Company Refs Acquired

Slater Investments and Stockopedia have issued a press release saying they have acquired the Company Refs financial analysis service. Company Refs was devised by Jim Slater, the father of the current Slater Investments Chairman and was originally published in paper form as a summary of all the key financial information on public companies on one page. It was later digitised but active marketing of the service has not taken place in recent years. But it was a truly innovative solution to help both professional and private investors when first devised.

Stockopedia provides a very similar service and the press release suggests that current REFS subscribers will be integrated into the Stockopedia service while Slater will use the financial database and intellectual property for internal research purposes.

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

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Goals Soccer Centres, Renishaw, Economic Forecasts, Politics and Portfolio Transfers

It’s Friday in August, the markets and the pound are falling, the Conservative Party have lost a bye-election meaning their majority in Parliament is vanishing, and the Governor of the Bank of England has forecast a shrinking economy as a result of Brexit. It’s gloom all around which explains the falling UK stock market today. But Mark Carney is only forecasting a 33% chance of a contraction in the UK economy in the first quarter of 2020, which means that there is a 67% chance it won’t and even then for only a short period of time. That’s assuming you have any confidence in Bank of England forecasts which are notoriously unreliable. The media are not exactly reporting matters in an unbiased way. Those who support Brexit are unlikely to be worried by such forecasts and they would probably accept a temporary disruption to the economy. Remaining or leaving the EU was never a primarily economic decision so far as Brexiteers were concerned – it’s about democracy and who makes our laws.

But there is certainly bad news for investors in Goals Soccer Centres (GOAL) who have reported that the defects in their accounting go back to at least 2010. The 2018 audit has had to be suspended, there is no time frame for producing the accounts and therefore the company is going to be delisted from AIM. This looks to be another example of defective audits – the past auditors were KPMG and BDO.

I have complained about the length of time it takes to switch portfolios between investment platforms in the past. The good news today is that I finally completed one. This latest one I have done has taken from the 23rd May to the 31st July, i.e. 70 days. And that’s one where it was a transfer of holdings in a personal crest account with Charles Stanley, after they raised their charges on such accounts, to another personal crest account with another provider which was already in existance. That should have been very simple as there were no fund holdings in the account – just all direct holdings on the register.

It is really quite unreasonable that account transfers should take so long and require so much effort, including numerous emails and letters to get it completed. It’s anti-competitive to allow such delays to continue.

Well at least that’s one simplification of my portfolios. I also sold out from Renishaw (RSW) yesterday after disappointing final results – revenue down 7% and below forecasts mainly as a result of alleged economic conditions in the Asia Pacific region. The share price is down another 5% this morning at the time of writing. This may be a fundamentally sound business with good products in essence but clearly investors like me are losing confidence that the company can justify its high p/e rating when growth is going into reverse.

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

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New Stockopedia Version and Abcam Trading Update

Like many private investors, I use the Stockopedia software to provide me with a summary of key financial information on a company. I also use it to provide “alerts” on price changes and for occasional stock screening. It’s one of the key elements in my share portfolio management. It has always been quick and easy to use, without too much complexity. They have just released a new version of the software that now supports mobile devices much better – that was certainly an issue with trying to use it previously on my mobile phone.

I have spent a few minutes trying the new version and reported quite a number of issues with it to Stockopedia support. Here’s a few of the key ones:

  • Portfolio holdings and alerts only show 40 stocks when my portfolio has many more than that, so cannot easily scroll up and down the whole portfolio.
  • Not supported on Internet Explorer which is still my default web browser.
  • Printing a stock page uses more pages – for example printing a report on Abcam now uses 5 sides in Chrome, i.e. 3 pages on a duplex printer instead of one page on Explorer with the old version. Print format screwed up also at top left. As with many new software versions, testing of print functions seems to have been limited.
  • Cost of holdings sometimes shows nil.

In general the testing of the new version seems to have been too little, even if I am very experienced at picking up bugs in software. As a result I won’t be switching to the new version just yet until they sort out some of these problems. However it is very easy to switch back and forwards between the versions. Let us hope they do not abandon the old version until all the problems are resolved.

On the subject of Abcam (ABC) yesterday the company issued a trading update for the year ending June. It looked fairly innocuous to me but the share price promptly fell sharply and finished the day down 13.3%. The only possible issue mentioned was the announcement that CFO Gavin Wood was stepping down “over the next year in order to continue his career closer to his family home”. He has been with the company for 3 years.

Did that justify the investor panic? Surely not. The FT commented that the company’s expansion plans had unsettled investors, but the announcement really only suggested a continuation of the growth strategy and formulation of plans to achieve that. Perhaps it was simply that investors had realised that a prospective p/e of 40 for the current year after a strong recent share price run was a bit too high. Or perhaps it’s that summer season problem where liquidity is low and hence share prices tend to be volatile. Anyway the share price is recovering today at the time of writing and my portfolio loss on Abcam yesterday was mostly offset by the rise in Learning Tecnologies (LTG) which issued a very positive trading update. It’s share price rose about 20% on the day.

Abcam is of course a producer and distributor of antibodies. On a personal note, last week I was injected with monoclonal antibody named Prolia from Amgen to control osteopenia. If I had looked at the side effects and user reports on the internet beforehand I might have chosen not to have it, but no concerns so far. Only costs about £1,000 per shot apparently for six months. No wonder the NHS needs more money.

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

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Broker Charges, Proven VCT Performance Fee and LoopUp Seminar

The Share Centre are the latest stockbroker to increase their fees. Monthly fee for an ISA account is going up by 4.2% to £5.00 per month with increases on ordinary share accounts and SIPPs also. This is the latest of a number of fee increases among stockbrokers and retail investor platforms. The Share Centre blame the required investment in technology development and “an increasing burden of financial regulation”. The latter is undoubtedly the result of such regulations as MIFID II imposed by the EU which has proven to be of minimal benefit to investors. As I was explaining to my sister over the weekend, this is one reason why I voted to leave the EU – their financial regulations are often misconceived and often aimed at solving problems we never had in the UK.

I received the Annual Report of Proven VCT (PVN) this morning – a Venture Capital Trust. Total return to shareholders was 10.3% last year, but the fund manager did even better. Of the overall profits of the company of £18.6 million, they received £7.7 million in management fees (i.e. they received 41% of the profits this year). That includes £5.6 million in performance fees.

Studying the management fee (base 2.0%) and the performance fee, I find the latter particularly incomprehensible. I will therefore be attending the AGM on the 3rd July to ask some pointed questions and I would encourage other shareholders to do the same. I am likely to vote against all the directors at this company.

I also received an Annual Report for Proven Growth & Income VCT (PGOO) and note that of the 4 directors, 2 have served more than 9 years and one is employed by the fund manager. So that’s three out of four that cannot be considered “independent” so I have voted against them. I would attend their AGM on the same day but the time is 9.30 which is not a good choice and would waste a whole day.

Yesterday I attended the “Capital Markets Day” of LoopUp (LOOP). This is an AIM listed company whose primary product is an audio conference call service. It’s just a “better mousetrap” to quote Ralph Waldo Emerson as 68% of the world are still using simple dial-in services rather than more sophisticated software products such as Zoom and WebEx. There are lots of other competitors in this field including Microsoft’s Skype which I find an appallingly bad product from past experience. Reliability and simplicity of use is key and LoopUp claimed to have solved this with no learning required, no software downloads or other complexities and high-quality calls aimed at the corporate market.

I have seen the company present before and do hold a few shares. This event was again a very professional sales pitch for the company and its product with no financial information provided. Yesterday they also covered the addition of video to their basic conference call service which was announced on the day, plus a new service for managed events/meetings. Video addition is probably an essential competitive advantage that was previously missing. They covered how their service is differentiated from the main competitors which was good to understand.

Last year they acquired a company called MeetingZone which has increased their customer base and revenue substantially and are transitioning the customers to the LoopUp product. Revenue doubled last year and is forecast to rise by about 50% in the current year. Needless to say the company is rated highly on conventional financial metrics and return on capital has been depressed by the cost of the acquisition. But one reason I like this company is that it’s very easy to understand what they do and what the “USP” is that they are promoting, plus their competitive position (many company presentations omit any discussion of competitors).

They also have an exceedingly good sales operation based on groups of people organised in “pods” which was covered in depth in the presentation. These only have team bonuses and the key apparently is to recruit “empathetic” people rather than “individualists”. Perhaps that is one reason 60% of them are female. As I said to their joint CEO, I wish I had seen their presentation some 30 or more years ago when I had some responsibility for a software sales function.

The latter part of this 3-hour event was an explanation of how the software/service is used by major international law firm Clifford Chance with some glowing comments on the company from one of their managers. Customer references always help to sell services.

In conclusion a useful meeting, but lack of financial information was an omission although “Capital Market” days are sometimes like that. But the positive was that they had both institutional investors and private investors whereas some companies deliberately discourage the latter from attending such events which I find most objectionable.

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

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Chas Stanley Prices Crest Membership At Ridiculous Level

Charles Stanley have sent out a letter to all their customers who use Personal Crest accounts that in future they will be charged £504 per annum (inc. VAT). Although the company stopped offering the service to new customers some time ago, existing users have in some cases been paying nothing to be a Personal Crest member. They clearly want to get rid of all such users of their service, including those using the low-cost Chas Stanley Direct platform because £504 is not likely to be an economically justifiable fee for most people.

They claim in the letter that there is a gap between what they charge for the service and the effort and costs involved as a Crest sponsor. Is this really true though? Almost all stock market trades go through the Crest system whether you are in nominee account or Personal Crest account. So why should it cost more?

In reality they are probably just trying to “simplify and standardise their service to cut costs and improve the service to clients” as they recently announced. But there are major advantages to having a Personal Crest account. You are on the share register of the company so the shares are clearly owned by you unlike in a nominee account. In addition you get the dividends on the shares paid directly to you instead of it sitting in a broker’s account earning them interest rather than you. Clients would probably be willing to pay a reasonable fee for the service, but not £504.

The only saving part of the announcement is that they are offering a free transfer to another Crest sponsor free of charge. I imagine many people will take up that offer although there are not many alternatives. I suggest clients of Chas Stanley who are affected by this change also send in complaints about this change.

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

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Share Plc Offer and Improving Corporate Reporting

There was a surprise announcement this morning of a possible offer for Share Plc (SHRE) who run the Share Centre. That is a very popular platform with private investors because it is low cost and administratively efficient but also because it is one of the few investment platforms that makes it easy to vote your shares held in nominee accounts such as ISAs. Takeovers of investment platforms are never popular with customers because it means having to learn one’s way around a new web/IT system and charges may also change. More consolidation of platforms will also reduce competition in this sector.

The offer is from Interactive Investor but it looks like they may have some difficulty even if founder Gavin Oldham supports it. He, his family and associated trusts held 69% of the share in December 2018 but there was also 18% held by staff and customers.

Yesterday I attended a roundtable at the Financial Reporting Council (FRC) to discuss the “Future of Corporate Reporting”. It was mainly attended by experienced private investors who I won’t name individually. But there was a consensus on many of the issues discussed. I will highlight some of the interesting points that arose:

  • There was widespread concern about the size of Annual Reports and the excessive “padding” and use of “boiler-plate” content. It was clear that most of the investors attending skipped large sections of most Annual Reports.
  • One even went so far to say that he always went to the accounts filed by a company at Companies House which often differed from that in the Annual Report and also contained more information. This is surely an issue that should be looked at by the FRC. It is surely not acceptable that there should be any difference.
  • There was a general view that commentary by the Chairman or CEO tended to be over-optimistic and that risk reporting was full of platitudes while ignoring the really big risks that a company faced. The Macando oil-well disaster at BP and the recent problems at Boeing with the 787Max were mentioned as examples.
  • Other particular issues raised were the valuation of intangibles on the balance sheet, the long-standing complaint that IFRS standards were inconsistent with Company Law (but the FRC has limited input to IFRS standards), the lack of disclosure of long-term debt terms, and the failure to disclose banking covenants.
  • There were also complaints about private investors being excluded from receiving some information disclosed to analysts by companies, and refusal for attendance at company presentation events. The lack of an equivalent rule to that in the USA (Regulation FD on Fair Disclosure) was a major problem.
  • As regards excessive size of Annual Reports, the FRC staff suggested that splitting up the Annual Report into sections might assist although I said that did not really solve the problem of excessive size and irrelevant content.
  • Reporting of ESG factors was discussed but this seemed to be a difficult area due to the lack of standards and the ability of companies to only present positive information.
  • The FRC does undertake quality reviews on large company audits and perhaps a scoring system for Annual Reports could be introduced to raise standards. But it is all too easy at present for company directors to throw masses of superfluous information into the Annual Report to distract investors from the really important facts. I suggested that there be a word or page limit on sections of the Annual Report to ensure that only key information was communicated. For example, do we really need 30+ pages of Remuneration Report as we are now getting at some companies? Where companies wished to provide more detailed information, that could perhaps be given on their web site.

In summary this was a useful meeting to raise the concerns of experienced and knowledgeable investors. Let us hope that the FRC will take up some of these issues.

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

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Running Out of Gas, and InvestorEase to Close

Media reports suggest that National Grid is running out of gas, and having to pay industrial users to stop consuming it. This is due to the exceptionally cold weather spell. But National Grid has also been running out of shareholders because of fears over possible nationalisation. The share price is down by 33% on its peak in 2016. As I have probably said before, the threat of nationalisation has undoubtedly spooked international investors who now dominate the holdings of UK public companies.

It seems Macquarie analysts have suggested that investors should encourage utility companies to move their domicile to another country. Shadow business secretary Rebecca Long-Bailey has said “Transferring asset holdings overseas in pursuit of higher compensation shows total contempt for the British Public”, but I think she complains too much. Surely moving the registration of a holding company would not be effective? The Government could just take control of the assets and bearing in mind principles set by other recent laws and legal judgements, just pay what they wanted. It would all be justified as being “in the national interest” even under EU law if that still applied.

One would have to pick the domicile carefully to gain much benefit. For example, National Grid has substantial assets in the USA so they could possibly keep those out of reach by demerging the relevant part of their business. But that only provides limited protection to current investors.

I have not personally held National Grid for some time because of the political risk and am not invested in other utility companies either. If those companies wish to avoid the risks of a Labour Government and their current policies, they might find it wise to look at other ways of thwarting damage to their shareholders interests.

InvestorEase

InvestorEase is a share portfolio management software product which I have used for the last 20 years. The current owner (Financial Express) has announced they are closing the service at the end of May on the basis that it is no longer economic to continue with it.

This is disappointing as although I also use ShareScope, there are some features in InvestorEase that are not easily replicated in the former. InvestorEase is also quicker and easier to use than ShareScope which has so many options that configuration is complex (SharePad from the same company is not a viable alternative either from my knowledge of it). But it’s hardly surprising that FE decided to close InvestorEase as the developer who maintains the software has clearly been having difficulty and losing interest of late.

I also have a portfolio in Stockopedia, but again I am not sure that will give a good solution. I need a product/service that enables maintenance of multiple portfolios with large numbers of holdings and transactions, plus a consolidated view on demand. The other reason I am running more than one such product is because I like to have a back-up in emergencies and by duplicating entries in the two products I can spot any obvious errors easily.

So any suggestions for good alternative solutions for the private but semi-professional investor would be welcomed.

Or perhaps anyone who might have an interest in taking on the product, which has suffered from total lack of marketing in recent years, should contact Financial Express.

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

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