Market Trends, Big Miners and Will the Music Stop?

Stock markets continue to rise. They seem to be ignoring the bad company results that are going to come out in the next few months. Although there are signs that the Covid-19 epidemic is weakening, some sectors such as hospitality are going to be in lock-down for some time. The economy is clearly going into recession with many employees being laid off. The lack of consumer spending, not just because some people have less money to spend, but because others are growing more nervous of spending money or finding fewer things to spend it on, is going to have a wide impact on the economy.

Cash is being put back into the stock market, simply because with very low interest rates there seem to be few good alternatives. The measures taken by central governments to refloat the economy will promote asset inflation so these trends may continue.

Investment trusts I hold which are popular with private investors seem to be some gainers from this market enthusiasm with their discounts narrowing again. Small cap stocks are also recovering and with very low liquidity just a few trades can raise their prices dramatically for no good reason. Or sharply reverse when a few sellers think the prices have risen too far. Rational judgement on share prices flies out the window when share prices are being driven primarily by momentum.

My portfolio continues to follow the market trend as it is very diversified even though I don’t hold shares in the sectors worse hit by the epidemic. I may have to put cash back into my ISAs which I withdrew only in March after making some sales. I have been buying a few large cap stocks which is not usual for me. I tend to avoid FTSE-100 companies as their share prices are driven by professional analysts’ comments, by geo-political concerns, by general economic trends and by commodity prices. You can buy a FTSE-100 company and soon find it’s going downhill because one influential analyst has decided its prospects are not as they previously thought.

But I did start buying a couple of big miners, BHP and Rio Tinto, in March which has worked out well. I considered the fundamentals sound and China, which is their major market, was clearly recovering and getting back to work rapidly. There was an interesting article in the Financial Times a couple of days ago highlighting other reasons why they are doing well. It was headlined “Australia’s iron ore miners exploit supply gap as Covid-19 hobbles rivals”. It explained how BHP, Rio Tinto and Fortescue Metals Group were capitalising on the production problems of their competitors in Brazil and South Africa who have been badly hit by the epidemic, while demand has remained buoyant. In Australia, where most of the mining is in Western Australia, they took vigorous action to halt the virus early on and most of the workers fly in and out so are easy to monitor. It seems that this unexpected turn of events has helped rather than hindered my investment performance for a change.

Although I am confident that the economy will recover in due course, and stock markets will follow that trend as they always must do, in the short term I find it difficult to be positive. It is hard to identify companies where one is both confident that they won’t be badly affected by the epidemic in the short term and where one can reasonably accurately forecast their future earnings. It’s the opposite of shooting fish in a barrel to use a bad metaphor. Together with the uncertainty of whether we will get a second virus wave, whether a working vaccine will be found, the impact of Brexit and the prospect of higher taxes, mine and the confidence of other investors must surely be low. In the short term, growth in company profits is going to be hard to come by, which is often the major driver for improving share prices.

But the market is ignoring that. It reminds me of the infamous saying of Citigroup CEO Chuck Prince during the last big financial crisis – “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance.”

Unfortunately judging when to move in and out of markets is not a skill that most investors have and so I will stick to trend following while keeping a sharp eye on events.

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

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Scottish Mortgage Investment Policy and LSE RNS Announcements

The Scottish Mortgage Investment Trust (SMT) have issued their Annual Report and AGM Notice. Readers who hold this trust will not need reminding that it has shown a remarkable performance over the last few months. That’s when the stock market has been decimated by the Covid-19 epidemic and the share prices of many other similar trusts and of the companies they hold have fallen sharply.

Last year SMT achieved a total share price return of 12.7% to the end of March and in the current year it achieved a share price increase of 23% to the 12th May. How has it achieved this return? Primarily by holding “hot” stocks like Tesla, Amazon.com, Illumina, Tencent and Alibaba to name the top five holdings. Over a third of the current holdings are unlisted ones. They claim the flexibility to invest in such companies “has been an important driver of returns over the last decade”. I do not dispute that but they are now proposing to change the “investment policy” of the company to raise the maximum amount that can be invested in such companies from 25% to 30%, based on the proportions when invested (that is why they have managed to already exceed that figure).

Is this a good idea? Should investors support it? Bearing in mind the travails of Neil Woodford where the funds he managed had large numbers of unlisted holdings, is it wise one has to ask?

Personally, I do not think it is and will be voting against. I am not suggesting that Baillie Gifford, nor the individual fund managers they employ, will make the same mistakes as Woodford. Just that valuing unlisted companies is a different matter to that of listed companies where there is always a market price. In addition unlisted holding are very illiquid in nature. Disposing of them can be very difficult. Private equity investment trusts often trade at a considerable discount to their net asset values for those reasons, while SMT currently trades at a premium of 2%.

Retaining the existing limit would prevent more unlisted investments being made, unless some of the unlisted holdings are disposed of, but that may be no bad thing given the current market enthusiasm for them.

I also note that Prof. John Kay is retiring from the board after serving since 2008. Much as I admire the wisdom of Prof Kay, I welcome this change. I hate to see directors of trusts serving more than 9 years and ignoring the UK Corporate Governance Code, as they so often do.

LSE RNS Announcements. I use the London Stock Exchanges free service to deliver RNS announcements via email. This morning it suddenly changed to a new format without prior notice. The first such notice I received was not in the best format in several ways. Wasted space in a right-hand margin, and no way to print just the announcement text and not the excess.

The second announcement I received just led me into an incomprehensible dialogue. I have sent them a couple of complaints.

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

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Discounted Share Issues at Learning Technologies and Whitbread, plus Trump Media Regulation

Companies are vying to undertake placings at present, to shore up their balance sheets in the face of the coronavirus epidemic. With many businesses closed, or suffering very substantial reductions in revenue, they can hardly be blamed for wanting to raise some cash. But private shareholders are disgruntled when they cannot take part in such fund raising, either by the use of a rights issue, or the inclusion of an “open offer” in a placing.

Let’s look at two recent examples – one I hold a few shares in, namely AIM listed Learning Technologies (LTG) and the other being Whitbread (WTB).

Yesterday LTG announced a placing when the market closed. This morning the details are provided. The shares were issued at a discount of 7.6% to the previous closing price and the dilution of existing shareholders was 9.6%. The directors participated including Chairman Andrew Brode and CEO Jonathan Satchell when private shareholders could not as there is no open offer.

That may not be a massive discount but it still rankles. However the shares could be bought in the market at near the placing price this morning. But my main concern is that the justification for the placing given by the company does not make much sense. They say that “The Company believes the current macroeconomic conditions present opportunities to accelerate future growth and gain further share of the $370 billion corporate learning market. The learning industry is highly fragmented and management believes high quality assets previously tracked, and potentially others that were not, are now becoming available at valuation levels that are highly compelling”.

Times are so tough it seems that you can now pick up some companies cheaply seems to be the argument. Does that make any sense? Not to me. Acquisitions are best made for strategic reasons, i.e. they are complementary business-wise and have good prospects, not simply because they are cheap. If they are also particularly cheap now because business prospects are much worse, that’s no reason to buy them surely?

The LTG announcement also refers to the “robust liquidity position” based on substantial facilities and refers to “further cash preservation” measures it has available. Is this perhaps hinting at some other reasons for the placing?

The other company worth mentioning is Whitbread. This company is now focused primarily on their budget hotel chain, Premier Inn. You can see why they may need the cash as both business and tourist travel has ground to a halt.

They said on the 21st May that “All restaurants and the vast majority of hotels closed in the last week of March 2020” and “Decisive action taken to reduce cash outflows and further enhance liquidity, including significant reductions in capital expenditure and discretionary spend, voluntary pay cuts for Board and management team and use of UK and German Government support packages”. They also announced a full rights issue to raise £1 billion.

They put a gloss on this by saying “The purpose of the Rights Issue is to ensure that Whitbread emerges from the COVID-19 pandemic in the strongest possible position to take advantage of its long-term structural growth opportunities and win market share in both the United Kingdom and Germany”, but they also said this which really spells out the main reason: “Actions Whitbread has taken have ensured its business can withstand a prolonged period of closures and/or low demand.  However, given Whitbread’s high fixed and semi-variable costs, its balance sheet will be impacted by material cash outflows during the period when its hotels and restaurants are closed or operating at low occupancy levels as a result of UK Government measures and/or social distancing”.

You can see why the rights issue is a heavily discounted one – a discount of 47% to the market price on the 20th May to encourage people to take up the shares, based on one new share for every two held. It also indicates how large investors view the issue. They need a lot of encouragement to subscribe.

Now anyone who remembers the RBS rights issue back in 2008 which was also a heavily discounted one will recall what a disaster that was. Such issues are to be treated with caution. In the case of Whitbread, it’s simply a bet that the business can reopen in the next few months and that customers will return. Readers can make their own judgement on that, but the company certainly seems to be taking the necessary steps to survive. However investors should remember that just because you already have some money invested in a company, it is not a reason to put more in. You should just judge it on whether buying the new shares at the price offered makes sense given the prospects for the business. Let the institutions and index tracking funds worry about maintaining their percentage stake.

An interesting item of news last night was that Donald Trump has signed an Executive Order” seeking to amend Section 230 of the Communications Decency Act. That law enables social media sites such as Twitter, Facebook, et al, to avoid responsibility for what appears on their sites because they are not treated as “publishers”. The law in the UK is similar.

That is based on the fact that they do not monitor, edit, or have control over what people post on such sites, and it might be very difficult to do so practically. But in reality they have been intervening in that way more and more. President Trump has raised the issue apparently because they edited a couple of his tweets to add “fact-check” links. Mr Trump only has 80 million followers on Twitter!

In reality these social media sites do monitor what is posted to remove or block some content. I recently had the need to complain to a financial blogger about some comments posted on an article on his site and it was very clear that he had been reviewing all such comments before they appeared, i.e. he was moderating the blog comments. In such circumstances it is difficult to see how someone could claim not to be the “publisher”.

In the financial world, it is quite important that what is published is accurate and responsible and I agree with Donald Trump. Social media sites cannot have it both ways – they are either moderating their sites or they are not, and it they are then they are publishers. In that case they have to take responsibility for all content, not just some of it. But if they are not moderating then the readers had better beware and there needs to be some other way to prevent or discourage libellous comments or market abuse from taking place.

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

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Unsatisfactory Avast AGM, and Designated Accounts

I “attended” the Avast (AVST) Annual General Meeting today. This was of course held on-line using Zoom with only one director in physical attendance (Warren Finegold) who chaired the meeting. Zoom seems to be becoming the de facto standard for on-line meetings.

The Chairman of the company, John Schwarz, gave a brief presentation backed up by some slides. To summarise, it was another strong year of growth and profitability. A new CEO is now in place. EBITDA was up 8% with strong cash generation and hence there was a steady reduction in debt. They added 400,000 paying customers making a new total of 12.6 million. There were numerous new product releases and dividends are up 8.1%.

But nobody could raise questions at the meeting. In addition, although shareholders could submit questions in advance, these were not answered at the meeting. Overall this was a totally unsatisfactory way of conducting an on-line AGM.

Votes were taken on a poll to be declared later, but the proxy counts were quickly flashed on the screen. I noticed Belinda Richards managed to get 13.7% of the independent shareholder votes against her. I wonder why.

The whole meeting was over in 15 minutes.

Apparently customers of The Share Centre have been notified that there are new terms and conditions which cover the future use of designated nominee accounts. This will be a major step forward in investor protection and shareholder enfranchisement. Most brokers, like the Share Centre, use only “pooled” nominee accounts where your holdings are jumbled up with those of all their other customers. It relies on the brokers sorting out who owns what, which can sometimes prove to be not at all easy if a broker gets into financial difficulties. Designated accounts contain both the broker and end customer identification on the share register and hence are by far preferable.

It will be interesting to see how they support such accounts, and whether it will be affected by the proposed merger with Interactive Investor. This was approved by a vote on the 8th April but there has been no further news.

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

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Burford Capital Share Trading and Why No Transparency?

Burford Capital (BUR) was affected by a shorting attack from Muddy Waters (Carson Black) who have published several dossiers attacking their accounts. As I have said before, I have never had any interest, long or short, in the shares of that company but I have publicly questioned the business model, their corporate governance and the prudency of their accounts. But other investors take a different view of the company.

Burford have alleged that there was some manipulation of their share price taking place at the time of the shorting attack, i.e. market abuse by such methods as “spoofing and layering”. They went to court to force the LSE to disclose the share trades so that they could determine whether this was in fact the case and to identify who might have been doing it. The application was supported by a joint letter from ShareSoc and UKSA.

The High Court rejected the application on a number of grounds. For example because the FCA and LSE had already reviewed the matter and could not confirm the allegations.

ShareSoc director Paul de Gruchy has now published a blog article which covers the judgement. See: https://www.sharesoc.org/blog/regulations-and-law/slave-to-the-algorithm-burford-and-the-importance-of-maintaining-confidence-in-a-broken-system/

It is very good analysis of the problem of identifying market manipulation when the market is dominated by high frequency trading. For example it says: “An ordinary investor may wonder what strategies could be revealed by releasing the trading data in relation to a single company on two days. It appears that there is a genuine fear that “algorithmic” trading companies would have their secrets exposed by this information”; and: “This may look like market manipulation, but the LSE, who have a commercial interest in maintaining the income stream provided by high frequency, algorithmic trading, say it is “legitimate”. Indeed, it is a noticeable feature of the judgment that the judge appeared unconcerned by the clear conflict that the LSE has in being a commercial business seeking to maximise revenues with its role in identifying market manipulation. A cynic might say that the difference between “legitimate” and “illegitimate” market manipulation depends on the level of fees you pay to the gatekeeper”.

The share trading all took place some weeks ago. What damage could have been done by disclosure of the trades? The Court could have imposed confidentiality conditions to avoid wider public distribution if they had a mind to do so. The fact that the FCA have given it a whitewash hardly inspires confidence either as they have been notoriously inefficient in pursuing wrong-doing in financial markets.

We do not know whether there was any market manipulation taking place and we will never know as Burford is not going to appeal the judgement. That is a shame because transparency is all important in financial markets.

Investors do want to know when market manipulation is taking place and who is doing it. As Mr de Gruchy says: “It was hard to imagine how confidence in the markets could be further eroded. This judgment has managed to do so”. I completely support ShareSoc’s stance on this issue.

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

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Is it Elecosoft or Eleco? And Electronic Meetings.

One company I hold is building software company Elecosoft (ELCO). I have just received the notice of the Annual General Meeting and one oddity is that they have a resolution on there to change the name of the company to Eleco.  But surely the company used to be named that but amended it when they changed to focus on the software side of the business. So why the reversion? No explanation is provided so far as I can  see.

Another confusion in the notice is that there is a proposed change to the Articles to permit electronic general meetings. That will be solely at the discretion of the Chairman but reading the detail it is not at all clear how electronic meetings are supposed to work. For example, they still include provision for a “show of hands” vote but how does one show one’s hand electronically?

As with many other companies, they are not permitting anyone but two people to attend the AGM. You may be able to attend electronically but no questions are possible. But they may be hosting an event later in the year where shareholders will be able to ask questions in person.

It would certainly be helpful to have clarity on the above issues, and as most companies are dispensing with physical meeting, at least temporarily, it would surely be a good idea for the FCA to lay down some regulations on how electronic meetings should operate rather than letting every company to make up their own.

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

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Property Shares Spooked by Land Securities and Pets at Home Accounts Attacked

Land Securities Group (LAND) published their annual results yesterday. I don’t hold the stock but what they said seems to have spooked the whole property sector.

The company is a large holder of both retail and office property. For retail property, only 38% of rents due were collected within 10 days of the due date in March. For offices it was better at 89% but that is still down from the prior year at the same time. What possibly really scared people was that the company said they estimated that only 10% of its office space was actually occupied. There has clearly been a big trend to move staff to working from home, particularly from central London locations.

If companies realise they can operate with much less office space, the demand longer term may drop unless the office space can be repurposed. Every cloud has a silver lining so perhaps this would be one way to solve the housing shortage in London – just convert the unused office space to apartments. Or perhaps convert it to “competitive socialising” venues as Ten Entertainment (TEG) described their bowling alleys in their results this morning.

Will people revert to working in the office if the epidemic is over? This is the key question because property investment is a long-term game so it would be rash to make decisions on investing in property on short-term demand. I suggest home working will only have limited appeal for both staff and management. Not many staff have space for a “office” at home and keeping kids and pets at bay while working is not easy. It also makes staff motivation and management more difficult. But if the virus epidemic continues for a long time then there will be many fewer people wanting to commute into central London. Offices may move to locations to which people can drive, as happened in the 1960s and 70s.

On the subject of pets, the company Pets at Home Group (PETS) came under attack yesterday from Bonitas Research. They published a report that suggests the accounts of PETS were distorted by incorrect disclosures of loans to joint ventures. You can find the report on the web.

I don’t currently hold PETS shares, but I used to do so. I sold in November 2019. One reason I sold, other than thinking the profit I had made was very adequate, was that the accounts were particularly difficult to understand. The multiple joint ventures (mostly veterinary practices) which seemed to lose money was one concern. Making forecasts of future earnings and cash flow was difficult as clearly the strategy was to take over many of those ventures or wind them up.

Whether the claims by Bonitas are correct (they go so far as to say that the company lied about undisclosed trading loans) I would not like to say as it would require more research than I have time to spend. PETS has yet to publish a response to these allegations, at the time of writing.

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

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Dividend Cut at Elecosoft, Dignity Trading and Public Transport Problems

Many investors are suffering from dividend cuts by companies. The latest one in my portfolio is Elecosoft (ELCO), a company that produces software for the construction sector. In their announcement of the full year results this morning they indicated revenue and earnings were much as forecast to December, and cash flow was good enough to put them in a net cash position.

Normally these results would not have caused any concerns that the dividend would be reduced or cancelled, but not this year. Even though they only previously paid small dividends and half the “cost” as a scrip dividend, this year’s final dividend has been cancelled. This is what the company had to say:

“Proposed Dividend: Elecosoft’s strong trading performance and cash generation in 2019, and, ironically, the strong start to trading in 2020, would normally have warranted the payment of an increased final dividend. However, having regard to the uncertainties created by the Coronavirus situation and the need to conserve our cash resources, the Board has decided to not recommend a final dividend”.

I don’t normally like to challenge the wisdom of management, who may know more than me about the trading position of the company and future revenue, but this does look at first glance to be excessively cautious. That is particularly so bearing in mind they could have paid it as a scrip dividend if they wished to conserve cash. ShareSoc has published some comments and written to the FRC, FCA and BEIS on the problem of dividend cuts suggesting they should issue some guidance. That seems to be a sensible suggestion because at present we don’t know whether this is just management panicking or being simply prudent.

One company that should surely be benefiting from the coronavirus epidemic is funeral provider Dignity (DTY) – I do not hold the shares. More deaths surely mean more business for them. But in their trading update today they show that it is not that simple. The company says the following:

“The absolute number of deaths increased by approximately one per cent to 161,000 from 159,000 in the comparative period last year. Sadly, since the end of the quarter, the UK has witnessed in excess of 20,000 deaths in a single week, the highest since the beginning of 2000. The number of possible incremental deaths as a result of COVID-19 is a matter of substantial speculation. Should 2020 witness a large number of incremental deaths, beyond the 600,000 originally anticipated by the Office for National Statistics, then it is possible that 2021 and 2022 could experience a lower number of deaths than in 2019. The Group will not speculate on the most likely outcome”.

In addition there is the problem that as many people cannot attend funerals, some funerals are being postponed or executors are opting for lower cost funeral packages. Dignity was already suffering from aggressive price competition which had prompted a strategic review before the latest crisis arose.

The company had previously decided to suspend dividend payments. Like Elecosoft they apparently are simply unable to forecast the likely impact of the epidemic on their business. So no guidance for 2020 is being provided.

On Saturday the 9th May Grant Shapps, Transport Secretary, said that only 10% of former public transport capacity will be available in some locations if social distancing is to be maintained. It seems likely that will be so for many months even if people are permitted to go back to work. This will clearly cause major problems in London where almost all commuters use public transport such as trains, the underground and buses.

After the Prime Minister spoke on the 10th May, Mr Shapps issued this tweet: “Speaking this evening the PM was clear – if you’re going back to work in a job that cannot be done from home, please avoid public transport if possible. Go by car, or even better, cycle or walk. To help, we’ve announced more than £2bn in the biggest ever boost to cycling and walking”.

An example of how problematic London transport has become is a report in the Times that says Transport for London (TfL) has asked the Government for £2 billion. To quote: “TfL is down to its last £1bn, which is being burnt at a rate of £21m a day — leaving it less than two months from emptying its coffers and illustrating the intense pressure on local authority finances”. The article suggests the Government will attach some strings to any funding.

Mr Shapps was clearly right to point out the public transport capacity problem, but his apparent remedy to get everyone walking and cycling makes little sense. It is a typical view of politicians who can afford to live in central London. But for the vast majority of London commuters who travel many miles to get to work, it’s simply impractical even if they are keen cyclists.

Mr Shapps also justified his proposals by saying the epidemic is a great health opportunity to encourage active travel with the objective to double cycling by 2025. He also proposes to implement at least one “zero emission” city, and argues that one of the few positives will be improved air quality. He actually said there are “more than 20,000 extra deaths a year attributed to NO2 emissions”.

This figure is nonsense. It repeats the past allegation of 40,000 deaths from air pollution in the UK which has been shown to be simply wrong and a corruption of statistical evidence. In reality, there may be a few months shortening of life expectancy from all air pollution sources, a lot of which cannot be removed such as natural sources. But the figure is essentially uncertain and it is clear there are no deaths directly attributable to pollution. To specifically indicate NO2, which mainly comes from transport, as being the problem is also wrong when the Government advisory body COMEAP could not even agree that NO2 contributed to the negative impact on health of air pollution from particulates.

Mr Shapps clearly knows little about air pollution and its impact on health but is using his ignorance to put a positive spin on his actions in response to the transport crisis.

Just to show how there is no direct correlation between traffic levels and air pollution, this is what the London Air Quality Network (LAQN) recently reported: “Levels of the pollutant nitrogen dioxide (NO2) has reduced significantly during lockdown, research from King’s College London has found. Concentrations of NO2 have lowered as much as 55% due to less road traffic. However, levels of PM10 and PM2.5 were higher after lockdown than at any other time in 2020, due to easterly winds and pollutants from northern Europe”. The reduction in NO2 is perhaps not surprising when measurements by the LAQN are often taken at the roadside so will be heavily influenced by adjacent traffic. But as particulates (PM10 and PM2.5) are of much greater health concern you can see that Mr Shapps’ spin on the air pollution issue is somewhat misleading. Other UK cities have also shown no direct correlation between traffic reduction from the epidemic and air pollution – at least to date.

The air pollution problem is much more complex than can be solved by encouraging walking and cycling alone.

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

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Porvair and Segro AGMs

I “attended” the Annual General Meeting of Porvair Plc (PRV) this morning. This was of course not a conventional meeting with minimal numbers there in person. But there was a telephone conference call before the legal meeting to enable shareholders to ask questions, although there were less than half a dozen investors who chose to dial-in.

The Chairman, John Nicholas, made some brief comments to begin with. He mainly just summarised the recently issued trading statement. But he did say all plants were open and they expected to be modestly cash generative for the balance of the year except in extreme circumstances. There was no AGM statement, so we then went straight into questions.

One investor asked about the impact of the problems in the aviation sector. Answer: too early to say.

I asked about the impact of the oil price decline, which in case you had not noticed briefly went negative yesterday. There was no clear answer to that but their recent acquisition Royal Dahlman obviously might be affected.

I also asked whether they could do something about the extreme volatility of the share price and the wide spread. All shares are volatile of late but Porvair is one of the worst in my portfolio and the spread this morning was 7%. That is unusual for a company of this size. They will talk to their broker Peel Hunt about this.

Another shareholder suggested they should do more to raise awareness of the company and it was admitted that they do not spend much time on promoting the company to investors. It might certainly help liquidity if they did so.

As the AGM itself was done on a poll with all resolutions passed, the “meeting” was over in 15 minutes. However it was still a useful event.

The other AGM held today which I could have attended in normal circumstances was that of Segro (SGRO). That was at exactly the same time as Porvair, but they also did not provide any way for shareholders to attend electronically. Questions could be submitted in writing via email but that is hardly a good alternative. I hope they publish the questions and answers.

Note that ShareSoc have just published a blog post concerning the letter written by ShareAction to FTSE-100 companies complaining about the lack of provision of virtual AGMs this year by many companies. Their complaints are very justified. The technology is simple to use and a simple conference call would suffice for many companies.

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

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Rio Tinto Production and BHP, plus Hollywood Bowl Placing

Mining company Rio Tinto (RIO) issued a statement on its first quarter production this morning. This was a very positive report and the share price has risen over 5% at the time of writing. The share price of BHP Group (BHP), another big miner in the FTSE-100, rose in tandem.

I am not generally a fan of mining companies as their profits are very dependent on the prices of the commodities they produce, but with a p/e of under 10 and a very high dividend yield I did consider those two companies worth a small punt recently. They are both heavily dependent on industrial consumption in China but that seems to be recovering, particularly for iron ore. That may of course simply be because it is difficult to halt blast furnaces temporarily. Their production guidance for 2020 remains basically unchanged apart from in copper where demand and prices have fallen and production and development of a new mine in Mongolia has been disrupted by the coronavirus epidemic.

Hollywood Bowl (BOWL) announced a share placing this morning at 145p – a slight premium to last nights price. The share price has risen by 10% today. This company is in the “hospitality” sector as it runs bowling alleys primarily, all of which have been closed.

The company has taken aggressive steps to cut expenditure such as halting all new developments, delaying all discretionary expenditure, furloughing staff using Government schemes and deferring a proportion of salaries for management. It is also negotiating with its landlords to defer rent payments for 9 to 12 months. In addition it has agreed relaxed covenants with its lenders, and it previously announced that the interim dividend will be cancelled.

All of this means that monthly cash burn will reduce to £1.6 million while its sites remain closed so it suggests it won’t run out of cash until the end of October. But I am still glad I sold most of the shares I held in this company in February. Financial results for this year are clearly going to be very poor and it may take a long time before customers return in volume.

As with all companies in this sector, buying the shares at present is pretty much a bet on when the restrictions might be listed and business return to normal. I have no better view on that than most readers of this article I suspect. But the share price probably rose today on the view that the company may avoid going bust if life returns to normal within a few months’ time.

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

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