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I found the CEO's recent comments regarding protein and weight loss drugs very peculiar.

Does anyone walk into Greggs thinking I need my 40 grams of protein!

Does anyone walk into Greggs thinking I need a smaller sausage roll, sandwich etc!

Also, I get why the shorts are high here - Greggs is more exposed to the current cost of living/basic needs (food, energy) crisis than any other company.

However, Greggs have much pricing power - they are substantially cheaper than their competitors.

And the meal deals will go a long way to maintaining volume.

I was also surprised that the trading statement made no reference to the particularly low high street footfall over November and early December.

Apologies for the simple question, but why are folk selling, or considering selling, when the company has today tripled the number of shares it repurchases each day?

Wiscos,

Sit on your hands and wait for 91p!

The trend is down but this company is being managed quite brilliantly.

Employee share schemes are a great thing. Go ask staff if they enjoy working at Card, or Wetherspoons. It's all part of a culture that values employees.

Funky Pigeon is a fantastic acquisition, and only possible because the company worked hard to reduce debt in previous years.

Re-introducing a decent dividend and re-investing in the business (capital expenditure) only possible through strong free cash flow generation.

Darcy and Matthias are doing a fantastic job. A large proportion of their remuneration is based on share price performance. And they continue to buy more.

Great post, Lorenzo.

All excellent points.

However, I think that there is a more simple explanation - not many analysts follow Card Factory.

This was evident at half-year - very few questions from analysts who would rather be elsewhere!

Neither a top-down approach (retail sector) nor a bottom up approach (trailing PE and/or dividend yield) would bring Card Factory to attention. I suspect this will change with the upcoming results.

Https://www.msn.com/en-gb/money/other/virgin-money-s-biggest-independent-investor-disappointed-with-board-agreeing-takeover-by-nationwide/ar-BB1meaXO?ocid=finance-verthp-feeds

Https://www.proactiveinvestors.co.uk/companies/news/1045277/reject-nationwide-takeover-kbw-implores-virgin-money-shareholders-1045277.html

The largest shareholders will have been invested since before the aquisition of Virgin Money by Clydesdale Bank - back when the share price was 360p.

They won't be selling for a loss, not in the current interest rate environment.

A decent set of results on Tuesday will reinforce this.

So I don't think this deal will be going through.

Eccles,

A response is not required until 15th May. The smart play is to wait for the results on 14th May. If return on tangible equity (RoTE) is above 8%, one typically would not sell below NAV (337p). The other banks reported RoTE in mid-teens, hence why they now trade above NAV. So it's looking good.

I'd be surprised if this offer went through now.

Lloyds and Natwest now trade at 1xNAV.

And NAV for VMUK is 337p.

Or to put it another way, if the offer fell through, what price would VMUK then trade at? Doubt it would be less than the offer.

Is dividend cut off tomorrow, Friday.

HI

Mark,
Debt and cash rolling in are important but not the main driver behind the low share price. Profit margin has been in free fall for years. The company clearly don't have the pricing power that they allude to when highlighting their vertically integrated business model.

I am a little surprised that RBS are purchasing such a small book of business. The mortgage market needs consolidation and RBS are in a great position to take advantage. Why pay 3% above book value for a £3bn mortgage book when Virgin Money with £70bn of assets, predominantly 65% LTV mortgages, trades at 0.6 times book value?

Capital isn't the issue, profitability is.
Mortgage rates need to hold up. And so far, so good. Other banks preoccupied with business loans and defaults, taking pressure off mortgage market pricing. Once attention turns back to mortgage market, should see mortgage pricing factor in higher inflation. All in all, expect NIM to hold up reasonably well, but lots of moving parts.

Tuxedo8, More4Less,

IMHO, Virgin Money is the most undervalued. Only 11% of their lending book is business lending vs 21% for Lloyds and 31% for RBS, so lower credit losses. They have a higher cost of funding so benefit more from TFS. And they have a lower capital ratio so benefit more from the relaxation of capital requirements.
The capital ratio of RBS is too high. In times of recession this would normally be the most important factor. However, given how accommodating the government have been, in effect protecting the banks, the capital ratio, while still important, is less relevant.
Lots to think about.

The BoE allowing banks to use their liquidity buffers, in addition to their counter cyclical buffers, is a major win. Particularly given that this additional capital will go towards high margin CBILS loans. This comes off the back of regulators encouraging banks to be "optimistic" about expected credit losses. The market seems to be looking beyond all of this, maybe focusing more on the long term impact of lower interest rates and levels of indebtedness.

Good to see that common sense seems to be prevailing regarding the application of IFRS 9 accounting and the concept of expected credit losses. This is significant as it will free up capital, allowing banks to open up the tap to more high margin, capital efficient CBILS loans. Strict adherence to the Standard (focusing on the fall in GDP etc with little allowance for the government stimulus) would have left little free capital to lend, exacerbating actual credit losses.

Strictly,

What was your thinking behind index linked gilts?
Was this a recent switch? All I can see moving forward is deflation, as the increase in the supply of money is more than offset by the reduction in the speed at which the money moves around the economy.

Personally, I do not see the reason for investing here. For the next 5-10 years, the growth of workplace pensions and equity release is not going to make up for the loss of profitability from individual annuities (lower new business volumes and more competitive pricing). And I am surprised that the bulk annuity market is buoyant at the moment given long term interest rates are so low.

whitelye,

I could have sworn the accounts stated that around £150m of claims was 'virtually certain' and implied around £35m of claims was probable, across both AWPR and Queensferry Crossing. For me, this write down really is a significant turn of events. I would go as far to say that the rump is now not investable.

londoner7,

That was a nice article. However, Im firmly of the belief that Help to Buy will be extended well beyond 2023. In my view, it really is only beginning. Heck, only last week Scotland rolled out a new initiative. The number of houses being built each year is still well below the number that need to be built. Couple this with the fact that house builders are rewarded for maximising profits rather than how quickly they meet this need, then you can quickly see why they do just enough each year to avoid government intervention while maintaining pent up demand and sales prices. This is going to be a long drawn out affair. Dare I say, house builders are a cartel. They don't even compete against each other.