Member Info for LordAdam

Thanks for the reference to "Extraordinary Popular Delusions and the Madness of Crowds" by Charles MacKay ... looks an interesting/enjoyable read and one that I shall enjoy looking at. I agree with the sentiment ... "Whichever way you trade, as long as you're profitable, then stick to that formula." I think the major difference twixt me and many here is that I see myself as an investor rather than a trader and my aim is to infinity-hold on a consistent income stream. That's why, for me, the recent buy backs (which yes I am obsessed about) amounts to a 15% pay cut. From a trading perspective though the recent rises are excellent news ... and I suppose from the point of view of the beneficiaries of my estate too as well -- although it's never wise to be worth more dead than alive! Mike

Thanks for the added information ... I'll have to go back and look at how it all worked out overall. On the face of it though it does rather smack of the lies, damn lies and statistics sort of thing. Leaves me feeling a little bit short changed and that someone pulled a fast one on the numbers so to speak -- perhaps naively I'd expected to see 26.7+5% rather than the 23.9p figure. I shall have to look at the total amount of cash the company has spent on dividends to see how it compares year on year. Mike

First glance of the results ... dividend up 5% this time around and another 5% for the interim later in the year to 23.9 & 25.1p respectively. BUT the last two dividend payments that I received (May/Oct last year) were both for 26.7p -- I must be looking at this wrongly as today's figures are a decrease in my books .... can some kind soul put me out of my misery and tell me what I've missed here? Mike

I wish it were true .... it's the end-of-day automated auction that takes place at 4.35pm each day and is used to settle up differences between the market makers. When one has a surplus and another a shortfall, this is how it gets resolved. So sadly there's no new money involved here. The only positive you can take from the situation is that it was at the top end of the spread so the suggestion is that the sentiment amongst the MMs is that the price is moving upwards. Mike

Chartists/Fundamentalists ... you takes your pick ... what is very interesting is that today's increase is entirely down to the market sentiment as nothing has actually changed. Leaving aside the questions that surround pilfering the dividend to fund the buy back the company has not declared any increase in its income rate/yield from an investors point of view and any equity increase is unlikely to be realised for the foreseeable future. With the company's 'cast in concrete' approach to value return over the coming years there's really no reason to rerate the share based on an unchanged income stream. Still, since when was the market ever rational or logical? What will be interesting to see is if the share buy back continues at these elevated price levels. Recently I've come to the conclusion that the buy back is more fuelled by alterior motive than sound investment principles -- we shall see. Mike

Yes ... particularly as the actual share purchase took place as the market closed on Tuesday with its details being delayed/hidden until after the close of business on Wednesday. Note that whoever bought those shares paid 77p for them when at the time the bid/offer was 68/72 ie they paid a substantial premium to get in on the action. As my old physics master would have said ... "Augurs well for the future". Mike

No it's not a pseudonym ... and no it's not a dilution of the SP either ... the shares were created and sold for what was effectively near enough the market price at the time 65p ... so the equity value of the company increased pro rata with the number of shares created and nothing effectively changed in terms of dilution etc. What did change was that the board, predicting that additional capital might be required later in the year, acted proactively to raise it ... and rather than give up any of the equity or incurr debt raised it mostly between themselves. Interestingly JW has just put more of his own money into the company than he got out of it in terms of salary, the FD put 50% of his salary in, the two Cowley's have put in 50% and 100% ... and the Non Executive Directors have piled in too with 4-500% of the fees that they get. As I said before these folk are in the same position as you and I ... the only way they can get their money back is from a rising SP and a dividend flow -- clearly they are supremely confident. Mike

Yesterday S&N sent me a proxy form for the AGM ... having seen the way the board secured their own bonuses by spending the money that they should have returned to me via a special dividend on a share buy back ... I ticked the box voting against them having the power to repurchase their own shares in future. If you too are wondering where that money went, and what you saw for it, then perhaps you should vote the same way. Mike

Yes the share purchase plan is continuing ... in the 10 trading days since the last dividend declaration the company has burned through 12p of our next 100p dividend. If this rate continues there will be no dividend as such in 6 months time. If any thing the rate of buy back is increasing despite the rise in the share price. I had thought that they were being at least a bit canny and were buying when the price was below the 20-day moving average but recent days disproves that. I've yet to see what I gained for giving up 15p of my previous dividend and now it looks like we're headed for giving up the lion's share of the next one. I agree it's still bullish, but this buy back has changed this stock from being a very significant income play to being a rather unpredictable and uncertain play on its equity value. Mike

Not sure where you are coming from here 50glass ... the RNS this morning clearly shows John Watkins putting £220,000 of his own money into the newly created equity and his fellow directors and managers putting in a further £590,000 between them. They could have 'loaned' the money, they could have issued preference shares or even bonds ... what they actually did was to issue the same class of share that you and I hold ... pari passu ... in equal step with the rest of us. Now ... take this on board ... ***There's no way for them to get their money back out -- other than the company being successful and the share price rising***. That's confidence for you ... even the FD (and we know how tight fisted and cynical they can be) put in £70,000 in line with his previous holdings. In addition the subscription was over subscribed and they were easily able to raise more capital (as insurance and to reduce debt) than they had originally asked for. That's confidence from a significant player on the outside for you. Rather than taking a knock, my confidence in this board has increased. Mike

As you say, ludicrously undervalued at present. One of the unusual things about this stock is the very large holding that the board of directors have in the equity -- over 35% between them. If you include other known founding investors and institutions that rises to over 66%. The thin market and the way the market makers work this stock means that there's really no connection between the SP and the real, long-term, valuation at the moment. One of the ways to impart some reality into the situation is to ask how much would it take to get those shares off the current holders? We know that £4 wasn't enough to break the directors resolve to hold on to their stock. My personal feeling is that the BoD do have a sense of value for the shares ... and that's more like the £5-10 level than the 75p we're currently seeing. I also sense that they are not at all concerned about the share price in the short term; they are not looking for exit any time soon and are quite happy to grow the business in the mean time. It will be a while, but my instinct is that this management has it right and is playing the long-term game. With so much of their own skin in the game their goal is very strongly aligned with ours -- after all, just like us, they want to retire and live comfortably! Mike

I have a life my friend, just I'm sure you do ... and I'm working on funding the rest of it, just as you must be doing too ... so you leave me to look after my interests and I'll leave you to look after yours. Actually less than 1% buy back BUT 15% drop in dividend, that's this time around, but as others have asked too, how much next time? As for me I said I would wait until I've seen a full cycle before investing further. In addition being short changed (aka shafted) is never a nice experience and someone asked about the unpaid dividends which I replied to. Further the identification of the buying strategy for the buy-back itself is useful information/discussion for investors in general. Mike

Given it's size, and that it didn't shift the price a single penny and that it's exactly in the middle of the bid/offer spread I would say that its a deal/transfer between market makers. Sometimes one gets over stocked and another gets understocked ... Just my take on it ... of course it could be a delayed trade from some time ago that is just being posted -- that makes it anybodies guess! Mike

Looks to me as if the trigger point for the buy back process is the 20-day moving average price. When the SP is below that they buy. Sadly I think that's not such a good buy back point as it doesn't take a long enough time frame into consideration, effectively they are buying on localized dips rather than taking a much longer strategic view. I wouldn't be put off so much if it was the 100 or 200 day moving average. At that point they would truly be buying back when there was a disparity between the market and reality. Sorry, but the uncertainty here as regards the income stream is just killing this share for me .... I can't/won't go in any deeper with this one until I've seen it through another div/results cycle. I'll stay in, but I'm not going to get further in. Mike

"what happens to the now unpaid dividends" ... good question, once the share is bought back and transferred to the treasury stock then it loses its eligibility for the dividend. So basically the company saves the 85p per share that it buys back between now and the exDiv date. Effectively its buying back shares at the market price less 85p. Hence as you say the 85p should be added back either this time around or in September. Two things about the dividend announcement ... first I was very pleased to see that they had done the maths in an appropriate way to reallocate the same funds over the reduced number of shares -- it's important that they don't take a windfall gain out of those numbes. Second ... I was going to be pleased that the buy back seemed to be triggered by the low 2800's sort of range. That seemed controlled and sensible ... I would have preferred to top-up myself at those levels rather than have the company do it compulsorily for me ... but it wasn't too bad a level. Now they are buying up at the 2880-90 level and it doesn't look such a good thing anymore. I get the impression that the board think anything less than about £29-30 is cheap and will warrant a slow but continuous buy back. I don't share that conviction and would want more individual flexibility rather than the corporate straight jacket of the buy back. Finally (and possibly third) ... we've lost 15% of our dividend and it's not clear to me that we've got a 15% gain in either equity or income flow. For me, as an income investor, this share has gone from being a very attractive investment to, at best, one with an unpredictable and inconsistent income flow -- and potentially very mediocre. Mike

No, you're too late ... you have to be owing the share as the market opens on the exDiv day to qualify for the dividend. You can sell it at 8.01, but you must own it at 8.00 to get the dividend. Mike

The bulk of John Watkins holdings were bought at about the 12p level ... approximately £700K worth ... since then the company has grown/expanded significantly. Apart from an agreed sale, by the entire board acting in concert, to an institutional investor he has not sold any of his shares (and before somebody goes on about the 2m shares that were mentioned in the RNS last year -- they were a transfer into another of his share accounts, his holding remained constant). A further £50K on top of the £700K is indeed very significant ... and a lot more than 1%. Also a CEO can't day trade and can't effectively get their money back out of the companies equity until the end game whatever that is. As such to permanently and almost irrevocably commit £50K in this situation does indeed appear to me to express great confidence that the future is indeed bright. Mike

Goff, it's interesting how different folk interpret the same events ... it took me a while to work out how this BoD worked and how they handled the subject of market involvement as regards investors etc. However you describe them I don't think you can call them unfriendly ... I emailed John Watkins this morning after the RNS came out and had a reply within a minute. Another investor I know called the company and was put through to John without any hesitation ... that wasn't this morning though! They certainly are very approachable and from what I can see and assess, very, very straight dealing. My way of seeing what's going on and how things are being played is that the BoD are very heavily invested themselves, but they are in here for the long rather than the short-term. At the moment the value that the market places on the few shares that are left in free circulation isn't actually relevant to them. They don't want to sell and they don't need to raise capital. That will change at some point in the future. I'm seriously underwater here, and very heavily invested ... but like the directors, I'm not going to be selling at these levels. I have every confidence in them and will let them get on with the business of growing the company into what they have structured and planned it to be. That time will come. Mike

An interesting and measured statement of the situation that most had already assumed existed and priced in to the price that we have now settled at. However, I suspect that the market makers will get their red pens out as their knee jerks ... we shall have to wait to see what the share holders make of this news in the middle term though to get any real sense of the next 6-12 months valuations. Mike

Arsenal, thank you so much for the pointer in the direction of special dividends being followed/accompanied by share consolidations. I've had a very ineresting romp around the archives. Back in the dim distant past (80's/90's) consolidations were actually very common and quite regular amongst very large capital companies (mostly privatisation floats) as they mixed and merged and messed about. After starting actively investing again a couple of years ago I've not seen any consolidation/splits and had thought they had gone out of fashion. The old adage used to be that a split was good, and a consolidation was bad ... most companies aimed for a share price in the £5-10 area and messed about with the numbers to achieve that. Now on to the present ... I can see why a company that issues a large one-off special (from a sale of a subsidiary for example) might do a consolidation to maintain the share price after/on the exDiv date drop ... but a company that issues a special from generated cash would have no reason as the future cash flow raises the SP back again over time. I've held LRE for a long while, enjoyed several special dividends from them, and they don't appear to have ever done a consolidation. Perhaps the above is the reason why. Interestingly, the consolidation/split should be genuinely neutral but as always there's a market psychology type effect which can go either for you or against you ... my sympathies if its always seemed to go against you in the past. Looking at SSE's windfall from their sale of assets ... there could be an argument for a consolidation following a special (if they had done that) but I wouldn't see it as a foregone conclusion. And what is an across the board number exercise on the number of shares held by folk shouldn't per se result in a gain/loss in terms of overall value. There's probably more evidence for an equitable outcome from a consolidation than for a guaranteed return from a buy-back overall. Still, as I say, thanks for the heads-up it was illuminating. Mike