Our latest Investing Matters Podcast episode with QuotedData's Edward Marten has just been released. Listen here.
It's been announced this morning that the UK competition authority has decided not to perform an in-depth probe of the merger. Good news. Might give the share price another small boost.
Monk, Out of interest, what infrastructure and bond funds are you rotating into? Also, why would you rotate out of TFIF to other bond funds, other than to spread risk?
One would have thought that, when interest rates start to fall, bond prices would start to rise i.e. there will be a switch from rising income returns to rising capital returns (as implied by the the MTM yield). Would you disagree?
Trek, You were saying that it was a solid long-term income play when the yield was c33%. Just saying ;-)
Before somebody gets hot under the collar because of further price falls today ;-)
The share price might be expected to fall as much as 2p today because of going ex-div. Hopefully not but we'll have to wait and see.
Calm down, calm down! FY23 was always expected to be an annus horribilis. Despite DLG increasing premiums throughout FY23 it was never going to immediately fix the problems created by its underpricing in FY22 and the initial part of FY23; it's called accruals accounting. It means that expenses are recognised as and when they arise whereas income is, more often than not, spread over the term of the policy i.e. there is a lag. There are already indications that the "worm" has turned in the first two months of FY24 and hopefully this trend should now continue without any further material inflation-related cost shocks in motor.
Weather-related claims are, perhaps, slightly elevated and perhaps there is more work to do on home premiums over the next 12 months. In the past, claims might have expected to be materially higher in the first quarter following winter-related weather events but we do now seem to be seeing more regular weather events outside the "normal events window" e.g. summer flooding events to appear to be on the rise (either that or there was chronic under reporting in the past). Whether increased flooding events are entirely related to Climate Change remains to be seen e.g. the increase in flooding events may in part be explained by (unscrupulous) developers having built more new properties in recognised flood zones over the last 20-30 years.
Monk, Any thoughts on the widening discount to NAV? Am slightly surprised that whilst NAV is continuing to trend upwards the discount is rising having previously started to narrow at the end of last year (TFIF was trading on a 0.25% discount as of the end of December but this increased to a 3.35% discount as of the end of February and, as of today, is currently c4.46%).
I see from the latest factsheet that the purchase yield was 11.4% at the end of February, which would suggest that they will be paying a final dividend of c5.5p (to be declared in April).
Just can't help feeling that this is just putting the final lipstick on the pig. DEC's not only managed to destroy shareholder value (just over 15 months ago it was trading at more than £26 equivalent) but now it's managed to slash the dividend by two thirds too! To suggest that something is not "rotten in the state of Denmark" beggars belief. US investors may prefer capital, rather than income, returns but even they don't tend to like capital losses! The share price is down c45% since it listed in the US. It's all well and good blaming the shorters but you can't have smoke without fire. I got out with a hefty loss back in December (which would have been even heftier if I was still invested today) and have been keeping a watching brief ever since. I've seen nothing to suggest that shareholders are doing anything other than cannibalising their own capital to pay the dividend (in the intervening period the share price is now down c200p and shareholders have been awarded c84p of dividends in return - the Q3 and Q4 dividends).
Why don't you actually do some background research before you come on here and compare SJP's fee issues to PHNX's! SJP has been locking in customers for upwards of 7 years and paying exhorbitant commissions. It's like chalk and cheese. PHNX"s fees issues have come about because the FCA has decided to retrospectively cap the charges that heritage funds could charge its customers (something the FCA should have sorted out years ago but was asleep on the job as usual). The FCA seems intent of rectifying its past failings and blaming other people.
Alessandro, SAFE's propertie are marked to market, so it's quite feasible that its profits can exceed its revenues (when valuations are rising)
The numbers just don't stack up at the moment.
A recent This is Money article reported that Peel Hunt analysts estimate that RGL would need to line up more than £175m of disposals (c25% of its portfolio) to reduce its LTV to to c40% but their calculations either seem to be based on the premise that the retail bond forms part of RGL's secured loans or that the disposals would need to be made in addition to a capital raise! IMHO they're living in cloud cuckoo land if they think RGL can sell c£175m of property in the current market within any reasonable time-frame (it's been an unrealistic expectation for the last 12-24 months); buyers generally either don't have the cash or the credit lines to purchase that much property as one lot and it's going to be a puch to sell that amount piecemeal.
I just don't see that a capital raise of c£75m is going to be enough. It smacks to me of Inglis, yet again, living on a wing and prayer i.e. hoping that between now and August 2026 interest rates will have started to drop, property prices started to recover and that the RBS loan can be refinanced on similar terms for another (say) 5-10 years whilst paying off the retail bond plus c£22m of the Santander loan to reduce the LTV to c40% (assuming that the maximim LTV is to reduce to 50% in three months time - I can't find any reference to this in the FY22 accounts). Inglis is just pushing the problem further down the road in the hope that the market will come riding to his rescue and we could just end up finding ourselves in exactly the same problem in two years time. What is the end game? There doesn't appear to be a plan to pay down debt; just continue to refinance with medium term loans.
In reality, RGL could probably do with raising c£150m (c£75m of which, certainly with the benefit of hindsight, it probably should have raised when it acquired the Squarestone portfolio back in 2021, in addition to the c£83m that it did raise at the time). c£150m would enable RGL to repay the retail bond and pay off c25% of its secured loans (reducing its LTV from c55% to c41%). Reducing the LTV to c40% should be the starting point not the end point at this juncture.
If not £150m (a huge ask), then I think RGL should really be looking to raise at least £100m. It needs more headroom and, if it must continue to dispose of property, to retain control over the disposal process and maximise value. It should also be considering ZDPs for, at least, part of the equity raise if it can.
There is an alternative. A members voluntary winding up; better than a creditor's voluntary winding up. Time to act now and kick out the BoD. They've been given every opportunity to try and resolve a problem of their making (the last portfolio acquisition should have been financed by an equity raise not medium-term debt). It's now time to save value for the members; an orderly wind down rather than a fire-sale
They helped to create the speculation with the latest Edison research note (which must have received their tacit approval)! This is the final straw. The manager and BoD must go.
Bottom line, selling individual, secured properties at this juncture is unlikely to generate surplus proceeds to repay the unsecured loan note
I think evidence to date would say otherwise; selling vacant or under-utilised properties is hardly "cherry picking". I think that the sales to date have been more driven by trying to sell properties that are not already pledged as security for their loans because it's likely that the lenders, as part of their requisite agreement to the sale of said properties, requiring the majority, if not all, of the proceeds to be applied to paying down their secured loan (that's how securitisation works).
I hope they do but it won't be the be all and end all if they don't as long as the dividned is on track to return in FY24; after the FY22 problems I'm inclined to be conservative (but quite happ to be proven wrong).
From reading and re-reading the circular, it appears that the the tender offer is intended to be more or less cost neutral for DEC. With that in mind, I think the only logic for the tender offer is that US shareholders prefer capital rather than revenue for US tax purposes; the US tax on capital receipts is a lot less than dividends. I would imagine that there are lot of new US shareholders who would be looking at signfiicant tax liabilties if they bought at the recent lows. From DEC's perspective, it they don't offer the capital option there could be a lot of share price turbulence as the ex-dividend date approaches (with US shareholders perhaps looking to sell before and buy back after) and the last thing the DEC share price currently needs is yet more price turbulence.
Just my thoughts.
Gulfharbour, I think you'll find that the £520m sales proceeds are earmarked to enhance the capital strength of the Group and improve its solvency ratio, not pay an FY23 dividend.
Whether they restart dividends is dependent on two conditions being met. First, an improvement in the capital coverage at the upper end of their agreed range (I think they targeted 180%) and secondly, a return to organic capital generation in the motor line. The first condition should have been met as a result of the £520m sale of their commercial lines business but it was still unclear at the H1 results whether the second condition would be met in FY23 (there were still some losses coming through from FY22 and prior years). The general expectation is that the second condition should be met in FY24, if not FY23.
Quite right too Warthog4. How can you possibly refer to packet of cigarettes in such a derogatory manner! Cigarettes have feelings too you know ;-)
FHS? Did you mean FFS?
Personally, I think IFRS is a complete disaster. When your KPI's are always "adjusted" it tells you volumes about what the finance professionals and markets think about IFRS. As Meconpsis has already pointed out, a direct comparison between AV's 2023 results and their restated 2022 results with their 2021 and prior years results is nye of impossible (without those figures being restated too). Having said that, I think there are some positives for insurers (from the investors' perspective); under the previous accounting regime insurers used to fairly dissmissive of using mark-to-market valuations but I think the pendulum has now swung too far in the opposite direction (there is certainly some merit in the insurers' argurment that where they are intending to hold gilts and bonds to marturity, market price fluctuations in between are fairly irrelevant).
It seems wherever you look these days, IFRS is leaving investors and professionals scratching their heads and becoming increasingly reliant on alternative performance measures that often aren't audited! When a figure in the accounts isn't self-evident, and needs detailed explanation, alarms bells should be ringing loud and clear that IFRS is not fit for purpose and that rather than making accounts easier to understand it's often actually making them a lot more difficult to understand.