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So, no daily weak-wristed anaemic 3,750 buyback today - but it's so pitifully tiny I don't think it makes any difference either way? Yet another loudly trumpeted BB campaign from DEC (I believe it's four consecutively now?) that in reality prove to be no more than a pathetic whimper.
Go to the agm this Friday and make your point notrex. It's in London, you can get a seta as a holder. I'm thinking of going.
PP: I'd be interested in why you think DEC are currently pursuing such an ineffective anaemic BB campaign (again). Furthermore, why trumpet this latest in the line of BB campaigns if you don't mean to do so with any real effect? Was it just a market ploy to worry the sorts (opposite effect to date) or was it to give shareholders who were making a lot of noise on this subject something to calm them (again - opposite effect to date) - or is it that good ole Rusty has just got used to saying one thing and doing another and no longer cares about his credibility? All guesswork on my part - but if he didn't intend doing a serious BB why the big announcement? Do you have a view?
My view is that they have signed a contract to outsource the BB to Peel Hunt and have put terms in kt that are making it misfire. I think it is likely they committed a quarter or less of the money that would have been paid out as a quarterly dividend to an annual buy back program.
Looking at it simplistically they may have divided the old dividend budget into 4, one part for new divi, one part for BB, two parts for debt reduction / acquisitions.
They may repeat that at each quarter going forward in which case the rate of buy back should accelerate each quarter. We will soon see.
Thanks for the response PP. You may be correct - it's certainly possible that's the underpinning logic. However, I suspect it's significantly less than 25% of the savings on dividend that are going to the current abysmal BB!? But again - why all the fanfare when it was always going to be a damp squib? After the last abortive BB attempts you would think they would have learned their lesson - but seems not? Guess we need to see what tomorrow brings eh (if anything)?
The obvious answer is : Companies need to lodge the cash for buybacks, no cash = no buyback. Compare to a fully funded buyback like BATS, or IMB.
DEC just doesn't have the free cashflow it claims to have.
'...My view is that they have signed a contract to outsource the BB to Peel Hunt and have put terms in kt that are making it misfire...'
pickedpeck, I'm surprised you don't know that the exact opposite to your guess on the mechanics of buybacks is true. In the case of buybacks, the rules are very strict, and there's no room for bespoke contractual terms and conditions between company and broker.
George, they wrote into the terms if the buy back that significant moves would pause buy backs, so a volatile price means buy backs stop.
I posted the terms here some time a week or two ago, basically price has to be within 5% of the 5 day closing average in order to buy back.
Without that pause mechanism I am sure PH would be buying every day, as it is they are not.
Pickedpeck, these are standard terms and conditions. Once the buyback starts, the company has no say in how the broker carries out the buyback program, (hence significant market moves + or -, price limits, and of course IF the buyback target is achieved before target date). Assuming there's no news that would affect the share price, the company must maintain a hands off relationship with the broker. The only reason for a broker NOT carrying out the buyback per the agreement is a lack of funds forthcoming from the company.
It's a shell game. Can't afford to pay the dividend, due to lack of cash. Therefore declare a share buyback, to cover up massive cut in dividend due to lack of cash. Of course, maybe DEC just aren't very good at the paperwork, or something, as you tried to comfort yourself with as a 'reasonable' excuse, lol.
Now now GG, calm down dear - it's only a share bulletin board!! LoL
# My reluctant puppet.
I doubt it. The text of the terms is in Resolution 17 of the AGM Notes
Diversified has today entered into an engagement with Peel Hunt LLP ("Peel Hunt") pursuant to an engagement letter under which the Company has issued an irrevocable instruction providing Peel Hunt with the authority to repurchase Ordinary Shares in the Company subject to certain agreed parameters...
17.2
to a maximum number of Shares with an aggregate nominal value of up to £951,368 (amounting to 4,756,842 Shares as at the date of the Notice) representing 10% of the current issued share capital of the Company, such amount to be reduced by the nominal amount of any Shares purchased pursuant to the authority in Resolution 18; by the condition that the Company does not pay less (exclusive of expenses) for each Share than the nominal value of such Share and the maximum price which may be paid for a Share (exclusive of expenses) is the higher of:
17.2.1 5% over the average market value of the Shares for the five Business Days immediately preceding the date on which the Company agrees to buy the Shares concerned, based on the share price published in the Daily Official List of the London Stock Exchange plc;
and
17.2.2 an amount equal to the higher of the price of the last independent trade and the highest current independent purchase bid at the time on the trading venue where the purchase is carried out,
I am making the assumption that the approval from the AGM is the only way the above terms would have been imposed on PH buy back. What's not obvious to me is why f they have to miss a day or three don't they start trying to catch up? Surely if they have given irrevocable authority then they must have handed over the cash at the time too, its not like PH are going to be buying on credit.
We have seen more than 5% shifts up and down in the last couple of weeks which inevitably pause the BB program. Its a tight set of boundaries and I am not sure why its there or what it is meant to achieve.
Oh dear, oh dear - is my little reluctant little puppet going to have egg on his face - again!? LoL
# My reluctant puppet.
'...Surely if they have given irrevocable authority then they must have handed over the cash at the time too, its not like PH are going to be buying on credit....'
You've answered your own question there, pickedpeck. No company (not even IMB or BATS or SPT, as a few examples of 'kosher' buybacks by reputable companies) has, for example, 10% of it's market cap in 'free cash' that it can hand over at the beginning of a buyback program. BUT it does have to remit enough cash to cover purchases that are to be made in the next day, week, month or whatever period they have cash to cover. Take a look at BATS, you won't see how much cash the broker has received from the company in advance, but you will see regular, structured buybacks on every single day the market is open. Compare that to the DEC piecemeal approach. BATS (and IMB and Spirent, even when Spirent had issued a trading statement reporting much reduced profits and poor outlook that led to a halving of their share price that they still had enough cash on hand to finance their buyback program) has cash, DEC doesn't.
'...The company uses its post-tax distributable reserves to pay for the purchase of its own shares.
If the company doesn’t have sufficient cash available, it cannot proceed with the buyback....'
It looks like DEC is living almost week by week, at best, on free cash flow.
Oh dear, oh dear GG - that back-pedalling must be quite difficult to do - but I guess you're used to it!? LoL
# My reluctant little puppet.
Also, pickedpeck, '...We have seen more than 5% shifts up and down in the last couple of weeks which inevitably pause the BB program. Its a tight set of boundaries and I am not sure why its there or what it is meant to achieve...'
Can you show me any 5 day period over the past month where the share price has been '5% over the average market value of the Shares for the five Business Days immediately preceding the date on which the Company agrees to buy the Shares concerned', based on the share price published in the Daily Official List of the London Stock Exchange plc ?
On a cursory glance, I can only see one day (29 April) where the share price exceeded 5% of it's previous 5 day trading range. (1076p - 1160p) since 12 April.
George,
You're agreeing with me on the cash flow. I think what they have done is handed over one quarter of one quarter's former dividend budget, not the full annual budget. Previously they were doing this as a management team opportunistically when they had some cash, but the divi was also full fat then.
I think they are spreading the quarterly budget over a FY buy back program, but I agree they may not be.
For exmple, lets say in round numbers they used to pay out $40m a quarter in dividend,.The divi has been cut to roughly 25% of that or $10m, then the buy back allocation is also $10m, and $20m now goes to debt paydown, reserves, Rusty's piggy bank or wherever.
Each quarter should see an increment to the BB program or $10m or so allocated budget as the former divi pot is generated.
Yes I know the round numbers are wrong, its an illustration not an audited set of accounts.
On the shifts, yep, we have seen shifts up and down that would stop it. It doesnt' take as much as you might think. Flat and then two days of +/-3% will stop the buy backs for a day.
Pickedpeck, I'm definitely NOT agreeing with you on cashflow. I'm saying they're struggling for cash. You're saying - what - they just bought too many too early into the program ? The share price was higher than they expected, so they spent all their cash early on ? If they were going to stagger their buyback program, as you're contending, then they would have stated that the program would be divided into quarters, or whatever periods they chose, as the IMB (or may have been BATS, or possibly both) buyback RNS clearly stated, their buyback program would be completed in two (?) tranches. They made it clear from the start, and at the end of the first tranche and beginning of the second, exactly what their schedule would be.
'...On the shifts, yep, we have seen shifts up and down that would stop it. It doesnt' take as much as you might think. Flat and then two days of +/-3% will stop the buy backs for a day....'
Pickedpeck, this is EXACTLY why they stipulate '...5% over the average market value of the Shares for the five Business Days immediately preceding the date on which the Company agrees to buy the Shares concerned', based on the share price published in the Daily Official List of the London Stock Exchange plc... It's a FIVE DAY AVERAGE, not a one or two day average.
Did you once claim to have ben a futures trader ?
No. I am saying that they have only committed a quarter of what they would have previously paid out in one quarter of dividend. That's redirecting cash, and the net outflow is halved compared to paying the previous dividend.
They should not have four quarters of dividend cash at hand to give a quarter of out in a lump sum.