The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Inflation goes up, cost of borrowing goes up, returns go down. Future investments require a higher rate of return to be justified, so share prices fall.
But PLUS has no debt & has little capex requirement. Volatility goes up so short term prospects are better.
But Plus falls with rest of the market, but I assume only briefly.
I read this before but I was never 100% sure what it meant- Is it that as soon as the share price hits 31p they get the shares for free?
Ian smith has gone - so thats 1.235m of shares not being taken. The amount for James Roberts does seem on the high side- at 31p is nearly £400k (with his salary only being 150k)
I still haven't got my head around the process for issuing them now. if the price hits 31p and everyone wants the shares they are entitled to then the "Employee Benefit Trust" needs a lot more shares - it can buy them on the market like it did recently, but it needs way more than it has and the volume would likely materially bump up the share price in the short term. Alternatively it can just issue new ordinary shares.
IGG client income in fY20 = £959m
Net trading revenue in FY20 = £649m
The difference between these two numbers is the cost of hedging, i.e. £310m a 32% of their client income. prior year this was 26% of their client income.
PLUS does not have this cost, it has volatility in terms of Customer trading performance that overtime is expected to be neutral.
PLUS Customer income over 2019 & 2020 was $1.326bn
The Customer trading performance over that same time was a loss of $0.100bn. This is 8% of customer income, which can be compared with IGGs cost of hedging... and still while this is an 8% loss, over a long period this is expected to be 0.
"I think being significantly reliant on your clients losing money for you to make some is a fatally flawed business model."
This statement shows you don't understand it.
Kindly crack on ramping up IGG on the IGG board.
Or at least do a little research on the company first (
Rosewall- take my approach and write some quick and sarcastic
The difference is PLUS don't hedge, IGG and CMC do.
PLUS is more more volatile, if you don't understand it then you are definitely better sticking to IGG and CMC which is simpler to understand.
PLUS are now looking at hedging, because of pressure from investors who don't like the swings. Personally- id rather they didn't, hedging is a not cheap. it makes up a large chunk of the cost of sales for IGG and CMC
Or maybe he could hire you to teach him what he has to learn
The numbers are a ratio. I.e. Customer Income of Plus* divided by the net operating income of CMC**
My objective was to investigate whether i agreed with your statement: "I'm not convinced that these are good figures at all when looking at equivalent quarter last year".
CMCs net operating income estimate was published on the 25th of march, so they are estimating only 1 week of a quarter, so it is sufficient to draw conclusions from.
*Plus’s Revenue consists of Customer Income & Customer Trading performance.
Customer trading performance comes from gains and losses on customers positions (should be zero over time, but can be volatile month on month.)
Customer Income is from spreads and overnight charges. Q1 2021 = $221.5m, Q1 2020 = $233.5m. This is the core of the business, it does not expect to win or lose on Customer trading performance.
** yes I meant net operating income here rather than revenue.
CMC and PLUS share the same quarters so analysis is easier. Here are the no. of times larger Plus's CUSTOMER INCOME is over CMC's revenue by quarter (i am comparing like for like CALENDAR year quarters)
(apologies for the CAPS - bold or italics would be prettier we don't have that option here)
2019 Q2 1.8
2019 Q3 2.1
2019 Q4 1.1
2020 Q1 2.2
2020 Q2 3.1
2020 Q3 1.9
2020 Q4 2.5
2021 Q1 2.6
PLUS have done better than CMC when comparing customer income across Q1 2021 to Q1 2020.
PLUS were on the winning side of customer trading performance in Q1 2020 to the tune of 82m which should be neutral over time, this was not repeated in Q1 2020
@MattTheBrave - A quarter ending February 2020 a quarter ending March 2020 are not comparable at all. life was normal in Feb 2020,markets got a little volitile from the 24th of feb, life changed in march and marketst got very volatile.
Sum up the VIX for a quarter ending Feb 2020 = 955
Sum up the VIX for a quarter ending Mar 2020 = 1880
The RNS on the 9th advised that the Trust is buying shares to be able to award the the share options to the employees.
If the share prices hits 31pence then the Trust still requires another 1.3m shares to be able to satisfy the share options.
Given the volume of shares traded here is <50k on a normal day this is quite a lot of extra shares needed in a short period of time which i believe will put considerable upward pressure on the share price.
Chucked on a virtual bonfire- yes effectively.
The company doesn't own shares in itself. they are cancelled off, on the balance sheet there is a reduction in cash (to purchase the shares) and a reduction in equity.
It means the remaining share holders own a slightly higher % of the company. Eg. say there are 100 shares, each share is worth 1/100 of the company. if they buy back one share then each share owns 1/99 of the company.
If the directors/board feel the market has undervalued the company then it is good for the shareholders for them to do a share buyback. it also makes the stock more liquid as there are more trades going through each day.
Given the withholding tax it is possibly a more efficient way to return cash to shareholders who wish to sell some shares.