Tag: Abcam

Revolution Demanded at Abcam – Quite Rightly

The former CEO and founder at Abcam (ABC) is planning to call an EGM to replace the Chairman. He has published an open letter to shareholders which spells out the reasons – see https://www.globenewswire.com/news-release/2023/05/17/2671109/0/en/Jonathan-Milner-Announces-That-He-is-Taking-Steps-to-Call-an-Extraordinary-General-Meeting-of-Abcam-Shareholders.html

My comment is the sooner the better. His letter is a very good summary of where Abcam has gone wrong recently. I hope shareholders will support him.

I purchased Abcam shares in 2006 soon after the company listed on AIM in 2005. I still have my analysis of the shares made at the time which included a cash return on capital of 78% and a prospective p/e of 22. Revenue was growing at a fast pace and all went well under the leadership of Jonathan Milner as CEO for several years.

But even before he stepped down in 2020 the business was clearly in some difficulties. I commented on this blog negatively about the large expenses on new IT systems (which was capitalised) and very generous remuneration schemes. I could not get my reasonable questions answered by the Chairman at the AGMs I attended and subsequently voted against him.

You can search this blog for the past articles on Abcam which reinforce what Mr Milner is saying.

But the last straw was the delisting from AIM and the move to NASDAQ in 2022. As Mr Milner points out, this was pointless and has not benefited shareholders. I sold most of my shares starting in 2020 and the balance only recently – overall return of about 30% per annum since 2006. But the recent financial figures have been disappointing with margins declining and way too many adjustments.

The conversion of Abcam shares to ADRs for the NASDAQ listing may help to frustrate the calling and voting at an EGM.

Mr Milner says the current Chairman is weak – I agree. He needs to go with a refreshed board put in place.

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

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Adjustments, Adjustments and Adjustments at Abcam, Oil+Gas Companies and FCA Decision on Woodford/Link.

Abcam (ABC) published their interim results yesterday (on 12/9/2022). I have commented negatively on this company and its Chairman before despite still holding the shares.

The same game continues – revenue up but reported operating profit down and cash flow from operations down. But adjusted operating profit up. What are the adjustments? These include:

£2.6 million relating to the Oracle Cloud ERP project (H1 2021: £2.0m); £6.0 million from acquisition, integration, and reorganisation charges (H1 2021: £3.5m); £9.0 million relating to the amortisation of acquired intangibles (H1 2021: £4.0m); and £13.0 million in charges for share-based payments (H1 2021: £6.7m).

The ERP project costs continue and I very much doubt that they are getting a justifiable return on the investment in that project now or in the future. Together with the acquisition, integration and reorganisation charges it just looks like a whole ragbag of costs are being capitalised when they should not be.

The company also announced there would be a webinar for investors on the day and a recording of it available on their web site later. Neither was available on their web site on the day or at the time of writing this. More simple incompetence!

The share price of Abcam has been rising of late which just tells you that most investors are unable to look through the headline figures and the sophistry of the directors.

As a change from investing in technology companies such as Abcam who of late are massaging their accounts, and not paying dividends, my focus has turned to commodity businesses. I have even been buying oil/gas companies such as Shell, BP, Woodside Energy and Serica Energy plus several alternative energy companies. There is clearly going to be a shortage of energy worldwide for some time while institutional investors have been reducing their holdings in some oil/gas companies simply from concerns about the negative environmental impacts and long-term prospects as Governments aim to reduce carbon emissions. But in reality the progress on carbon reduction is slow and I feel oil/gas companies will be making good profits for a least a few more years. Energy has to come from somewhere and these companies should do well and can adapt to the new environment easily. In the meantime, they will be paying high dividends and/or doing large share buy-backs.

I am generally not a big holder of commodity businesses as their profits can be volatile and unpredictable as they depend on commodity prices. These can be moved by Government actions or political disruptions such as the war in Ukraine. Will the war end soon? I have no idea. But even if it does there is likely to be a new “cold war” if Putin or other hard line Russian leaders remain in charge. I never try to predict geopolitical changes but just follow the trends in the stock market.  

The partially good news for Woodford investors is that the FCA has formed a provisional view that Link Fund Solutions may be liable for £306 million in redress payments to investors for misconduct rather than losses caused by fluctuations in the market value or price of investments. In other words, it may be nowhere near covering investors losses in the Woodford Equity Income Fund. They have announced this simply because Link is currently subject to a takeover bid which they have approved subject to a condition to commit to make funds available to meet any shortfall in the amount available to cover any redress payments. I suspect this is going to make gaining a full recover for investors somewhat problematic.

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

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Abcam to Delist from AIM and Victoria Webinar

Biotechnology company Abcam (ABC) is one of the largest AIM listed companies (market cap £2.7 billion). Yesterday (20/7/2022) they included in a trading update a statement that they are planning to cancel the admission of their shares on AIM. They previously moved to list their shares also on Nasdaq so they are currently dual-listed. This means they have already lost the IHT tax advantage of most AIM shares which qualify for Business Property Relief.

The move to Nasdaq was no doubt made in the anticipation that the valuation of the company might be higher and to attract more US investors. It did not obviously have an impact. They now say the latest move is to improve liquidity. But it will prove a great inconvenience to UK investors.

The board of the company does not seem to realise that there are good reasons why Abcam does not look attractive to investors. The financial profile of the company has been declining in recent years. Reported EPS has declined and ROCE is now down to 3%. Only adjusted EPS has held up due to adjustments which comprise everything the company wants to ignore such as “systems and process improvement costs” and “integration and reorganisation costs”.

How will removing one listing venue help liquidity? I do not understand. If the company proceeds with the delisting from AIM I will be selling my shares and I have already been reducing my holding after losing confidence in the current Chairman.

We should get a vote on this proposal so I hope shareholders will vote it down.

Another event yesterday was a Results Webinar for flooring manufacturer and distributor Victoria (VCP). Geoff Wilding took over as Executive Chairman of this company ten years ago after a revolution and turned around what was a moribund business into a great success. After a number of acquisitions the company claims that £1 invested in VCP on the day Geoff was appointed Chairman would today be worth £24.57 (with dividends reinvested).

After backing Geoff in his appointment I bought a few shares but I did not do as well as that claim might suggest because I never held a large number of shares and am now down to a nominal number. I became concerned about the high debt (net debt now £406 million ignoring leases which actually rose on these latest numbers which were otherwise good – revenue up 54% and adjusted eps up 38%). Understanding the business after several acquisitions is not easy and the preference shares issued to Koch complicate matters although operationally it seems to be well managed. The webinar helped to explain matters and there was useful discussion on the results by Paul Scott et al on Stockopedia yesterday.

Numerous acquisitions always lead to difficulty in understanding the true financial position of a company. I am currently reading the book “Engines that move markets” by Alasdair Nairn and he is particularly good on the history of internet companies. He has this to say about AOL: “AOL’s chequered financial history is readily apparent. In the early days, analysing the accounts required constant to-ing and fro-ing between different years in an effort to separate the operating results from other items such as acquisitions/ disposals, financing and changes to accounting treatment. In many ways analysing AOL was the same as trying to analyse the acquisitive conglomerates of the 1970s and 1980s. The business never appeared to be in a ‘steady state’, making it difficult to estimate future operating margins and rates of subscriber growth. Some analysts argued that the changing nature of the business made this analysis fruitless, but such an argument was spurious. For any investor buying something, the more information that can be gained about the ‘substance’ of the something that is being bought the better. Sadly, for Time Warner, this did not appear to be a principle that was followed”.

The merger of AOL and Time Warner subsequently turned out to be one the biggest mistakes ever made in US corporate history.

Numerous acquisitions certainly complicate any investors understanding of a business and in addition acquisitions can be risky. On some measures Victoria currently looks cheap but you need to have confidence that Geoff Wilding will continue to manage the risks well.

Note that the Victoria webinar was hosted by the Investor Meet Company platform which is a good service and where you can no doubt find a recording.

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

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Is the Investment World Changing?

With the war in Ukraine continuing and inflation hitting over 6% (and likely to go higher), it seems a good time to review one’s investment strategy. My thoughts on this were prompted by watching the panel discussion at the Mello Trusts and Funds webinar on Tuesday. Some members argued that now is the time to move into commodities and out of the high growth technology stocks that have been such winners in the last few years. Is growth going to go out of fashion?

It’s certainly very clear that high inflation in basic commodities such as food (likely affected by the war in Ukraine who are a major producer) and oil/gas (also affected by the war and the associated sanctions on Russia) will have a big impact on consumers in the UK in the coming year. We are already seeing this in the shops and in on-line stores from my brief shopping experience yesterday.

As the Chancellor’s Spring Statement indicated yesterday, the UK is facing its biggest drop in living standards on record as wages fail to keep pace with rising prices. His measures to relieve this by raising the National Insurance threshold and cutting fuel duty will help a few people but not the retired or those not in work. The basic rate of income tax will fall slightly in 2024 in time for the next general election but the country will remain a high tax environment. Perhaps the Chancellor has decided he cannot protect people from the world economy which is undoubtedly true so he has just made a few gestures.

Economies might grow less rapidly or recessions hit as a result of these adverse economic winds, or we might see the dreaded “stagflation” return to the UK. But does this mean I should change focus on the types of companies I invest in?

I don’t think so and I shall repeat what Investment Manager of Smithson Investment Trust (SSON) said in their Annual Report which I was reading today: “One might then ask, if interest rates are so obviously on the rise, and this so obviously creates a more favourable environment for value companies rather than quality or growth companies, shouldn’t we adapt our strategy to buy the companies which stand to benefit? Well, no. Owning high quality companies with sustainable growth is a winning strategy over the long term, has been shown to work through several economic cycles, and is one which we know we can execute successfully. Whilst other managers may be able to run a value strategy, we believe it is inherently more difficult, as you cannot hold value companies for the long term if all you are doing is owning a poor quality company at a low price, which you hope will re-rate in the future. If this does happen (there is no guarantee), you then have to sell the company to find another such investment, and so on. This means that unlike our strategy, time is not your friend, because the longer you are holding the company and waiting for it to re-rate, the lower your annualised returns become, and if you’re particularly unlucky, the worse the company becomes. On the other hand, it matters less if it takes more time for the market to appreciate the value of the type of companies we hold in our strategy, because the highest quality companies are constantly getting better, or at the very least bigger, owing to their growth. So, once we have found the right companies, all we have to do is wait. We think that patience is one of our competitive advantages, because with the strategy we employ, it tends to pay off”.

Commodity companies go in an out of popularity as their profits depend on the commodity demand and prices. But the production of most commodities responds to price changes so in a year or two the boom is over and the bust follows as over-capacity has been created. Chasing these rotations requires a large amount of time and effort when I prefer to purchase companies that one can stick with for many years.  

The impact of high inflation does mean that one has to be careful in selecting companies with high margins and pricing power, i.e. the ability to raise selling prices when their costs rise. But that is a truism in all economic circumstances. Those are two factors that differentiate quality companies from the pedestrian ones.

Companies that have index-linked contracts with their customers might be worth looking at now that inflation is heading to 10%. That applies to many infrastructure investment companies for example and another sector is property companies who often have inflation linked rent reviews. I hold a few shares in Value and Indexed Property Income Trust (VIP) which is one such company.

Incidentally Smithson noted they had sold their holding in Abcam (ABC) which I also commented on negatively recently. They are concerned about the uncertain paybacks on the investments being made which I completely agree with.

Changing my investment strategy which has developed over the last twenty years and has made me an ISA millionaire does not seem to be wise. There was an interesting article published today in the Daily Telegraph on ISA millionaires of which there are apparently over 2000 in the country now according to HMRC. There may be more than that as Hargreaves Lansdown alone claim to have 973. See article here: https://www.telegraph.co.uk/investing/isas/meet-millionaires-made-fortune-using-isas/

The average age of ISA millionaires is apparently 71 and the article reports that the top three stocks favoured by these investors are pharmaceutical company AstraZeneca, insurer Aviva and oil giant BP. Popular funds include Artemis Income, Fidelity Global Special Situations and Fundsmith Equity. That tells you that you don’t need to be a speculator to become an ISA millionaire. You just have to invest the maximum possible every year in a diverse portfolio and stick with it.

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

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Comments on Abcam Results Webinar and Fonix Mobile

It’s nine months since I last commented on Abcam (ABC) but I still hold some of the shares so I watched the results webinar today. This covered the results for both the 12 and 18 month periods ending December 2021 as they moved the company’s year end – for no good reason that I could see.

The reported profit was up at 7.1m in the 12 month period which is a substantial improvement and revenue was up by 17% but the company preferred to talk about adjusted profits which were given as 60.4m “adjusted operating profit”. Adjustments comprise everything the company wants to ignore and even extends to “systems and process improvement costs” and “integration and reorganisation costs”.

In summary the results were not brilliant in essence for what is supposed to be a growth company in a hot sector (biotech).

I have commented negatively in the past about the slow and expensive implementation of a new ERP system and on this it is stated that “roll-out of the final states of the ERP renewal programme continued”. In other words, it’s still on-going.

The webinar comments from the CEO effectively said the company had been building for the future in the last couple of years. I hope that is the case. The strategy in many regards makes sense but a lot of costs are being incurred which have been capitalised. The share price has not moved far in the last three years but the company has been impacted by the Covid epidemic.

One question put by an analyst was for more explanation of the comment in the announcement that “The Board continues to review options to increase share liquidity and intends to consult with shareholders on these options in due course. Is this an indication of a placing particularly to attract more US shareholders? I suggest it might be. But the analyst did not get an answer to his question.

Another company that reported results this morning was Fonix Mobile (FNX). There was a good profile of this business published in Small Company Sharewatch last week. I can do no better than repeat some of the comments by Paul Scott of Stockopedia on the results:

“I’m impressed with these numbers. Fonix floated on AIM in Oct 2020, and amazingly for a fairly recent float, it has not collapsed after a profit warning, nor run out of money!

I remember having a video call with the CEO around the time it floated, and thinking what an impressive business this is – dominating a niche of payments/votes for reality and charity TV shows (e.g. X-Factor, Children In Need), Fonix has the infrastructure for taking those payments/votes, and the customers tend to be very sticky, coming back year after year – on the basis of if it ain’t broke, don’t fix it.

That results in a cash generative business, with high margins, which is able to pay out decent divis, with a yield of c.4%”.

It is a relatively small business but looked reasonable value to me although the costs of the AIM flotation were high and directors were selling as part of it but I did read the prospectus so did purchase a few shares. The interim results are excellent.

This is the kind of business I like – good return on capital, high recurring revenue and positive cash flow. The prospects look good.

But like any e-payment business its accounts can be difficult to follow and there is a regulatory risk for the business if the FCA decided to tighten its rules.

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

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Abcam Remuneration Vote Only Narrowly Won

There was a vote by Abcam (ABC) shareholders last week on a new Remuneration Policy including a new “Profitable Growth Incentive Plan (PGIP)”. I voted against them because the proposals seemed very generous to me particularly bearing in mind that they are in addition to existing bonus and LTIP schemes and could involve up to 2.8% of shares being awarded to participants in the scheme (including 1.36 million shares to the CEO, currently valued at £14.25 per share).

The outcome of the vote was that 46% of shareholders voted against the revised Remuneration Policy and 44% against the PGIP. The company says that those who use proxy advisors did not support the resolutions but that “Abcam’s Remuneration Committee received positive indications of support for the final proposals following an extensive consultation process” prior to the meeting.

It seems the company plans to do nothing about this substantial opposition to the remuneration proposals which I consider most unfortunate. All they say is “The Board remains firmly committed to maintaining an open dialogue with its shareholders to ensure it fully understands their views and it will continue to constructively engage with those shareholders who were unable to support the proposals”. This is simply not good enough. I will also be voting against the current Chairman in future as I have done in the past after he failed to answer some simple questions I posed at a previous AGM.

This company’s financial performance has been declining in recent years. Perhaps the PGIP was designed to incentivise improvements in that regard but I think the directors and managers have incentives enough.

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

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Market Crash and Abcam Impact from Coronavirus

This morning my stock market portfolio was a sea of red – down 5.6% at the time of writing at 9.30 am.  Not only have most shares fallen, but spreads have widened so it’s not even easy to pick up those shares that are now undervalued at a fair price. I think the answer here is to wait until the immediate panic is over before making any more decisions to buy or sell.

The major impacts on shares have been the threat of the coronavirus Covid-19, where the reality of the possible economic impact is finally sinking in, and the other has been the oil share price decline. It might be only short term but the impact of Covid-19 on China and northern Italy is clearly going to be substantial.

I don’t actually hold any oil company shares and it was just propitious that I said on February 14th when discussing electric vehicles that one should “sell BP and Shell perhaps”. The price of oil is down over 25% since Friday and the share prices of BP and Shell are down 16% and 18% respectively today at the time of writing. These declines have a major impact on the FTSE-100. Does that make them a bargain? Perhaps to dividend seeking investors but these are companies whose share prices are driven by oil/gas prices so they are not the kinds of companies I like to own.

One company I do own is Abcam (ABC) who published their interim results this morning. Revenue up 11% but adjusted profits down 20% with the share price down 7% after a sharper initial drop this morning. They report a £3 million revenue reduction from the Covid-19 virus from its early spread in China. But the broader China activity is now returning although still below pre-outbreak levels. The supply chain has been largely unaffected to date.

Cash generated from operations increased but free cash flow is down slightly mainly because of high levels of expenditure still being applied to “new ERP systems and processes” which is capitalised and which I have commented negatively on in the past. Well at least that expenditure is down from last year.

Notwithstanding the short-term impact of the virus, they give a positive outlook statement – “pleased with progress, strong fundamentals, confident in our future prospects, attractive long-term dynamics” are some of the phrases used. I think we might see a lot of similar statements from companies over the next few months. But adjusted earnings per share forecasts for this year are surely going to be downgraded somewhat at Abcam.

I am also not optimistic that the UK, USA or other western economies are going to avoid a widespread outbreak of the disease which will disrupt our lives and economy even if it is a relatively short-term impact.

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

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When Major IT Projects Go Wrong – Abcam Results

Abcam (ABC) published their full year results this morning. I have commented negatively on this company as a holder of the shares in the past, particularly after the last AGM in which I expressed concerns about the cost and delays to the major Oracle ERP system which they were building to replace legacy systems. Clearly over budget and running late. I was also not impressed by the failure to answer questions by the Chairman.

Now we see the real outcome – namely a write-off of £12.8 million on the ERP project. That is actually for work on the new Oracle cloud ERP system “following a detailed review of this programme undertaken during the year”. This is what they also said in the announcement:

“With the installation of the latest modules of our global ERP system, we have concluded the programme that initiated in 2015/16 to provide more scalable back-office systems at Abcam. Many global functional areas have been improved by the programme including process and data management in Human Resources, Customer Experience, Finance, and non-stock Procurement. We are already seeing benefits to scale, better data and better controls from these changes.

Manufacturing and Warehouse Management remain functional areas not yet addressed by this IT upgrade programme. Following an extensive review of business requirements and the current state of Oracle Cloud software as well as other best-in-class software providers, we have decided to make some changes to the approach and software used in these areas.”

This looks to be putting a positive gloss on a very negative result. Clearly the failure to implement Oracle for manufacturing and warehouse management including a write-off of work put in on that project, or so it appears, is a major and costly failure. They are now back at square one.

The overall financial results show that revenue is up 9.2% but profits are down by 28% on the reported figures. Even after the write-down mentioned above, the intangible assets on the balance sheet increased slightly and £22.7 million of cash was spent on the purchase of intangible assets, i.e. software development expenditure capitalised no doubt.

This looks to be a typical example of a “big-bang” approach to IT project development failing to deliver the goods, particularly in critical areas of the company’s operations. At least the company seems to have finally accepted that this project was misconceived and needed a major rethink.

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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Abcam Interims, Brexit Amusement and Superdry

Abcam (ABC) published their Interim Results this morning (4/3/2019). The share price promptly dropped 20% although it has recovered half of that at the time of writing. What was the reason for the price drop? A major profit warning, totally unexpected results or other issues? None that I could see. Before giving you my analysis, you may care to read what I said about the company after attending their last AGM – see https://roliscon.blog/2018/11/07/persimmon-departure-abcam-agm-and-over-boarding/ .

I expressed concerns about the cost and delays to the major Oracle ERP system which they are building to replace legacy systems. Clearly over budget and running late. I was also not impressed by the failure to answer questions by the Chairman.

The latest results did not seem exceptional to me – the IT project is still bogged down it seems with financial and procurement modules only “on-track for implementation in Summer 2019” but that’s hardly surprising. There is one more major module to do after that. Revenue growth was 10.8% which is better than they achieved for the whole of last year but slightly less than forecast for the full year.

Perhaps the major concern for investors was the decline in net margins although gross margins were up. Clearly administrative expenses are up, partly as the result of a move of their headquarters to a new site in Cambridge and product development costs have apparently increased.

One amusement was that it was mentioned that they are opening a new distribution facility in Holland to avoid any disruption post Brexit. This generated a question in the on-line analyst presentation (which you can see a recording of on their web site) on the cost, and the answer mentioned the new “HQ”. That was rapidly corrected to “Logistics Centre”, but the costs were not indicated as being of significance.

Another negative was the mention of a new banking facility of £200 million when they don’t seem to be particularly short of cash. This might be used for “future corporate transactions” and it was made clear they are looking for acquisitions.

A further issue is no doubt the typical bad habit of referring to “adjusted figures”. What does that mean? Here is what it says: “Adjusted figures exclude systems and process improvement costs, costs associated with the new Group headquarters, amortisation of acquired intangibles, the tax effect of adjusting items, and in respect of the six months ended 31 December 2017, one-off tax arising from new US tax legislation”. It sounds like there is a lot thrown in there that might be dubious.

One only has to look at the cash flow figures to see what is happening. Overall cash decreased by £7.8 million after £11.9 million spent on acquisitions. Purchases of “property, plant & equipment” and “intangible assets” almost doubled. Clearly costs have been ramped up as part of the aggressive growth strategy pursued by CEO Alan Hirzel since he joined. That required a major rebuild of internal systems and facilities which is proving costly.

The shares are still highly rated after this hiccup which looked somewhat of an over-reaction to me, but we seem to be in one of those markets where the share prices of companies can collapse on the hint of possible problems even though overall market trends are up. Investors are nervous.

Another company that has suffered sharp share price declines in recent weeks has been Superdry (SDRY), a retailing and brand company. Last Friday the company announced the requisition of a General Meeting to appoint two new directors, including founder Julian Dunkerton who left the board last year. He and another founder, James Holder, are clearly unhappy with recent events which includes more than one profit warning and a 65% drop in the share price. Between them the founders hold almost 30% of the shares and it looks like this is shaping up for a big proxy battle. The company has rebuffed any return of Mr Dunkerton or the appointment of an experienced independent non-executive director suggested by the founders.

Such a prompt rebuff with the likely costs that will be involved in a proxy battle as a result never seems a good idea to me. It tends to destroy any chance of an amicable resolution.

I may write more on this situation after obtaining more information on the key issues which seem to be other than the difficulties faced lately by many clothing retailers.

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

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