LoopUp Profit Warning and Brexit Party Policy

Conference calling AIM company LoopUp (LOOP) issued a trading statement this morning which contained a profit warning. At the time of writing the share price is down 47% on the day but it has been falling sharply in recent days which suggests the bad news had already leaked out.

This is an example of what happens when lofty growth expectations are revised downwards. Revenue is now expected to be down 7% on the previous market consensus and EBITDA down 20%. The company blames the shortfall on “subdued revenue across its long-term customer base” driven by macro-economic factors and diversion of sales staff into training new ones.

LoopUp is presenting at the ShareSoc seminar event on the 10th July so it will be interesting to hear what they have to say about this – see https://www.sharesoc.org/events/sharesoc-growth-company-seminar-in-london-10-july-2019/ . This news comes only a month after LoopUp held a Capital Markets Day when there was no hint of these problems. I did a report on that here: https://roliscon.blog/2019/06/07/broker-charges-proven-vct-performance-fee-and-loopup-seminar/

I do hold a few shares in LoopUp but thankfully not many.

Brexit Party Policy

I mentioned in a recent blog post that the Brexit Party is looking for policy suggestions to enable them to develop a platform for any prospective General Election. Here’s what I sent them with respect to financial matters:

  1. The personal taxation system is way too complicated and needs drastically simplifying. At the lower end the tax credit system is wide open to fraud while those on low incomes are taxed when they should not be. The personal tax allowance, both the basic rates, and higher rates, need to be raised to take more people out of tax altogether.
  2. The taxation of capital gains is also now too complicated, while tax is paid on capital gains that simply arise from inflation, which are not real gains at all. They should revert to being indexed as they were some years ago. For almost anyone, calculating your own tax that is payable is now way too difficult and hence requiring the paid services of accountants using specialist software.
  3. Inheritance tax is another over-complex system that wealthy people avoid by taking expert advice while the middle class end up paying it. It certainly needs grossly simplifying, or scrapping altogether as a relatively small amount of tax is actually collected from it.
  4. The taxation of businesses is inequitable with the growth of the internet. Small businesses, particularly retailers, pay a disproportionate level of tax in business rates while their internet competitors often avoid VAT via imports. VAT is now wide open to fraud and other types of abuse such as under-declarations, partly because of the EU VAT arrangements. VAT is in principle a simple tax and the alternative of a sales tax would create anomalies but VAT does need to be reformed and simplified.
  5. All the above tax simplifications would enable HMRC to be reduced in size and the time wasted in form filling by individuals and businesses reduced. Everyone would be a winner, and wasted resources and expenditure reduced.
  6. The taxation of company dividends on shares is now an example of the same profits being taxed twice – once in Corporation Tax on the company, and then again when those profits are distributed to shareholders. This has been enormously damaging to those who receive dividends and the lack of tax credits has also undermined defined benefit pension funds. The taxation of dividends should revert to how it once was.
  7. The regulation of companies and financial institutions needs very substantial reform with much tougher laws against fraud on investors. Not only are the current laws weak but the enforcement of them by the FCA/FRC is too slow and ineffective. Although some reforms have recently been proposed, they do not go far enough. Individual directors and senior managers in companies are not held to account for gross errors or downright fraud, or when they are, they get off too lightly. We need a much more effective system like they have in the USA, and better laws.
  8. Shareholder rights as regards voting and the receipt of information have been undermined by the use of nominee accounts. This has made it difficult for individual shareholders to vote and that is one reason why investors have not been able to control the excesses in director pay recently. The system of shareholding and voting needs reform, with changes to the Companies Act to bring it into the modern electronic world.
  9. The pay of directors and senior managers in companies and other organisations has got wildly out of hand in recent years, thus generating a lot of criticism by the lower paid. This has created social divisions and led partly to the rise of extreme left socialist tendencies. This problem needs tackling.
  10. Governance of companies needs to be reformed to ensure that directors do not set their own pay, as happens at present, but that shareholders and other stakeholders do so. Likewise shareholders and other stakeholders should appoint the directors.
  11. Insolvency law needs reform to outlaw “pre-pack” administrations which have been very damaging to many small businesses. They are an abuse of insolvency law.
  12. All the EU Directives on financial regulation should be scrapped (i.e. there should be no “harmonization” with EU regulations after Brexit). The MIFID regulations have added enormous costs to financial institutions, which have passed on their costs to their customers, with no very obvious benefit to anyone. Likewise the Shareholder Rights Directive might have had good objectives but the implementation has been poor because of the lack of knowledge on how financial markets operate in the UK. Other examples are the UCITS regulations which have not stopped Neil Woodford from effectively bypassing them, or the PRIIPS regulations which have resulted in misleading information being provided to investors.

Let me know if you have other suggestions, and of course the above policies might be good for adoption by other political parties in addition.

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

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Impressions from the Brexit Party Rally

Brexit rallyAs I received an invite to the Brexit Party Rally at the NEC in Birmingham, I went along yesterday to see what I could learn about their policies – apart from wanting Brexit of course. Not that there was a great deal to learn as clearly policies for a prospective general election are still being developed, but there were a few hints. However they do plan to have 600 candidates ready to fight such an election by the Autumn and 100 of them can be seen in the photo left of the event.

It was a lively meeting, and clearly professionally organised. With the party only being in existence for 49 days, it is surprising how much they have achieved already. They are clearly going to be a force to be reckoned with in UK politics whatever happens on Brexit.

The main speakers were Annunziata Rees-Mogg, Richard Tice, Tim Martin and Nigel Farage. Richard Tice is the party Chairman and spoke particularly well. He runs a property firm and was formerly CEO of CLS Holdings – a listed property company. He made it clear that the Brexit party has an “anti-London” focus where they think too much money is spent and have already committed to scrapping HS2. Another big commitment was to scrap interest on student loans and cancel all historic interest.

Tim Martin runs the Wetherspoon pubs and suggested that on a hard Brexit happening we will not need to drink French wine or German/Dutch beer. We can produce it ourselves or import from Australia. But his main focus was on the lack of democracy in the EU. He just wants to leave on WTO terms, i.e. without a deal.

Other speakers argued that the electoral system needs reform with some type of proportional representation introduced, and the House of Lords reformed or scrapped altogether (cheers for that from the audience). The events in the Peterborough by-election where the party failed to win the seat were explained as an abuse of the postal voting system (see below). Reform was also planned for the Civil Service – exactly why or how was not made clear, and the party wants to scrap the BBC License Fee but not scrap the BBC.

Unlike Boris Johnson and Jeremy Hunt, there was no great commitment for tax hand-outs to bribe the electorate – maybe they will come later. But cancelling HS2, not paying the Brexit bill as proposed in the Withdrawal Agreement and halving the foreign aid budget will create many billions of pounds to spend on the regions outside London.

The Brexit Party is clearly a party of protest – members don’t like the EU, don’t like Westminster politicians, don’t like the BBC who collected boos from the audience, don’t like the London elite and the Civil Service, and more…. At a general election they might simply split off a lot of Conservative voters enabling the Labour Party to take power. That is an issue they have yet to tackle.

But that’s about all I learned about their policies which are clearly still under development. You can submit your own suggestions for what they should be by sending an email to policy@thebrexitparty.org .

You can see a video of the event and Nigel Farage’s speech on YouTube here: https://www.youtube.com/watch?v=eXk0tChqOUk

Voting Reform

The alleged abuse of the postal voting system by the Labour Party in Peterborough is the subject of a legal challenge by the Brexit Party, who only lost by 683 votes. They are lodging a petition under the Representation of the People Act and several allegations of voter fraud are being investigated by the police.

Now I do personally have some experience of how the Labour party operates with postal votes. A few years ago we happened to visit my late mother-in-law when the Labour candidate was visiting to collect her vote. It was clear they had organised a postal vote for her, and had come to ensure she ticked the right box and they then promised to post her vote for her.

She might have been on their list of traditional Labour voters but given her age at the time she was hardly acting independently or with due consideration of the candidate and his policies. In other words, the Labour Party was leading the prospective voters by the nose with a well organised machine to collect votes from those who only had a vague commitment to the candidate and the policies they were supporting.

The Brexit Party certainly have a case to argue for reform in this area.

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

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