Is it all it is cracked up to be?



Revenue in 2014 = Euro48.4Bn ;Rev in 2018 = Euro50.982 ------> Growth 5.3% (1.3% annualised).
OK This is difficult because business units have been added and some sold off so not like for like – but it is still a business, right, so it needs to grow?

Profit after Tax (forget EBITDA which is bullshit) in 2014 = Euro5.15Bn; and in 2018=Euro9.808BN ----> Growth 90% – pretty good yes?
So this would have implied that they sold off less profitable units and added better ones and/or improved organic margins - a bit of both maybe?

Borrowings in 2014=Euro7.186Bn and in 2018=Euro21.65Bn -------> 3X or 201.3% growth – more than double the profit growth and dwarfs the revenue growth.

Net cash applied to finances :
In 2014=Euro5.19Bn and in 2018=Euro11.548BN ---------> 2.22X or 122% growth in commitments

Net Gearing:-
In 2014=231% and in 2018=379%

I’m not convinved this company is actually growing other than at the expense of extraneous finances.
I’m also not sure it deserves a P/E of 21 when it is set to grow between 5 and 7%?
Most of the growth seems to have come from price increases, not volume, is that sustainable?
The stock price has recentlly fallen from 53XX to 4781 as I type.
Does it have further to fall – would a P/E below 15 be more appropriate?

OK these are simplistic figures in themselves, but the yawning gap between the growth in debt and cash compared to revenue and profit is there for all to see.



All valid questions, Games.

Based purely on growth, whether recent or prospective, I agree - hard to argue for anything more than 15x, maybe even a bit less. You can then make a case for a decent premium justified by the “quality” of that growth (sustainability, long term track record, relative predictability, etc) - but can you make a case for anything more than the long-term mean of around 18x? Not easily.

And for the £ shares, don’t forget the considerable boost from currency to reported profits and cash flows.

Good company, of course… but as we know, good companies are not necessarily good investments!


How are your recommendations from October 2017 doing two years on?

Just to remind you they were IMB, ITV, MKS, WPP, WTB, RMG, CPI, BT, VOD


Unc - that’s a bit cruel m8, they have all, or mostly crapped out, but then again you knew that.
I have ITV and IMB and WPP and under water in all 3.

Fortunately I sold BT some years back at over 4XX
I have a small stake in Vodafone just in profit, but on recovery to over 2XX - which I think it will be going.
RMG is a basket case and sold this after the flotation having taken up the IPO
Oh I forgot I have MKS – what a fool I was to believe in that story - I should just sell before it collapses.
Whitbread I missed out on and Bill will have done well on this with the sale of Costa to Coke. Since then it is rudderless.
CPI is largely uninvestable.
That’s it.

On a decent IMB recovery I’ll offload, but sentiment to tobacco is rock bottom, far below its value proposition and pay rate.




Yes, a bit cruel I admit, sorry abt that … it’s just that I came across a note I’d made in Oct 2017 of Bill’s recs for future and they were all pretty much duffers. Now … if he’d shorted all those …:slight_smile:

I too have plenty of failures:
WPP - recovering well this year
ITV - need 140p to break even
BARC - down 30%
BT - need 235p to break even
LLOY - down a wee bit
VOD - need 170p to break even
CNA - just awful - so glad I didn’t average down though
RMG - back in at 199p, made profit bottom fishing before

I don’t have MKS - very tempted to have a punt at 164p

Made profit and still hold or got out of:

Got 35% cash in war chest waiting for a recession/crash


Got a few ULVR @4640 today - liked the price.


Doug, Did you buy it in a plastic bottle?

Games – You’ll need to add to your holding i n a refillable carton.


ULVR has always had an eco friendly policy - long before it became en vogue. Been in and out a few times over the years and with brands like Hellmans, Persil, PG Tips, Walls, Flora, Dove, Knor, Vaseline, Cif, Liptons, Ben n Jerry, Lynx, Findus, Pot Noodle, etc., I believe you can’t go too far wrong.

They probably don’t own all those brands nowadays but I always notice on my travels how many countries stock their goods making it a good currency hedge too. I’m happy to buy on any big dips and 4640 will surely make profit for me at some point. If it goes down I’ll sit tight and buy more. Decent enough divvies and the likes of Kraft, P&G, RB will always be sniffing around.


Doug, I doubt Kraft will be sniffing with its current balance sheet, or RB which is much smaller and is likely to split in two now that it has formed health and home business units. P&G – not sure on this, it sure is very much more US centric and has a lot less international exposure.
Unilever has grown its debt a lot over the years so I’d watch it closely.

Out of Unilever at the mo, in RB.