Member Info for Gerry557

Downgrade doesn't bode well for the SP either and it sounds like we might be reinvesting divis down at these levels for some time. They expect debt/EBITDA levels of around 3.2x (Voda said 3.0x was top end of range) and that post deal could max out at 3.6x in 2020

OK Im sure there will be some action taken to deleverage but it doesn't leave much wiggle room should the plan go off piste. What could they meaningfully sell and would they want too. A few masts wont do it.

As for Buffett's be greedy quote, I think he was talking about markets generally not one individual stock. I might be sitting on my hands longer as it sounds like we might have a few years down here. Still rating agencies have been wrong before and big time. Have they learned lessons? At least they are a bit more cautious this time.

I suspect Mr Read will have to be scheduling the deleveraging to the markets ahead of the game and that big swings might en-shew with both positive and negative news stories. I wonder if we can ask Pakistan to go easy on our infrastructure in India and aim at the competitors instead!

catching up with Town although they are over the worst now. Retail down from 70% towards 50%. A trend running in many property companies, wonder when all this selling might prove to be the time to be buying retail instead?

Maybe there will be just less retail overall and lots more warehouses instead but with prettier front doors. Car parks still doing well (Shops into carparks?) Covered car parks for the discerning driver maybe.

Lots of negatives in the headlines and I see the SP is down 5% on the back of this. Divi held (Boo Hoo) but there are new lettings coming on soon and more developments starting too. Will there be a placing following the comment:

"With an estimated GDV of over £60m, and a build cost of over £50m, if planning consent is achieved TCS will need to put in place funding for the development."

Will retail shareholders be included or excluded? Im holding off topping up in the hope of something better (discounted placing, I wish!) and and for any Brexit concerns. Will it wont it be 29th March? Just get it sorted!

They can't cut the pension payments and its more likely to rise in any rate at the next review under way.

Operating cash flow, which is expected to be down is the thing on my radar. This is likely to be lower than the "conditions" for 2018/2020 of between £2.1B and £2.3B to pay the divi I think they were guiding lowest for this year anyway.

Still things are not cut n dried as some of the bad issues could get better Nuclear for one might be back on line and there might be a point where they dont meet the criteria for the divi but see ongoing improvement and chose to increase debt a tad if they can bring it back in line a tad later.

Otherwise he would have to admit he was wrong the first time he cut the divi and might be shoved before he gets pushed.

have stopped the investigation. Although they seem to have quite a checkered history and poor results in getting convictions. Several companies have admitted some wrong doing and paid fines recently (GSK, TSCO) but no one had actually been convicted. The only one I can recall is the chap who worked for MRW.

Still it will be nice to get that weight of the shareholders shoulders although have we already paid up?

"But nobody seems to mention the $45 Billion of debt"

Where did you get that figure from and when was it dated? Why in $ not £? (although Euros might be next.)

From the last full year results, Mar 18 it was £31,169M including cash. I haven't kept a ready reckoner since and there is a deal to fund soon too so they have highlighted a rise, should the deal go ahead.

As for "unsound" the market seem to accept this sort of debt with cash generating, stable companies. Ideally no debt would be my prefered amount but its not necessary most efficient as per previous posts.

I suppose it comes down to affordability, its fine whilst you can afford it but a worry when you become less stable and cash generative. This normally occurs when the plan back fires and "headwinds" increase and debt cost rises etc into a perfect storm. Lets hope they only come one at a time, if and when they do

Hi danieth. You mention contradictory things regarding the Divi. "Why don't they just keep the money(divi) in the 1sp place?" and "Investing in a high yield" To divi or not to divi is altogether a different argument.

Vodafone is (currently) a dividend stock and pays out twice yearly. So when you buy its shares you have to decide what to do with that cash. Yes you can spend it or compound it. The latter helps with growth over time and hopefully even more income later on.

Reinvesting or investing has the pitfalls you mention but as you point out tax can be offset, stamp duty is fixed and costs are fairly small, sometimes free. Maybe if you only have a small dividend script might be a better option. You wouldn't turn down a pay rise because you would end up paying more tax would you.

The divi also gives a cost free real return unlike a paper profit when you have selling costs and its always nice to have some more cash coming in for extra shares or more wine women and song. You dont have to buy Vod there are hundreds of other shares. With the divi now static against inflation how would you keep the same spending power over time?

Mine goes into the pot to add something I see "looking cheap" Vodafone dipped out against LLOY and RGL as my last top ups. (Just dont mention Brexit!) without a divi how do you top up on the temporary bad luck?

You are correct in the fact any company needs to keep trading (and paying the divi) to give you the option to add more shares on a dip or average down with a bigger PF pot. How do you do that without the divi or other income?

So for "folly" I see "compounding" plus Im not adding any "real (or new) money" so getting free shares that buy more free shares etc. If you want income why not buy an annuity or bonds? Might be a lot less risky.

If what you are doing works for you great but Im sticking to compounding over time and its coming up to the 5 year point for the Verizion sale and I suspect keeping the US assets was much better opting at this point in time as any. Now if only Vodafone did quarterly divis like over the pond although some will be happy as long as the x2 divis remain

on this mornings letting info. Only had a quick skeg but need to sort additional from extended income. Still its better than not adding more lets.

Over to you Brexit

Brokers are just like us, making educated guesses on where the SP will likely be. Maybe they get more face time with someone in the company but often you need to pay to see all the detail behind the recommendation.

Even so, 12 months ago the majority had 250 to 300 price range and one "daft" broker was 120 or some such thing and being knocked for being so low and out of step. With the benefit of hindsight it wasn't that daft. There is also conformation bias, where you think one way and the articles you read say the same and you ignore those that say the opposite.

As for needing funds for the end of the year, maybe the stock market is not the best place to put funds for that short period of time, the longer the better and Buffet said his ideal was forever. Personally I done see it gaining a quid in a year (then again I didnt see this fall either). The deal needs to complete and then it will take a few years to gain substantially from it and in that time there could be a recession or any number of things that might cause a hit.

Reinvesting divis over time with vod seems to be a way forward (for me anyway) but each to their own

Im not complaining about individuals within the NHS, im sure the have a range from less than average to outstanding. Often its the system that is inefficient and that spending occurs without ownership/responsibility. Its a two sided coin as we the people generally do wrong by ourselves smoking drinking and eating too much. Gerry (not me) fixes the NHS TV program well worth a watch if you can get hold of a copy.

As for robots, Im sure they will come in some areas hopefully with some 5g (or 6g,7g,8g) comms from Vodafone

I read a very interesting article on government spending and taxation. Along the line of businesses create wealth and governments waste it and that lower taxation was better for society as more gets done and that the more that you give governments the more waste there is.

I wish I bookmarked it as it was quite thought provoking. There have been some quite high profile government projects that have wasted Billions, NHS IT just one of the top of my head If governments were efficient we wouldn't have interest payments bigger than the defense budget but would be using that cash to fund hospitals instead of putting on the never never PFI type projects.

I remember a school spending thousands on software but had no computers but the funds came from a different (tax payers) pot. By the time they had the IT in place the software was completely out of date and unused.!

Daniel, with a divi you can choose, however painful it might be, to stop paying it. You can't choose to not pay your interest. as for wrong calls, that's with hindsight and a current picture. That picture is subject to change and could improve (or get worse for that matter.)

Longish, I'd expect the bean counters to be working this down to the last penny and Nick was a counter himself until his recent promotion. The recent change in the divi policy, no more increases until debt metrics are better, have been a signal to the markets about affordability and that he has one eye at least on the ball.

As for the tax situation, it can change and quite rapidly. To be honest I'm a bit surprised they are not more aggressive really. I can't see a Jeremy Corbyn government being more accommodating on tax. If fact I'm surprise at some of the tax changes by this government. Buy to Let one example where tax on revenues rather than profit is now the name of the game and interest is no longer tax deductible. Still Vodafone could move somewhere else if the tax gets too much of a burden and maybe we all might follow.

Let's hope the bean counters can act faster than the politions.

But they could do a return of "our" capital instead of overpaying for there own shares. The cynic in me also says that any bonus should be adjusted to account for and esp upgrade ..... which is often the basis for the bonuses.

Maybe selling the building they wont have room for two highly paid bosses, or maybe they need somewhere bigger so they can have a third!

The board might buy em up after all they were quite proud of:

"We began our share buyback programme of up to £0.75bn on 9 August and since then we have repurchased 46 million shares at an average price of £3.06 per share".

Maybe they should have waited a tad longer! Still Im glad they are spending out money well!

Except Vodafone said differently to their investors. Effectively saying we will be later to the party but better than others when we get there.

Unlike a mortgage, Vod don't have to pay off the debt by a set time. They roll over the debt so it's the cost or affordability of that debt that is the main focus. Normally within set metrics or covernts. How many major companies have zero debt? Hence why there are concerns with Vod as debt will be at the top end of the range on doing the deal.

Technically companies should have zero debt as it's funded by its shareholders but currently they can issue debt at almost zero rates so it's much cheaper. This is not an issue when thing go to plan. Post the deal savings should be made, cross selling should add more and fcf increases and then debt can, over time be reduced within the metrics even if the actual debt is higher in real terms. Think of uprising your house after a job promotion. More debt but now you can afford it.

What happens though if the deal doesn't work out as planned and savings don't materialise and they don't sell more widgets or someone else sells the cheaper. They might want to borrow more but already at the top of their limit so it becomes very expensive to borrow, fcf turns negative so they have to reign in outgoings. They easy one is the divi cos they don't have to pay it.

Why don't they borrow tons at these low rates and buy Vod shares at 10 percent?

In reality they should earn a better return by investing the cash than paying off the debt which works out fine until it doesn't.

What none core assets did you have in mind? Towers for £30Bn anyone

Look up the saying "The market can remain irrational longer than you can remain solvent."

Don't do it Duff Moon!

Why take on leverage to buy more shares. You were wrong last time so what makes you right now. It might drop again and then how can you average down again? Then if they cut the divi and mortgage rates keep rising ...... etc

Yes it could all turn out wonderful in hindsight so add more "free cash" when available or better still add more other income assets to spread risk. I advised someone else against buying back Vod instead of paying off the mortgage and it didnt work out. So my advice is loose a shirt rather than risk a house.

As for how low could it go .... Well Zero at worst case and there would be no divi either. Just a nice corporate action email to confirm. It will probably arrive at the same time as the foreclosure email.

There is educated risk and there is gambling. Why not put your house on black or red, same odds better return.

OFAH,

I assume you as jesting when talking about risking the house on Vod shares. I suppose it depends on how long you have to repay the mortgage and what risk you are prepared to take. Maybe you have more thn one residence so losing one is not that big an issue.

Still a 10% divi to pay a 2% mortgage sounds like a plan even if you discard eggs n baskets and not having a regular monthly income from Vod. I suppose a basket of mixed shares might be less risky and help with the monthly payments issue although unlikely to get 10% more like 4.5%.

Sods law says if you do, this wont be your SP bottom, the divi will get cut, and Vango tents will be your main bb talking point. Then again if you dont you wont get a free house either.

I dont mind loosing a shirt off my back but Id like to keep my houses!

Hi Longish.

Back in Nov they said the divi is being held until debt is back to the lower end of the target range. I suppose it depends on how long that will take. 2020 was being touted as the divi being fully covered. I suppose that all depends on cap ex savings, deal execution. So maybe a couple of years before starting to reduce the debt. Will the market give him the time?

Dan, as long as the fcf remains in this ball park they should be given the time, the fear is the fierce competition, higher spectrum expectations and synergy expectations all go in the wrong direction and with debt at the top of the range there is little wiggle room.