Wednesday, 7 December 2016

IG Group - Repurchase

IG is a global leader in online trading, providing access to over 10,000 financial markets - including shares, indices, forex and commodities.

Established in 1974 as the world's first financial spread betting firm, IG's aim is to become the default choice for active traders globally. It is the world's No.1 provider of CFDs and a global leader in forex. It also offers an execution-only stockbroking service.

With a current market cap of around £2bn, it is a member of the FTSE 250. IG has offices across Europe, Africa, Asia-Pacific and the US, where it offers limited risk derivatives contracts via the Nadex brand.

I held IG Group for some time in my SIPP, however in 2012 it was sold along with some other individual shares to release funds for the tax-free lump sum. In 2014 I repurchased the shares at the price of 595p in my ISA but sold a year later as part of my revised strategy to move away from individual shares.

Never Look Back

Once I am settled on a revised strategy, I like to see it through - HOWEVER on Tuesday the share price of IGG plummeted by over 40% on the news that the FCA were seeking to protect retail investors in the CFD market. My gut feeling was that IGG were not the likely target for the FCA and the drop in share price was an over-reaction to the news.

In the past year IG have introduced their Limited Risk Accounts, which are a really big change. Prior to this introduction, they rejected about 30% of people who applied for a new account, either as being too poor or too inexperienced to have an account at IG. The introduction of Limited Risk Accounts will now allow the company to accept some of those accounts who formerly we would have rejected. So partly, it’s around accepting people and giving them an account, on which, as the name suggests, you can never lose money which you have not already put on the account, and that is guaranteed.

For this and other reasons such as global operation, I believe IG are unlikely to be dramatically affected by this investigation.

According to the latest trading update on 29th November "The Company continues to perform in line with expectations, after a strong second quarter.  Higher operating costs over the first half of the financial year, due primarily to the ongoing success in effective new client recruitment, have been offset by good revenue delivery". The first half results are scheduled for 24th January when we should have more on their response to the FCA paper.

My re-entry price was 480p which is around half of what it reached just 3 months earlier.

year-to-date share price
The company paid dividends of 31.4p for 2015/16 and if this is maintained for the current year, the yield on my recent purchase is 6.5%. There has been a rebound in the share price today but until the uncertainty is resolved, I expect some further volatility.

One of the big attractions of IGG from a valuation and risk perspective is its balance sheet. Not only does it have a net cash position, but it has the ultimate version of net cash, namely no debt at all.

I am unlikely to hold long term with this one but just could not resist the offer from Mr Market yesterday.

As ever please be sure to DYOR!

Friday, 2 December 2016

Berkeley Group - Interim Results

House builder Berkeley Group have today issued results for the half year to end October 2016 (link via Investegate).

Pre-tax profit are up 33.9% to £392m compared to the same period a year earlier, exceeding estimates of about £350m. Revenues were up 24% to £1.4bn driven by the sale of  2,076 new homes across London and the South East at an average selling price of £655,000. It compares to 2,091 new homes sold at a price of £506,000 in the first half of 2015.

In 2011, Berkeley put in place a framework to deliver £13 per share to shareholders over a ten year period, as the market began to recover from the global financial crisis. Berkeley now have cash due of forward sales of £2.9bn, an estimated land bank gross margin of £5.9bn and net cash of £208m, which means the group is on target to deliver a new five-year target of £10 per share or at least £3bn pre-tax profit beginning 1 May 2016.

However, the Board is proposing to introduce flexibility such that the remaining £10 per share payments can be made through a combination of share buy-backs and dividends, as opposed to solely dividends. They confirm that the next £1 per share will be returned by 31 March 2017 with the amount of this to be paid as a dividend to be announced in February, taking account of the cost of any share buy-backs made in the intervening period.

Berkeley remains ungeared with net cash of £208m.

Commenting on the interim results, CEO Rob Perrins said: "The prevailing environment is one of uncertainty and we expect this to continue with short-term fluctuations, both up and down, likely to be a reality. Our business is well set-up to perform strongly in these conditions and is centred around London and the South East.  Notwithstanding the UK's decision to leave the European Union, we believe that London will endure as a global financial centre and a place where people from all walks of life and corners of the world will continue to aspire to live and work.

We remain well positioned to deliver our existing earnings guidance for the three years ending 30 April 2018 of some £2.0bn of pre-tax profits".

There can be no doubt these are once again very good figures. The results were well received by the market and by lunch the share price was up over 5% £26.90.

In hindsight, it may have been better to dispose of my holding last year when the share price was ~£36 however, looking longer term, there is no reason to believe the price will not recover to these levels and beyond once the uncertainty surrounding Brexit is resolved and in the meantime I continue to receive a chunky dividend every 6 months.

I am happy to continue with this one for the foreseeable future.


House move update - all went well on the day and new phone line and broadband connection was up and running after the first week. I am now busy with my long list of DIY jobs around the new house before my enthusiasm starts to wane - usually after the first couple of months!

Tuesday, 15 November 2016

On the Move...At Last

Just a brief post to say I will be moving house in the coming few days and it will be at least a week or so before the broadband connection is up and running at the new property - so no posts for a little while.

Its been quite a while coming and lots of twists and turns. The one aspect that stands out for me however is the dramatic fall in professional standards amongst the legal people compared to the 1980s when I was doing the job.

Anyhow, fingers crossed for a smooth transition and back asap!

Friday, 4 November 2016

Goodbye Motley Fool!

I was sad to hear that one of my favourite personal finance forums will be winding down later this month. I have been a regular visitor and occasional poster since 2009 during which time I have learnt a great deal about personal finance and investing issues. Not only financial however, but help with legal matters (especially Clitheroe Kid), with computer problems and a host of other aspects of everyday life.

I am sure many thousands of ordinary people have found inspiration and guidance from all the many forum members who gladly pass on the wisdom of their own invaluable experience and expertise.

I would check out my favourite boards at least 2 or 3 times each week and have enjoyed the banter and wit from many of the regulars which makes it feel like a real community. I guess many will be feeling a sense of loss as the closure is about to happen in less than two weeks.

On the bright side, a few of the regulars are talking about some continuity replacement forum. Indeed one - Lemon Fools is already up and running!

So, thanks to all at Motley Fool for all the articles and discussions over the past few years and I hope many regulars will meet up again in the future.

Feel free to leave a comment below with your experience of TMF.