Member Info for Meconopsis

Superficially, very little to not like.

I agree with Trek that a bid is likely with this level of certainty. I’d imagine, though, that major shareholders will want north of 40% premium based of that level of certainty.

Https://www.thephoenixgroup.com/media/byypjb0l/phoenix-group-fy23-results-presentation.pdf

CSM on page 17 - being generated faster than released

Cash release page 43 - needs analysis

Currently between back squat sets! Will look at properly over the weekend.

Reuters via Apple News - https://stocks.apple.com/A-CHXCVktSg25SzCCiLzc4w

“ British insurer and asset manager Legal & General (LGEN.L) has shelved a plan to obtain a China business license and more than halved onshore headcount, two sources said, joining a list of global financial firms scaling back in an uncertain market.

Legal & General (L&G) had been planning to apply for a QDLP (Qualified Domestic Limited Partner) license that allows foreign firms to sell offshore products to Chinese investors as part of its asset management business push, said the sources, who had direct knowledge of the matter.

The company, with 1.2 trillion pounds ($1.53 trillion) worth of assets under management globally, has shelved that plan now and, as a result, last month cut its local team size to two people from around 10, they added.

The remaining two will focus on the firm's existing business of managing Chinese institutional investors' offshore assets, said the sources, who declined to be named as they were not authorised to speak to the media.

L&G did not comment on the business license shelving or the job cuts when Reuters sought a response but said that China remained "an important and large market opportunity for asset management over the long term".”

…only dumb people.

Looking at the trading data…

# Trades 1,466

Vol. Sold 542,567

Sold Value £2.14m

Vol. Bought 238,889

Bought Value £925.60k

How does a majority of sellers to buyers result in a 5% gain…?

Slide deck - https://www.mandg.com/~/media/Files/M/MandG-Plc/documents/investors/2024/mg-plc-full-year-2023-results-presentation-21-march-2024.pdf

“2023: £355m (2022: £129m)

So they've added £226m to the long-term profits pot (equivalent to 9.5p per share). I'm happy with that as it provides support to the dividend in the long term.”

The devil’s in the detail. You need to look at page 28 of the accompanying slide deck.

The overall CSM is DOWN, not up.

They added more to the pot than last year. But also took a £600m(?) (sorry - writing this in Waitrose car park whilst Mrs M picks up some stuff!) mark to market write down.

I suspect that most of that is commercial real estate and ground rent exposure where they’ve taken a £200m write down.

I’ve not had a proper look yet, but these are the type of results that need a really good looking over.

Interestingly, no mention of any Customer Duty stuff as they have exposure in Wealth and the historic investment book.

As I say, the results need a VERY good read.

“He didn't waste any time selling £200k worth.”

It’ll almost certainly to cover tax.

"Thefrogster : let's find a meeting room to have a breakout session."

I'll bring the flip charts...

“Personally, I do not find these words reassuring. ”

Then almost certainly isn’t the investment for you.

Personally, I take a view that management team are doing prudent things in recognition of a near certain risk.

What more could you ask?

I think that’s more interesting than what’s said is what isn’t said. And what needs to be read between the lines.

I find it interesting that Lloyd’s, who probably have the biggest exposure to compensation, have chosen to provision £450m. Yet Close has stated there being no need to name a number at this point.

Management will have their best / middle / worst case numbers. So why not put them out there?

My view is that building £400m of immediately accessible capital signals the worst case capital requirement to cover compensation; remain solvent and not require a rights issue.

I also suspect that the FCA, PRA and government have no desire to force a UK bank into a rights issue over this issue. Just think through the consequences investor confidence.

It might be ok for Metrobank to be a bit doddery, but the bank that owns the investment company that issues UK government debt?

I think the worst case numbers here are overblown and the shares oversold.

The material impact on profitability is almost certainly a direct consequence of taking less profit on business to make capital more immediately accessible.

You’re right that this is going to hang over the shares for a while. But, as the knight in Monty Python would say, “tis merely a flesh wound”.

Completely agree Slikoil - apologies I misread the intention of your post. Rereading I’m not entirely sure how 🤪

The key thing is that “the number” should be relatively straightforward to size and provision for.

"The Consumer Duty does not apply retrospectively."

Correct.

And/but there is now a duty to apply it to in force policies. So, revised charging would need to apply to those policies going forwards.

Full story blow. Apple News link to original - https://stocks.apple.com/A8F0v0ZQfQTmf4HiFdfm1qA

Britain’s largest pensions firm is to set aside £70 million to cover the cost of reducing customer charges.

Phoenix Group, which manages £269 billion in assets, is expected to report the one-off provision when it releases its annual results on Friday. It will cover a cut in annual pension charges across old funds, and other customer support measures, to comply with the Financial Conduct Authority’s new consumer duty rules. These will start to apply to off-sale or closed-book financial products from July 31.

All investment and asset management firms are facing questions from investors on the possible impact of the duty on their fees and bottom lines. Tom McPhail, at financial adviser The Lang Cat, said: “[The] duty is a significant and immediate challenge for all firms with closed books… and Phoenix is one of the biggest.”

The company’s legacy, or heritage operation, which has been built on acquiring old life and pensions businesses closed to new customers, runs more than 3,000 savings and life insurance products and has £119 billion in assets. Many of these old accounts, held by nearly five million customers, were opened as long ago as the 1990s.

While modern pension charges have been capped at 0.75 per cent a year since 2015 by the government, older pensions can be much costlier. At Phoenix, hundreds of thousands of customers with old pensions are paying over 1 per cent a year, and more will be paying between 0.75 and 1 per cent.

“Details” at https://www.gov.uk/cma-cases/barratt-slash-redrow-merger-inquiry

It’s hard to see how the merger of the largest and 7th largest creates competition concerns when PSN, TW and Bellway aren’t far behind BDEV.

"Surely that 1bn should be invested into a current portfolio company or grab a new one. Ideally publicly traded."

Only if they take the view that the £1bn can be deployed well. And making the money available for buybacks doesn't take it off the table if something better comes up.

It might be the case they have a view of when some of the currently privately held companies are going public and taking a view that buying some of the resulting price action at a discount to NAV is a good move.

From Apple News - https://apple.news/ARtLnCj1bSpa6w2x2WQVt8Q

Key bits below…

Some companies almost certainly were guilty of failings in concealing commissions charged on car loans, the chief regulator of the City has suggested, but he played down speculation that redress would cost anything like the £50 billion bill for mis-sold payment protection insurance.

Nikhil Rathi, chief executive of the Financial Conduct Authority, told a City conference yesterday it was “improbable we will find nothing to report as we look at historic motor finance sales”.

However, he added that the investigation and compensation arrangements would not be on the scale of the PPI scandal or as protracted. The last PPI compensation payments were made in 2021, 16 years after the first official review began. “I do not anticipate this issue playing out as PPI did, not least because we have intervened early in the interests of market orderliness,” Rathi said.

I'm not a premium member, but would otherwise message this...

I thought you might be interested in this - https://monevator.com/what-to-do-if-youre-queasy-about-the-us-stock-market-members/

The site is largely free, but they have two levels of membership and this article sits behind the first level membership. In my view, the cost of the membership is worth the content.

You're welcome b-w-f

If you are invested here for the dividend then you might want to read this - https://www.roywalkerwealth.com/2018/01/warren-buffett-on-hamburgers.html#

I'm invested here and with AV., MNG and PHNX. MNG and PHNX are both reporting next week, which I'm looking forwards to.

"My understanding is basic but the dividend per share is grossly under covered by earnings per share. (Source simplywall.st). As I say my understanding is limited but this is not sustainable for any business. Can anyone explain how this level of dividend is likely to continue please?"

What BeReyt say, plus...

b-w-f - two things to understand:

- Dividend cover as a metric simply doesn't work with the new accounting standards. Explanation below

- Simply Wall St is primarily auto-generated content, so lacks the nuance to understand that!

Why Dividend Cover is a broken metric...

Dividend cover is calculated as Earnings Per Share divided by the total Dividend paid.

Earnings Per Share is calculated as Operating Profit divided by the number of issued shares. (Simplified, but it will do for our purposes.)

In 2018 (IIRC), accounting standards changed so that companies had to assess the value of investments against what they could be sold for and recognise any profit or loss against their declared profit and loss. (This is called mark to market.).

Prior to 2018, operating profit was calculated only recognising the profit or loss for investments actually sold during that year.

As an example, take a company makes £100m in profit, but has commercial property whose value (if sold, which they have no intention of ever doing) goes down £250m. They pay out £50m of dividends.

Prior to 2018, the company will have reported an operating PROFIT of £100m and Dividend Cover would be 2.

After 2018 it made an operating LOSS of £150m with Dividend Cover of -3.

The amount of money going into and out of the company is the same.

Under the new rules, if next year the value of that commercial property recovers and the company has still made £100m of operating profit then the reported profit will be £250m.

Again, the amount of money going into and out of the company is the same.

Just to make it more fun, last year, another new accounting standard (IFRS17) changed the accounting treatment of insurance companies. What it does (and I simplify) is require companies that sell long dated products to recognise the profit from those products over the life of the product. For example, if you sell a 10 year annuity then you have to recognise the profit from that annuity over 10 years. If you sell a car insurance policy then you can recognise all (actually most) of the profit in the same year that you sell it.

This is why Aviva's profits this year look fab - they've been able to hike general insurance premiums and increase margin whilst doing so. Whereas L&G has sold LOTS of annuities, whose profits have been put into a "pot" and will be released incrementally over a number of years.

So, Dividend Cover is broken - and has been since 2018 - because it's calculated based on Operating Profit, which no longer represents the ACTUAL operating profitability of the company on a day to day basis.

Hope that helps.

Zac - your point about shielding money in a SIPP is an important one.

“The same value investment in a sipp would pay you, assuming you are a 20% tax payer, an identical nett dividend and if you sold your invetment you'd be 6.25% better off with your sipp than your isa!”

I understand the principle zac - make the contribution; get tax relief on the contribution; payment comes out with 25% tax free and with only the remaining 75% taxed at your marginal rate.

And/but it does leave someone in the hands of the tax setting gods as it assumes that you’ll stay a 20% tax payer.

It also doesn’t work if you’re near the LTA, which Labour has promised to de-abolish.

As a general principle, I’d argue that once money is in an ISA then it’s better kept in the ISA as it’s much more flexible - you can take money out and repay in year and take a view closer to the time of retirement about whether to put into the SIPP at the time. You can also draw from it before the normal minimum pension age, which is increasing from 55 to 57.

With the MPAA at £10k you can always indulge in a spot of pensions recycling as and when you want to - take the income from the ISA; pay it into the pension and draw it down immediately and benefit from the tax free element of it’s available to you.

Paying into a SIPP is much more one way.