Clued ...you make a good point, but as LGEN's liabilities are almost all in sterling the solvency rules make it mandatory to hold sterling-denominated assets, the authorities are more concerned with preventing a solvency crisis than allowing greater profits. Various mutterings in the Kwarteng speech the other day hinted at greater freedoms for UK financial institutions but we may have to wait for the next formal announcements before we know what, if anything, is to happen in this area.
I posted here on 10 August making the point that investing in LGEN is a bit like investing in a leveraged FTSE tracker, today's price action confirms that, the SP here responds to sharp moves in the FTSE often by greater %age than the FTSE moves. Here is the key para. from that previous post
"The nature of UK banks and insurers and the stringent solvency conditions they operate under since the GFC, mean that the need to hold very large quantities of assets to meet the strict solvency criteria put in place as a result, because those assets are required to be liquid , ie easily sold in an emergency , they consist primarily of equities and tradeable bonds. They are proscribed from investing in long -term high-value infrastructure projects and are expected to hold much of their portfolio in sterling-denominated assets, to eliminate FX risk. "
Obviously, those assets have, in total fallen sharply today, lowering considerably the value of assets LGEN has, hence the SP fall.
If/when the FTSE recovers you can expect to see the LGEN SP rise, probably more than the FTSE does.
Hi guys i've just added here and to move on from the IMV, fruitless takeover speculation and strike related issues I thought I'd lay out in simple terms why I am back in.All stats taken from or calculated on the basis of last years finals published in May.
First and foremost is my assumption that ,despite the current media and market turmoil(which are again IMV closely linked!)BT will not go bust and the SP will, in the medium term, rise from here.
The key stats supporting that assertion are these:
In last years finals the board said that FY 2023 revenues will grow from £20.9 bill., ebitda will exceed £7.9bill despite a planned capex of £4.8 bill on the rollout of FTTP and FCF will be betweeen £1.3 bill. and £1.5 bill. All figures committed to are likely to be hit (and in the nature of things will be conservative- sensible boards don't set targets they can't hit)even though strike action may affect them in the short to medium term.I am assuming that commonsense will eventually find a resolution to the strike.
FTTP rollout is proceeding at a rate of ~3mill. households pa and whatever the telecoms landscape looks like in a years time BT will still be the major player.
At the present SP, downside is (again IMV) limited, the current P/E is about 10 (below recent averages - source Finbox) and the divi even if maintained, not raised, is >6%
Those criteria return BT to my folio standards and as said I am adding and will, down to 100p should it get there
Value , we each make our own decisions based on our own analysis, I wish you well if/when you re-invest whether here or elsewhere. I am comfortable with my position here and willing to wait for the medium term(a position which I keep in constant review), OCDO is one of 40+ positions I hold so it's not terminal if it goes down, though obviously, I expect to make profits in the medium term. As is always the case, I look beyond the crisis headlines and doom-mongering of the media In the expectation that this "CRISIS" will pass and in the next year or two will almost be forgotten. I have been an investor for almost thirty years (I started very young!!) and know that there will be a point in time this year, next year, the year after where good stocks will be much higher than today, I can afford to wait and will do so.
cheers
casa
Theo.... strictly speaking, the UK need NEVER default on its debt as it issues its own currency, and AFAIK it is the only country never to have done so.
Current 10-year rates are here:
https://www.bloomberg.com/markets/rates-bonds
Gazz, the problem is that huge numbers are now an inescapable part of the modern world and huge national debts are commonplace, see
https://www.usdebtclock.org/
or China's $7 trillion debt , about 250% of GDP, cf the UK's debt at around 100% and the second lowest relative to GDP in the G7(only Germany is lower)
Value,... Ocado are signed up with a major player in all of the world's developed areas, see
https://www.ocadogroup.com/our-solutions/our-global-partners/
Realism suggests they should be well on the way to fully building out services in the US and Canada, Western Europe and Asia before venturing further afield, indeed it is quite possible that Ocado's technology is at present unsuited to all of Africa and South America, because of logistical and geographic constraints. From my travel experience, the only major markets not yet touched are places with large-scale capital cities in SE asia,indeed it may well be that Ocado think they are at or near, saturation in terms of countries with a wealthy and dense (geographically!)population.
A bit of macro context for the last few days market hysteria-
According to figures produced for the house of commons library the cost of government aid in the Covid crisis will be between £310 and £410 billion in about two years, see
https://commonslibrary.parliament.uk/research-briefings/cbp-9309/
while current estimates of the cost of the recent Kwarteng "financial event" are put at about £160 bill over five years see
this extract from Bloomberg
" UK Chancellor of the Exchequer Kwasi Kwarteng's fiscal giveaway totals £161 billion ($180 billion) over five years, according to figures ..."
Compare and contrast the media hype and panic market reaction !!
Ocado have contracts to build 40 more sites and a capacity of ~12 per annum, for 6 partners in 5 countries(source half-year report 2022), with a work programme of almost four years in the pipeline I see no urgency for new contracts.
....the weekend whine festival, but I thought I'd offer some thoughts on the merits of LLOY shares as an investment following the chancellors statement in parliament on friday!
Upfront declaration- I have been planning to sell LLOY in the not-to distant future if/when they reached the 55/60p level, banking a substantial profit on my holdings , mostly assembled in mid- 2020 at prices in the 20's.However on analysis of lrecent events I will (probably ) hold on to most of them for the following reasons.
It is clear that interest rates have further to rise, even tho' I suspect that the Chancellor and the BOE are not singing from the same hymn sheet (or indeed following the same religion!)Kwarteng is going for broke on growth , while the BOE cannot yet pause the restrictive policy of rising rates.The outcome IMV is that rate rises continue, with the benefits to banking of a better NIM and hence greater profits, offset at least partially by more defaults as customers inability to pay loans rises.Previous contractions have suggested that banks have default rates better managed than in the past and are required to hold more than enough robust assets to meet their needs.On balance recent events are bank-positive.
Suggestions in the chancellors speeech that the bank "surcharge" reduction planned for next April(down from 8% to 3%)is still likely to take place- and maybe accelerated/increased? will help sentiment in the short term.
A further suggestion that the balance sheet levy might also be reviewed(and by implication and in sympathy with the overall tone of the speech reduced?) also holds out the prospect that a less aggressive tax policy for banks is intended.
Finally, the increases to the stamp duty levels are a positive to the mortgage business as they will offset(partially) the previously expected downturn in the housing market.
Once the initial hysteria has died down and serious , balanced analysis of friday's announcements has taken place, I expect to see a slight overall recovery in the UK stock market and SP rises ,particularly for banks, builders and defence stocks .
I will plan my short/medium term startegy accordingly.
Ok guys, back to pointless bickering about socio-political matters,
cheers
casa
Before you invest it would be sensible to earn at least a little about how the LSE works Daz and nitro read about the uncrossing trade, the role of market makers , the spread, auctions, in fact, understand what you are doing before trading!!
Freudian slip in my last post " anti-UK" bias!!!
stupmy...for the last year in which it was included in RR's accounts (2020) ITP had revenues of £705m and profits of £68m. I'm pretty sure that RR did not want to sell, but it was the most financially and logically discrete component of the business and was(according to my info.) a sacrifice demanded by the underwriters and subscribers to the massively discount RI in late 2020.
see
https://uk.investing.com/news/stock-market-news/gsk-sell-rating-removed-as-zantac-liabilities-expected-to-be-us5bn-2752198
Credit Suisse's"finger in the air" and it is no more than that, suggests a $5bill. hit to GSK by "buying off" the plaintiffs in the Zantac legal action.It is implicit that, to argue the merits of the case in the hope of winning a legal victory is a less sensible strategy than to yield to the US justice sytem's anti - US bias.
I am inclined to agree and would not be surprised to see GSK's lawyers seeking such an outcome.On that basis it may be that (almost)all of the SP damage is now done. I will watch and wait.
I suggested some months ago that the ITP sale announcement would NOT move the SP much and I think the next few days will prove that, but it is positive . Here's why
From the 2021 FY accounts, RR's debt stood at £5.1 bill and debt service costs were £863m in that year, pro rata, paying down the full sum against the debt would save £260 mill pa . for this and future years.
I haven't bothered to identify all the elements of the debt pile, but RR have said they will use the sum(about£1.4bill at today's FX rates) to clear the £2bn loan which is gov. guaranteed, so they may in fact have to find some further finance to clear the full £2 bill.
If we assume that after the debt rejig the position will be, debt ~£3.7bill, annual debt service costs ~£600mill (maybe a little more as "new" debt will incur a higher Interest charge)and following the recent commercial flying numbers it seems more likely that this FY will show a profit!!. As before, it takes the analysts and the market a while to A) digest and B)react to news so I expect very gentle upward momentum to follow.
Baggs .. If you choose another ISA provider and notify them that you want to make a transfer "IN" of your existing ISA they will set it up for you, I use interactive investor and they did mine some time ago without a hitch and little effort on my part.
there are two significant advantages to Van- based distribution, the first and largest is that the goods do not have to be moved from a warehouse to a supermarket and then to the supermarket shelf(if you wander round any supermarket you will see dozens of staff with trolleys unloading goods from shelves to meet home delivery, soon after other staff have wandered around with trolleys filling those same shelves!!) , see my post a few days ago about Kroger, they spend 30% of their costs on shelf-filling(and 20% on checkout).
The second advantage is that each van makes many deliveries per day and the net cost of fuel set against the equivalent two-way trip for the dozens of car drivers is stunningly more efficient , carbon-friendly and traffic friendly. As customer take-up of home delivery grows both of these advantages grow proportionately. A sensible government (if we ever get one !) will encourage the process of home delivery, indeed might wish to offer tax advantages to drive towards a carbon-neutral world.