The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
You pays your money and you take your chances.
The dividend will be re-started at some point, if not FY23 then more than likely FY24 (it's not a case of but when), albeit that the annual dividend will probably be less than previously.
DLG might not meet their criteria for FY23 due to the unwinding of their pricing miscalculations in FY22. They only started to take the necessary actions to rectify their mispricing in H2 FY22 and their premiums have been rising since but it has had to be a gradual process. Premiums generally, across the whole market, are now more than double what they were on average just 12 months ago but much of that benefit (hopefully profits) will probably not be recognised until FY24 (due to how the premiums are accounted over the term of the contract).
As a result, I suspect that DLG may not start to see the full benefit until FY24. Because of the effects of fiscal drag, their FY23 results will still probably underwhelm (due to many of their FY22 contracts closing out in FY23) but they should have pretty good visibility for FY24 and that might give them the confidence to re-start the dividend (they have the reserves even if they don't have the current year profits).
Churchill and Direct Line are household names in the car and home insurance business. There is therefore no doubt in my mind that DLG has the means to deliver but it will take time to put FY22 firmly behind in the rear-view mirror.
If there is, it'll probably be tomorrow morning (if Valentina, or another director, has sold another tranche)
Has Valentina been telling porkies (to the Company) and come back to the trough for another snuffle? Redecorating is so expensive these days, especially if you have to import your new designer kitchen from Germany and your tiles from Italy!
The "bug zapper trade" just about sums up the new kids on the block in the City. Clueless. For the most part, UK companies have a high dividend yield because they are generating consistent profits (there are always a few where the wheels come off due to a miscalulation e.g. DLG) but are undervalued because they are not the new "high growth" stocks that have become the most recent fixation of the latest City "slickers" (the previous generations of whom touted dot.coms to the heavens at the height of the late 1990s/early 2000s tech boom on the basis that profits were no longer relevant and purred about the so-called "goldilocks economy" in the 2010s which meant that the bull market would run on forever). Forgive me if I'm a bit sanguine about anything they say (growth, turnover multiples etc. etc. are all irrelevant if you can't return a profit).
DLG still has good brands despite FY22 having been an unmitigated financial disaster. DLG got its timing wrong. Coming out of Covid DLG thought that it could get a jump on its competitors and grab market share (its pricing was very competitive at the time) before it, and the rest of the industry, became fully cognisant of the post-Covid supply chain issues and the impact that would have on the cost of repairs and second hand car prices (it was unprecedented). Once the premium is written you can't turn back the clock and DLG was left to pick up the cost.
Given that management would have known yesterday about the contract win (my read is US$20m each year for two years) it does rather beggar the question why they seemed to rush a relatively small equity raise yesterday afternoon. It would seem to have given some (preferential) investors the opportunity to buy at 50p yesterday rather than (possibly) 55-60p today. Not exactly cricket.
The amount raised does seem somewhat paltry and, when you consider that they raised £1.56m (gross) in December, rather odd (you'd have thought that they might have been able to raise an additional £1m through a bank loan if required).
It's hardly cost efficient to repeatedly issue (relatively) small amounts of new equity. It also smacks of rather poor cash flow planning if they need to repeatedly issue new equity every time they win a few new contracts; it seems a bit unnecessarily hand to mouth.
Chid, following the share buy backs, in principle LLOY could pay more dividends per share without increasing the overall dividend paid and still generate a c5%+ (depending on what price the share were repurchased at) annual increase YoY.
At the end of the day they are your BoD and that should limit their personal largesse. The directors don't have a controlling interest and the large institutional shareholders have just as much vested interest as private investors to ensure that the BoD don't over remunerate themselves. Shareholders can always vote down theirthe BoD's remuneration and/or their re-election if they are sufficiently aggrieved.
I'm sure that LLOY's BoD are fully aware of long terms holders current resentments, namely the decline in share price since 2008 (for the most part this has been outside the BoD's ability to control, firstly due to the dilution caused by HMG's bail out and secondly due to the whole UK banking sector having fallen out of favour) and the decline in the dividend payout (in part due to the dilution). I think the BoD is set on rebuilding the dividend in a sustainable manner. This requires patience but I'm sure that the BoD realises that they can't afford a mis-step i.e. they can't short change the shareholders by solely relying on share buy backs.
You could point the finger at LLOY's acquisition of HBOS as being the root cause of many of LLOY's problems since 2008 and it certainly was the CEO's long stated desire pre-2008 to launch a bid for HBOS (despite concerns that such a bid might fall foul of the competition authorities) but I'm certain that the BoD never intended to launch such a bid without undertaking any detailed due diligence. However, during the 2008 financial crisis occurred I'm pretty certain that HMG basicially gave LLOY an ultimatum i.e. bail out HBOS immediately with virtually no due diligence and any competition concerns would be waived OR see HBOS carved up and sold off to the highest bidder(s) excluding LLOY.
Ultimately, I'm not sure who was doing who a favour but I always felt that it was unfair that HMG left LLOY to bear all the costs and opprobrium for all of HBOS's previous misdemeanours (particularly the fraud perpetrated at its Reading Office) which might have been discovered if LLOY had been permitted the time to undertake proper due diligence.
LTI, that's why I said "all other factors being equal". Of course if the share price rises then the number of shares LLOY will be able to buy back for £2bn will be less and vice versa. Based on past performance, LLOY's buy backs to date haven't caused the share price to markedly rise (that said, the buy backs might have prevented the share price falling more than it might given the current economic backdrop; nobody really knows what the share price might have been without the buy backs) and I would postulate that part of the reason for that is there is quite a high "free float" i.e. (in this instance) shares not held by long-term investors. Barring sentiment towards the UK banking sector improving, I think only a marked improvement in LLOY's underlying profits is likely to drive the share price much above (say) 50p in the medium term.
On the face of it, the FY23 results look good but I'd suggest that there is an element of exceptional profit after tax in FY23 of c£500-£600m due to rising interest rates that is unlikely to be repeated; indeed LLOY's own guidance suggests that the FY24 net interest margin is likely to drop into the 290s basis points (which looks comparable with FY22) from 311 basis points in FY23. Plus LLOY has been able to benefit from the writeback of some loans previously written off which again is unlikely to be repeated.
Interestingly if you net off the operating lease depreciation against the other underlying income, net underlying income has actually fallen YoY (and there was me thinking that it might actually be a profit driver in FY24). Clearly if LLOY is to increase its profits in FY24 (and beyond) then it needs to stem deposit outflows (so that it can increase its lending) and cut its costs. FY24 operating costs are projected to increase to £9.3bn because of redundancies but are then expected to fall thereafter.
All in all, stripping out the FY23 exceptionals and factoring in the projected FY24 cost increases, I would be surprised if the FY24 statutory profits after tax were to exceed c£4.5bn (assuming no unexpectedly signficant increases in provisioning).
Market Screener is actually forecasting FY24 EPS of c6pps and FY25 EPS of c7pps (compared to c8pps for FY23). Ignoring any changes in the issued ordinary share capital arising from future share buy backs, its FY24 forecast would equate to statutory profits after tax in the region of c£3.5bn and c£4.1bn whilst its FY25 forecast would equate to statutory profits after tax in the region of c£4.2bn and c£4.8bn. However, I'm not sure whether its forecasts (which are based on the average of the analysts' forecasts) have been updated for any changes that might have occurred to those forecasts following yesterday's results.
I'm a long term holder, so am not too concerned about short term blips, providing medium/long term profits are trending upwards.
Fundamentally disagree with the "quality US growth" premise. Apart from perhaps Nvidia, all of the Magnificent 7 (the M7) are facing major issues IMHO. Nevertheless, they all appear to be currently valued on the basis that they can continue to increase their earnings by c50%-100% per annum over the next 3 years but only Nvidia is currently showing that sort of potential growth prospect (predicated on forward PE ratios in 3 years time of between c7%-15%, all other factors being equal). I've seen some people, when defending the high PE ratios of the M7, suggesting that PE ratios of c20% for low/medium growth companies are the "norm", they most definitely are not (this isn't a new paradigm; the businesses may be different from yesteryear but ultimately they all end up facing much the same potential issues).
Amazon and Tesla are both looking particularly vulnerable to competition; Temu and BYD respectively. In addition, Tesla is reducing its prices just when worldwide EV sales are looking as if they might strat to fall off a cliff (apart from perhaps in China) because the new battery and motor technology in development (which promises to significantly improve the miles per full charge and also reduce battery degradation) still hasn't "arrived", the crushing depreciation on EVs which is only now starting to become evident (batteries are degrading a lot faster rate than promised and it's debatable whether the crop of current EVs will ever "recover" their CO2 production deficit, let alone the additional cost of purchase) and the lack of fast charging infrastructure.
Likewise, Apple is begining to look dated. Unlike Jobs, Cook is not an innovator; he's a financials guy. Cook has done well to squeeze out all of the last "pips" but, like Apple itself between the mid/late 1980s - mid/late 1990s and IBM before it, there's only so long that you can continue to charge premium prices for non-premium products. Apple's phones and computers are no longer the driver of its profitability as they once were but it's highly profitable App store is, nevertheless, heavily reliant on continued product sales to maintain its profits (even if you ignore the exhorbitant prices it charges app developers and questionable anti-competitive and/or anti-trust customer practises).
The share prices of all the M7 have undoubtedly performed (stupendously) well over the last 12 months but I think that their rise has had more to do with the "wall of investor cash" chasing prices higher than their underlying performance. It's looking increasingly like a bubble akin to the early late 1990s and early 2000s. Now, like then, the Cassandras were mocked for even suggesting that the prices were unsustainable. We'll have to see but, if there is a rush for the exit, there will be a lot of red ink around (some investors who bought at the height of the 1990s tech boom are, I believe, still nursing losses). I'm not suggesting that the M7 are worthless but they are looking seriously overprice
LLOY is currently valued at c£29.45bn. Even if LLOY doesn't increase the dividend pot for FY24 and buys back and cancels c£2bn of shares then, all other factors being equal, that alone would increase the annual dividend per share (dps) by c7% YoY. Factor in (say) a 5% increase YoY in the dividend pot and that would equate to a c12% increase YoY in the annual dps.
On that basis, it's quite feasible that the annual dps could again be increased by 15% YoY (equivalent to a c7.5% increase in the dividend pot) in FY24 with only a (fairly) modest c£130-£150m increase in the annual dividend payout.
It should not be forgotten that, following the 2008 financial crisis, LLOY's issued ordinary shares ballooned from c5.65bn to c71.43bn just over 2 years ago; in the main due to the government bailout between 2008-2010. Using surplus capital, as and when it arises, to buy back shares should allow LLOY to sustainably increase its annual dividend at c10%+ for several years without "breaking the bank". The alternative, paying special dividends, may be nice but cannot be guaranteed and doesn't help private investors who are looking for a reliable annual income (assuming that the banks don't collectively fcuk it up again). Within the next 4-5years, if there are no further significant skeletons in its closet to be revealed and it continues to generate the same magnitude of surplus capital, it's feasible that LLOY could have reduced its issued ordinary share capital to c50bn shares and increased its annual dps to c5p; assuming it achieves sustainable annual profits after tax attributable to ordinary shareholders of, say, £6bn over the next 4-5 years that would equate to an annual payout of c41% (as compared to c36% currently).
When directors sell large tranches of shares it's not unusal for companies to issue statements to the effect that the director need to raise money for a personal matter and that they don't have any plans to sell any further shares for the foreseeable future. So the company's response to SopwithCamel (planes used to have the most unusual, interesting names in the past) is not so outlandish (it would have been better if they'd added such commentary to the last RNS on the matter).
I suspect that the sale was done in several tranches to avoid impacting the share price too much (after all Valentina wanted to sell the minimum number of shares for the maximum return). Unfortunately, from our perspective, the sales have taken the air out of ANX's sails somewhat after some fairly positive updates on trading, emissions claims and the Supreme Court Appeal (without such large sales, one suspects that the share price might have re-tested 70p)
Hi Rothers, We received c102p per old share which is equivalent to c134p per new share (we received 76 new shares for every 100 old shares - 100*102p/76 = c134p)
You're ignoring any debt repayments that might be due on the properties being sold (the retail bond is unsecured).
I had a look again. Google lists it as a clothing shop (open 9:30am to 5:30pm) but it's not open Saturday or Sunday.
I could ignore the Google maps image not showing a shop (because if it had just opened then it would be quite possible that the Google maps image might have pre-dated the shop opening) but I find it hard to believe that a clothes shop wouldn't be open on Saturdays.
Sorry, but I think I might have given you a bum steer (particularly if the head office is located at the same address). Mea culpa
"Why is it that when I say I am the only Englishman in my road that the post gets removed?"
So. we've narrowed it down to Northern Ireland, Scotland, Wales or abroad ;-)
I you search Sosandar stores you'll find that they now have a store open on Water Lane, Wilmslow just outside Manchester (it's where a lot of PL footballers live). Not sure when it opened but Wilmslow is a good location for an up-market shop.
The National Grid pays offshore wind farms not to produce because they can't store the electricity. The problem isn't an oversupply of storage but a lack of infrastructure to transfer the electricity from where it's generated/stored to where it's needed. Successive governments have completely mismanaged the whole process; they thought that they could solve the energy supply problem by simply licencing more offshore wind farms but, without the nessessary infrastructure, it's as good as useless. They are a bunch of dolts. The government's green energy policy is as linked up as a sieve!
As regards BESS, there's clearly insufficent capacity (otherwise they wouldn't be paying wind farms not to produce) but if the price remains low then no new capacity will be built after the existing projects are built out. New battery technology isn't really a threat. Half the problem at the moment building new storage is getting the necessary licences and building permits; once operational, replacing existing batteries with more efficient batteries further down the line should not be a problem (they may have planned on existing facililties being operational for more than, say, 50 years but that does not mean that they necessarily expected the current battery technology to remain in operation for the whole of that time period; you're mixing apples and pears).
Also, with more efficient battery storage, the possibility of green hydrogen comes a step closer. I don't expect that we'll ever see a take up of hydrogen-powered cars but hydrogen-powered commercial vehicles, HGVs, tractors, buses, trains etc. are certainly a more realitsic possibility (electricifcation of the whole railway network would not only be very costly and, for the most part, not value for money, but also very disruptive). We could also see hydrogen being mixed with natural gas for use in heating systems; existing gas boilers can use a 75:25 mix of natural gas and hydrogen.
It would appear that the Dixons sold down 2.25m shares on, or before, 9 February (they now hold 38.5m shares) according to RNS issued at 12:38 today (per the London Stock Exchange)
0715, Selling property doesn't solve the problem if Inglis has to apply all of the proceeds to pay down RGL's outstanding secured loans. The lenders won't have lent against individual properties; they'll have lent against a portfolio of properties on a joint and several basis. With the possibility that market valuations may still continue to fall and LTV covenants being broken, lenders may insist on all of the proceeds being applied to pay down the debt so that they have more LTV cushion. Selling property is not the long term solution; either RGL has to wind itself up and sell all of its properties or increase its capital base. Even if RGL could sell some property to help repay the retail bond now, it only defers the problem. A lot of debt is coming up for renewal in the next few years and RGL has no means to repay it. With the benefit of hindsight, RGL really should have raised more capital rather than take on additional borrowing but we are where we are.
RubyDog, REIT dividends are paid based on the EPRA profit not the tax adjusted profit. In any event, capital allowances aren't generally available on building works and certainly not if the capital expenditure is reimbursed by the tenants. Investment properties are carried at their estimated market value (no depreciation) and any increases/(decreases) in their valuations are, I believe, excluded from the calculation of EPRA profits.
Not sure they could delay paying dividends unless they went to an annual dividend cycle e.g. if the Q3 FY23 dividend was the last dividend for FY22 then they couldn't delay their quarterly dividends if they intended to pay out 90% of their FY23 EPRA profits by Q3 FY24. In any event, delaying the dividend only defers the cash crunch.
As regards the bank borrowings, the liabilities are (probably) joint and several and if there is a risk that valuations might continue to fall then lenders would probably insist on any money raised from property sales being applied against their outstanding debt (at least until there was more headroom in the LTV) i.e. sell one property and the lender would probably insist that all of the money was used to pay down the outstanding "portfolio" debt whereas sell (say) ten properties and the lender might agree to RGL retaining (at least) some of the "excess". Bottom line, selling the odd secured property here and there is unlikely to free up the cash RGL needs and selling a large portfolio of secured properties seems unlikely (few, if any purchasers, would have the cash; they'd probably need to raise some debt themselves and that might prove problematic at the moment).