The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Any "premium" was factored into the share price as soon as it was public knowledge. i.e. if the "market" thought it was a good deal the share price rises on the announcement. (Or prior to an announcement if it was expected)
And yes, once a stock goes ex Divi it's price drops by the dividend amount immediately. (When it goes ex Divi existing share holders are entitled to the dividend at a point in the future even if they sell their shares before this)
It doesn't make any difference whether a dividend is paid from sale of a bit of the business from normal earnings or even extra debt the companies takes out to specifically pay a dividend.
Share consolidations won't make you richer or poorer either. You can't create value of think air.
Ultimate owner - THE RT HON VISCOUNT GARRETGRAHAM WELLESLEY who owns:
WELLESLEY GROUP INVESTORS LIMITED owns CLOVERLEAF 375 LIMITED*
WELLESLEY GROUP INVESTORS LIMITED owns WELLESLEY GROUP LIMITED which owns WELLESLEY FINANCE LIMITED**
So a transfer of shares from CLOVERLEAF 375 LIMITED* to WELLESLEY FINANCE LIMITED**
It is WELLESLEY FINANCE LIMITED** which is started the CVA.
Imagine you owned something that said you are entitled to a pot of cash which has a value of £100. You can sell this at any time.
Now imagine out of that pot you get paid £5 right now leaving £95 in the pot....
So now you have a fiver in your hand and you can sell your pot for 95quid. That's all the dividend is and that's what it does to the share price.
Ah ok, i forgot we had a balance at Q3...
starting point of Q3 @722
dividends = -100
Share buy back = -20
EBITDA at Q3 =360*+134 = 494
EBITDA at full year = 515
so additional cash from operations = 2m
which comes to approx $620m of cash.
not sure on the timing of tax repayment, but the credit for 2017 + 2019 and the tax charge for 2020 comes to approx net 40m positive cash flow.
*ive used operating profit rather than EBITDA, but with low depreciation its close enough.
You are probably double counting H1 EBITDA. i make it more like 650m cash
Cash @ june =587 (with EBITDA =360 for the half)
Dividend = -100
tax rebate 2018 = +47
share buy backs = -40? - not sure if this is right for H2?
trading update the other day for full year EBITA = 515 - 360 (Operating income at the half year) = 155
Additional tax rebate for 2017, 2019 plus tax charge for the full year +40
total cash = 650m
I'm making it a net tax credit of about $40 mil.
Made up of
47 mill received in July 2020 relating to 2018.
Estimated rebate of 53 mill for 2017 and 2019 to be recognised in 2020. ( Not sure if they've had the cash but I assume they will accrue it)
A tax charge for 2020 of 61 mill (ebitda less a bit of IDA @12 percent tax rate)
Anyone agree/disagree?
@Retired banker
What trading staff are you referring to?
Where is the 109m trading loss coming from? in 2019 93% of revenue came from Customer income, 7% of revenue came from customer trading performance. (PLUS was a "winner" that year)*
What is IGGs hedging cost? I think simplethesis said a while ago its 25% of revenue (could be wrong here). if i haven't dreamed up this number and PLUS did the same it would be sitting on 750m of revenue not 872m on this year. So sure its more volatile, but all in all, its cheaper they way they are doing it in the long run, and this was a bad year for customer trading performance.
*see annual report 2019 page 29 under Revenue
Regarding the tax rebate, this is not included in the EBITDA of $515m
Regarding the short term investment and cost - to get to 515m of EBITDA I estimate they have spent an additional $60m more than I was expecting. Its easy enough to have a go at calculating it yourself, look at the P&Ls of previous years and half years, decide what costs are fixed and what are variable, and see what you get to. Note - They are making the point this extra spend is in this financial year, but the benefit (i.e. revenue) comes in later years.
Regarding them not being transparent/mirky, I agree they are not transparent at all. I believe this customer trading performance was known at the Q3 trading update, its also material and investors would want to know. Also given the materiality of the tax rebate, I think they could have also stated profit after tax for this current trading update.
That said, revenue still strong, the world is still uncertain, still more positive to come from PLUS
I agree with most your maths. Although tax losses aren't infinite, so your 2m/per year will need tax taken off. I haven't looked at the tax losses but I'd assume they are probably wiped out by tax charge on the 2020 and the expected 2021 pbt if it really does achieve the 70 odd mill of cash. (I'm not sure whether the 70mill is pre or post tax)
So your 27 becomes 34 at a 20 percent tax rate. Is a p/e ratio of 34 in this industry that normal? If so why is it higher than than other industries? I've never followed this industry before.
RE: your point on covid testing required on an ongoing basis on a material basis? Why is this the case? I've had a tetanus jab about every ten years, I've never had a test to see if I need the jab. Why bother?
I'm sure there will be testing in a year or twos time, but it's not going to be anywhere near the current volume.
Also the bulk of the valuation comes from one product, testing for covid. While I read in news that the rapid tests aren't as accurate as the tests this company does. Its a big race for a rapid test that is accurate, if this comes in say 3 months time and can be done cheaply then their primary revenue stream dries up pretty fast.
I saw this so tool a look. It's had an exceptional year. Will be trading at a p/e ratio of 13-14 for the year. But a huge amount of this is driven by covid testing. The NHS contract (they only have one other contract) hasn't not been extended and won't be until feb.
They did 1million PBT before covid, looks like they can expect an ongoing boost from covid who knows quite how big, but really, in a years time following full vaccination its going to be back in the ball park of what it did befofe fore. So maybe next year they might do 30/40 mill of profit. Then maybe they do 3 mill profit a year (three times prior year). So unless I'm missing something, this is massively over valued.
Also 2019 was the only year they actually made a profit according to the IPO documentation
Sale of shares by one of the founders of Plus has spooked people. He still holds 4.24% of the shares from 5.07%.
He's no longer a director. The actual directors own 2.2% of the company, they haven't sold anything. I would expect the directors to have more knowledge of the company than a founder who know longer works at the company.
I'd imagine this years trailing P/E at the current market cap will be about 14. People turned to gambling for entertainment when there wasn't much else to do, I suspect another 6 months or so of heightened revenue until covid ceases to impact peoples lives . Some newly acquired customers will continue to gamble but the current revenue is probably at its peak which in my opinion will decline. So if a normal year going forward is 75% of this years revenue thats a forward P/E of about 19. So id sell a good chunk if i was the CEO too.
There hasnt been a stellar rise because nothing has changed.
Trading update for the half year issued on the 8th of October:
CFD net trading revenue = 200m
Stock broking net revnue = 26m
Operating costs = 80m
This is exactly the same as the results issued today, slight difference is todays full year forecast is revenue of 370m, vs the october update of 330m. But even this isnt new information - their forecasts are on the cautious and assume that trading returns to pre covid levels immeadiately. And there was a decent SP rise yesterday.