Wentworth CEO sees both capital and dividend growth opportunities in Tanzania's Mnazi gas field Watch Now
I dont know the answer to your question. However, a piece I found about IMB's debt worth reading, so I just copied here. please dyor.
"The majority of the debt is issued as bonds with varying coupon and maturity date. There are a couple of the bonds that definitely need to be refinanced, such as the £1 Bn (Feb-22) with 9% coupon and the £600 M (Mar-24) with a 8.125 % coupon. Everything else has much lower coupon, less than 5 % and most less than 4 % with maturity dates out as far as Jun-32.
The total outstanding bond value is £13,476 M with an average margin of 2 %, from the results presentation. £1.681 Bn of that debt is due to mature in the next fiscal year and £1.329 Bn in FY21. The peak FY for maturity is FY22 with £2.073 Bn. There is very little debt with current maturity beyond FY27. I'd expect that to change for the reasons below.
If IMB can get decent bond rates then there is no reason not to issue new bonds to cover those that mature, as long as the ROI on that capital outperforms the coupon taking into account interest rates and inflation over the period of the bond. The simplistic point of view that IMB has too much debt really misses the point of making the extra capital work for you.
I've taken on short to medium term debt in my lifetime just because the interest rates that were on offer were just too low NOT to take the money. If you can't outperform 0.5-1 % ROI over 2-3 years then you may as well just give up now. It provides fiscal flexibility to make investments that require short term capital injection to give longer term returns. Most businesses don't have access to the bond market to get this type of funding and would snap your hand off if given the opportunity.
The cash conversion rate of IMB and the gross revenue mean that they can easily match the necessary capital investment going forward, while retaining the dividend at the 200+ p level, retiring some debt (but mostly refinancing) and continuing the buyback programme. It is a flexible and reasonable strategy that allows for capital reallocation as business and external demands require.
The cash required to service the bond debt is about 2/3 to 1/3 fixed interest rate over variable and 80 % / 20 % bonds over banks revolving facilities. There is no reason to believe that the revolving facilities will not continue...they are revolving after all! ;-)
With low single digit revenue and EPS growth forecast for FY20 then you are looking at about £2 Bn in divis against £3.75 bn of gross earnings as the basis point (FY19). Keep the divi constant and you are looking at gross earnings to increase by at least £100 M in FY20. With savings from restructuring and some non-core divestments, you make a simpler organisation with focus on its core revenue generating markets that maximises ROI, while retaining flexibility to retire and restructure debt and/or perform buybacks.
Greggs was in similar position in May 2018, posted over 4% pre-tax profit loss and their share price dropped to ~950 from ~1250s but then it shot up to 2400 in just a year.
@Ratknapp, I do not know Velo but he/she makes valuable contributions to this board and there are lots of people enjoy Velo’s posts as it is thought provoking and makes me to think about other aspects and issues about the company that might have missed in my research. Anyhow, you were wrong about net profit.
It baffles me too, as so many speculations about dividend cut when there is nothing to suggest this. A guy on the ADVFN chat was so happy to sell 6000 shares easily at 4 pm, this is the opposite of what should normally happen when everyone is looking for exit door on price fall. The uncertainty of general election, brexit, etc is quite frightening but this share looks very attractive to me as it pays more than 10%, which is more than enough for me and is a safe return in this market even with 50% divi cut. Any suggestions about risks? Is it correct to assume its debt is less risky now because of Fed’s rate cut?
You know that the sept RNS was a Pre-Close Trading update? The intention of pre-close update is to just give an idea to investors what is going on. It is not to present figures for the trading year that has not been finished yet. The year end for IMB is 30th September. Not a single company I have traded, has ever presented more details as IMB did for its preclose update.
They warned about e-cig/vape sale in the US, which last year generated £200m “Revenue”, IMB revenue is in excess of £30B, i.e. less than 1% of their total sale. In the report they said 2019 targets are single digit higher than the last year. Why do you suggest a dividend cut and insisting on it when the sale is in line with last year ? Unless you have inside information that is not available to public. I would be eternally grateful if you share your knowledge with us.
More positive noise about Telecom sector.
Talking about market confidence and share price is total BS. Market don’t think, prices come through a collection of human beings (often herd mentality) and AI trading. This may or may not be relevant to the company’s fundamentals. A sound investor buys at the times of hysteria and sells to the insanity based on their own judgment. Given the BT’s reports and information available publicly, I personally did not think that the last Nov rise to 260ish was an insane price so I did not sell although I could make a good profit. But I do feel 160p is “hysteria”. BT had its ups and downs 80p, 500p and £10. I have a sizeable position and keep buying every now and then until situation becomes clearer.
“how will that pension deficit look the way bond yields are heading ..?.”
I dont know how but this article in FT says it is going well.
***How hedge funds are thriving in a world of negative-yielding debt***
“Never shoot the messenger” but Fleccy never called this nutter a messenger. Messenger is just a clueless staff with no idea of their own.
For the record, many large companies delisted themselves from NYSE because of expensive fees and reporting costs like Bayer, it has nothing to do with “more bad news”.
“Well guys I did tell you so!!!l”
You posted that you took long position for divi harvesting a few days ago hoping to sell at 180. I never saw anybody in real life so excited about loosing money ?!?
UK economy contracts for the first time in seven years
The UK economy contracted in the second quarter for the first time in almost seven years amid rising Brexit uncertainties and weakening global growth.
Output fell 0.2 per cent in the second quarter, worse than the flat performance expected by economists and down from a 0.5 per cent expansion recorded in the first quarter, according to data from the Office for National Statistics. Britain’s economy has not contracted since the final three months of 2012.
“If you think a Johnson led administration is going to be more BT friendly you are living in la la land imv.”
I think it is about openreach not BT. With the tight timeline of 2025, openreach could well be on the spotlight. Sky uses openreach for its fibre and have no plan for their own network. I agree this isn’t the only option and is possible to come up with few contradictory scenarios. But on this occasion I bet on BT and bought more as I think Bojo’s admin needs trading deals and might make some unanticipated moves before October.
Good list,, with discount of no deal brexit priced in and expectation of interest rate cut, I think it is a good strategy repositioning portfolio with high yield stocks. I also got Legn and Bat in my portfolio. Non correlated shares from solid companies.