Member Info for Hounddog10

Oligarch. Nothing against long service but organisations need a mix of people. It is very difficult to get people to change (or acknowledge the need for change) if so many have been in place for a very long time. Humans are creatures of habit generally.

Yes, I rather liked the look of Ricky. Assume he has worked his way up from the ranks. Gave short and blunt answers and looks like he is up for dealing with the recalcitrant. Perhaps he should have a shot at being CEO. I suspect when Thompson goes a fairly hard edged person will need to come in.

I found Select Committee 2 very depressing viewing. These select committees are meant to be fact finding exercises not political hit jobs. The pettiness of making them take the oath set the tone. There was more grandstanding by Owen Jones who clearly is out to impress Starmer as a rising star in a future Labour government. Then we had Lavery asking at one point (around 15:38 in the video) about 150 “harassment and bullying” cases which laughably he portrayed as being 1.5% of RM’s workforce. He cannot even do basic maths. It never serves these left wing politicians to stray into factual or analytical detail. And then all of them - MacDonald, Brown, Lavery pretending all the IA is about the workforce trying to look after service standards in RM. I noticed one of the Conservative MPs, the woman, did not attend.

Two comments struck me. Firstly Thompson saying that the average tenure of a RM worker was 17 years. Worth repeating that. 17 years and average! No wonder the workforce does not want to change. Secondly, Williams saying he think the decline of letters will bottom out. Surprised by that as I think for the next few years decline will only accelerate.

I wonder what Kretinsky will make of this, I would assume he will be worried. With the prospect of a Labour government looking very likely and the crowd on the SC in charge he must assume it will not be good for shareholders. Plus Starmer leading, who subscribes to the Groucho Marx school of principles so you have no idea what he will do. It will be a long grind, years, to get RM to a sensible state. Surely for shareholders best action is to get GLS out and run. I would have thought the SC has upped the chances of a GLS demerger quite significantly.

“As previously announced, Symphony commenced a legal action against the Commission, Parliament and Council of the EU having been advised by three specialists in EU law that Article 5 of the Directive 2020/904 is unconstitutional. We are currently waiting for the court to fix a date for an oral hearing in Luxembourg. This is expected in Q4 2022 or Q1 2023.”

I think the results and shareholder distributions were very much in line with expectations. Certainly £1.5bn for Q4 2022 and £5.5bn for full year 2022 seemed where it was going. Lloyds has very firmly said that there will be a one third/two thirds split of interim to final dividends hence the 1.6p and the buybacks are favoured by the institutions. There never was much room for a special dividend as there are still some uncertainties (mainly loan loss provisions) and increased need for regulatory capital in 2023. From 1 January 2023 more capital needs to be set aside for the pension deficit, new insurance accounting, end of transitional relief on certain loan loss accounting and a second 1% increase in the counter cyclical buffer by July 2023. Also Nunn is earylish in his tenure and so will want to be cautious. Buybacks over special dividends have the advantage they can be stopped part way through whereas a dividend is a point in time event.

Of the uncertainties some are going:
(1). They put in an additional £400m to cure the pension deficit in Q4 2022 and have said they will put in £0.8m in H1 2023. Although they did not say what the deficit was at 31 December 2022 the CFO is reported to have said in October 2022 that the net deficit was £2-2.5bn. So half will go with these payments and it looks as though Lloyds are hoping to get the trustees/regulator to agree (by Q3 2023) to using collateral for the other half. There is already over £10bn collateral posted against the £29bn gross pension liability. NatWest and Nationwide have come to similar agreements.
(2). They took an extra £50m provision for HBOS Reading in Q4 2022 and have said they have have settled half the overall estimated exposure with half remaining provided but under negotiation. So looks more or less dealt with.
The uncertainties still ongoing:
(1). Court judgments on PPI to come through in 2023. There is an imminent one due from the Supreme Court. Let’s hope the whole circus does not start up again but if it does it should be quite limited.
(2). Tax case ruling in 2023 which might cost £1bn.
(3). Indemnity on Visa/Mastercard sale - perhaps £400m.

I think Q1 2023 may well end up with c£2bn profit after tax. Q4 2022 was £1.5bn but that had hits for the banking levy, regulatory remediation and volatility (thanks Liz!). That plus buybacks should start to move the price up. The overall picture is one of old problems and extra capital requirements having largely gone by the interims. The remaining focus will then be on increase in NIM outrunning loan loss provisions - which I think will happen.

Usual excellent results and muted market reaction. In some ways I think WK is currently an overhang on the share price because it is not yet clear how it is going to be mined, the cost and funding. In the last webinar I asked Eric when he anticipated a mine plan and PFS. He said, because of Singida experience, they were essentially near DFS stage and the project manager would be authorised to start spending in April. Or I thought that is what he said. So perhaps we will find out relatively soon.

At last some of the analysts have grasped the importance of the point.

https://www.proactiveinvestors.co.uk/companies/news/1006109/lloyds-bank-and-barclays-pension-surpluses-to-boost-dividends-and-buybacks-1006109.html

I think they will probably wait a couple of weeks into April in order to firm up Q1 numbers. They are going to have to tell us how they did given the forecast of breaking into profit.

Doubtful we will get much before mid April (prelims). However, I suppose there is a possibility of news on the EU authorisation of the nitrile gloves (meant to have been 3Q last year, then Q4). Whether will ever get to hear of the fate of the 100 then 60 trials of potential $40m recurring annual revenue is difficult to ascertain.

They might be taking a £100m hit but if it is a major upgrade they will likely be able to capitalise it in the balance sheet and spread the cost (amortise) to the p&l over a number of years. Still up front cash out of the door though.

They have hinted that they might start with Ramula. $60m might be a bit on the low side but I guess it could be under $100m. They must have learnt a good deal from building Singida and should not have to contend with Covid.

Eric is always very bullish. He is an excellent salesman. My favourite comment was when in a webinar he was asked why the start of Singida was now delayed (originally due to start end 2022) he replied that no it was not delayed - merely moved to the other side of the year end. Ice and eskimos.

He has been somewhat overly optimistic in the last 18 months but overall I have a good deal of trust in him and his competence. However, he is working in an environment that is not that predictable - mining, Africa etc.

Under the current President it is highly unlikely there will be nationalisation. What could happen if the gold price surges skyward is additional tax probably in the nature of “windfall” royalties. The construct at the moment under the Mining Act is for there to be a 16% free government carry in a mine and a 50/50 sharing of the economic benefits. Shanta are already around the 50/50. Any extra revenue would already be taxed at 30% corporate tax, 6% royalty and I think there is a 2% “transmission” tax. So I could see the Tanz government trying to make up for the extra 10% or so if, say, gold prices go $2,500+.

So far Shanta has escaped the 16% free carry but I have noticed that it is happening on new mines being proposed in the country. NLGM was built long before the Mining Act, although not so Singida. From an overall economic point of view Shanta has only benefitted the country, which is what may be saving it from the 16%. Shanta has (from memory) about $35m deficit on reserves - so purely from the perspective of a shareholder owning the underlying net assets of the company after 20 odd years in the country there is a loss. However, in a publicly traded company of course it all works on share price and estimates of future profits with joining and exiting shareholders benefitting/losing at the expense of others.

It is also to be remembered that increasingly the value of the company will shift towards WK where, as far as I am aware, there is no equivalent (yet) of the Tanz Mining Act.

Yes, I asked one of those questions - likely timing of a mine plan/PFS (I think some time back it was pencilled in for Q3 of this year but I had sensed Eric was trying to move it forward). I think what Eric was said was that he was skipping to effectively a DFS as had a good idea of machinery needs (presumably having recently done Singida helps enormously) and that the project manager would be given authority to start spending in April (being presumably after a successful Singida startup).

So it does seem initially at least they will use internal funding. I suspect they can get a fair way on the preliminary stuff that way an perhaps that is the approach. Get as far as possible and, if necessary, do a future placing and/or get debt finance. A bit risky perhaps but Shanta may well be in a better negotiating position for money if the project is further advanced.

I am not sure they will easily have all the funding for WK from internal resources. I think Eric is aiming for WK to be operational end 2025/2026. Surely they will need debt and the debt providers will want a chunk of equity in there up front before they commit? I have been wondering how much the mine will cost - the old very outdated Acacia plan was I think $161m but things have moved on. So $200m? But then Singida, albeit a mine probably 2-3 times smaller than the likely WK one, has only cost $40m. Also they seem to be thinking of a smaller and quicker build mine at Ramula. If the mine is in the $100m-150m cost range then possibly they could generate just enough internally but will still need debt. One aspect of this is that any debt presumably comes with hedging requirements which could be very disadvantageous if we on a gold bull run.

Mining plan for Singida is for an initial 7 year period. See July 2021 five year plan (Not aware changed since). Albeit there is a drop off of in the last three years. 30,000oz for five years (given the profile of projected mining) is probably a bit conservative as if there are glitches the ore will be mined in later years.

https://shantagold.com/_resources/Shanta%20Gold%20Five-Year%20Plan%20Presentation.pdf

The forecast for India is £250k per month by end Q1 2023. So presumably about £3m or so for the year. They have said in their 23rd December trading update that revenue for 2022 was £6.5m and if you look at their detailed table of revenue (outside India) it only adds up to £6.0m so implicitly I would guess they made £0.5m in India in 2022 which only really started in the last 3 months of 2022. About £200k per month. (Or otherwise the table is wrong.). So they would seem well placed.

The profit from India will be very welcome but it is a JV (46% for SYM) and tax in India is about 30% plus I think a 20% withholding tax in dividending any profit out to the UK. Every Rupee counts in India and I would imagine they are not getting any more than their normal 40% gross margin on d2w. However, it has the potential with Indorama pushing it to do large volumes and they are also doing d2p bread as well. I think for SYM it is very strategic if such a large country can go down the d2w type route rather than compostables or a total single use plastic ban.

More generally in the 23rd statement they seemed (not entirely sure) to pull forward their guidance for £14m revenue from end H1 2023 to end Q1 2023:

“Based upon the Group's trading performance in December 2022 and that trending for Q1-23, the Board expect Symphony to move back into profitability during this period.”

By my calculation breakeven (Zeus is the same in one of their broker notes) is reached somewhere around £12-14m revenue.

Whether SYM will achieve this and sustain/grow revenue is anyone’s guess. They have a lot of initiatives on the go but they consistently wildly over promise and underdeliver so it is difficult to have any trust. I can well understand Zeus suspending their coverage until some real results come through. They too must have been a victim of unrealistic guidance on revenues from SYM.

Yes pre 2000.

I think they will skew towards buybacks rather than a special. In part because I am not sure there is too much scope for a special at the moment (but probably could afford 0.5p). There are still some uncertainties eg HBOS Reading, PPI and of course loan losses. Buyback really paid out of 2023 rather than 2022 profits and, if necessary, can be stopped. £2.5bn seems about right. Clear out the shares whilst still cheap. Special possibly at 2023 interim, but probably early 2024 on the final then.

Oligarch. Yes I can imagine Guildford DO and Porsche being on a developer’s plans for a long time. Near but not on the river and road quite quiet. Probably go to student accommodation for Univ of Surrey. Most new building down that road is for that. Incredible buildings - seem more like 5 star hotels. For the foreign students, esp Chinese, I guess. When I went past there was some new structure (metal frame only) being put up next to the DO. Pouring with rain so could not see what it was for.

A very long time ago I did some Xmas casual work at Guildford DO. Were driven around in back of vans with postbags (wouldn’t be allowed now) and the regulars told us to make sure we didn’t work too hard!

There is about £100m of deferred asset sale proceeds sitting on the balance sheet as a debtor. Mostly Mount Pleasant - £66m payable in 2023/24. That will be the core of it. There probably is a good deal of value in the property estate - but much of it in DOs that are operating. So the DOs will need to be amalgamated/moved further out of town to a cheaper area eg as happening in Brighton. Also in eg Guildford the smart student flats are almost upon the DO there and I can imagine that will get sold and moved. Terrible building anyway.

Quite bitty to get hold of the value in the property estate but it is there over time - albeit there will be costs for newer relocated premises. Also, yes, K and other shareholders will not want to see the value continuously thrown down the maw of operating losses.