Member Info for Merciaman

Agree Smiler. If we don't have different opinions on the board we can become subject to groupthink. I don't think that AML will be profitable at bottom line (after D&A and Interest charges) this year or next, but for 2021 I do expect to see improving financial results reflecting better marketing and production management.

Nice gain so far today - maybe driven by the Airbus announcement that they plan to increase production to cope with demand and see demand for airliners back to pre-pandemic levels in 2025 ?

Think Boeing's shares have also bumped upwards.

Dividend appeared in my account about an hour ago (invdirect).

If no gyrations in the markets, a quiet week.

Nuri, wonder whether the spike in retail sales announced this morning has just re-sparked some inflation fears generally. If so I expect it will pass as quickly as it occurred.

Helu0104, you're right in that the payment of a dividend will reduce the net value of the business, and by extension the share price should drop to reflect that some of the business's cash has been paid out to the shareholders.

But this impact on the share price happens when the share goes ex-dividend, not when the payment is actually made. Hence the dividend is paid on the (25th May) to shareholders who were on the shareholder record as at (16th April I think).

So the reduction in the share price to reflect the dividend has already happen - please to say it's been completely overwhelmed by the general rise in the share price over the past few weeks.

The share went ex-dividend back in April, so timing of the actual payment next week should not make any difference to the share price.

Agreed Stille. There is a clear strategy to get to a prosperous / rewarding business. Does the mgt team have the capability to execute the marketing and operational efficiency improvements required to deliver ? I think their track record suggests they do.

How prosperous will that company be, will the debt overwhelm it, what will that do for the future share price ? Less clear I would suggest, and C26 is right to flag up the downside risks. I don't think he's alone in having those risks in mind just now either, as I think the share price fluctuations confirm.

Just on the interest charges as I recall there is debt of £840 million (maturing 2025) at a 10.5% coupon (£88 million interest pa) and £259 million (maturing 2026) at a 15% coupon (£39 million interest pa), both assuming no repayment of principal over the term. So that's a £127 million pa interest bill going forward on a total debt of £1.1 million.

Seen numbers around of £1.3 million debt so very much like welcome info regarding other debt ?

I think also £810 million of fresh equity was raised (including £536M from yew tree and £125M from Mercedes) but don't know of any costs to this given I presume shares were or will be issued.

I saw in the Q1 costs a total net finance expense of £26.9 million which seems a bit low ?

Hi C26, which FSA are you referring to ?

Finally, is Mr Stroll and his partners making use of bonds or other instruments to recoup some of their investment by getting a juicy return from AML ? Probably. It's not illegal (shareholders loan money to businesses regularly and charge interest for doing so) but there may be a conflict of interest (if AML could easily borrow more cheaply elsewhere). If AML execute the strategy successfully then the increased value of the business will make this a bit irrelevant. If it doesn't.......

The next question is how viable is this financially ? I'll get round to doing a few numbers but does £500m EBITDA in 2024/5 mean a bottom line profit ? Probably it does though it doesn't pay off the debt. Does that matter ? Maybe, maybe not, I'd certainly expect AML to refinance at lower rates at some point in the future and thereby reduce the interest rate burden. Having a bunch of debt on the balance sheet doesn't matter too much if there's also plenty of equity, and sensible level of gearing, and no problem in coping with interest payments. Again, probably comes down to execution of strategy delivering the necessary growth to support the level of debt.

Strategically and operationally AML seems to be on the right track. Growing sales by developing models for the SUV and electric market segments, and getting much more efficient and productive in its manufacturing to produce that increasing number of vehicles at lower cost. I doubt anyone would argue with that, the level of success is going to depend on the quality of the execution of that strategy.

Depreciation is typically write down of assets, so spreading capital expenditure over a period of years. Amortisation is writing off an intangible asset as an operational expense - helps reduce tax bill.

I wonder whether the capital markets day a week tomorrow will stimulate some buying / the share price ?

Sufcessex, indeed it did, but it spent the great bulk of the year in that 55-65p range.

It stayed around 49p-50p for the second half of august, after a sharp decline in late July, and rapidly recovered in early September. As always there will be peaks and troughs - and trading opportunities - but most of the year was spend in that 10p or so range I specified.

Motbuck that's a fair point, but I think the divi yield precovid was relatively high in part because of history - I suspect LLOY will use this as a chance to "reset" at a level less generous than before, but still at a level that makes it attractive in the current low interest rate climate.

I'd like to be proved wrong (!), but we'll see.

Speaking as a long term holder of shares - this revised target adds to the currently benign climate for Lloyds.

Given the economic damage from covid has not been as bad as expected you would expect provisions to be released. The Embark acquisition - and maybe others - shows a desire to build the range of services the bank can offer, and not stand still. It is realistic to expect the housing and mortgage market to quieten down in the not too distant future.

While this will absorb some of LLOY's surplus cash, there should still be enough to resume a healthy dividend policy, and maybe a special dividend of some sort. Again, this should help to underpin some share price growth.

In 2019 the share traded typically between 55 and 65p, and other than for a few days in august '19 never below 50p. I see no reason why the share price cannot repeat that going forward. In terms of dividend I'm guessing completely, but I'd guess at something of the order of 4% per annum to achieve that "progressive dividend" policy, so 2p and a bit per share.

I doubt very much it will be a straightline to this sort of trading environment, but I do expect it to get there. Time will tell, GLA.

Agree it was a very good trading update, and the various businesses all seem to be in decent order for future growth.

I think there are a couple of key headwinds to that growth - the semiconductor shortage will clearly affect automotive, probably for the rest of this year, while commerical aviation will take a lot longer to get back to pre-covid levels. So I doubt there'll be any big uptick in the share price soon (hope I'm proved wrong), but one to hold for the next couple of years I think.

thanks ftseexplorer