Interims from the Pru

[daveh]

can be found here:
www.investegate.co.uk/article.aspx?id=2 ... 1238X&fe=1
here:
www.investegate.co.uk/article.aspx?id=2 ... 1247X&fe=1
here:
www.investegate.co.uk/article.aspx?id=2 ... 1250X&fe=1
and here:
www.investegate.co.uk/article.aspx?id=2 ... 1250X&fe=1

PRUDENTIAL PLC HALF YEAR 2018 RESULTS

PRUDENTIAL DELIVERS HIGH-QUALITY PROFITABLE GROWTH

Performance highlights on a constant (and actual) exchange rate basis

· Group IFRS operating profit1 of £2,405 million, up 9 per cent2 (up 2 per cent3)

· Asia new business profit4 of £1,122 million, up 11 per cent2 (up 3 per cent3), IFRS operating profit1 of £1,016 million, up 14 per cent2 (up 7 per cent3) and underlying free surplus generation5 of £590 million, up 14 per cent2 (up 7 per cent3)

· US variable annuity separate account assets up 10 per cent2 (up 9 per cent3) from 30 June 2017 leading to a 13 per cent2 increase (3 per cent3 increase) in fee income

· M&G asset management first half external net inflows of £3.5 billion (2017: £7.2 billion), PruFund net inflows of £4.4 billion (2017: £4.3 billion)

· Planned demerger of M&G Prudential from the Group is progressing well

· Group Solvency II surplus6,7 estimated at £14.4 billion; equivalent to a ratio of 209 per cent (31 December 2017: £13.3 billion, 202 per cent)

· 2018 first interim dividend of 15.67 pence per share, up 8 per cent3

Mike Wells, Group Chief Executive, said: "We have made a good start to 2018, delivering high-quality, profitable growth. At the same time, we are taking the steps needed for the demerger of M&G Prudential from the Group, which we announced in March, alongside implementing M&G Prudential's merger and transformation programme, which remains on track to meet its objectives.

2018 First Interim Dividend

Ex-dividend date: 21 August 2018 (Singapore), 23 August 2018 (UK, Ireland and Hong Kong)
Record date: 24 August 2018
Payment of dividend: 27 September 2018 (UK, Ireland and Hong Kong), On or about 4 October 2018 (Singapore), On or about 4 October 2018 (ADR holders)

Not high yielding today, but was when I bought.

[ADrunkenMarcus]

Not high yielding today, but was when I bought.

That's the best sort!

Best wishes

Mark.

[kempiejon]

Not high yielding today, but was when I bought.

That's the best sort!

Best wishes

Mark.

Like, my Royal Bank of Scotland.

[ADrunkenMarcus]

Not high yielding today, but was when I bought.

That's the best sort!

Best wishes

Mark.

Like, my Royal Bank of Scotland.

Errr....no.

I'll add the qualifier that the current lower dividend yield, compared to the dividend yield at the time of purchase, needs to have been caused by continuing dividend growth accompanied by share price appreciation rather than suspending the dividend for ten years and making the greatest losses in UK corporate history.

Best wishes

Mark.

[daveh]

Not high yielding today, but was when I bought.

That's the best sort!

Best wishes

Mark.

Like, my Royal Bank of Scotland.

That's the worst sort* - I own both and both fit the description for me. Unfortunately one has turned £17.50 into £1.00 and paid not a lot in dividends; the other has turned £4.25 into £23.50 plus it has paid more than £4.25 in dividends over the period. I just whish the starting values had been the other way round.

* I realise the RBS comment was tongue in cheek .

[Gengulphus]

That's the worst sort* - I own both and both fit the description for me. Unfortunately one has turned £17.50 into £1.00 and paid not a lot in dividends; the other has turned £4.25 into £23.50 plus it has paid more than £4.25 in dividends over the period. I just whish the starting values had been the other way round.

Assuming that those values are per-share and you'd invested equal amounts (say £5k each) in each holding, then as things stand you'd have bought (allowing for 0.5% stamp duty and £10 broker commission):

283 shares of the first at £17.50 each, now worth 283*£1.00 = £283 capital value and not a lot in dividends.
1168 shares of the second at £4.25 each, now worth 1168*£23.50 = £27,448 capital value and over £5k in dividends.
Total capital value £27,731, and total dividends over £5k.

If the starting values had been the other way around, you'd have instead bought:

1168 shares of the first at £4.25 each, now worth 1168*£1.00 = £1,168 capital value and not a lot in dividends.
283 shares of the second at £17.50 each, now worth 283*£23.50 = £6,650.50 capital value and over (283/1168)*£5k = ~£1.2k in dividends.
Total capital value £7,818.50, and total dividends over ~£1.2k.

And you wish it had been that other way around? There's no accounting for tastes...

Basically, a share that 5-bags will on its own make up for four other originally-equal-sized holdings being total losses, which makes it tremendously valuable - so don't wish it away!

Gengulphus

[daveh]

That's the worst sort* - I own both and both fit the description for me. Unfortunately one has turned £17.50 into £1.00 and paid not a lot in dividends; the other has turned £4.25 into £23.50 plus it has paid more than £4.25 in dividends over the period. I just whish the starting values had been the other way round.

Assuming that those values are per-share and you'd invested equal amounts (say £5k each) in each holding, then as things stand you'd have bought (allowing for 0.5% stamp duty and £10 broker commission):

Gengulphus

I was clearly being too clever in trying to not say exactly how much capital I had invested in each company. Basically I invested 4x as much money in RBS than Prudential. RBS is showing an ~90% loss and Prudential a ~500% gain and I just wish I'd invested more in the PRU and less in RBS. Unfortunately it is down to timings. Prudential was one of my early investments in 2002 and RBS was first bought just before the banking crisis (doh!). However during the intervening period my position size increased 4 fold, but I didn't top up the PRU as its yield was no longer high.

[Gengulphus]

That's the worst sort* - I own both and both fit the description for me. Unfortunately one has turned £17.50 into £1.00 and paid not a lot in dividends; the other has turned £4.25 into £23.50 plus it has paid more than £4.25 in dividends over the period. I just whish the starting values had been the other way round.

Assuming that those values are per-share and you'd invested equal amounts (say £5k each) in each holding, then as things stand you'd have bought (allowing for 0.5% stamp duty and £10 broker commission):

I was clearly being too clever in trying to not say exactly how much capital I had invested in each company. Basically I invested 4x as much money in RBS than Prudential. RBS is showing an ~90% loss and Prudential a ~500% gain and I just wish I'd invested more in the PRU and less in RBS. Unfortunately it is down to timings. Prudential was one of my early investments in 2002 and RBS was first bought just before the banking crisis (doh!). However during the intervening period my position size increased 4 fold, but I didn't top up the PRU as its yield was no longer high.

OK, I now see what you meant. Not a question of being too clever, though - just one of having said "the starting values" when there were only two values earlier in the post that could be thought of as starting values, and they weren't what you meant!

I think your experience does show the point of the "equal amounts invested in each share" HYP diversification principle: basically, the further you go from it, the greater the risk that one share halving and another doubling presents to you. That is often presented as something like "if a share falls 50%, you need a 100% rise to make up for it", and that is true in the right context, namely that the fall has already happened and the rise is needed on the same capital - either by hanging on to the share and hoping it will rise, or by selling it and reinvesting the proceeds in another share that you hope will rise. But in the wrong context, it's anything but true: if I invest £5k in each of two shares and one falls 50% while the other rises 100%, I've turned £5k+£5k = £10k into £2.5k+£10k = £12.5k, a 25% rise overall.

In a many-holding portfolio with £5k in each share, any share could double and another halve and I would still see that £2.5k rise. If the amounts are less equal, the wrong pair of shares happening to experience that one-doubles-the-other-halves event can produce a less good outcome or (if the amounts are sufficiently unequal that some have more than twice as much as others) a bad outcome. E.g. HYP1 as reported on last November would look pretty sorry for itself if BATS were to halve and Mitchells & Butlers to double. (Of course, it would look outstanding if instead Mitchells & Butlers were to halve and BATS to double, far better than the £2.5k the equally-weighted portfolio would get from any one-doubles-the-other-halves event. How one feels about that depends on the relative importance one places on maximising the upside vs minimising the downside. But if you regard maximising the upside as more important, as a HYPer you're probably in the wrong strategy!)

Having said all that, I do realise that the "equal amounts invested in each share" principle can be difficult to follow when a HYP is bought over a long period, especially in cases like yours where a share has dropped out of contention for top-up purchases. Unfortunately, I don't think there's anything much to be done about it, beyond watching out for the dips when it might qualify (Prudential might have done in 2016, for instance) and reckoning that only having limited ability to take advantage of some of the purchase opportunities is the price one pays for having purchase opportunities for quite a few more companies over the years.

Gengulphus