doors banging indicates further activity. Finally, when Eunice is just getting into Jem’s car I wander up to ask what’s going on.
“I’m taking Mum to hospital,” says Jem.
“Can I help with directions? You go round the M25. Then take the A30, turn off just after Camberley heading for Crowthorne, Broadmoor is just off the A3095.”
“Bernard,” says Eunice, testily. “I’ve told you goodness knows how many times, I’ve got my screening appointment today.”
“A screening?”
“About my lump. Look, Bernard, do I have to shout it down the street just because you never remember anything?”
“A mammogram!” hissed Jem.
“You’re wasting your time Jemima,” Eunice said. “Bernard probably thinks a mammogram is a new Post Office service to keep him in touch with his mother.”
Thursday 8th May: Unileverage
Unilever, a major part of the DotCom fund, has reported a 35% rise in earnings per share, and has taken action to recover the cost of commodities. As hoped, this company has the leverage to hold its own against the supermarkets. BP, Billiton and BG Group, the other elements in the fund, also seem to be doing well, so at last I have a workable investment strategy.
Close of play: Made about £430 today. That’s the ticket!
Saturday 10th May: Antichrist Cluster
Family get-together, arranged by Jem to be supportive to Eunice, who as I’m repeatedly told is going through a ‘difficult time’ with medical worry. My sister Yvonne’s come all the way down from Stockport, while Brian and Janet have ferried over the Antichrist to keep us all on our toes. I’ve done my bit, buying Eunice a big box of Thornton’s best, making pots of tea and patting her on the back on numerous occasions. Digby, having asked to use the den this morning, emerges with a hand-painted egg box filled with hand-made Belgian chocolates. He basks in the praise for some truly out-of-character behaviour as we devour the lot. However, when we get to my chocolates, the box ribbons are curiously awry, and the cellophane gone. All seems well until we delve into the second layer. Instead of lemon parfait, coconut paradise and chocolate dream there are just empty spaces.
“What a swizz!” I say. “They’ve only given me half a box.”
“Oh, I should take it back,” says Yvonne, eating the last almond marzipan from the top layer. “Trade descriptions, isn’t it?”
Eunice chuckles: “While my nine-year-old grandson is able to get me hand-made Belgian chocolates I can’t trust my husband to get me a whole box of shop-bought.”
Some cog in my brain clicks, and I look at Digby, who is looking particularly smug. Why, the cunning little...
Tuesday 13th May: Energy Savings
For the fourth time in a fortnight, I am going to have to drive halfway around the M25 to see my mother. She’s phoned up, having got into a state about the energy efficient bulbs she was given by the council. She can’t seem to fit them.
“Can’t you just use the existing ones for now?” I ask.
“No. The council man said it was very important. Apparently the police can tell who’s been using too much energy through their carbon fingerprints.”
“Carbon footprints, Mum, not fingerprints.”
“Anyway, Mrs Harrison and the Dentons at number 37 have got their bulbs, and keep them on all day just so we’ll notice. Well, I don’t want to look bad, so I’m washing me nets and I’ll have mine on display too.”
So, cursing the price of petrol and Gordon Brown’s eco-drive with alternate breaths, I drive round to fix things for her. My carbon footprint for this journey alone probably amounts to five years’-worth of savings from her energy efficient bulbs, but I can’t begin to explain that to her. When I do get there I see she’s been supplied with screw-in bulbs when she actually needs a bayonet fitting.
“Didn’t they give you any bayonets?” I ask.
“No. I think they gave them all to the Home Guard.”
It takes me another ten minutes to straighten that one out, and another fifteen minutes on the phone to the council to explain that Dot needs the other fitting. On the journey home I notice that the price of petrol at the roundabout has gone up 3p since I last passed it just an hour ago. Unbelievable! The way things are going I’ll only be able to afford to do this journey in Maurice, Dot’s mobility vehicle.
Wednesday 14th May: The Final Purchase
Warm weather at the share club, so we sit outside at the Ring o’Bells, allowing Harry to use his ‘totty screener’ to assess the merits of the women walking by.
“That’s an Ashtead,” he says, peering at a forty-something bottle-blonde. “Used to have attractions, now expanded a bit too rapidly and vulnerable to a slowdown in spending. Cheap, though.”
He then points out a large, worn-out looking woman besieged by her numerous children. “Definitely a BT. Top heavy costs, looks sluggish next to rivals, but resilient in tough times.”
Harry then sees a mini-skirted brunette on a bicycle: “Now there’s a BHP Billiton. Superb natural assets, buoyed by the commodity super-cycle, but mucky if we�
��re lucky...”
At which point Harry’s face is pushed firmly into his lasagne. Chantelle, holding it there, pours half a pint of dregs from the tables she’s been clearing onto the back of his head. “Harry, your attitude to women makes the Taliban seem like Germaine Greer. Now if you were a share it would be JJB Sports – sagging sales, trouble in the fitness sector and distinctly unattractive.”
Harry emerges with egg, and much else, on his face as the rest of us dissolve in giggles.
K.P. Sharma, calling the meeting to order finally insists that we must make a decision over whether to spend our small surplus or keep it for still lower prices. Mike Delaney, Harry, Chantelle and K.P. expect the market to fall further. I see it flat but wobbly, while Martin Gale, ever optimistic, thinks FTSE’s heading for 7000. With most of us bearish, we decide to keep our powder dry. Perhaps the end of September will be the right time to commit the cash, after the summer doldrums are over.
Monday 19th May: Going For A Wii
Just as I suspected, the long arm of the American legal system has finally snagged BAE Systems’ collar. Chief executive Mike Turner was detained by Justice Department officials at Houston Airport. Things called subpoenas were involved. Like gubernatorial, valedictorian and sophomore, such words are destined to mystify the English. Still, it’s all about Al Yamamah, that’s for sure. Though Dot wouldn’t allow me to sell her BAE shares, I’m really glad that Mary Asterby of the Womens’ Institute persuaded her to do it. This isn’t over yet for BAE, mark my words.
