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Kone - Expanding Multiples

Analysing companies' finances and value from their financial statements using ratios and formulae
ADrunkenMarcus
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Re: Kone - Expanding Multiples

#353526

Postby ADrunkenMarcus » November 4th, 2020, 7:31 pm

Yes, that's very true Doug.

I have other holdings such as Unilever where valuation hasn't inflated to this degree and so the underlying business performance alone has delivered the results. However, Unilever's business growth is less than both Diploma and Spirax. So it could be tempting to do some chop and changing but I am resisting the urge!

As you know, I got into Diploma after you did, in 2012, and it was much better value at that time. Spirax looked - maybe not expensive, but not cheap - in 2015 at x23 earnings. I'm holding both for the long term but I'm acutely aware that much of the return has come from a re-rating above the fundamental business growth. I think Diploma's valuation is more defensible - a 3.5% free cash flow yield on a forward basis (2022 estimates) vs. 2.5% for Spirax (same basis).

I hope the p/es will gradually move towards something more sustainable over the long term as these businesses continue to grow but we may well see a period of relative stagnation while that adjustment happens.

Then again, what valuation is appropriate? These companies all grew their dividends this year! I'd rather hold them than Shell, Lloyds or BP...

Best wishes


Mark.

ADrunkenMarcus
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Re: Kone - Expanding Multiples

#353877

Postby ADrunkenMarcus » November 5th, 2020, 7:29 pm

doug2500 wrote:It's a better problem than the other one though!


Our shared problem got worse today. Spirax went through £121 at one point and Diploma almost £24.

Best wishes


Mark.

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Re: Kone - Expanding Multiples

#381798

Postby ADrunkenMarcus » January 29th, 2021, 8:50 am

Kone's results for 2020 included a 2.9 percent increase in the ordinary dividend per share from 1.70 to 1.75 Euros and a 'extraordinary' or special dividend of 0.50 Euros per share. It's quite pleasing when you have a company that is able to increase its dividend in the current circumstances and even pay a special as well - the first since 2012. To look purely at Kone's dividend history, you'd have no idea of the current economic situation!

Best wishes,

Mark.

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Re: Kone - Expanding Multiples

#384610

Postby flyer61 » February 8th, 2021, 8:49 am

Mark,

what are you making the net figure we will see?

1.575 Euros?

ADrunkenMarcus
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Re: Kone - Expanding Multiples

#384611

Postby ADrunkenMarcus » February 8th, 2021, 9:05 am

flyer61 wrote:Mark,

what are you making the net figure we will see?

1.575 Euros?


I am assuming 1.4625 Euros in total for the ordinary and special together, per share. Finland levies a 30% withholding tax on dividends and, from what I can see online, it looks like they may have implemented a proposal to raise this to 35% in 2021. Therefore I'll see 65% of the gross dividend rather than the 70% I am used to.

My Kone holding is in an ISA. I think it *may* be paid gross in a recognised pension scheme such as a SIPP? And I believe you could reclaim some of it via form filling if it's in an unwrapped account.

If this didn't go through then I'd be very happy with 1.575 Euros, based on the previous tax rate.

Best wishes

Mark.

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Re: Kone - Expanding Multiples

#384614

Postby Dod101 » February 8th, 2021, 9:13 am

ADrunkenMarcus wrote:
flyer61 wrote:Mark,

what are you making the net figure we will see?

1.575 Euros?


I am assuming 1.4625 Euros in total for the ordinary and special together, per share. Finland levies a 30% withholding tax on dividends and, from what I can see online, it looks like they may have implemented a proposal to raise this to 35% in 2021. Therefore I'll see 65% of the gross dividend rather than the 70% I am used to.

My Kone holding is in an ISA. I think it *may* be paid gross in a recognised pension scheme such as a SIPP? And I believe you could reclaim some of it via form filling if it's in an unwrapped account.

If this didn't go through then I'd be very happy with 1.575 Euros, based on the previous tax rate.

Best wishes

Mark.


presumably every time you receive a dividend it is converted to sterling? Is that correct? I gather that unlike for a SIPP, we are unable to hold foreign currencies in an ISA. Sorry this is not quite relevant to your point.

Dod

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Re: Kone - Expanding Multiples

#384640

Postby ADrunkenMarcus » February 8th, 2021, 10:14 am

Dod101 wrote:presumably every time you receive a dividend it is converted to sterling? Is that correct? I gather that unlike for a SIPP, we are unable to hold foreign currencies in an ISA. Sorry this is not quite relevant to your point.


Yes. For my Kone dividends to date, I've taken 70% of the gross figure in Euros and then looked at the day's exchange rate to convert into Sterling and they match up very closely. Once the dividend has been paid next month, I should know quite easily if Finland has raised the tax and whether it's been taxed at 30 or 35%. I will also work out from the total amount I receive what proportion was the 'ordinary' and what proportion was the 'special' dividend. I'm afraid that Kone has a big problem as there's still a lot of cash on the balance sheet and it simply keeps piling up. I would not be surprised to get more specials in the coming years.

I hold MasterCard in an ISA as well but the withholding tax is fortunately 'only' 15%.

I do hold a Swedish share in my SIPP. The single, annual dividend is not due yet so I am going to await with interest how much I will get - I'm hoping it's paid gross. The SIPP is denominated in Sterling and it does not have a separate foreign currency account within it, but I understand you can get foreign currency SIPPs.

Best wishes

Mark.

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Re: Kone - Expanding Multiples

#384648

Postby Dod101 » February 8th, 2021, 10:28 am

Thanks Mark. I hold TD Bank in my SIPP and have a Canadian Dollar account within it. That is with Interactive Investor. I intend to accumulate Canadian Dollars until I feel I have enough to make a further investment but I think they will reinvest my dividends as they arise if I prefer that.

Dod

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Re: Kone - Expanding Multiples

#384704

Postby monabri » February 8th, 2021, 12:20 pm

Dod101 wrote:Thanks Mark. I hold TD Bank in my SIPP and have a Canadian Dollar account within it. That is with Interactive Investor. I intend to accumulate Canadian Dollars until I feel I have enough to make a further investment but I think they will reinvest my dividends as they arise if I prefer that.

Dod


Interactive Investor allows one to select dividend reinvestment for 99p (on an individual share basis) under "Portfolio , Dividend Reinvestment". The dividend must >£10.

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Re: Kone - Expanding Multiples

#384712

Postby Dod101 » February 8th, 2021, 12:34 pm

Thanks monabri. I am hopeless at looking for stuff like that. I will take a look at dividend reinvestrment because I just let stuff roll up in my SIPP.

Dod

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Re: Kone - Expanding Multiples

#384756

Postby Dod101 » February 8th, 2021, 2:05 pm

I see that automatic dividend reinvestment with II applies only to dividends paid in sterling and of course I am interested in T D Bank's dividends. I will just need to do as my earlier plans and wait until they accumulate to a worthwhile amount and then buy manually.

Dod

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Re: Kone - Expanding Multiples

#394163

Postby ADrunkenMarcus » March 10th, 2021, 9:37 am

Spirax Sarco described a 'resilient performance' in 2020.

I'd say!

On a statutory basis, operating profit edged up 2% and revenues fell 4%. They increased the interim dividend for 2020 by 5% and paid it as scheduled and now they have increased the final dividend by 8%, for a 7% dividend increase for the year. The company has either held or grown the dividend for over 50 years with a c. 11% CAGR growth rate. As with Kone, if you look at Spirax's dividend record you'd never know there was a pandemic or a huge global recession going on.

The company has always had a clean balance sheet with net cash balances much of the time, but recently took on debt which stands at only 0.7 x EBITDA and is coming down faster than anticipated.

Best wishes


Mark.

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Re: Kone - Expanding Multiples

#395434

Postby ADrunkenMarcus » March 14th, 2021, 12:41 pm

ADrunkenMarcus wrote: Finland levies a 30% withholding tax on dividends and, from what I can see online, it looks like they may have implemented a proposal to raise this to 35% in 2021. Therefore I'll see 65% of the gross dividend rather than the 70% I am used to.


It looks like this is true as per the Kone website's Investor Relations section:

Payment of dividends
For the financial year 2020 a dividend of EUR 1.7475 was paid for each class A share and a dividend of EUR 1.75 was paid for each class B share. Further, an extra dividend of EUR 0.4975 was paid for each class A share and an extra dividend of EUR 0.50 was paid for each class B share. The date of record for dividend distribution was 4 March 2021 and the dividend was paid on 11 March 2021.

Withholding tax of 35% will be withheld from dividend payments made on foreign nominee registered shares. If the custodians are registered with the Finnish Tax Administration’s Register of Authorised Intermediaries, lower withholding tax can be applied based on the required additional information collected. Any tax withheld in excess can be reclaimed after the year of the dividend payment by submitting a refund application to the Finnish Tax Administration, either on paper (form for corporate entities here, and for individuals here), or electronically (pending updates). Dividends paid to Finnish tax resident holders of nominee registered shares may as of 2020 have been subject to withholding of 50% tax prepayment. Any excess tax prepayment will be credited in the normal tax assessment process.


The dividend may show up in my account shortly, as there's sometimes a slight delay of a day or two with foreign dividends. I will therefore know the exact amount in Sterling.

Now for finishing preparing Mother's Day lunch!

Best wishes

Mark

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Re: Kone - Expanding Multiples

#395644

Postby flyer61 » March 15th, 2021, 9:05 am

Which platform do you hold your Kone on ADM? I'm on HL and nothing yet.

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Re: Kone - Expanding Multiples

#395685

Postby flyer61 » March 15th, 2021, 10:42 am

350 shares = £435.09 dividend for my SIPP.

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Re: Kone - Expanding Multiples

#395694

Postby ADrunkenMarcus » March 15th, 2021, 11:00 am

It looks like they went in this morning. :D

I do wonder if we will see further 'extraordinary dividends' as Kone calls them, because net cash is forecast to continue to built up on the balance sheet - reaching 1.5 times EBIT in 2023.

The only thing I dislike about Kone is the withholding tax situation, but that is the Finnish tax authorities and not the company's fault!

Best wishes

Mark

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Re: Kone - Expanding Multiples

#408557

Postby flyer61 » May 1st, 2021, 12:11 pm

Mark,

any thoughts on the recent results and the subsequent price action.

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Re: Kone - Expanding Multiples

#408559

Postby ADrunkenMarcus » May 1st, 2021, 12:21 pm

flyer61 wrote:any thoughts on the recent results and the subsequent price action.


It did strike me that it declined quite sharply even though that quarter's headline results seemed to be better than expected. I wonder if the market got rather ahead of itself, both in the recent price surge commented on in this thread and now in discounting solid, reliable companies now that an economic recovery seems to be underway? I don't think there's any fundamental change in the company's business.

I'm not looking at adding to my position unless it's significantly cheaper (I bought at low x20 earnings) but I continue to have Kone as a long term hold and its one of my largest portfolio holdings.

Recent forecasts for earnings per share may be revised down in time, but 12.5% growth for 2021, 6.4% for 2022 and 7.8% for 2023 hardly looks bad. I do think it likely we'll see more, possibly larger, special dividends in the coming years because cash continues to pile up on the balance sheet.

Best wishes

Mark.

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Re: Kone - Expanding Multiples

#415662

Postby ADrunkenMarcus » May 27th, 2021, 9:02 pm

ADrunkenMarcus wrote:
doug2500 wrote:It's a better problem than the other one though!


Our shared problem got worse today. Spirax went through £121 at one point and Diploma almost £24.


And again! Spirax got close to £128 today and has overtaken MasterCard as my second biggest holding, but the only saving grace is that it seems it's on the basis of earnings forecasts being revised up so hopefully the valuation is not stretching even further.

Compared to a recent peak around 3050p, Diploma looks 'cheap' at 'almost £24'.

Needless to say, Kone is looking better value in both local terms and due to strengthening Sterling.

Best wishes

Mark.


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