Trump Tariffs, 4Imprint AGM and Purplebricks Apologies

US President Donald Trump has created some havoc in world stock markets by threatening in a tweet to impose 25% tariffs on a wider range of Chinese goods from Friday. He is apparently getting impatient with the progress on trade talks between the USA and China, but is pursuing international diplomacy via tweets a good idea?

One company that might be affected by higher tariffs on Chinese products is 4Imprint (FOUR) whose AGM I attended this morning. 4Imprint is an AIM-listed retailer of promotional products (sold via catalogues and the internet). Most of its business arises in the USA with only a relatively smaller operation in the UK, and it imports a considerable proportion of the merchandise from China. I asked the Chairman after the AGM whether this was a concern. He said they discussed tariffs at every board meeting but as their competitors would be in the same position the impact might not be high.

There was a trading statement from the company this morning before the AGM. Revenue up 16% in the first four months and the board is confident that the Group will deliver full year results in line with market expectations.

This is the kind of company I like. Revenue growing, no debt, profits turn into cash and return on equity was 82% last year. Like a lot of retailers, they sell the products and collect the cash from customers before they have to pay the suppliers. In essence a simple business and the AGM in the City was a quite brief affair – duration about 15 minutes.

Only I asked any questions in the formal part of the meeting and one was: what is their market share in the USA? About 4% was the answer, and it’s still increasing. The competition is also fragmented so there is room for growth. You can see the kind of products they sell here: https://www.4imprint.co.uk/ . Having used the company in the past I can recommend them.

I also asked whether there were any substantial numbers of proxy votes against any of the resolutions (this is a question to ask when the Chairman says proxy votes will be disclosed at the end of the meeting as happened here!). Yes there was one. Remuneration Committee Chairman Charles Brady only got 93% support. I later asked him why. He said one institutional investor voted against him because the company does not have an LTIP.

I actually voted for the Remuneration Report because they have a simple remuneration scheme and pay of the executive directors is not unreasonable bearing in mind they are based in the USA. This is the kind of pay scheme that should be applauded, not voted against.

Another AIM company of a very different nature that made an announcement this morning is Purplebricks (PURP). A trading statement gave a financial update but included several very negative points. The Australian operation is being closed down, the US operations are now the subject of a “strategic review” with bad news being hinted at, and founder/CEO Michael Bruce is “stepping down with immediate effect”. That usually means the person named has been fired.

The board acknowledges that performance has been disappointing over the last 12 months and “we sincerely apologise to shareholders for that”. The company blames too rapid geographic expansion and poor operational execution.

The company is still losing money and the share price graph is one of those downward facing ski-slopes that investors hate. The share price is down another 7% today at the time of writing. Still an unproven business model in my view. I do not hold shares in the company for that reason.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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