Member Info for Beo1

They are granted at a 20% discount to the price at that point in time. Employees are allowed to put in max £6k per year over 3 years. So £18k worth in total, but if you got the max in 1 year you can't do any others till they end, as its £6k in total across all the option years. My Mrs is doing them for the ones that are due Jan26 at 99p, but they were oversubscribed so we're limited to £260 worth per month.

But at the exercise point the shares aren't bought on the open market they are new shares and thus dilute existing shareholders. I can't say how much as I don't know how much they set aside each year, but I do know the last 3 years have been fully subscribed.

FYI I'm talking about employee options, not call and put options.

This is not SIPP, which doesn't dilute, as that is just a tax efficient deduction.

But share options are issue via creation (or using treasury shares if there are any) of new shares. Which in itself has a dilution effect, as the same EPS is then over more shares, but the fact those shares were granted at a discount to the current SP, dilutes as well, and the crystallising point is the executed option not the granting of those options

Effectively M&S have to create new shares, and sell them shares at 99p, that itself creates dilution, although it is limited to a certain amount. That drives the SP down a little.

People then get the opportunity to sell those shares and a bunch will so this creates a secondary drag on the SP

The drop is most likely due to the Share options which mature in January. My mrs has 8800 options at 99p, but we have another year till we can excecise those options, but this January's options will probably be sub 99p, which when they are excercised will dilute everyone elses shares

As mentioned the other day, £800m is the number being thrown about, that could be rounded up, wasn't about to ask as the context the value was given wasn't appropriate to ask more questions. He also mentioned 20+ store openings next year, so seems there is legs in the future growth to some degree too

In addition my mrs works at the warringon store and they too have been shouting loudly about record sales (in the teams channels)

The 2 sources are totally different, the mrs doesn't work that high up.

Yeh lets pay off the debt that costs us less than 5% and offers a tax shield, and instead increase the equity %, which will be over 10%. That would do wonders for a company that barely makes a return above cost of capital as it is. Lets make that cost of capital higher.

They are trying to maintain the same level of gearing, that way the cost of capital doesn't change, they will be reducing the debt, but you can't just use 100% of cash to pay down debt, they are reducing the equity too, in the the form of buybacks.

Thats a copy and paste from a fools article, which itself was probably AI

Hearing M&S targeting FY PBT of £800m, not sure how that compares to consensus but feels a number that will move the SP further up

Your not inJD yet? So why describe as we? The we here are invested and looking for rises, not praying for drops

Might want to rethink that, obviously soke poor comments on the call as the nike SP dropping like a lead balloon now

Sorry the £813 you are talking about may or may not be what im seeing, I cant see the full financial statements on H1, just the presentations etc, so I'm using the YE numbers

That £813m is call and put options, which may or may not be executed at a pre-determined date. It is not term debt subject to the whims of movements in Interest rates. I used YE figures, but even H1 shows they have £0 debt (even treating the options as debt)

The organic comment was because the FCF before investing was £200m. and the organic growth is funded pre that number, whereas acquisitions is after that number.

It really hasn't put all its eggs in 1 backet. They have chosen to to use one asset (cash and generating next to 0%) and buy another asset which could generate returns over over 20% (assuming they perform as well as the current business). They have also chosen that they may fund a small amount of that with debt at less than 10% as they may be able to make a return at twice that amount.

Like for like numbers are so misleading, Store 1 makes £Xm, you open store 2 and make £Ym, but if 15 miles away from store 1, store one grows 1%, but has the headwind that some of the customers now buy at store 2 not store 1, its only the 1% that gets included in the Like for Like, but had you not have opened store 2 the like for like would have been higher, but then store 2 was creating incremental value that you would lose out on

Again, they have £130m of interest bearing debt. with a cash balance of over £1b. Before IFRS16, they would be reporting a negative net debt number, eg net cash. I would argue thats highly tax inefficient. Equity is always more expensive than debt and debt offers a tax shield. They are making a Return on capital of 20%, cost of debt will be materially below 10% (after tax 7.5%), cost of equity maybe 15%?, It doesn't take a genius to work out that funded more of the business at the lower rate is better for the company, especially with a net cash position on true debt.

I think you should target another company to attack. JD has very little real debt, nearly all of it is Lease Liabilities (from the stores they own) this is a liability granted but not technically debt. They have physical store presence, they are paying rent on those stores and will have committed terms, that debt is the PV of that future committed rent. It will not be subject directly by changes in interest rates (indirectly the landlords may increase there rents to cover but its not directly proportional, eg if interest rates went up they may increase rents, but they wont really for it staying higher for longer)

, In a period of organic store growth, still be able to spin off over £200m of FCF

Give it a rest. Hopeful for a further 10% drop in the SP, on a share trading at such a low PE already? Most of the worst news is out, things will start to improve as people/business realise there is life after the budget. Wasnt 80p in the Covid and/or when sales were £3b so not sure why you think it will get there now.

A reduction in share capital that comes at a cost to the business. they aren't reducing it for free. they use cash that was in the business to pay for it, thus creating a lower NAV, which the market may or may not (plus other factors) use to value the company at its market cap. You can't reduce the NAV by £b's and not think the value of the company be affected in some way? in theory the 2 should net off to some degree, then over time you keep the same FCF but over fewer share and derive a better SP, but in the immediate term you are using one asset to pay down another asset.

Got into this ding dong with you on VoD and you were a Sanctimonious clown then.

So yes the buybacks have served their stated aim of reducing the share capital, but at a cost of less £b in the bank (or reduced net debt). And at the moment the market has valued the net of these at a low value than it did before hand (other factors apply). You focus on one point and build a whole argument around that, you know what was being implied by the statement but you choose to fixate on the semantics.

Although the value would indicate they were indeed buys IMO

Ignore, they were misreported it seems, can see the strike off and then on again as sells as a total different value.