The Bear Club...... Milfield Group

B*llox. The death of the small IFA is greatly oversold - yet again.
The big groups are where the troubles lie. The life offices, with their institutional balance sheets, couldn't make large sales forces pay & neither can large IFAs. IAL demonstrated this quite clearly with its demise, and the figures here are no better. The fundamental issue is the size of the corporate overhead that has been constructed. There is no margin available, thanks in part to the government's price capping, and further due to the collapse in the markets.

Beware the cash burners - they have no solution. Ask the question - if you couldn't make profit with large commissions how do propose to do it now commission rates have been cut?

The life companies have pumped the share prices in a bid to support distribution, and with no interest in whether or not the trading entity is profitable. The saving grace they are all hoping for is for multi ties to come in with free money being handed out. Given the hammering of the balance sheets caused by the market falls that is not likely in the near future.

An issue with this firm is its attempts to buy firms using its paper as collateral. Any astute IFA owner recognises that the profits needed by MIL over the next 3-5 years to create liquidity in its stock (and therefore any value at all in its shares) is optimistic in the extreme. Without a secondary market they will only be able to get basket cases - and hey presto look at the 3 'purchases' they have announced. I thought the plan they announced was 20 by October? I would suggest their acquisition strategy doesn't work - so how to buy volume with latent profitability? I doubt this can work whilst the RIs are self-employed - the commission cost is just too high.

There is an 'established' (just) RI profitablity model, and this firm firm is some way off that yet. When (if) it gets there, the market cap should be c.£40m on a sustainable p/e model, almost 40% adrift from here.

There should be only one measure used in this immature sector - cashflow. Without poitive pounds there can be no predictable divi stream, and without that there can be no liquidity, and without that there is no market for the stock to sell into. Go on test it, offer £5k's worth of stock in a lump - see the market makers reaction!