Member Info for LordAdam

You also have to factor in the share buy back ... this board of directors took the 50p per share cash surplus that they had and used it to do a buy back rather than to issue a special dividend. I've written before as to why they might have done that rather than just give the owners (us) the money as they should have. Experience shows that once a board starts doing this they tend to do it again, and again, and again. It may not be long before some (or most) of the current dividend is converted into "returning value to shareholders" and is used to continue the buy back ... hence the need for caution if you are allowing the current (historical) dividend yield to influence your investment decisions. As a side note SSE has never been a really good long-term capital investment, it's always been the dividend that made it a solid income investment, and without that, for me, there's little to commend the share now. Mike

Why? ... because the company is spending £2-3 million of the dividend fund every day on buying back its own shares. (est 20-30 million so far) ... and that's money that's not going to be paid out as a dividend. So, if you're investing for the dividend income the future is uncertain now. So far I estimate they've spent 10% of the annual dividend on the buy back scheme, and that means the dividend could well go down by that amount -- and if they continue this buy back it will only get worse. Mike

Well let's hope that I'm wrong ... one thing that offers some hope is that the BoD have called fro an EGM on 23 Feb to alter the LTIP (Long Term Initiative Plan). If the changes make the plan effectively neutral to the effects I mentioned then they are at least re-levelling the playing field. On a personal level though I'm not at all pleased to see the dividend decrease as it was for the long-term income generation side of things that I valued these shares ... that may all change as we start to understand what the changes actually mean in terms of numbers. Fingers crossed. Mike

Artifically increasing the EPS by buying back your own shares is the usual underhand way that this scheme works ... depriving the shareholders of funds and virtually guaranteeing that the bonus is paid. But here I believe that the bonus scheme is based on 'Return on Capital Employed' ... by reducing the capital base of the company (by buying and cancelling shares) the same return looks better and there is an increased chance that the bonus will be paid -- same result as before but a slightly different mechanism. And the bonus here is very, very significant ... I seem to recall the press saying that it was £280 million split between four executives? As I say, with bonuses that large triggered on somthing that might be manipulated via a share buyback, the BoD may have their interests at heart rather than ours. I'm also concerned at the size of the buyback that is in progress ... £2-3 million per day ... Mike

Dividend vs. Share Buy back is an easy comparison .... it compares 100% certainty of payment of dividend against an almost 100% guarantee of executive bonus payment -- coupled with a hope of increased share price and a possibly increased (but probably decreased) dividend payment. Overall I am against share buy backs ... they are generally a sign of an inward looking board that are more interested in protecting/promoting their own bonuses than transferring money to their share holders. In short they may have their interests at heart rather than ours. Mike

The Route Monkey acquisition was actually a pretty shrewd move ... more so than it appeared at the time. Firstly it did the simple things ... acquired standing customers, eliminated a rival from the competition, bought new IP and a development team that produced it. Secondly, and more subtly it had a real synergy ... I had thought that the original management of RM might be stood down after a transition period but no ... Colin Ferguson has been integrated into Trakm8 and his expertise is now leading the Fleet and Optimisation division. This is a move that plays to everyone's strengths. Overall I'm now even more impressed by this company and the way it manages itself. In a masochistic way I'm also impressed by the nonchalant way they don't seem to care about the share price. As my son, wisely pointed out to me, the BoD will have their exit plan and it's not at £1 a share, nor £3-4 ... more like £20! When the time comes we'll be riding on the coat tails of a fantastic deal or a meteoric rise to a flotation. Mike

Hi ... thanks for posting ... I got in about 18 months ago for the long-term dividend at the 270-75 sort of price and have been collecting the dividends steadily since then. As you say all things emerging are taking a beating at the moment but as I see it ASHM are one of the best managed fund companies and I didn't want to be without some exposure to that market. I'm up to weight at the moment in ASHM but after the April ISA inflow will be looking to top up -- I'd like the 250-275 sort of price range but that might be just way too low to be a realistic option, but you can never tell in this game! Mike

I'm not a fan of share buy backs. There are very few occassions when they have actually increased value for small share holders. But to be fare to this BoD the RNS does give a suggestion that the actual money distributed will be absolute and hence the dividend will rise as shares are cancelled. Overall though, I'd prefer to be paid the dividends and then do my own buy back by reinvesting them! Mike

No, that's a different (but agreed, genuine) story. The original post was about a bunch of e-Bay auctions of £5 notes serial AA04 onwards. The link is about four specific £5 notes AM32 885551-4 which have had artwork added to them thus increasing their value. Given that there are at least four million £5 notes earlier in the numerical sequence I'm pretty certain that the eBay items are a tax on stupidity! Mike

Well I might give you £5 for it ... but not a penny more! There's a tradition I believe that the first note in sequence is given to the Queen ... and the second to Prince Philip ... but after that I think there's a big gap and a random start point. So a note with a AA04 ****** number is probably worth no more than any other of the one million notes that are just like it. Even if the note sells for £5 and is delivered the seller is making on the postage ... Scam? Interesting question ... perhaps more a tax on stupidity ... Mike

My take on today's activities is this ... 40+ % of this company is held by the directors ... another 25% is held by large institutional investors ... that leaves about 35% of the shares for the likes of you and me. That's about 10 million shares. Of that 10 million ... 500,000 were sold today ... and about 500,000 were bought ... there's no sign whatsoever of any of the directors or the institutions selling. They seem happy to hold at this price for the long term. And I'm happy to hold here too. Yes, I would have preferred that I wasn't looking at a book loss ... but this BoD has never been perturbed by either rises or falls ... and neither have the institutional investors. Long term the real price, the exit price, of this company is more like £10-20 per share than £4, £2 or £1. There's no sign that the BoD are looking for an exit, they are both managing and investing for the future ... and more importantly ... there's no sign of them stoking/inflating their share price. if anything, their level of disinterest in the share price is, exemplary, They are just getting on with making this company the best that they can in a 5 year time scale. If you can empathize with them, and go along with that time scale, then I think that you, like they, will do very nicely. Either hold, top-up or get-in whatever, but you may kick yourself if you sell out at 120-130 ... Mike

Come on guys ... let's get real about the 'Ex-Div' effect ... the interim dividend is 0.5p ... that's half a pence. There's almost zero effect in the share price from the dividend ... we're regularly seeing more than that on a daily basis. At the start of September the price was 50p .. today its 40p ... that's 20x ... twenty times ... the dividend. What ever you put the recent changes down to, it's not the dividend in four weeks time. Mike

Interesting ... LSE are showing this in their trade list for yesterday ... 24-Nov-16 08:23:58 193.50 932 Sell* 188.00 200.00 1,803 O ... and ADVFN are showing this ... 3 193.5 932 O 188.0 200.0 08:24:00 932 So it looks to me as though your trade was reported at the time that it took place (I think the rules are within 3 minutes). It may be that HL were internally slow for some reason. The buy/sell thing though is of particular interest. The daily trade list doesn't actually record the direction of the trade just its volume and price. What the web sites do though is to try and interpret it as a buy or sell according to what the bid/offer prices were at the time the trade was reported. So some times they get it wrong. It looks to me as though the price was moving up at the time and I suspect the market makers were 'overlapping' in bid/offer spreads. HL did the right thing and got you the best price ... so you actually bought just below the mid-price. Well done you! Hope that helps explain the mystery. Mike

The Trakm8 web site page detailing the significant shareholders was changed today. Folk may remember me posting some time ago about how closely held the shares in this company are and how an institutional investor would only be able (realistically) to obtain shares via a placing or a deal with another institutional investor. Well looks like there's been a minor readjustment amongst the IIs recently. No shares have been bought or sold in the market place ... but Hargreaves Lansdown and Hargreaves Hale have acquired a further 152,764 shares from Barclayshare (25,000) and HSDL Nominees (126,952). I suspect that the deals were done directly and may or may not show in the trade lists over the next few days. Interestingly ... if you count up the shares held by directors and by II's the total accounts for over 68% of the shares in issue. No wonder small trades shift the price alot! Anyway, what does this mean for us smaller folk? Basically, Barclayshare and HSDL have trimmed their holdings by a very small amount ... and Hargreaves were more than happy to snap them up rather than let them go to the market. Looks like a good sign to me. Mike

Sorry Gerry, I'll stop going on about the buy back ... we small guys at the bottom of the heap are just going to have to live with the situation -- it ain't going to change. On the plus side we have a healthy regular dividend to look forward to. What I will do in future, and I advise everyone else to do the same, is when the AGM proxy forms come around, automatically tick the box to vote against the directors power to buy their own shares. In company law they don't normally have that right and they have to seek it from the shareholders -- by default they won't get it from me. Also, like Jeremiah, I'm subject to my own prophecy and I won't be topping up here ... I'll not be selling because of the return that I have 'locked' in ... and this is effectively, the only utility that is UK owned now ... but I won't be increasing my holding -- which is larger than most of the non-executive directors hold! Mike

I think we can see why the buy back is taking place ... I've been doing some research and number crunching. Firstly only the CEO and the FD have a significant share holding ... the rest of the board have typically 2-5000 shares (ie overshadowed by many PIs). Secondly the CEO and FD get up to an additional 150% of their salary as a share bonus each year if they meet their targets. The buy back, using £500m, equivalent to 50p special dividend per share, will remove approximately 35m shares from issue at current prices. This increases EPS by approximately 4% ... which is half the annual target for the bonus scheme ... effectively the buy back almost guarantees the maximum share options bonus for the CEO/FD ...which is worth 150% of salary rather than 50p per share. Additionally there are fewer shares in issue ... so the dividend could rise by 4% without any additonal cost to the company. The BoD has announced less than 2% increase ... get the feeling that you're being short changed? So the buy back guarantees that the headline dividend per share can be maintained easily and even increased ... ... and blow me down, guess what? One of the targets for the bonus share scheme is, 'Dividend per share'. Well I'll be ... Call me cynical or what. I guess it boils down to a choice ... 150% of 750K sort of thing ... or £75k as a special dividend ... don't think I need a calculator to see why we're not getting a special. Mike

Sadly they aren't spending 0.5bn on shareholders ... they're spending 0.5bn on buying back their own shares ... out of that has to come costs to brokers, stamp duty etc ... then the shares are held in treasury or cancelled. Note that by this stage no value has actually been added to our share holding ... the company then relies on the 'market' to re-evaluate the share price on the basis of reduced shares in issue compared to the actual value of the company. Again, note that the capitalisation actually goes 'down' in a buy back not up ... as shares are cancelled, if the market does not re-assess and increase the sp then shares in issue times price means a lower capitalisation. The net result is an uncertain at best increase in sp dependant on the market's whims ... compared to the certainty of a 50p dividend payment. There's really no competition ... unless your bonus depends on the EPS ... they get the EPS increase (guaranteed) and we get the market's possible re-evaluation (totally unguaranteed). Sadly neither mine nor yours does ... and if you're a long term holder for dividend income higher share price is not much use either ... and to increase the dividend by less than 2% under these circumstances is outrageous. They could have banked the money and guaranteed a 5% dividend growth for the next 5 years with it -- now that would have done something for the share price! Mike

The surplus money comes from the sale of assets that belonged to the share holders ... this use of the money raised is incestuous and narcisstic ... it's naive to think that the government of the day can't/won't see profits and surpluses because you use them for a buy back. Almost always buy backs are done by Boards where the individuals hold little equity themselves and stand more to gain from an EPS increase than a dividend. If you want to look at a buy back in action ... wander over to Smith & Nephew where they are using about the same proportion of money in a 'return of value' to shareholders. Mike

You mark my words ... you've been robbed of 50p a share via a special dividend ... and its the Board of Directors that has done it. It's a bad, inward looking board that does a buy back. If they haven't got a sane and sensible investment to make they should give the money back to the shareholders instead of feathering their own nests by means of artificially inflated EPS figures and hiding the dilution due to bonus schemes. For us folk at the bottom of the heap this is not a good sign. You mark my words. Mike

My understanding of it is that if you are long in the share you acquire the right to the dividend at the time the market opens on the ex-div date (usually a Thursday). If you are short you acquire the liability to pay the dividend at the same point in time. The actual money changes hands on the payment date which is usually at least 4-6 weeks later. So its possible to receive a dividend payment long after the shares have actually been sold ... and I would think the reverse is true ... it's possible to have to pay the shorted dividend long after you've closed out your position (if you did that after the exDiv date). Good luck with it ... it's a mine field ... I'd be really interested to know how you get on with it as it's something that every serious investor has at least thought about! Mike