Member Info for strictlybricks

Londoner, I didn't at first follow your fourth paragraph but, having gone back to my own post, I now do. My fault for not putting the figures more clearly, sorry about that. I didn't actually give the BVPS figures - just the year, the actual EPS in terms of balance sheet movement adjusted for dividends, and what I've called the mythical earnings figure (and I appreciate the term is perhaps a tad contentious). So, for 2017, to lay this out in full, I have end of year BVPS of 480.7p, less start of year BVPS of 545.0p, plus divs paid during the year of 56p and 32p = earnings implied by balance sheet movement of 23.7p. This is as compared to declared EPS of 59.1p. And that meant a return of equity of just 4.3% - truly dismal at this very sweet stage of the cycle, when the good guys are returning over 20%. If you're interested in the implications of looking at all companies through this particular lens, I can tell you from personal investigation that it is illuminating. If you'd looked at all the shares in the FTSE100 like I did back in 2003, it was clear to see it was going nowhere as a whole. As indeed it hasn't - it hit 6900 at the end of the last century and what is it now? less than 10% up on that in 18 years! Going back to Galliford, I did a bit more legwork on it in preparation for corresponding with you further subsequent to your licao (had to google that!), and I reckon the picture further back is also pretty dismal... In 2007, Galliford were short on dosh, so they did a share placing.... 100m @ 150p a share. Three years later, they did a 10 for 1 share consolidation, so the poor saps who bought into the share placing were now in for 1,500p a share. To mitigate this, and now needing to raise yet more money, they did a 7 for 6 rights issue @ 285p a share. My schoolboy maths may have this wrong, but I think that boils down to an overall net cost for the folks with the 2007 placing shares @ 855.17p a share. So, if they sold now they'd have about an overall 28% return on their capital for having it tied up for a decade, plus of course the dividends paid over that time. So, it's not the end of the world, but neither is it impressive - especially when put up against the rest of the house builder sector. Controversially, perhaps, I reckon that Galliford, despite its poor five year share price performance, is still nearly double the price it should be to be fair value against other house builders. But clearly there are plenty of investors who don't agree with me, or Galliford's share price would be in the dustbin! Londoner, re your PS, I have a blog for just discussing builders shares that a number of regular posters on LSE contribute to (mainly the regulars of the TEF chat), and you are welcome to join that if it interests you. You can only access it via an invite, though, so let me have an email address, even if just temporary one for this, so I can send you a link. Kind regards, Str

Londoner, Well, good luck with learning the lingo, then... I'm out in Spain in a rented villa at the moment, dodging the English winter... I hope your Portuguese is better than my 30 odd words of Spanish, though... :-) Strictly

Londoner, The "characters left" section said I still had a few left on my last post when it was completed - but it obviously lied, as was apparent only after I'd pressed the send button! My last line should have read: Happy to hear back from you on this, and good luck with your own journey of learning. Strictly

Londoner, Thanks for your reply... let me see if I can clarify what I've said a little and, if you still disagree, I'm happy for you to come back to me on it and, if you don't, well - no worries.... Firstly, your comment "...and I think the hyperbole in your last paragraph is inaccurate..." The EPS figures, comparing stated EPS against what I suggesting is the reality by taking BVPS start & finish of year adjusted for dividends, are: 2012, 60.9p vs 37.1p 2013, 71.7p vs 62.9p 2014, 94.6p vs 78.0p 2015, 112.8p vs 67.0p 2016, 132.5p vs 112.6p 2017, 59.1p vs 123.7p To put some context to this, I've been investing exclusively in house builder shares for more than 15 years now (hence the name!) and, as I have had no other form of income during that time, these investments have had to provided for my entire livelihood. The point being, I necessarily have to take what I am doing seriously - I mean, to try to be the best that I can be at this, and so am more than happy to discuss points like this with people like yourself who seems to be also interested in moving forward beyond wondering what the share price will be tomorrow. So, while I'm arguing my corner here, I'm not trying to just score a point as I'm also interested to see if you come up with something good to challenge my take on all this... :-) On any company report, I think 99 point something percent of what's written there is just guff. What I'm looking for is the company value net of intangibles and the number of shares in issue, from which I can obtain the BVPS, also and the dividend paid. Using the latter, plus the BVPS at the start of year, gives me the true return on equity - I'm not in any way interested in ROCE as I don't like investing in companies with high gearing (I learned that the hard way with Barratt!). I've got the vital statistics like this on some builders as far back as the early '80s. Over that time, Bellway is the unsung hero, with average ROE of around 16%. GFRD's actual performance above, through a very sweet period, was around 15% ROE not the 20% implied by their stated EPS figures... doesn't look bad, but they banged it all out in div - so no growth. Bottom line, over the past five years with divs invested on the day paid, Galliford have returned 95% on investment compared to Bellway returning 279% - yet Galliford are still, by some margin, the most expensive share in the sector taking a measure that combines book value and performance. My aim as an active investor is to beat Bellway by an average of 10% a year. I'm not there yet, but consider that I'm still learning and, hopefully, improving.... last five years, I've beaten Bellway by an average 8% a year, compared to my longer term average of only 4%. I know I haven't responded to all your points, but I'm running out of character space and, anyway, this is probably more than enough for one post! Happy to hear back from you on this, and good lu

Tailender, A concern with Galliford is that the total earnings per share they've declared for the past three years are 304p whereas the actual total earnings per share per the balance sheet movement adjusting for dividends paid has been just 203p. The upshot of that is that the book value per share now is less than it was three years ago...! 480p for end June 2017 compared to 497p for end June 2014. So, if you're unhappy with how Galliford's been for you as an investment, that's probably the first place to look for a reason why the share price performance has been so dismal - 1,254p end 2014 compared to 1,144p now - especially in the light of such sparking underlying performance to be found elsewhere in the house building sector, and with, mostly, share price performances to match. I wait with interest to see if Galliford actually achieve anywhere near the above 160p per share earnings performance that the scribblers have them down for....? That is, on an actual, i.e. adjusted balance sheet, performance basis, mind, and not just some mythical headline EPS figure that, for every year over the past six years, hasn't matched up to reality...

strictlybricks, thanks for the clarification. I'd question your end of june number of 480p, if book value = net asset value. If not what? Simply taking the net asset value I come up with 694p against current capitalisation (I'm assuming - because I haven't looked - there hasn't been any change in share issue). But backing up a little, book value isn't a metric I use. Taking one extreme, if I put �100 in the bank, the book value is �100 and the price to book value is 1.0, but the return is a pittance. ............................................ Londoner, With regard to BVPS, I'm imagining you're looking at the figure including intangibles - whereas my figure is net of intangibles. And galliford do have a shed-load of intangibles on their books! In your example of a cash deposit, assuming an interest rate of a paltry 1%, that would also be your return on equity. Yes, Galliford isn't a pure house builder - so that's another reason I'm not watching it too closely... Let me perhaps give you an other aspect to consider... If you'd bought �100 of Galliford shares at the start of 2013, held onto them, and re-invested the dividends on the day they were paid, you'd now have �201.50 of their shares. If you'd done the same with Bellway, you'd now have �396.20. And if you'd done this with Redrow, you'd now have �430.50p And yet, despite Galliford's p..s poor share price performance, it's still soooooo expensive. The difference between Galliford and Carillion in this respect is that Carillion were paying a dividend they couldn't afford even before recent revelations, and Galliford were paying a dividend that was out of wack with Redrow, Bellway, etc., during what has been a very sweet period for house builders when they could have been chuntering that back into the business for more growth.. I'm looking forward with interest to seeing how well Galliford do this year....? The scribblers have them in for an EPS of 163p.... if they achieve that it would mean an ROE of almost 34%.....! I'm not holding my breath on that, though...

strictlybricks, thanks for your response but I don't understand "PBV around 2.3 or BVPS", please expand. Okay I might have BVPS - book value per share? ......................................... Londoner - yes, BVPS = book value per share. PBV = price to book value. Book value per share end June 2017 was 480p, less div paid in November 64p = 416p, add on 6 months worth of this year's earnings at let's say 120p earnings per share for 2017/18 (I didn't buy into the scribblers' figure of 2018 EPS of 160p even before this week's announcement) = 416p + 60p = 476p estimated current BVPS. Share price of 1,185p divided by 476p = PBV of 2.49. That's higher than the figure I gave yesterday, but that's because I don't track Galliford too closely at the moment as IMO it's so far out of the zone value-wise compared to Bellway, Telford, Redrow and Crest which is where I'm paying more attention. So I just did the calculation for my response to you here - and Galliford's even more expensive than I thought. Return on equity, for me, is the stand out indicator. You can look at figures going back ad nauseam into the past and providing you've got the BVPS and div paid for each year you can define the ROE for each year. A significant amount of leverage changes things insofar as present day risk, return, etc., but a lesson I learned expensively through the credit crunch was to avoid builders (the only companies I invest in, hence the name) with big borrowings. But ROE is the figure needed to get from the start point to the finish point for any period for underlying performance, regardless of whether some accountants may regard it as a blunt instrument. Anyway - hope that helps clarify things..?

Londoner "It seems disproportionate so I've take a nibble. I'll watch for a little while but this looks interesting. Am I missing anything?" ................................................................................. Bear in mind that, at close of play, Galliford is still at a PBV of around 2.3 - so multiply the book value loss by that number for a pro-rata adjustment to the market cap. The other thing with Galliford is that, for the past six years, their actual average return on equity has been 15.3% if you just work from balance sheet to balance sheet to extract the BVPS each year after adjusting for dividend, as opposed to the average 20.3% ROE they've said they've achieved if you just accept their stated EPS each year for that period. That is a huge difference..... and maybe it says something about the nature of the beast...? And now this? As I said, the PBV is 2.3 after today's announcement.... which means it's still significantly higher than for the other major builders except for Persimmon (and maybe Berkeley - I don't track that one?). So it's hard to see the value in Galliford, currently, as compared to the others..?

James, "This is exactly the point. I have traded in and out in the past,(as well as remained invested), sometimes successfully sometimes not. Later analysis indicated I would have been much more successful if I had just sat quietly in the corner and remained" Whereas, moving between different builders' shares DOES work - at least, it has for my circle of people involved in this... My benchmark share is Bellway - by which I mean that, being the most consistent (though often under-rated) builder's share of the lot over the long term, if I'm moving around between shares then I want to at least do better than I would have by just sitting in Bellway and scratching my nuts (or whatever...) My target is to beat Bellway by 10% a year on average.... given that Bellway's long term average annual gain is 16%, that would make for a target gain of 26% overall - which is quite a magic number, as it means doubling every three years.... I've been in this game a long time, but my record keeping on this is only accurate enough to give a precise figure for the past five years and that is that I've beaten Bellway by an average of 8.7% a year over that time so not quite up to my target as things stand... However, while five years might seem along time it isn't really for this sort of thing and, for example, Bellway is currently a tad expensive (in my view) hence I'm mostly in Telford with some Crest and Redrow right now If Bellway slipped back to be in line, value-wise, with the others my gain would then be at around the average improvement of 10% a year I'm aiming for. But, in summary, I've been pretty much exclusively in builders' shares for around sixteen years, and I have always during that time traded between them and have consistently made additional gain by doing so - some years better than others, mind - I've worked pretty hard at improving what I'm doing and especially over the past couple of years since I've been writing a blog for my circle of people about it all, as having to rationalise & justify to them what I'm doing has pushed me to up my own game. One thing I can say, though, is that letting go of being influenced by what the scribblers think and instead relying much more on track records, company guidance and common sense really does help!

James, In respect of my own personal ethos in this (because I'm not trying to tell anyone else what to do with their money...), I can boil it all down to a single sentence.... Which is: "I'd rather be in shares when I should be in cash than in cash when I should be in shares" Because I've never been able to answer this question for myself: "If you call the market, get it wrong, and go to cash and builders' shares (the only game in town for me) keep going up, how do you get back in again?" This is, of course, providing that you think that the companies themselves are still okay....

James, It's taken me many years to come to the conclusion that moving between shares and cash takes bigger cojones than I've got... Moving between builders' shares, however, is a different story that is much discussed both here and on my own separate blog about builders shares (hence the name!). On the point of heady pricing, I think price to book value is a much more stable rule of thumb than current PE etc. And there is a very mixed message here currently... When vBellway gets up anywhere around 2.0 PBV, it sniffs the rarified air up there, finds it doesn't like it, and soon dives back down again - as has very recently happened. Persimmon got up to a PBV of 2.9 pre-crunch, whereas this time it has been as high as 3.2. Now it's slipped back down to 2.6. Still very high for a builder's share, though.... But Telford.... what to make of that...? Pre-crunch, it went as high as a PBV of 4.0 (adjusting the 2008 accounting change backwards) yet, right now, it sits at a humble1.5 PBV - virtually on par with the Hound of the Baskervilles! On the blog, we have a friendly contest going for the best percentage investment performance this year - the losers club together to buy the winner a curry, so hardly big stakes here - but maybe 2018 will just be Telford's year..? If so, that probably means that one of the Musketeers will win..? (Sain & Terrace are both in it)

Terrace, If you're prepared to let history be your guide - for Telford or any of the other builders - then the course of changing (nearly always increasing) book value per share has pretty much always run a helluva lot smoother than the course of share prices... So, unless you think it's different this time, why lose any sleep over what the market may think in the short term..? And in case you give much credence to the scribblers, well, they haven't indicated they've changed their minds thus far, have they?

Sain, Everyone gets to eat.... it's more a matter of who pays....?

Cyber/Terrace, "Terrace, Strictly's system is a lot more subjective than you think...." ....... And part of that subjectivity is who is running the business.... Having said that, these things do tend to show through in the numbers in the end anyway... And sometimes in can be seen in the numbers first... Examples of the latter, Persimmon, history of buying businesses, blowing shareholder value to create a bigger business more quickly.... equals greedy management and look what happened recently with the umpteen £squillions bonus the boss received (quickly followed by his P45, as it happened...!). And Bovis.... p..s poor profitability over the long term.... and eventually caught cheating trying to bring the numbers up last year by bribing hapless house buyers to sign off early, damp 'n all.... In the end, I have a lot of faith in the notion that the calibre of the management will show through on a spreadsheet in its track record.... And never mind the new strategy, if we just took TEF's track record in increasing shareholder value through increasing the book value per share, to the best of my knowledge, its performance has been second to none in the building sector since 2000.

Cyber/Sain, If Sain is starting with a portfolio that contains an amount of cash then, providing the cash is committed to the portfolio it really doesn't matter how much or for how long it remains in cash... Because, let's face it, to gain an advantage that way, Sain would have to be able to successfully call the short term movements of the market... And if he can do that, well, all hail the conquering hero - and we should surely all be buying him a three course curry each...!!!

Sain, It's not a curry eating contest.... the curry is the prize...! And the fact that it is due to be bought by the losers should make it all the more to be savoured..? By the way, I did have a couple of mouthfuls of someone's chicken phaal recently..... and two mouthfuls was enough, thanks...

Sain, That's the point I'm making.... Letting go of all that fine, detailed stuff for a moment and just looking at the one, simple indicator, Telford are ahead by a mile...! Completely separately, are you intending joining this year's curry contest...?

Here's a New Year offering.... If we were to consider just one historical indicator in splendid isolation, a stark contrast is thrown out... The indicator I'm referring to is price to book value... taken by itself, it might be considered to be something of a blunt instrument.... but, over the term, nowhere near as blunt, I would say, as either dividend yield or price earnings ratios taken by themselves, and they are the main indicators used by the FT et al... Looking forward from 2000 onwards, and using a share price graph overlaid with a grid of price to book value tramlines at different levels from 0.6 to 2.0, it is clear to see that there has been a middle zone for each company over the long term. Of the four graphs sitting in front of me, Persimmon's and Telford's band zones have both been between 1.6 and 2.0 PBV. For Bellway and Bovis, it has been lower - between 1.2 and 1.6. And if above this zone is expensive and below this zone is cheap, using this PBV indicator only, there is a surprisingly sharp contrast... Essentially, from 2000, Persimmon and Bellway have both been cheap, expensive, cheap then currently expensive again. Bellway is currently near 2.0, where it has ALWAYS wanted to fall away from quickly & sharply, and Persimmon remains in previously uncharted territory in terms of how expensive it currently is..! Bovis, well, they're currently the only one of the four in the middle of their middle zone but, seeing as they've only recently been truly found out by the market as really being the Hound of the Baskervilles, let's just ignore them... But Telford, since 2000, have gone expensive, cheap, expensive and cheap again and are currently well below the middle zone - the only builder to be there... on-one else is even close... So, anyway, I've currently got 56% of my entire holdings in Telford. However, if I was to put all my faith into the notion that price to book value is the only reliable true indicator of value, and so if I ignored the change in business strategy and it's likely impact on return on equity, and also ignored the blow-by-blow details of new developments, BTR, and individual properties being sold, etc., the contrast in the PBV track records between the companies suggest I should be 100% in Telford! I probably won't be doing that, but I thought I'd just throw this out there as a notion for consideration... On a blog about builders' shares that is separate to this share chat, we have a curry contest in place for 2018 for the best percentage performance and, if the above proves to be completely valid, it's highly likely that the losers will collectively owe one of the regular contributors here a ruby at the end of the year...! Oh where is Captain Hindsight when you need him..?

Terrace, Sain & Steph Cyber & I have been discussing the implications of the Equity Development article on the link you posted below, Terrace - except we've done so outside of this share chat using email and the blog instead... Firstly, given that the author has stuck his/her neck out by giving forecasts right up to 2023 - i.e. a quantum leap from only up to the 2020 estimates that were previously available - I would have thought that the detailed article would be a worthwhile read for any TEF aficionado on this share chat...? Although the author professes to be a TEF fan, I don't think the numbers given fully concur with that...? The article has ROE falling to 14.4% by 2023, which seems a bit thin to me..? My own numbers, which are based on the notion of an ROE that peaks in 2019 at around 19% and then slides gently back to 14.5% in 2037, the ROE is still 17.4% by 2023 so a very different story to the scribbler concerned... I hasten to add that I'm not saying I'm right, only that the numbers I'm using make sense to me in the scheme of using more or less the next couple of years' forecasts (I don't think much of the scribblers' number for 2020, so I've got 65p EPS for that year), dividends at one third of EPS, and EPS growth settling at 9% a year after 2020. Obviously, this probably all becomes fairly arbitrary by the time we get to 2037 - the world as we know it might not exist by then, we might have become the new Venezuela, or something - but my spreadsheet goes that far so I just took a look at the numbers on Telford... If all that worked out, however, I'd have a BVPS of 2,130p for 2037, which at a PBV of 1.5 would give a share price of 3,195p. If you go with Equity Development's figures, and again apply an 8% annual growth thereafter (which does also happen to fit with their numbers after 2023), you end up with a BVPS in 2037 of 1,830p and therefore at a PBV of 1.5 a share price then of 2,745p. I'd be interested to know whether any of the TEF musketeers have similarly played these numbers forward and, if so, what end figures have you have all come up with..?

Terrace, I think this was the key comment you made...? ......... "...because I don't understand their operational ( not talking about financial) activities to anywhere near the same extent." ........... I think that's it..... clearly the Musketeers, between you, have a far greater depth of knowledge & understanding than me about Telford operationally whereas I'm pretty much relying on the numbers. But numbers do tell you more than may be apparent at first glance and I suppose that, for better or for worse, relying on the numbers makes it more straightforward to look at and consider more companies...? For example, Bovis long term performance is so p.ss poor there had to be a story behind it.... and that one has now manifested in the past year and let's see if the new boy can make a difference...? Persimmon historically have serially bought other businesses - damaging share holder value but growing the turnover more quickly - and head honchos get paid for how big the business is far more than for how good a job they're doing (compare JDF's salary package to any of the full listing boys...) so, one might argue that the directors of Persimmon have been greedy, putting rapidly growing their own pay packages before shareholders' interests... And look what came to pass last week at HQ at Persimmon and which made the main news..! I'm now waiting to see what happens with Galliford over the next year or two.... the scribblers have them down for such higher numbers than I do each year going forward it doesn't seem like we're talking about the same company...? They are serial offenders in terms of the profit the analysts say they're going to make, and the profit they declare, compared with the profit that actually pitches up showing through in the book value per share after adjusting for dividends - their BVPS has moved forward by little more than 10% from start to finish through the past five years which should have been a really sweet period... which has resulted in their share price falling overall during that time and they're still STUPIDLY overpriced (IMO, of course) with a PBV of around 2.5 (compared to Telford, a far better company, IMO, at under 1.5). Galliford Try - rabbit hole performance vs actual performance Actual Actual Stated Theoretical EPS ROE EPS ROE 2016 112.50 22.3% 132.50 26.3% 2015 67.00 13.5% 112.80 22.7% 2014 78.00 17.0% 94.60 16.7% 2012 37.10 9.2% 60.90 15.1% Average 15.3% 20.3% Anyway, Terrace - got that off my chest, rant over..!!