The “Building Blocks of Investment”
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Monthly Archives: January 2016
Cash at Glaxo SmithKline
Glaxo SmithKline is one of the UK’s largest firms.
It is huge.
http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=10042
A £67bn company. With leading medicines to fight HIV/AIDS, to everyday products such as Sensodyne, Aquafresh, Panadol, Beechams, Corsodyl, Day & Night Nurse, Nicorette, Macleans.
Earlier in the month, the famous and highly regarded fund manager Neil Woodford called for GSK to be broken up.
http://www.bbc.co.uk/news/business-35259184
Interesting to know the cash that GSK actually holds:-
http://www.gsk.com/media/841910/q3-2015-results-announcement.pdf
£5,908 Million. Yes, £5.9 Billion, a nice buffer for any potential opportunities.
Prudential Debt
Prudential plc is an international financial services group with significant operations in Asia, the in US (Jackson National Life) and the UK (M&G Investments). They serve around 25 million insurance customers and have £505 billion of assets under management.
To fund its operations it has a bond issuance programme
http://www.prudential.co.uk/investors/credit-investors
Interesting to see the levels of debt that The Pru carries:-
EUR 20m
GBP 3585m
US$ 2800m
That is in UK£
£14.8m + £3,585m + £1,917m = £5,517 Million
So £5.5 billion of Debt.
Now with £505 Billion under investment management, if that was invested in say some investment product that was yielding 2% for example, that would give a return of £10.1 Billion.
So just the investment return is more than TWICE the debt that Prudential is carrying, which is why the credit ratings of Prudential are so high.
Marks and Spencer January 2016 Dividend.
Marks and Spencer PLC, the most famous name on the UK high street, paid its shareholders on Friday 8th 2016 its bi-annual dividend.
http://www.marksandspencer.com
It was 6.8p per share that was paid to shareholders.
Marks and Spencer capital consists of 1,629,051,928 ordinary shares.
This the cash it paid out to its shareholders was:-
1,629,051,928 x £0.068 = £110,775,531
Yes £110 Million left the business to pay the shareholders
One of the single largest shareholders is William Adderley, the founder of Dunelm.
https://en.wikipedia.org/wiki/Bill_Adderley
He has 49,311,140 shares in Marks and Spencer PLC. (that is about 3% of Marks and Spencer PLC)
That means on Friday 8th Jan 2016 he was paid:
49,311,140 x £0.068 = £3,353,158
Yes, £3.35 Million. A great investment.
The Government Pension Investment Fund of Japan.
The Government Pension Investment Fund of Japan is one of the largest investment funds in the world.
http://www.gpif.go.jp/en/about/
With 135,108 Billion YEN = £777 Billion under management one can see why it is one of the largest funds on earth.
http://www.gpif.go.jp/en/fund/pdf/2015_q2.pdf
They have 8 categories of active investments and have selected 21 active investment managers and 6 passive investment managers.
Global Aggregate managed by:-
Goldman Sachs Asset Management
Schroder Investment Management
Sompo Japan Nipponkoa Asset Management
Nomura Asset Management
BNY Mello Asset Management
PIMCO Japan
BlackRock Japan
Prudential Investment Management
Manulife Asset Management
Mizuho Asset Management
Morgan Stanley Investment Management
Legg Mason Asset Management
U.S. Aggregate managed by:-
DIAM Co
FIL Investments
Euro Aggregate managed by:-
BNY Mello Asset Management
U.S. High Yield managed by:-
Nomura Asset Management
Euro High Yield managed by:-
UBS Global Asset Management
Emerging Markets Local Currency managed by:-
Ashmore Japan
Emerging Markets Hard Currency managed by:-
Alliance Bernstein
Inflation Linked managed by:-
BNP Paribas Investment Partners
Passive investment managed by:-
State Street Global Advisors
Nomura Asset Management
BlackRock Japan
Mizuhu Trust and Banking
Sumitomo Mitsu Trust Bank
Resona Bank.
Sainsburys Bank
The UK Supermarket group Sainsbury’s has a bank.
http://www.sainsburysbank.co.uk
Started in 1997, as a joint venture with The Bank of Scotland, who is now owned by Lloyds Banking Group, it is now moving to a standalone bank, that is wholly owned and run by Sainsbury’s
[http://www.j-sainsbury.co.uk/media/2475918/sainsburys_bank_ar_2015_-_final_-_jul_15.pdf]
Balance sheet total assets £4,237 million (£4.2 Billion)
What is interesting is that the deposits from savers make up £3,488 million, and has loans of £3,032 million to customers and only is dependent on wholesale funding of £171 million.
Also interesting to see that Sainsburys Bank has Bank of England Reserve account balance of £773m.
What this tells us, is that the bank has deposited cash from its day to day to day operations with The Bank of England. That is 22% of all its customer deposits.
The Oil Production of Oman.
The Sultanate of Oman holds the strategically important position at the mouth of the Persian Gulf. With a population of 4.3 million, this nation has benefitted from good governance and the wise investment of its natural resources.
It produces 943,000 barrels of oil per day. The UK with a population of over 60 million produces 850,000 barrels of oil per day. So what is the value of Oman’s daily crude oil production ?
943,000 barrels of oil per day.
Crude oil is $36.46
Thus:
943,000 x $36.46 = $34,381,780 a day.
That is £23,398,000 a day, £23.3 million a day.
Barclays Subordinated debt and preference shares
Barclays Bank PLC has various funding mechanisms to fund its daily business operations.
It can use deposits from customers to create mortgages and loans for example. It can borrow (issue bonds) on the open market to raise more cash, to create more loans or use that cash to fund business expansion, such as opening new branches in emerging markets.
It also uses other financial instruments such as subordinated debt and preference shares to raise cash to fund its operations
One can see the funding levels it needs for its business.
EUR 8,351,730,000
GBP 13,798,949,000
YEN 35,000,000,000
US$ 28,301,458,000
That is in UK£
6,130,590,000 + 13,798,949,000 + 199,783,000 + 19,260,200,000
= £39,389,522,000
Yes, that is £39.3 Billion.
And this is just one funding programme at Barclays.
The Funding of Vodafone PLC.
The FTSE 100 mobile phone operator is Vodafone PLC
To fund it day to day operations, apart of its revenues from sales, it has a funding programme based on borrowing on the bond market.
Two funding mechanisms.
http://www.vodafone.com/content/index/investors/debt_investors.html#
Interesting to see the levels of debt that Vodafone is carrying.
It’s US Dollar Programme:
$22,739,400,000
It’s European Programme:
€9,236,350,000
£4,436,350,000
Y3,000,000,000
Thus, the total:-
$22,739,400,000 + €9,236,350,000 + £4,436,350,000 + Y3,000,000,000
That is in UK£
£26,696,669,300
Yes £26.69 Billion, in outstanding loans. Investors (creditors) are willing to lend Vodafone huge quantities of cash, for a stable income. This is what income investors such as pension funds are looking for, lending to a creditworthy business.
Northern Venture Trust PLC
The Northern Venture Trust PLC is managed by NVM Private Equity.
The fund is now 20 years old, started in 1995. (The year Oasis released What’s The Story, Morning Glory)
http://www.nvm.co.uk/investor-area/nvt/
It holds investments in these firms:-
4.50% Buoyant Upholstery
3.90% Kitwave One
3.30% MSQ Partners Group
3.10% Lineup Systems
3.00% Biological Preparations Group
3.00% Silverwing
2.90% Weldex (International) Offshore Holdings
2.40% Volumatic Holdings
2.40% CGI Group Holdings
2.20% Closerstill Group
2.20% Wear Inns
2.10% No.1 Traveller
2.10% Agilitas IT Holdings
2.00% Entertainment Magpie Group
2.00% Graza
41.10% Total
These 15 investments make up 41.1% of the total fund.
Look at the yield: over 7%
Marks and Spencer January Dividend.
Today, 13th Jan 2017, Marks and Spencer the most famous and highly regarded UK retailer that is on most UK high streets paid its Jan 2017 dividend.
http://www.marksandspencer.com
It paid out 6.8p per share.
The Company’s capital consists of 1,624,723,081 ordinary shares with voting rights
http://otp.investis.com/generic/regulatory-story.aspx?newsid=823533&cid=228
Thus is paid out:
1,624,723,081 x £0.068 = £110,481,169.51
That is £110m in cash
A yield of over 5%
The Debt of Aviva
Aviva PLC is one of the largest UK insurers. Recently just bought Friends Life.
It is interesting to see how Aviva finances its day to day operations.
http://www.aviva.com/investor-relations/credit-investors/
When one looks at this we get:-
$m 1615m = £1095m
€m 2750m = £2027m
£m 4522m = £4522m
Total = £7644 million = £7.644 Billion
Total debt of £7.644 Billion.
But when looking deeper into Aviva it has £328bn of Assets.
The Bonds of Shell
Shell is one the largest energy companies in the world. An Anglo Dutch company.
[http://reports.shell.com/investors-handbook/2014/consolidated-data/statement-of-income.html]
Revenue of $421 Billion = £285 Billion
it is about to buy the UK’s BG Group
[www.bg-group.com]
One major finance mechanism for Shell to invest in its energy projects is to raise money is by issuing debts on the bond market.
These are Shell’s listed debt.
http://www.shell.com/investors/financial-reporting/bonds-and-credit-ratings.html
when one looks in detail you get this:-
CHF (m) 1325 = £899m
EUR (m) 12950 = £9548m
USD (m) 33250 = £22557m
GBP (m) 500 = £500m
That is the total outstanding debt on Shell’s bonds.
That is when converted into UK£ = £33,504 m = £33.5 Billion.
So at first glance that is a lot of cash £33.5 billion but then when looks at the revenues of £285 billion, then servicing the £33.5 Billion of debt can not too tricky.
French Electricity Production
The nation of France is one of the largest produces of electricity.
555.7 TW/h to be precise.
With about 64 million people France produces 555.7 TW/h while the UK with 60 million people produces 335 TW/h.
The reason for the large number in France is that the bulk of electricity in France is produced by nuclear, which is constantly running. So France is able to meet all its in country needs and export excess capacity to its European neighbours.
Chesnara PLC
Chesnara plc is engaged in the management of life and pension books in the UK and Western Europe.
The strategy is simple:
“Our mission is to deliver value for shareholders, while maximising returns to policyholders”
Thus manage books of pensions and life companies, and wise investment management of the assets will leave shareholders with a decent return.
http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=103970
Look at the yield….
Yes, 5.5%. Incredible return to investors.
Indian Oil Reserves
India is known for its incredible food and its rich heritage of tradition and culture, but not known for oil. However, India has 0.3% of the world’s crude oil reserves.
This represents 5.7 Thousand Million barrels that are in the ground on the Indian Subcontinent.
That is 5,700,000,000 barrels. Today crude trades at $36.78 a barrel.
So what are India’s oil reserves worth ?
5,700,000,000 barrel x $36.78 a barrel = $209,646,000,000
in UK£ = £141,610,000,000 = £141 Billion.
Warren Buffet Quote
The genius of Warren Buffet, the head of Berkshire Hathaway. A long term investor.
A great quote that represents his long term view is:-
“If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes”
Just a superb quote.
HM Government Borrowings: Dec 2015
Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.
In December 2015, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.
There were “only” 3 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury :-
17-Dec-2015 1¼% Index-linked Treasury Gilt 2032 £700 million
08-Dec-2015 3½% Treasury Gilt 2045 £2,199.970 million
02-Dec-2015 1½% Treasury Gilt 2021 £3,750 million
When you add the cash raised:-
∑(£700 million + £2,199.970 million + £3,750 million) = £6,650 Million
£6,650 Million = £6.650 Billion
On another way of looking at it, is in the 31 days in December, HM Government borrowed:-
£214 million each day for the 31 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2021, 2032 and 2045. All long term borrowings, we are mortgaging our futures, but at least “We Are In It Together…”