Member Info for tophat

Strictly

I am in no way implying that you are trying to unduly press your point of view. I am merely trying to understand and potentially learn from someone with a different perspective. After all that is what this board should be about.

I don’t know (or want to know) your circumstances but if I was in a similar situation I might make exactly the same decision as you.

As I said investment is vey personal and depends on many things such as risk appetite, the amount of time prepared to monitor the situation, the amount involved….

Without hindsight there is no correct investment strategy and I sincerely hope you achieve your goal.

Strictly

I understand perfectly. Investment is a very personal decision but it is useful to understand how other people see the same situation.

Strictlybricks

I think you misunderstand the TW dividend policy. It has always been described as a “through the cycle” dividend policy.

Historically the housing market cycles through good and bad periods and what TW mean is that they should be able to afford to pay the div until the market picks up again. They will have analyzed the previous cyclical behavior and be reasonably confident that the policy works. Obviously it is unsustainable if the downturn is too severe or too prolonged but anything close to a normal cycle should be Ok.

To make the policy sustainable they have built up reserves by increasing the land bank above what is necessary for the normal running of the business. This means that, if necessary, they don’t have to buy anything like the amount of land they normally would, reducing costs and making the div more sustainable.

The other side of the coin is that when business does pick up again the distributions to shareholders will be less than they otherwise would be until the buffer is built back up again.

Chris Carney explains why the div is sustainable during the Q&A on the latest results webcast.

Mr Johnson won his appeal under the Consumer Credit Act but on very case specific grounds which may not apply to many other cases. All other claims were dismissed.

Definately a good day

Asperger1

The SC has been asked to consider four issues; the first three of which are linked. A link to the case summary is given below.

First the banks have asked the SC whether or not the “tort of bribery” does or should exist. This has been created by lower courts and confirmed by the Court of Appeal (CoA) and is totally distinct from the long standing offence of “bribery in equity”.

The plaintiffs argue that by paying undisclosed commissions the banks and dealers are guilty of the tort.

It is unsurprising that the claims companies have brought an action under this tort as, under the law as it stands, there are three major advantages.

1) There is no need to prove any damages as the court can assume damages “at least as great as the bribe”.

2) The plaintiff can recover the bribe from both parties, in this case both the finance companies and the dealers. In a cynical move the claims companies have conceded that they are not trying to recover multiple damages in this case but you can be sure that if they win they will in all future cases.

3) The plaintiffs have the right to rescind the contract.

The banks argue, with more than a little justification, that this is bad law and should be abolished. The law goes against the long established principles that plaintiffs should show that they suffered actual damage and that the damages awarded are to restore the plaintiff to the position they would have been in had it not been for the infringement. Damages should not be a windfall!

The SC could uphold the law as it is, abolish it or remove what the banks confider the offensive features of the law. However if the SC does the latter then it would be redundant as it would mirror “bribery in equity”.

If the SC upholds the tort law then the banks have raised issues two and three which basically ask the court to define the tort so that the banks behavior can be compared against the definition to see whether or not they actually broke the law. Obviously these issues are irrelevant if the tort is abolished.

The fourth issue is whether or not the transactions were unfair under the Consumer Credit Act 1974 (CCA).

I haven’t read the FT article as it is behind a paywall but I strongly suspect that people are expecting the SC to abolish the tort of bribery. This would be a big win for the banks even if they were found guilty of breaching the CCA.

I watched part of one of the evidence sessions during which council for the claims companies tried to be clever and introduced a ruling by one of the SC justices before he was appointed to the SC. After reading out the relevant passage he started explaining why that supported his case until the SC judge stopped him by saying that wasn’t what he meant. At which point council replied that what he had just said was how the CoA had interpreted the judge’s ruling and as at that point in time it was the law of the land!

https://supremecourt.uk/cases/uksc-2024-0159#case-summar

Lending

Thank you for your thoughtful reply. I was thinking along similar lines and was wondering why so many companies cancel the shares when holding them in treasury gives them a company more flexibility. There may have been another advantage which I hadn’t thought of and was wondering if anyone knew.

Invstrat

Ok I may have misunderstood you. You are against the buybacks and I understand that position. I too would like a reduction in debt to be a priority.

However once the shares have been bought back I can’t see any disadvantage to holding them in treasury rather than cancelling them.

NewKOBT

Thank you for your reply. I am aware of the reasons for buybacks but the question was specifically what benefit do shareholders get from cancellation of the shares rather than holding them in treasury.

There are advantages to holding shares in treasury which other posters have given several times. I was just wondering what disadvantages invstrat had in mind.

Invstrat

Could you kindly explain what benefit I, as a BP shareholder, would receive if the shares were cancelled rather than being held in treasury?

The latest consensus figures for Lloyds can be found using the link below.

https://www.lloydsbankinggroup.com/assets/pdfs/investors/financial-performance/lloyds-banking-group-plc/2025/q2/2025-lbg-hy-consensus.pdf

The FCA submission to the Supreme Court can be found using the link below.

https://www.fca.org.uk/publication/corporate/fca-written-submissions-10-march-2025.pdf

RoJo

The buybacks allow the company to increase dividend payout per share without increasing the total amount paid out.

This is exactly what Barclays are doing for 2025 and 2026.

The total dividend payout for 2024 was £1.2bn and Barclays have said that this amount will be maintained for 2025 and 2026. The increase in dividend per share in those two years will be from the reduction in the share count due to buybacks rather than an increase in the cash paid out.

If a company performance goes through a bad patch for any reason then the reduced share count makes maintaining the dividend easier as the same div per share costs less.

Of course financial institutions will invest in new business if it fits in with both their returns and risk appetites. The problem is that many companies are competing for that business.

The worst thing a financial company can do is write marginal business which may be profitable at the time but which can turn into massive liabilities. That is what caught out many companies during the global financial crisis.

It is far better for a company to return the surplus capital to shareholders via dividends and/or buybacks than to invest in marginal business.

67Sam

The Financial Ombudsman decision against Lloyds in the Black Horse Finance case said that the broker/dealer had a duty to disclose the agreement but that Black Horse Finance “may” also had a duty to do so.

I can’t imagine an agreement in which a principal lender agrees to take responsibility for the broker/dealer breaking the law.

I have no insight into what will happen but it could be far more complicated than some people think.

If the SC decides that disclosure was necessary then the banks/finance companies, as principal lenders, are responsible for compensating customers.

In which case the question of who was responsible for informing customers becomes important.

If the dealer/brokers were responsible then the banks/finance companies may have a claim against them.

Warthog4

“What happened to the good old days when the annual accounts were not full of "adjustments" which, while intended I think to make the figures more "realistic"

What happened was there was a Global Financial Crisis (GFC)!

Company accounts even before the GFC were always a compromise between the needs of competing consumers of the information.

The management need information so they can run the company day to day and plan for the future. Investors, both current and prospective, need financial information to decide whether or not to invest or continue investing in the business. Tax authorities need to know how much they can tax a business and, probably most important for a financial institution, the regulator needs to understand the financial strengths and weaknesses of the company.

The GFC showed to regulators that much of what had been considered “loss absorbing capital” was not actually loss absorbing. Also many debt holders who it was thought that would have absorbed losses from financially distressed companies got paid in full.

As a result the financial regulators implemented, and are continuing to implement, significant changes to the capital requirements of regulated companies. However, in the meantime, although accounting regulations have been updated they have drifted further and further from the financial regulators requirements. Hence the proliferation of “adjusted terms”.

I have said on a number of boards over several years that the best thing to do, for any financially regulated firm, is to ignore any profit related figure.

What really matters is the capital position, and in particular the capital surplus. For financially regulated companies, shareholder distributions and investment in new business are paid out of surplus capital, not profits! There are many items which can have a big effect the profit and loss account but which have absolutely no impact on the capital position. Profit and loss are meaningless and capital is king!

Finley1

I am not making any political statement, far from it. Your justification, taxation, austerity etc was used by posters on LLOY to justify just about any topic at all. May I suggest that you look at recent posts on the LLOY board!

When I started investing in shares, a long time ago, I learnt a lot from knowledgeable posters on the LLOY board. Today the board is swamped by political fighting and if someone does post useful information then it incredibly difficult to find amongst all the infighting.

I seriously hope that the LGEN board doesn't deteriorate in a similar manner to LLOY!

May I respectfully suggest that political comments are made on the LLOY board as the vast majority of posts there for at least four years have been on politics.

I don’t know the answer for the slow down but there are a number of possible reasons.

First there are restrictions on the price

and quantity of shares which can be bought at any particular time.

Second the timing and quantity is up to Barclays as the broker. LGEN are more than capable of handling the buybacks themselves however by delegating the responsibility to Barclays they avoid any allegation of insider trading.

Given the second point, the buyback broker is not normally paid for the service. Usually they make their money by trading on their own behalf, knowing in advance the trades they will be making for the buyback. If they don’t see an opportunity to make money themselves then they may wait for more favourable conditions.

Revshep

The dividend is probably a lot more sustainable than you think. At the time the new div policy was announced it was stress tested to economic conditions far worse than have happened so far.

The decision to raise capital via a share placing during covid has put TW in a good position. The money raised was used to buy land at cheap prices while other companies were cutting back on expenditure.

From memory I believe that TW have a short term land bank of over eight years. This means that they can reduce or postpone land purchases for several years without significant impact on the business thus supporting the div.