The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Seems like another very good update -
Loan to Value ratio down
Cost of debt down
Occupancy up
Oversubscribed equity raise in July
Continuing to buy property
Very diversified across sectors and tenants with little exposure to retail
156 properties valued at £750million, 1,224 units and 864 tenants
Positive outlook
Quarterly dividend up 3% on same quarter last year to 1.90 pence payable on 19th December 2019. Ex-div 21st November.
Rolling 12 month dividend yield is 7.5% based on current sp of just over 108.
Happy long term holder.
The way I look at it:
Free cash flow has to be there to pay dividends year-to-year otherwise where are the cash payments for the dividends coming from -
- Debt (more of - and we all know where that ultimately leads...) or
- Sale(s) of assets (effectively liquidating part of the company to give you your own money back)
FCF is real - not an accounting number. But capital expenditure can take FCF negative. Is that bad? It depends. If the capex is relatively one-off and is going to fund tangible growth then why wouldn't that be a good thing. But if FCF is consistently negative then clearly that doesn't bode well.
However, it's all well and good having FCF to pay dividends but in the long term the company still has to be able to pay dividends from profit (earnings). We all know (or should know by now) that earnings can be manipulated without any material change within the business. Conveniently writing off intangibles and goodwill when it suits (political reasons or new CEO?) is a classic example. Does that make the business more or less viable? It depends. If the write offs are due to massively overpaying to take over another company (lack of due diligence?) it suggests management incompetence. But what if the write offs are due to legacy issues that are now firmly in the past?
IMHO nothing is ever clear-cut. FCF can keep dividends rolling in in the short term but longer term you cannot ignore earnings cover for dividends. If either FCF or earnings go negative then you have to look deeper to try to understand the reason(s) and ask if it's likely to be a one-off or is there a pattern developing. In the case of VOD's earnings cover for the dividend there was clearly a pattern and there was intermittent but growing talk of a dividend cut. Perhaps is was confirmation bias from a few that keep telling people to just look at the FCF cover... In the short term they may have been right, but as earnings kept falling short so did the share price.
You only had to look at a VOD chart to see what was happening. But it's the hardest thing to sit on your hands - waiting for the right time to buy. I've got it spectacularly wrong on occasions and missed out altogether. In VOD's case though I bought my first tranche at 143 and bought again at 130. Happy to hold long term. Now let me tell you about my Carillion loss as a result of believing audited accounts and statements from directors... Never easy is it?
I'm still in profit having bought much lower several years ago, but I was very tempted to buy another tranche earlier. The price has recovered slightly but if it drops to the 360's again (support currently @ ~364) the temptation might be too much. FWIW the trading update seems like a typical kitchen sink job by the new CEO. So predictable you can almost set your watch by it.
I used to hold BDEV (used to work for them at one point) and PSN for a time. When I bought into CRST I evaluated all the major housebuilders - running the numbers through my spreadsheet. CRST was by far the better choice fundamentally and was and I believe still is at the better quality end of the scale when it comes to mass housebuilding. I haven't checked the numbers from the others recently - but I'm a happy long term holder of CRST (now the only housebuilder in my portfolio) and plan to continue to be.
My partner is a highly educated professional and earns a salary significantly above average. She's no scrounger. She also holds LLOY shares, as do I - both purchased at 49/50p. Many years ago she had 'loan insurance' on a car loan with Lloyds and PPI on a credit card. Fast forward to the PPI scandal and she didn't do anything about it until the ad campaigns alerting people to the deadline to make a claim. This prompted her to write a few letters only a few weeks ago. Does she need the money? No. But she can remember the PPI payments being charged automatically and didn't feel she had any choice in the matter. She's now older and wiser and knows better. She did consider whether she should make a claim with Lloyds as she's a shareholder but in the end decided she would. Clearly a lot of people were prompted to finally do something by the ad campaign. Some may be fraudulent - I wouldn't really know - but my guess is most are genuine. However I don't think it's appropriate for bitter(?) shareholders to tar all with the same brush because the share price has fallen!
Bob Dudley's retirement will soon be announced according to Sky News. He's expected to retire within 12 months.
Hargreaves Lansdown are showing "Bid Situation" just below the share price but I can't find any RNS about this. Can anyone shed any light on this?
Retained earnings to reduce leverage due to falling retail valuations and a further update in due course. So, yes, it looks like a divi cut is on the cards. However, this seems to be prudent and should pave the way for increases in divis once things settle down, so perhaps a buying opportunity for long-term investors.
Hello Jack (again) and Ripley
Regarding LKH going AWOL - a while back I was intrigued about his sudden and unannounced absence and the many posts expressing concern, so I ended up doing quite a lot of digging... of course it's possible I may have led myself up the garden path but from what I uncovered, in the end I came to the conclusion that the person that I thought was most likely behind the LKH ID was most likely:
1) a very wealthy individual indeed - an address kept popping up - I google earthed it - wow!!!
2) quite old and long since retired, although still had interests in more than one business - one of his sons still appears to run one of them - not the one occasionally mentioned on ii but not entirely unconnected.
3) unfortunately if I found the correct person then it is likely he succumbed to a long-standing illness. This fits in with him once posting words to the effect of getting his affairs in order, although at the time it came across as just tidying his finances up rather than knowing his own imminent fate.
I've been deliberately vague with some of the above - I'm not going to post personal / identifying info about anyone - although it is out there if you put the pieces together and do enough digging. I recall saying some of the above on ii but not revealing the conclusion regarding point 3. Sorry.
Hello Jack
Just read your post - thanks for the update/info.
I agree with your comments about ii - it is dire compared to what it used to be like, so no surprise that the forums are quieter. Have you tried to set up a portfolio here at LSE? I've found it very easy and fast, and it works very well. I like the fact one can click on headers to, for example, sort your portfolio by risers and fallers, and each line shows if there are new discussion posts - pretty much like the old ii portfolios used to. I really do like the functionality here.
Hello all
I almost bought back in here at 165 but fortunately sat on my hands. Today the sp hit a long term line of support going back 20 years and triggered my limit order set at 143. This level should be good for a bounce at least and with a 9+% yield on offer this level factors in up to a 50% dividend cut, if it happens. If it doesn't then great!
Hello to Jack Dawson who I recognise from ii. If you read this, Jack, let Bill1234 (or whatever the numbers were) that I finally bought back in to VOD. Glad I didn't when he was trying to tell me at 200p that it was all about cash flow...
Hi Longish
Yes I'm aware of who the new CEO is and the new Group CFO. That doesn't stop the CEO wanting to make his own mark or for that matter notching a low point for the share price as a starting point. Anything is possible for any number of reasons. No doubt all will become clear in due course. In the meantime I'm keeping an open mind and continuing to watch closely.
Another thing perhaps of interest, O2 are said to be considering floating - at least that's what the IPO page at AJ Bell says. It will be interesting to see if this actually happens in light of depressed share prices in the sector, and also exactly what will happen to the proceeds.
...Another thing that perhaps shouldn't be ruled out with VOD is a rights issue in order to pay down debt. New CEOs do have a habit of shaking the tree a bit when they get the bit between their teeth and as long as it's in the long term interests of the business then who can blame them?
I really do think long term VOD will do very well indeed - it's the short term I have an issue with. I am itching to have some exposure to the telecoms sector again - it's an area of my portfolio that's currently completely bare. Lot's of potential ahead, I think.
" Big period coming up for many companies now. All took advantage of cheap finance. But who used it wisely. "
Exactly. Some debt will be at fixed rates. Some will be in different currencies and some will be hedged. But high debt in an increasing interest rate environment will bring a few chickens home to roost. BT and ISAT also both have high debt levels and look at their share prices. BT also has huge pension liabilities but that's a different issue.
" Hey FRTEB
you still think the Div will be cut and a kitchen sink job is on the cards? ..you mentioned that previously "
Yes, I also think it's in the new CEO's interests to say nowt to the market just yet - the SP is in a confirmed descending channel so he'll let the SP slide to a (very) low level, then that's the starting point for his tenure in the hot seat.
Also, as a shareholder (which at present I am not) I would prefer the high debt to be addressed, and divi cover against earnings (divi cover against cash flow is OK for a year or two but long term is not viable) - if this means cutting the divi then so be it (sorry to all existing shareholders) - short term pain but it would put the company in a stronger position going forward in the face of higher interest rates.
To be fair, I recall LastCall recommending buying into PFC - that was a good call (no pun intended).
FWIW I still haven't bought into VOD despite the sp hitting my 160 target. Gut feeling is telling me it may well fall further (14x ?) Several times I've considered buying a first tranche (fear of missing out) but as at the time of typing this I've managed to resist the urge.
Interesting watching price action...
Hi Pokerchips
I'm not saying the Liberty deal is a timing disaster, but I would say it might be a convenient excuse for the new CEO to make changes - most new CEOs like to make their mark and many like to kitchen sink the business - sweep the decks clean of anything that might come back back to haunt them in the future - get the bad news out there right at the start - thereby starting from a low point so that in the following years their time at the helm can be viewed as a success (with all the bonuses and incentives that go with it). It's a well-worn theme.
As the new CEO is currently the existing CFO some people are choosing to see the future as much like the past. I think this could be a mistake. Equally I could be wrong. But putting my money where my mouth is I'm not buying back into VOD yet.
If the divi is cut due to insufficient earnings or cash flow then yes the sp will fall. However, if the new CEO decides to re-set the divi in order to facilitate a reduction in debt and/or to help fund acquisitions, for example, then this will seem like prudent management and therefore the sp will rise. All IMHO obviously.