dealtn wrote:TheMotorcycleBoy wrote:It seems highly likely that management have lost the plot. Back in March 2021:
https://www.investegate.co.uk/unilever- ... 30017706X/the stated aim of which
The Initial Programme, the purpose of which is to reduce the capital of Unilever PLC, will take place within the limitations of the authority granted to the Board of Unilever PLC by its general meeting, held on 5th May 2021, pursuant to which the maximum number of shares to be bought back by Unilever PLC is 262,811,000So they "wanted to reduce their capital" then, despite knowing full well back then that GSK's health care was on the table? And now, when it looks as if they may not have the readies sufficient to buy HC, they are suddenly looking to raise capital. They seem to be asleep at the wheel. Zero forward planning, not how I do business.
Matt
So in a hypothetical world where you might have an overdraft, and a monthly salary from which you have excess funds that enable you to save, what do you do?
You might have a potential need for a new car in a year or twos time, or a wish to move house requiring an additional mortgage, for instance.
Do you eshew paying off the overdraft, preferring to hold cash at home, because you might need that bank finance at some point in the future for those large strategic items. Or do you for short term reasons pay down the overdraft, save interest etc. and consider the financing of those longer term items (that might not happen, or be significantly different) as and when they become more solid, enjoying the flexibility and potential liquidity when required?
Having short term Capital allocation decisions isn't mutually exclusive to having concurrent longer-term ones which depend on a large number of variables both in terms of outcome and how they might be financed.
I've not been overly impressed with the (short term) actions of this particular Board of Directors, although I am a holder of their equity, but I wouldn't be impressed either by a dogmatism around Capital allocation that precluded repayment of excess Capital.
Ok. Short term vs Long term goals.
However, IMO the analogy breaks down in a couple of ways. Firstly (from AR2020) Alan Jope's "on target" annual compensation in 6.84 million euros. I think that means he's (supposedly) being paid for Strategic Vision. By mistiming the availability of GSK's HC and his buyback flutter, he's failed to demonstrate this. Even I manage my income/future purchases better than that.
Secondly their outstanding shares do not constitute an overdraft. It's equity not debt. ULVR, to my knowledge they ain't actually obliged to 1) pay back their shareholders anytime soon, or 2) even pay an annual dividend. In fact IIRC several firms in the height of the lockdown in 2020, temporarily cancelled their divs, and were actually awarded by the shareholders, i.e. for certain shares the SP would rise, as the market judged the cash save to be "prudent".
However I guess in the case of ULVR, cancelling their dividend would result in their SP falling off a cliff! Perhaps when they were executing their BB scheme, some analysts felt that they trying to deliberately reduce the dividend payout burden (however I'm sure their dividend cover is currently >1.0 as I type), and that move signalled predictions of lower profitability, hence their fall versus the rest of the market over the BB campaign.
Matt