Tandem Share Discussion Threads

[castleford tiger] 11/1/2020 10:02

several points
AMT has always defended leaving the cash in the company and under certain FAST growing companies I have no problem with that.
However we have a pension scheme that's closed and can change dramatiucally with the passing of one or two elderly members.
I also have issues in valuations but others are far more qualified than me to comment.

What I can say is that TND is a mature company which unless there is a seismic shift in direction will be churning out some cash for some time to come.
We have a strong balance sheet with freehold property on it and a board who are more than well paid.

Can I also say put the shares in your ISA and the dividend and capital gain become tax free.

I agree with Maddox that we need a sensible dividend policy building to 50% of EPS.
OVER THE LAST 7 YEARS WE HAVE BEEN AS LOW......as 7.6p eps to 32p
Its taken 10 years to get the Dividend from 3p to 4.31p.
The earnings have come after significant increases in director pay.

I think we should be starting at 10p with the dividend and over the next few years be looking at 50% pay out.
The figures quoted above by Maddox keep us within this hypothetical pension figure.
It was said we only pay in what's needed because getting a surplus out is not easy.

Upset will be caused if the board do not listen to holders.
Shareholder rebellion /takeover action cannot be far away.
I know someone was looking at TND a year ago.
At least 10/15% of the shares are "lost" in my opinion ( the company must know this as dividends must be un cashed or returned)

So to regain unity this needs a serious review.
I am guessing Simon building his stake must have a plan.
If we are not careful this might go private.

Tiger

[maddox] 11/1/2020 09:41

Back to the pension deficit. Even if there was a rule (and I can't find one) that says the dividend payment cannot be greater than the deficit contribution - there is plenty of headroom.

The dividend could increase by 60% to 6.9p (4.31p currently), moving the yield from 2.15% to 3.45%, and not breach the mythical rule.

[maddox] 11/1/2020 09:21

Hi amt,

You won't see much capital gain here in the short or medium term unless the dividend is hiked-up or there are prospects of it being hiked-up - this isn't a unicorn.

We're currently trading on a p/e of 4.5 - bargain territory for value investors. Push-up the dividend and the the share price will respond. Otherwise, we're set to languish at this level of valuation and you won't see any significant capital gain.

Regards Maddox

[amt] 11/1/2020 07:41

It's a significant risk for Directors dealing with pension fund deficits. Remember there is a government backed scheme to bail out pension fund deficits in cases where companies are unable to do so. However this depends on companies dealing with deficits. They have to show there is a plan in place to eliminate the deficit over a period of time. They have to balance the interest of the pension fund and shareholders. They are in the best place to do this. With the share price starting to rise again and perhaps some good results on the way I think we may be rewarded with further significant capital gain here.
Each shareholder will have their own priorities. Personally I am invested for capital gains and am not interested in Dividends which are taxable income. If my other investments were half as good as this one has been I would be more than happy.

[briangeeee] 10/1/2020 23:28

BTW, interesting point about cost control in the company David. I'm clearly new to this one, but certainly getting a better understanding of 'value-for-money' of the various elements of Admin expenditure in the company should be an interesting area of focus for the future. Sometimes these traditional companies can get stuck in a rut of ways of doing things, and can do with updating themselves. Only speaking generally at this stage of course.

[briangeeee] 10/1/2020 23:20

Okay, understood David. However, it would be a serious matter to misstate the basis of dividend policy to shareholders. This is the Chairman of a UK PLC in the setting of an Annual General Meeting. He MUST have solid evidence to support his assertion. It should be an easy matter for him to clarify. The FD and CEO will also be very aware of the situation, and if they didn't intervene to correct, then that adds weight the the view that it is the case. Of course if there is doubt, it's reasonable to request the basis behind his assertion.

[davidosh] 10/1/2020 23:04

Brian and all new investors....It is a rule that the shareholders attending the Agm had never come across as all of the holders that attended were basically requesting a much higher dividend. That was their response and excuse for keeping it at a very low level albeit it has increased but from a very low base.

Effectively they said they could not pay more to shareholders than they contribute to the pension deficit. That of course still means that they could have paid much more in dividends already but choose not to do so as the deficit payments are much higher. There is clearly no rule that they cannot pay the board far more in remuneration than they contribute to the pension pot...just shareholders lol

I would like to see this official ruling or proof that a pension regulator has specifically told the Tandem board that this is the case.

[briangeeee] 10/1/2020 22:52

Thanks simso.

If the Chairman hadn't been sure of his facts, he would almost certainly have said that he would check and get back to the questioning shareholder, so I would assume the statement to be correct.

If he has stated (as significant a matter as) the basis of dividend policy incorrectly at an AGM, that would be a major failing, and not one I would think a PLC Chairman likely to make. He should be readily able to substantiate such a statement, and that would save time on speculation.

[simso] 10/1/2020 22:34

Hi Brian, I attended the AGM in the Summer, and the question of increasing the Dividend was raised. Mervyn Keene, the Chairman, explained that "The Pension Regulator would not allow the level of dividend to be higher than the deficit contribution made" I found this surprising, having managed a Company's DB Pension Scheme for over a Decade (in deficit for most of the time). I have never come across that rule...and indeed believe the Pension Regulator only very rarely becomes involved in any individual company's agreement and negotiation with their Scheme Trustee.

[briangeeee] 10/1/2020 22:10

Where specifically has the information come from about the company not being able to increase dividend due to pension deficit? Is this just a shareholder suspicion, or has it been formally stated?

[norbert colon] 10/1/2020 21:19

Good to see some intelligent debate on here. I've taken an initial position this week and look forward to coming along to this years AGM. There is a solid business here with improving financial metrics over recent years and with a few key changes implemented going forward I look forward to this being a long term investment.

[maddox] 10/1/2020 20:25

Hi JakNife,

Wonderful,a trained Actuary, well we probably need to take a close look at this pensions deficit then.

One quick point is that they had enough cash and cash equivalents on their B/S to cover the whole pensions deficit.

Arguably, as trading is going well, they might need to increase their working capital to fund growth. But they could certainly use some of the cash to reduce the deficit.

However, one factor creating the deficit will be the current historically low Gilt yields that will be a factor in the actuarial valuation. As an investor the rationale for funding a pension scheme using an asset class yielding less than inflation is irrational in my view. So the deficit is probably an artifact of the valuation method and probably not wise to completely eradicate it. Getting a surplus out of a pensions scheme I bet is far more difficult than put the money in.

Regards, Maddox (Risk & Compliance professional)

[castleford tiger] 10/1/2020 20:00

Looks like the shares from Jupiter trades are now showing.
Some big changes coming as some new 3% holders to be declared.
Some great news at last.
Looks like Simon first to declare.
300 by midweek is my guess
Tiger

[maddox] 10/1/2020 16:42

Hi guys,

Just come on board The Tandem Gravy Train - looking at this as a value share.

Business is trading well with a very strong balance sheet but where the shareholders are not currently being adequately rewarded. One sticking point to raising the dividend is apparently the pensions deficit - £2.83m as at 31 Dec 18.

It's true, The Pensions Regulator (TPR) is taking a far harsher stance, for example, they state:

>> pension schemes should be treated fairly;
>> need strong funding targets;
>> recovery periods should be short;
>> firms that cannot afford to support their pensions scheme should not be paying dividends.

However, there is nothing that I can see that would prevent TND hiking their dividend payments. In 2018 their pensions contributions were £487k (incl. £423k deficit contribution) whereas dividends paid were £210k. So it would be difficult to argue, either that TND is not in a position to support its pension scheme and that shareholders are being remunerated at the expense of its pensioners.

IMHO there needs to be a re-balancing between the various stakeholders in Tandem.

Regards Maddox

[davidosh] 10/1/2020 16:10

Wow....Jupiter have been holders of over 10% for all the 13 years or so that I have been a shareholder. That is a big change as they were very passive and simply held it for some kind of reason in their ecology fund I think. They never attended Agms and were not in touch with the wider shareholder base.

[davidosh] 10/1/2020 13:19

Graham1TY......Remuneration is clearly an issue. How would you deal with it?

The directors have 13% of the shares in issue so my view is that they should have lower remuneration but more bonus related and take a higher return via much higher dividend payments. That way management and shareholders are more aligned. Tandem could afford to pay 20p in dividends having repaid the mortgage on the freehold

That 20p would be an additional £50k a year for the directors so not losing out but merely gaining from a larger cake. The share price should also appreciate if the yield is much greater so their holdings would be worth considerably more.

They seem to prefer to not let investors have any of the cake or at least restrict to very small slices even though we have provided the capital in the first place.

[graham1ty] 10/1/2020 12:48

Total remuneration for the last few years:
2018 was £717,000
2017 was £787,000 ( three Directors over £200,000)
2016 was £689,000
2015 was £665,000
2014 was £820,000 ( three Directors got over £200,000)
2013 was £566,000

Total remuneration over six years.....£4.2m

Nothing else to add

[davidosh] 10/1/2020 12:38

Simon is now the largest shareholder and has moved ahead of Jupiter who last announced their holding had reduced below 10%

The website has already been updated....

There are currently 6,013,480 shares in issue, of which 987,389 are held in treasury and the total number of voting rights in the Company is 5,026,091. The Company’s shares are only listed on AIM. There are no restrictions on the transfer of these shares. These details were last reviewed on 10 January 2020.

The percentage of shares not in public hands is 36.3% and the Directors have been notified of the following interests representing 3% or more of the issued ordinary share capital:

Ordinary Shares of 25p %
Mr S Bragg 587,996 11.7
Jupiter A.M 480,941 9.6
Mrs D Waldron 312,560 6.2
Mr S J Grant 250,000 5.0
Mr M P J Keene 250,000 5.0
Mr J C Shears 170,000 3.4

[simso] 10/1/2020 12:18

Delighted to see Simon Bragg increase. A very impressive guy.

[castleford tiger] 10/1/2020 11:56

Just don't go far !
Tiger

[balcony] 10/1/2020 11:27

News of increased holding.

[castleford tiger] 10/1/2020 09:18

Stick around balcony pal

[balcony] 10/1/2020 08:45

Yesterdays volume of just short of 150k as set this alight.