Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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 ?
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
RogueRiver ain't that the truth ! I'm surprised the share price has fallen, although I don't think the likely price for Nortek was at that much of a premium to expectations previously outlined. Agree, I'd certainly have expected the SP to be a few points up rather than down.
I suspect the outlined price for Nortec was as expected, hence little move in the share price. I agree that the share price will rise above the cash distribution - it'll just take time. I'd expect a special one-off dividend to shareholders once the Nortec transaction is completed.
I suspect this is the end. It doesn't look like MPM can pay the VAT bill if it arises. The time it takes to sort out the VAT issue could leave the company burning through its remaining cash before the takeover / fundraising can take place. Can't see the business coming back from this. Still struggling with this VAT issue - this looks like sheer ineptitude. And how come it seems MPM is the one that has got stung by the VAT where, I assume, it hasn't charged it and its supplying partners now have ?
Thanks for the update InvestingGenius. I think Mporium has made some good moves in (re)structuring the business to provide a platform through which growth can become profit. I'm just uncertain of their ability to monetise the technology to generate that growth, so fingers crossed the deals come to fruition and profitable revenue flows in. If they can do this, and don't need to tap their selected shareholders anymore, then it's not difficult to see the business sharply increasing its current balance sheet value of £650k - and its £4 million mkt cap doing likewise.
Key question in my mind is where will revenue come from ? The re-structuring has sharply reduced the headcount, and the board's letter with regard to the placing / fundraising / meeting indicates an ongoing operational expense of £ 3 million annually. Much reduced, office move, all good stuff. But without revenue and margin growth the business still won't turn a profit and will still burn cash. ClickLabs t/o is estimated at £2.8 million in the year just finished, not sure what their margin is. 25% ? Can that apply to the whole business ? So to breakeven you'd need £12 million of revenue for £3 million Gross Margin ? That's what I'm struggling to believe, whatever the quality of the software.
I guess if you don't think the company is going to survive - and that is clearly a possibility given the substance and tone of yesterday's announcement - then 0.45p now is obviously preferable to zilch at a later date.