Cube Report (30 Oct) – FTSE ends October on a scary note

Cube Report (30 Oct) – FTSE ends October on a scary note

Good morning!

The FTSE is now trading at 5570. Tough times!

Today, I note that my largest personal holding, Volvere (VLE), has announced a placing and retail offer. I will certainly have to reflect on this.

I also want to keep up the coverage of mid-caps in this report, so I plan to say a few words on:

  • Computacenter
  • International Consolidated Airlines
  • WPP
  • Smith & Nephew


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Market cap £2.6 billion
RNS Q3 Trading Update
Writer disclosure No position.

This stock has been a true Covid winner, and you’ll have more than doubled your money if you bought in during the deep sell-off earlier this year.

As organisations switched to a working-from-home (WFH) model, they needed Computacenter’s help more than ever.

The forecasts in the market suggest that the company’s net income will grow by around 30% this year to £130 million.

Today’s update is nice, confirming expectations:

The quarter finished as we had anticipated when we reported our Interim Results on 9 September 2020 and we are highly pleased with the performance, as a whole, across all our major geographies.  The Board is very comfortable with its current expectations for the full year as we have entered the fourth quarter with good short-term visibility and a strong backlog of orders.

We also get an update on two acquisitions that “should, together in aggregate, add significantly to 2021“. The recently-announced acquisition in Canada came with a price tag of CAD$ 105.8 million (£61 million).

My view – there’s no reason to change my perspective on Computacenter following today’s update. A nice company, and in the right place at the right time.


International Consolidated Airlines

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Market cap £4.6 billion (€5.1 billion)
RNS 3rd Quarter Results
Writer disclosure No position.

Let’s check up on how this devastated industry is doing.

  • Q3 more active than Q2 (not difficult).
  • “Demand continues to be adversely affected by volatile government restrictions and quarantine requirements”.
  • Q4 capacity planned to be no more than 30% of 2019.

It’s been an awful year for employees in the industry, and IAG has reached agreements with “most” employee groups at British Airways. Spain and Ireland have also seen major cuts.

Financial result – operating loss of €1.3 billion in Q3, bringing the year-to-date after-tax loss to €3.2 billion (before exceptional items).

After exceptional items, a total of €5.6 billion has been lost this year.

At least the liquidity is excellent:

  • cash position at the end of September was €5 billion
  • undrawn facilities of €1.6 billion
  • capital raise generated €2.7 billion in gross proceeds.

Total liquidity is therefore c. €9.3 billion. Much, much bigger than the market cap!

CEO comment – the CEO is frustrated that passengers can’t get tested for Covid before and/or after arrival, freeing them from the need to quarantine.

But regardless of this, he doesn’t expect demand to recover until 2023.

Trading outlook – none provided.

My view – I don’t dabble in airline shares and have zero intention of breaking this rule. That said,  I am intrigued to see how this one fares.

If it earned a “normal” profit in 2023, I would expect the share price to make a significant recovery by then. Perhaps one to tuck away in the bottom drawer?

Current forecasts suggest €1.3 billion could be earned in 2022.



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Market cap £7.5 billion
RNS Third Quarter Trading Update
Writer disclosure No position.

This enormous advertising/communications group has been doing ok, in the circumstances:

The outlooks for revenue (less pass-through costs) and operating margin are within the range of analyst expectations.

These expectations are:

“Like-for-like growth in revenue less pass-through costs of -8.5% to -10.7% and headline operating margin of 11.4% to 12.5%. Equivalent ranges on 27 August 2020 were -10.0% to -11.5% and 10.4% to 12.5% respectively.”

So we have a nice uplift in expectations for the year, compared to late August. But the share price is currently lower than it was at that time – I guess reflecting the more pessimistic Covid outlook?

CEO comment:

“Given the tightening of COVID restrictions around the world and uncertainty in the global economic outlook, we remain cautious about the pace of recovery. It is important that we maintain our strong financial position and we are on track to achieve cost savings towards the upper end of our £700-800 million target.

My view

When it comes to my big-picture perspective on the economy, I take some comfort in these numbers. A reduction in revenue of less than – or circa – 10% is better than I would have expected.

This reflects plenty of activity at WPP’s clients, i.e. many of the biggest companies in the world. The recession could be worse.


Smith & Nephew

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Market cap £11.7 billion
RNS Trading Statement
Writer disclosure No position.

An excellent Q3 bounce from this medical devices group: Q3 revenue down 4.2% on an underlying basis, versus Q2 down 29.3%.

The devices it produces are typically to do with orthopedics and other non-Covid treatments, and many of those treatments were suspended during the period of harshest lockdown.

I’m pleased to see that business is now almost back fully to normal.

Although the geographic spread has shifted: the US anbd China are growing, while LatAm and India are shrinking.

There is no full-year guidance, which I think is a bit of a disappointment.

I can understand airlines not wishing to make any sort of forecast, but why couldn’t Smith & Nephew give a range of possible outcomes?

CEO comment:

“I am pleased with our progress in the third quarter and how the business and our employees have responded to challenging circumstances. We were well prepared as global levels of elective surgery recovered and delivered a substantial improvement in performance over the previous quarter, led by growth in both the US and China, our two largest markets.

My view – I could see myself buying shares in this at some point, when the valuation is more to my liking.



That will do it for this report. Thanks very much for reading – I’ll be back soon with some premium articles!





Wordpress (4)
  • comment-avatar

    Hi Graham. First of all, many congratulations on your recent events. Always remember, a happy wife is a happy life! I know you have a wee virus fixation, so I thought I would fill you in on two interesting local stories. The wife’s niece was required to attend for a test after having contact. She attended with two work colleagues. The test centre was shut, and had been for a week. All three decided to just return home, and stay there for two weeks. Seventy two hours later all three received letters telling them they had tested positive and should isolate them selves!

    Two weeks ago my neighbour’s parents both died within three days of each other. They were in their early eighties. Both death certificates stated Covid 19 as a contributory cause. Neither had been tested. The father passed first, at home. He had been a chronic asthmatic for more than a decade and intermittently hospitalised for pneumonia over the last five years. The mother was found dead in her bed three days later. A heart attack seems likely.

    I have never been overly sceptical about the virus, but I have certainly shifted that way of late. As an afterword my wife has been told not to expect to be back in her office on a permanent basis until after Christmas….2022!

    • comment-avatar

      Thanks very much, very kind of you to wish me congrats and that fine advice.

      Re: the virus, you might also find interesting the videos being taken of test centres around the south of England, showing pretty much all of them completely empty! Citizen journalists are now doing the basic work that mainstream journalists refuse to do!

      And thank you for sharing the recent situations you’ve come across re: positive tests, and “Covid-related” deaths. I fear that most of the data in the public domain is rubbish, and that has been the main focus of my Twitter campaigning.

      I just can’t allow statistical crimes to be committed, without saying something!

      Chat soon,


  • comment-avatar

    Welcome back, G – we missed you!

    As for your Covid twitter campaigning – hope it isn’t used to damage your rep by those who are couldn’t care less about the merits of the argument being made but like to cause a bit of trouble.

    And isn’t it about time the media demanded another million more (ineffective against Covid) ventilators? To show how much they really care about people.

    • comment-avatar

      Thanks Shine! Really appreciate that.

      Doesn’t bother me getting into tussles or taking some flak – I have thick skin.

      I just wish the mainstream media covered it in a more reasonable way, would have saved me a lot of time!


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