HHG - HHG PLC

[DTM]

Hello all

I'm holding HHG shares which are supposed to pay on average 73 cents per share. The deal is that you must have them by April. They pay $1.36 per share and you have 52 out of every 100 shares cancelled. This was announced when the share price was around $1.40 hence an average of 73 cents per share dividend.

I'm not sure of the risks involved and would like to know if our more informed investors/traders have any knowledge of how risky it is holding these shares.

Thanks in advance.

 

[clowboy]

No idea really...

but if you lose over half your value in stock and then get 100% of it paid out in dividends you end up roughly where u started but with a tax headache

???

 

[RodC]

It doesn't actually appear to be a dividend, it's a return of cash. Which probably has different tax implications - talk to an accountant.

I just glanced at their announcements, it appears they've sold a UK business and are just returning the cash to the shareholders instead of reinvesting it. It's not actually income, you're just getting your own money back.

According to P44 of their circular, it shouldn't be taxed as income (as it's a return of capital) but you may realise a capital gain or loss depending on your original purchase price.

This looks like a pretty normal sort of thing, but I'd have a good read of the circular to assess your own situation.

Rod.

 

[clowboy]

by return of capital do you mean "share buy back" becuase that would be effectively what they are doing, wouldn't it?

I don't know becuase I haven't looked at the anouncments or anything but if you lose 48% of your shares and gain some $$$ I would think that share price would fall. there would however be less shares on issue afterwards (one would hope)

 

[RodC]

Yes, it appears to be effectively like a share buy back, although they aren't calling it that, so there may be some subtle taxation differences.

There will be less shares on issue after the cancellation, but if the amount of cash returned in exchange for the cancelled is equal to the value of those shares then I would think that the individual share price shouldn't change much. But obviously the market capitalisation will be less.

Rod.

disclaimer: I'm not an accountant or financial advisor or anything, so do your own research!!

 

[clowboy]

RodC, Yes I jast had a shower and slaped myself...what was I thinking...there should be little difference in the share price afterwards.

In regards to the tax side of the "share buy back" I would THINK that they have structured it this way and used excess franking credits so that the tax is effectivley paid on the "dividend" making it more atractive to shareholders.

DTM
I am just guessing so make sure you talk to an accountant if you are overly concerned.

In regards to your actual question, again I am just making asumptions but I wouldn't see they "divedend/share buyback" as risky and long term I would think it would benifiet the shareholders. again this is just my opinion and I have no idea about the stock itself or the risk involved in holding them.

Hope that helps

 

[RodC]

They aren't calling it a dividend so I'm pretty sure it isn't. I suspect they don't have any excess franking credits to use.

This is from their circular (page 46)

"No part of the payment received by Australian CDI Holders in
respect of the cancellation of their CDIs is expected to be treated
as a dividend for Australian tax purposes. HHG PLC is seeking
confirmation from the ATO that the Return of Cash proposal will
be treated as a return of capital rather than a dividend. Once
obtained, the confirmation will be published on HHG PLC’s
website (www.hhg.com)."

It looks like the only potential tax implications are CGT.

Also from their circular:

"A capital gain will be realised upon the cancellation of a CDI if the
cash payment for the cancelled CDI is greater than the cost base of
the cancelled CDI. Australian CDI Holders may have different cost
bases depending upon when they acquired CDIs and the price paid
for the CDIs. The first element of the cost base (and reduced cost
base) of those CDIs acquired under the demerger of HHG PLC
from AMP Limited is A$1.73 per CDI."

I think I need to go back to looking at my own shares.

Rod.

 

[clowboy]

I think I need to go back to looking at my own shares.

he he


thanks for that clarification

 

[DTM]

Thanks for your replies.

:bier:

 

[mime]

Is this good news?

Will the share price drop sharply after Apirl?

I think I got HHG shares because of my AMP shares.

 

[tdkx669]

I heard that some one is going to takeover HHG and AMP has valuation about $1.70 to $1.80
Regards
Ankur