Member Info for Meconopsis

Everyonesawinner - it used to be that a scrip dividend (a dividend paid out as shares rather than cash with that cash reinvested) was preferred if the investment was held out of an ISA or SIPP as the dividend was counted as a capital gain rather than as income. They also don’t attract stamp duty or dealing commission.

And/but HMRC changed the rules, requiring the cash equivalent value to be declared for the dividend, regardless of whether cash was paid - so all you now save is the stamp duty and dealing commission.

KatieD - a thing to consider when comparing PHP and SUPR is the quality, likely longevity and covenant of tenants.

That’s what makes PHP a winner for me.

I’m not sure why anyone is getting exercised by this…

The CFO received a performance bonus paid in shares. The bonus was awarded a couple of years after the financial year to which the bonus relates.

He then had to wait for the shares to vest.

As is common with all such bonuses, he sold enough shares to cover the income tax relating to the bonus.

The share sale will have been done at arms length - so he would have had no ability to influence when it was done.

All very standard and if you look back a week or so then you’ll see the same happening with another bonus plan.

[L&G have two share-based scheme for senior execs, details of which can be obtained from your favourite AI.]

Nothing to see here. Move along.

“ I would be interested in people's thoughts on weather it would be better holding for the dividend or selling at close of play today”

In a more stable market, my experience is that with L&G is that the share price *generally* falls more than the dividend.

AND/BUT there’s a general buoyancy to the market at the moment and there’s price support from the buyback, so personally I’d hold.

The problem with any share/fund price return is that it’s entirely personal to not only the day, but also time you invested.

If you’d invested in LGEN in Jan 2020 at a peak price of 306 then you’d be sat on a total return of 26%.

Had you invested in May 2020 at 195 then you’d have a total return of 92%.

Case in point…

I did a portfolio rejig in January, but dithered about one ETF for a couple of weeks. I’m down 4% on the fund. If I’d bought when I bought my other funds then I’d be up 36%.

SMT are carrying SpaceX at an enterprise value of $1.3tn, which is the SpaceX / XAi merger valuation.

The % of fund would grow to 24.5% at a $1.75tn IPO value and 27.2% at a $2tn valuation. That would add 6.7% and 10.4% to NAV respectively.

Interestingly, SMT has a governance rule that an investment cannot constitute more than 8% of the fund at the time of investment, but no rule about what is the maximum size a single investment can grow to a percentage of the fund.

That said, I wouldn’t be surprised if SMT exits around 25% of their holding at the IPO. It would be a sensible bit of risk management and at a $1.75tn the current holding would increase from circa £3bn to £4bn - so they could sell a quarter; realise £1bn for new investments; reduce concentration risk.

Sheltie - Musk like to own vertically-integrated companies, so I’m expecting SpaceX to use their post-IPO paper to try to buy up those companies in their supply chain that provide unique capabilities. That effectively blocks potential competitors out of that technology.

Given that SpaceX already holds warrants over 10% of FTC then it’s not a flight of fancy.

Cosmochf - whilst many companies declare transactions the next day, they don’t have to be reported for seven days - allowing companies to consolidate a week’s worth into a single report. I suspect that L&G are taking that approach.

It’s worth saying that the company doesn’t buy their own shares back and it is done independently by a broker - this is done to prevent market abuse and for various tax reasons.

@Baywater - this was covered around a week ago. He is REQUIRED to sell his shares because he's moving to their regulator.

This should answer your concerns…

https://gordonmaitken.substack.com/p/private-credit-under-the-microscope

“I ran this on my 15 year compounding dividend re-investment portfolio and this buy back alone increases my LGEN holdings in year 15 by 10.1%”

I trust your wife is as unexcited about your Excel spreadsheets as my wife is with mine 🥳🤣🤣🤣

Worth a read…

https://gordonmaitken.substack.com/p/l-and-gs-dividend-why-the-market

He was always going to have to pay the tax on the vested shares for the performance and bonus schemes. (The share save scheme comes with tax exemptions.)

It’s standard practice to do this when the shares vest as the value at the time of vesting sets the tax liability.

The 500,000 shares he currently holds are vested and will be “tax paid” - so that’s £1m+ in the bank.

He’ll probably clear another £1m after tax on the balance of his currently unvested shares.

Most of us would consider it to be worth it 😉

It would only be not worth it if his unvested shares don’t vest. But I doubt he’d be moving if that was an impediment.

The money needs to be seen in the context of him being CxO level for around 10 years - so the total isn’t outrageous I think.

Katstrangler - the only people who will be spooked by this are people that you spook.

The markets fully understand the implications and impact of a PDMR moving to a regulator.

It’s also worth nothing that regulatory filings show that he has up to 1,000,000 shares potentially left to vest. The actual number will depend on how the remuneration committee treat his leaving and what’s happened to the 250,000 shares due to vest around now.

Normal “form” is that around 45% of the shares are sold anyway to cover taxes when shares vest. So we may well see all of those 250,000 shares sold fairly soon as those vest.

NONE of this will alarm the markets.

It would only signal a lack of confidence if he retired and sold his shares immediately on exit. But in that case he’d have no reporting requirement, so we’d never know.

The shares will be undoubtedly placed in the market rather than “sold” on LSEG as it distorts the market less.

“You buy the shares for one reason, profit, but you sell for many other reasons.”

It’s worth saying that the directors have NO CHOICE is taking shares as part of their remuneration and bonus.

“so you HAVE to ask 'why'? is he confident that the div and buybac will do the sp better than the 243 he got on thursday?

see if there is more selling into the week... but it's worth acknowledging that the markets will digest this rns with a degree of caution and it could be that we see the sp slip back to 240 monday/tuesday... or not. we'lll see...”

He will have had *VERY LITTLE* say over when these were sold.

He will have know that he was going months ago and agreed exit timing with the CEO. The share trades will have been set up in advance prior to the closed period for results.

He’s moving to L&G’s regulator - so he’s selling because he has to.

The FCA Employee Handbook prohibits staff from "dealing or actively managing" shares in FCA-regulated firms. (This extends to immediate family - a friend had to sell shares when she married a senior director at a regulator.)

For the senior director role that Chris Knight is taking, divestment is standard practice to ensure total impartiality.

The trades will have been set up in advance - prior to the results - and we can expect them to be executed once a month (or so) to pound cost average the exit for him.

He will also have significant unvested shares under the Share Bonus Plan and Performance Bonus Plan (and less significant ones under the Employer Share Plans). These normally wouldn’t vest until 2027-2029.

Normal practice for someone leaving for public service would be to treat him as a “Good Leaver”, accelerate the vesting period and pay out in full. So we’ll likely see a final additional “sell” on his departure. (You’re a Good Leaver if you retire, are made redundant, exit by mutual agreement or go into public service.)

If he was hoping a competitor then he would lose the unvested shares, but the competitor would normally award a “Golden hello” of an equivalent value of shares, vesting over 2-3 years.

“Even this year’s dividend of 20.5p won’t be covered by eps of 12.6p.”

Adjusted EPS, which strips out the effect of Mark to Market, is 25.2p - and covers the dividend.

CSM, which is the most important measure of dividend sustainability as it’s the store of future profits, is up from £6bn to £6.6bn - around £300m is attributable to operating performance (so a 5% improvement before tailwinds).

Whilst the underlying facts are not spectacular, they are *not* “not encouraging”.

I read a lot of “I wish we had Amanda Blanche” type comments.

Those are fair comments. She’s a great leader who has done a great deal to sort out Aviva and driven a lot of shareholder value - despite the misogynistic hate of far too many shareholders on boards like this. (Just saying.)

In drawing a comparison you need to bear in mind two things when drawing the comparison.

Blanche has been in post for nearly six years. Simoes for just over two.

Aviva was a sprawling mess of a conglomerate when Blanche arrived. She immediately did a slash and burn on the eight international businesses, fire saled them for around £7bn and returned £4.75bn in a single capital return event.

[There is some criticism in the markets that her announcement only a month or so after arriving of her intention to exit those markets resulted in Aviva getting £2-3bn less for those assets than they could have done with a quieter and more deliberate strategy. Having said that Aviva was going to exit then she had to exit.]

Blanche moved into the worst house on the street where it was easy to make a big impression on value.

Simoes moved into - probably - the best house on the street where adding obvious value is more difficult.

L&G wasn’t broke when Simoes arrived in the same way. And L&G has significantly more institutional stakeholders than Aviva in terms of pensions mandates.

What Simoes needs to do is pivot the business, but the “shock and awe” approach of Blanche would have undermined the confidence of institutional stakeholders. So his was a much more “deliberate review” approach.

But/and their management actions aren’t that different:

- sell non-core assets

- restructure

- make the business more capital light

- return excess capital to shareholders

Being nearly four years ahead in timescale then Blanche is well into the “growth” bit.

Simoes hasn’t yet had the chance to start that bit yet. Although the change in SCR range and “deploy capital for growth” statement more than suggests a plan.

“ Interesting (worrying?) nugget on reduction of SII Ratio, and how this is the answer to how the dividend is sustainable long term.

"At the lower end of this range our dividend is sustainable, and this is not an automatic trigger for capital measures."

That's for a newly stated range of 160-190%. Last year it was 232%.

They are saying they can only continue with the high dividend by reducing coverage of SII - I don't think this is going to land well and is something to consider in terms of risk.”

That’s not what they’re saying - although this is undoubtedly the thing that’s triggered the largest part of the share price drop.

The PRA stress tests in November effectively showed that the SII ratio was very comfortably high.

What L&G is saying is that they think it’s too high and that they want to drop the ratio and deploy the £2-3.5bn released for other things.

The point about the dividend is that the act paying out the dividend causes the SCR to drop. So they’re saying that the balance sheet will allow for current levels of dividend to be paid out without breaching that range.

There were some posts on SCR last week that are worth a look. They will have undoubtedly discussed an appropriate range with the ratings agencies for them to keep their AA credit rating.

The number you want to be interested in is the CSM, which is the lead indicator of dividend sustainability. We want that to go up, which it has by 2%.

I’m not so worried about the full year to half year comparisons - the numbers aren’t quite double, they’re not far off.

This is a bit like SDLF’s last results last year that punished them with a 7% results drop because there was no extra super good news.