Tp Share Discussion Threads

[chickenrun1] 20/8/2016 12:43

Larry Laffer, you have totally misunderstood the RNS.

As tiltonboy has pointed out, you cannot pay a dividend unless you have 'distributable reserves'. It's a technical thing. Shares have a 'nominal value'. Some co's may have shares of different nominal values, they are the price put on the share when they float but it doesn't mean that's what they trade at.



A company is not allowed, by law, to pay as much money out in dividends as directors or shareholders may wish. It may only pay out a certain part of the shareholder's equity.

In a company's accounts the shareholder's equity is divided into several categories. These are shown on the balance sheet. It may only pay dividends out of its retained earnings and dividends have to come from profits, repayments of shareholders' capital require a reorganisation.

This provides a limited amount of protection for creditors. They are assured that a company cannot pay dividends that will reduce its capital below a certain level. Of course its capital may nonetheless shrink through losses.

[tiltonboy] 20/8/2016 10:29

It's a legal requirement to have distributable reserves (not profits) to be able to pay a dividend.

I do not see a dividend being paid in the short term, and it is more likely that they are looking to do another acquisition, and want to issue shares.

[larry laffer] 20/8/2016 10:02

"What makes anybody think the capital reduction isn't to allow a dividend to be paid?......"


I see plenty of companies paying dividends literally from fractions of a penny through to pounds. And these companies have share prices from the traditional penny share to several hundred pence. Barclays as an example are about 150p currently but didn't pay an interim dividend at all recently and reneged on a promise to increase dividends every year, Newmark Sec are about 2p and pay a fraction of a penny dividend.

I don't understand why TPG need a recap to pay any amount even very small at all ?

[chickenrun1] 20/8/2016 09:52

I think they would want any dividend well covered by regular earnings. At this stage, just the comment that they are looking to do so as a token at year end would be more than my expectations just a month or two ago.

[larry laffer] 20/8/2016 09:52

PA

Thanks for the reply

But I don't think it is getting ahead of ourselves here at all. If we don't explore the opportunities that open up by doing the recap it won't be possible to build in any protection for current shareholders afterwards. Once the recap is done its done. And just being a little cynical, I don't see what opportunities it presents for us existing shareholders. Raising money is no issue when revenue and profit and an order book are where we believe them to be. Unfortunately the downside to recaps are that existing shareholders suffer much more dilution than necessary, albeit in some instances the lift up in shareholder value could compensate for that loss. If the Submarine orders need financing why not say so.

Is there any rational explanation that holds water as to why this recap is necessary at this time. If theres an acquisition on the cards why not say so now rather than the vague words in the RNS that can be interpreted either way in the future.

Whats the odds after any dilution we will be getting a consolidation and the board will be saying Institutions won't invest in a penny share so we need a 200:1 to bring the share price back up to their perception of a respectable level. By then me and you will be very minor holders with a much smaller wedge.

Unfortunately I just see this as a way of transferring potential money from joe public to the insti's etc.

[pavey ark] 20/8/2016 09:46

cr1,good points.

I certainly agree with your points about Edison's forecasts but although TPG are their clients Edison can't have or be seen to have information that is not in the public domain.

As far as profit, t/o etc I expect Edison's comment of "Solid" will probably be correct as I see the company moving from potential to implementation to increased profit.
I think the H1 results will see us going from the second to the third stage but full year and beyond looks very good indeed.

As far as dividend is concerned I think we may get a commitment to pay a dividend at some point in the future which is something that would be difficult to promise with the nominal share value at 10p.

I think the market would be very pleased with even a mention of dividend payment as many set a great deal of store by the ability to pay a dividend.

At current prices a 3% yield would cost £700k or c. 10% of cash but I can't see them going for this at this stage in the game.

2% yield on 8p would cost the same and may be a possibility at year end but who knows ?

[pavey ark] 20/8/2016 09:11

sp, yes,that's another side of this.
The institutions hold almost 70% of TPG and they put their money in well north of 10p so I doubt if they will go for any "fat cat", "fill your boots" scheme.
When senior management wanted to redefine the conditions of some options they were able to bring them down to 10p but the share price had to be at 15p for twenty consecutive trading days.
On the other hand I don't think I've seen many companies where the senior management have spent more of their salary on BUYING shares.
Cartmell in particular has spent serious amounts and recently Simon Kings has bought 1m.
I think the institutional shareholders may go for an incentive scheme that covers certain key workers but not massive awards under 10p to senior management.

One slightly depressing thought is that with the share price at 5p surely a following wind could see it up at 7/7.5p and then a 10p option is entirely reasonable given that they are usually valid for nine or ten years.

On a brighter note it is possible that they are trying to get people to come to them now.

As you may have guessed I simply don't know but again I am pleased to see that things are moving on and may be moving on in a big way.

[chickenrun1] 20/8/2016 09:09

What makes anybody think the capital reduction isn't to allow a dividend to be paid?

As I pointed out last weekend, TPG made a £300k profit in 2h. If they are very confident going forward, after winning £50m orders that play out over the next 7-8 years, then they may wish to declare a final divi in the coming year.

I find it hard to take the Edison update this week seriously as it is basically the same as it was prior to those huge contract wins which must make a material difference to the bottom line in the coming years. So having made a £300k profit in 2h is it really over-optimistic to hope for a profit in the coming year somewhat better than current forecasts? The fact they are getting this sorted shortly before the interim date may signal that they want to say they'll pay a divi at year end and it would be good to have the formality out of the way prior to announcing that or there's something else exciting in the interim results, or both perhaps.

Whatever the case, this co has £7m or so cash that definitely isn't in the share price by my reckoning. The fact they will now be able to give that to shareholders in some form has to be a positive. I think it will be a combination of both going forward with earnings enhancing acquisition(s) from he cash and a token dividend to signal the company's health.

A profitable co with a large forward order book and £7m+ cash, valued at a mere £23m.

[septblues] 20/8/2016 08:37

Pavey Ark

I used the word risk in two ways in my post.

The first as used in the English language, the second as used by finance professionals.

with apologies if I confused

[swiss paul] 19/8/2016 21:20

Aw cmon guys this has been diluted more than some chavs orange drink. So what are they trying to do and looking at some bounded rationality and self seeking you have to see it in the RNS:
should it be considered desirable to do so in the future; - no promise
but here is the hooker
as well allowing the Group to put in place appropriate incentive schemes to attract, retain and reward high performing individuals

so why cant they do that through normal channels?

Therein lies the conundrum!

[pavey ark] 19/8/2016 18:13

Sept blues, I didn't say that it wasn't done for a purpose but that it had no real, direct or immediate effect on private shareholders.
If shares are subsequently issued or a dividend declared we will know where we stand but right now this only allows things to be done.

As far as risk is concerned I very much doubt if few if any private shareholders looked at the share price and nominal share value and bought/sold because no new share could be issued.

As I said to Larry, this looks positive to me because things may be on the move.
If any fund raising is done, and we have no proof it will be, the biggest plus for me will be that the £7m cash pile will be thrown into the hat.
The market has simply given no credit to the company for this cash and when the share price was under 3p,60% of the market cap was cash!!
This management bought the Submarine business for c.£10m and snapped up Shaw Engineering for less than £1m so I'm perfectly happy to let them get on with things and if they want to buy then they should go for it.

[pavey ark] 19/8/2016 17:53

Larry, the institutional holder have certainly paid up in the past.

I think we are getting rather ahead of ourselves here.
The company has c. £7m cash but I don't know if setting up the Managed Solutions unit is expensive.
A very major purchase for a company this size would be £10m/ £12m so cash plus loan would easily cover it without issuing shares.

We should remember that this company spent months under 3p (fairly recently
)so 10p is big ask but even if the share price was 12p it is likely that a large fund raising would always be at a discount.

Things are certainly moving along and I think that we would all like to see the price above 10p.
If there was a large share placing I've no doubt most private investors would wet their pants so you you would "get a look in" and probably at a price less than the issue price.
I don't see this scenario unfolding any time soon and I for one am pleased to see almost any action that shows that things are being pushed along.

[septblues] 19/8/2016 17:52

Pavey Ark

Professional equity analysts would disagree with you. It's done for a purpose, changes the structure of the balance sheet and creates a better basis for greater flexibility in the future, although at greater risk of dilution for PI's.

All these would change the risk premia attached to this share.

[larry laffer] 19/8/2016 17:37

It wouldn't be necessary if the share price was over 10p.

The common reason to reduce the par value is so the company can raise cash when the usual institutional investors won't pay the going rate.

After this change the company can issue shares to preferred buyers at a new lower price, which will be at some discount to the current price. As has been pointed out they can't legally issue shares at a price lower than the par value. Institutions who benefit most by this will vote for it as it means more and cheaper shares for them. The avergae joe won't get a look in.

I would prefer they get the share price up above 10p and don't bother with the recap.

[pavey ark] 19/8/2016 15:59

Septblues, it is a technicality in as much as it makes no difference to the holding of current shareholders nor does it make any difference to the profit or prospects of the company.
Whither it is the precursor to a move by the company to issue shares, pay a dividend or make a major acquisition I have no way of telling.
None of the above would be "a technicality" but I view today's announcement as one.
For what it's worth I think that some sort of major moves are afoot but this is only a hunch and can't really be based on today's news.

[septblues] 19/8/2016 15:37

Pavey Ark

dont think this is a technicality

[pavey ark] 19/8/2016 14:59

I certainly agree that the Edison note is rather silly.

If you can't issue shares below the nominal value of the ordinary shares then TPG couldn't issue shares below 10p. As we are all perfectly well aware that the current price is 50% of this figure then the company couldn't issue shares so it is logical to remove this barrier.
This is a technicality as the nominal price is usually considered meaningless ,certainly when compared with the true or market price.

With £7m cash and an enterprise value of £16m it would be some acquisition that required shares to be issued.
It would get my attention!!

It would make sense though to buy a £20m/£30m engineering group with the contracts and contacts that TPG have.

[bullster] 19/8/2016 14:33

If you didn't grasp the simple version, try this:-

Share values

A share will have a nominal or par value: 1p, 10p, £1 or any other sum in any currency. And it is an absolute rule that a share cannot be issued fully paid for anything less than its nominal value – that is, it cannot be issued at a discount. A company cannot issue a £1 share fully paid for 99p or less. A company thus has no ability to issue free shares (but it may buy shares in the market and give them as free shares to employees, say, as part of an incentive scheme).
A company can, however, issue shares nil or partly paid. That means it can issue a £1 share and take no money for it on issue; or it may issue the share paid as to 25p only. The amount unpaid (the full £1 or the balance of 75p) remains due and will have to be paid when the company calls for payment at a time anticipated in the terms of the share’s issue, or on a winding up if the company’s assets are not enough to settle its liabilities.
Of course, a £1 share will often be issued with a price being paid to the company well in excess of that sum; the difference between the nominal value and the price paid is the premium. The directors are under a duty in issuing shares (as in all things) to act in the best interests of the company, and if a £1 share has a market value of £1.50, they must have a good reason for issuing it for anything less than £1.50. The nominal value is only the minimum price at which shares can be issued.

[bullster] 19/8/2016 14:19

This is the thickest explanation i can convey to make it simple:-

The Nominal Value of TPG shares is 10p.
The Company wants to reduce it to 1p per share.
This frees up 9p in the £.

Its kind of saying, rather than have a £100 houshold budget contingency float, we can sail closer to the wind with a £10 float and party with the £90.

....CONFIDENCE.....

[pavey ark] 19/8/2016 14:08

albo76,
It makes absolutely no difference to you,your holding,the value of the company etc.
The reasons for the change are set out in the announcement.

My take is that it is being done to give management more scope at some later date.

I don't think they would make an acquisition at this stage that cost more than the cash they have but they may fancy their chances at some later stage to add a business of considerable size.
Given the contacts they have and given the inside track route that the new business would now have this could make sense.

BA. has only 15 named, main suppliers and TPG is one of them.
BA. has a market cap 800 times TPG.
The EV ratio is well over 1000 times?!!

SK said in his Feb presentation that BA. were desperate for engineers/staff etc to build the new trident subs, he also mentioned the total sum being spent on Trident and said TPG were out to get a share.

All of this is in addition to the considerable profits being made by TPG maritime which as I said previously has really been the sole provider of profit.

[paulgo] 19/8/2016 13:53

Lots of buys at 5.45p showing up as sells.

[qackers] 19/8/2016 13:51

Edison note just out

[113mike] 19/8/2016 13:46

Sorry..wrong thread! but c'mon TPG!

[113mike] 19/8/2016 13:44

So are you saying £1.01/51p a share? Or 1p/.05p?

[septblues] 19/8/2016 13:40

possible preparation for a token maiden dividend

dividend could be continued with adequate profit and cash flow coverage

possible (token) return of capital

indicates confidence in the future

the above could pressage a rerating if enough buyers believe

at current P/E's with the QE and interest experiments globally they're less likely to find earnings accretive acquisitions, which the above suggests is the case