Why Do People Queue, and Retail Renaissance?

This blog post was prompted by pictures of people shopping on Oxford Street last night and a tweet from Emilios Shavila showing a queue for Primark at my local shopping centre in Bromley – it looks to be at least 100 yards long. Why does anyone queue to buy non-essential items? Have they not discovered internet shopping?

This is very puzzling as personally I can’t stand to queue for anything and I don’t think I have been in a shop for over 3 months, and very rarely also in the last year. Do people like the social interaction of shopping? Or is it because they can take a friend along and ask them “do I look good in this?”. Perhaps retail shops are not quite heading for extinction just yet, but I certainly would not be investing in them at present unless they had a very strong on-line business element. I feel that shopping habits really are changing and the epidemic has  hastened the move to on-line retail therapy.

The good news is that US retail sales bounced upwards by 18% in May which is a record since 1992 according to the FT and confounded forecasts of a rise of only 8%. That followed a decline of 15% in April. Will the UK follow a similar pattern? Let us hope so because retail spending can have a big impact on the overall economy.

One company that might be affected by High Street footfall is Greggs (GRG) who gave an update on their plans for outlet reopening this morning. Many of their shops are still on High Streets although they have been diversifying into other locations such as motorway service stations and train stations. Greggs has over 2,000 shops altogether and plan to reopen 800 on the 18th June. The rest will reopen in July.

The share price has jumped by 7% at the time of writing, but they do say that they “anticipate that sales may be lower than normal for some time”. Shore Capital reiterated its “Sell” rating on the share because they consider the High Street will take time to adjust to life in a post-coronavirus environment”. They also consider that Greggs will incur significant extra costs as a result of the measures they need to take.

My view (as a shareholder in Greggs) is that I still find it impossible to judge the likely profits (or losses) at Greggs in the short term despite quite a lot of detail in today’s announcement. It’s really a bet at present whether you see it as a valuable property in the long term or not while ignoring the short-term pain. That’s not the kind of investment bet I like to take so I will simply wait until the picture becomes clearer. Regrettably the same logic applies to many other companies at present.

On a personal note, one organisation that has solved the queuing problem is the NHS. Apart from converting my hospital appointments to telephone consultations, the latest manifestation was a new “drive-thru” blood testing service. You get a timed appointment so I drove up on the dot and immediately had it taken through the car window. No need to even get out of the vehicle. Absolutely brilliant. But I am not sure that will be quite so practical in mid-winter.

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

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Unjustified Remuneration at Greggs and Avast

The markets seem to be settling down from the Covid-19 panic even if the impact on company results is far from clear. But it has given me time to read the Remuneration section of a couple of Annual Reports.

Firstly Greggs (GRG). Their Annual Report is a masterpiece of explaining why the company has been so successful of late – to quote from it: “Cheers to a record-breaking year. Since 1939 we have been on a roll….”. But it was clearly written before all their stores were closed.

Their Remuneration Report consists of 28 pages which is way too many. CEO total pay last year was £2.5 million – up by 46%. They did have a very good year but EPS was only up 32%. But the board appears to consider pay is inadequate so this is what the Chairman of the Remuneration Committee (Sandra Turner – why are they often women?) has to say:

Annual Bonus: The current policy allows for a maximum individual policy limit of 125 per cent of salary for the Chief Executive and 90 per cent of salary for other Executive Directors. It is proposed that the individual policy limit will be increased to 150 per cent of salary for the Chief Executive and 125 per cent of salary for the other Executive Directors. PSP: The current policy allows for PSP awards of 115 per cent of salary for the Chief Executive and 95 per cent of salary for other Executive Directors (150 per cent in exceptional circumstances). It is proposed that the new policy will provide for awards of 150 per cent of salary for the Chief Executive and 125 per cent of salary for other Executive Directors (with awards up to 150 per cent possible in exceptional circumstances)……

The Remuneration Committee is aware that the changes outlined above incorporate increases to reward opportunities under both the annual bonus scheme and the PSP, and that there are understandable sensitivities around increasing executive pay levels in the current political, economic and regulatory climate. However, the Committee wishes to ensure that the Executive Directors are appropriately rewarded for their contributions to the next stage of the Company’s growth, and we have been concerned that the pay opportunities under the existing policy no longer reflect what is appropriate or competitive for the leaders of a successful FTSE 250 company. We believe that the revised award levels are required to ensure that the policy is fit-for-purpose for the next policy cycle and will ensure that Executive Directors are appropriately incentivised to deliver and drive the business forward and are rewarded for success. As noted above, for 2020 we are not increasing all elements of pay for the Chief Executive and the Finance Director to the maximum levels permitted under the new policy, but we wish to retain a suitable level of headroom.

It is also important that we have the right structure in place as part of our succession planning processes. Should we need to recruit externally at senior levels during the policy period, we would like to have headroom in relation to the annual bonus and PSP opportunities in order to be sufficiently competitive in the market. Even taking into account the proposed increases, we believe that when compared against the market more broadly, the pay for the Executive Directors remains at below mid-market levels and total remuneration is positioned appropriately, thus demonstrating an ongoing focus on restraint”.

You can see how the pay is being ratcheted up and telling us it is below mid-market levels is no justification. No everyone can be above the average. Greggs undoubtedly employs many low-paid workers. Their figure for “All Colleague Costs” only went up by 11.4% last year. Clearly another example of the better paid getting richer, while the poorer are not equally benefiting from the success of the company.

Am I suggesting the lower paid in the company should be paid more? Not necessarily. But the increases at the top are not justified, however good a job they are doing. I suggest shareholders should vote against the new Remuneration Policy and Performance Share Plan (PSP) resolutions even if they consider last years Remuneration Report is acceptable.

The Remuneration Report of Avast (AVST) is only 16 pages. The total pay of the CEO, Andrej Vicek, in 2019 is given as $6,933,411 but he was only made CEO through part of the year. The vast majority of the total pay comes from the value of an LTIP. The former CEO received even more.

Some 95% of shareholders voted to support the Remuneration Policy in May 2019. The company’s excuse for the high level of pay is this: “Our Directors’ Remuneration Policy has been designed to incorporate the best practice features of the typical UK pay model while setting reward levels, particularly long-term incentive opportunities, at a level that recognises that we source talent in a global market and in particular from the US where pay models are different to the UK”. But this is a UK listed company and many of its operations are not in the USA.

But the CEO has made a token gesture by indefinitely waiving his annual salary and bonus (not including the portion related to his Board fee) for a nominal annual salary of $1. He has also notified the Board of his decision to donate 100% of his Board Directors’ fee ($100,000 per annum) to charity. He will continue to receive an annual LTIP award, calculated as a multiple of his (waived) base salary.

Avast was originally founded as a co-operative in Czechoslovakia but listed in the UK in 2018 after taking over AVG. How times change!

I will be voting against the Remuneration Report at this company and I suggest other shareholders should do the same.

 

 

 

 

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

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It’s Impossible to Value Companies at Present!

The stock markets rose sharply yesterday and this morning, allegedly on the news of the $2 trillion economic support package announced in the USA. But the company news is consistently bad where it is available.

In the company announcements I have read, they seem to fall into two kinds: 1) We are shutting down all or part of our operations and managing the cash but our balance sheet strength is such that we can survive this for weeks and won’t go out of business (Greggs, Dunelm, Next and Victoria for example); or 2) Only minor impacts so far but it is too early to judge the wider impact of a possible economic recession on the business (Diploma for example).

Nobody is giving forecasts and it’s impossible to work them out for oneself. The result is that individual stock prices are bouncing up and down, and the whole market is also gyrating. I have no confidence that the recent market bounce is an indication that we have passed the bottom. It’s simply impossible to value companies at present with any accuracy.

One could perhaps say one can value them because the coronavirus crisis may only last a few weeks while company valuations should be based on years into the future, but there is no certainty on the duration of the epidemic, how many people will die and when the economy will be back to normal.

Here’s a useful quotation from the Victoria (VCP) announcement today: “….the Group goes into the uncertainty of the next few months from a position of considerable strength. However, as Darwin stated, those who survive ‘are not the strongest or the most intelligent, but the most adaptable to change.’ Therefore, our managers have been willing to think the unthinkable and act decisively and promptly to protect their business – particularly its cash position – as the impact will, in the short term, be significant”.

Some of the companies mentioned above have seen an immediate impact on their businesses while others are less affected. Those who run “non-essential” businesses such as General Retailers and Hospitality operators are the worst hit, but I suspect others will see the impact in due course as the economy slows. It’s OK for Governments to pump money into the economy to try and keep it afloat but the future profits of many companies will surely be wiped out this year.

The impact might be wider than we expect. For example, one of the on-line retailers I use has closed down its web site today presumably because of the difficulty of packing and shipping orders. On the other hand, office productivity might suddenly improve if everyone is working from home – less time will be spent gossiping or flirting with others or wasted on commuting.

As an investor does one simply sit on one’s hands in the expectation that the crisis will pass in due course and the markets will rebound?  There was an interesting article by Chris Dillow in last week’s Investors’ Chronicle. He pointed out that research tells us that when there is bad news, investors tend to look at their portfolios less often. It’s the equivalent of not going to the doctor because their diagnosis might be bad news. Not reviewing your portfolio regularly is surely a habit to be avoided. I do it every evening as a matter of routine.

I know exactly the value of all my portfolios and the movements of individual holdings over the day. It’s made for gloomy reading of late. I also get alerts during the day of share prices that have moved significantly from previous levels and review them at the end of the day also. I use software products such as ShareScope and Stockopedia to provide this information. As a man of action, I do react to what I see happening in the market and to individual shares. I manage my portfolio to reduce exposure to the market when it is falling. And I make changes to my individual holdings dependent on the latest news and current prospects.

But it’s easy to waste a lot of money by over-trading, and waste a lot of your personal time, so I try not to make changes unless trends are very clear. My habits have developed over many years of investing in the stock market and have worked out reasonably well. But others might take a different approach. There is no one “best solution” but hiding behind ignorance of what is happening in the market is surely a recipe for poor portfolio performance.

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

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Pound Jumps Up on Brexit Party News and Portfolio Impact

The pound has risen by about 1% against the US Dollar and Euro today with suggestions that it is the news from Nigel Farage’s Brexit Party that prompted it. He won’t be putting up candidates in seats where the Conservatives won the vote last time when he was previously threatening to have candidates stand in all constituencies. This makes some sense because even if they have good candidates willing to stand, building a local campaigning organisation from scratch to get the vote out is not easy. It strengthens the probability of a Conservative win although there is still some risk because in marginal seats which the Conservatives hoped to win but lost last time there could still be a split vote.

The result has been quite significant on my portfolio with companies with large overseas revenues and profits falling while UK dominated businesses rose. That was particularly so with Greggs (GRG) who are up 16% on the day after a trading statement that indicated overall sales were up 12.4% for the last 6 weeks and year end figures should be even better than expected.  Sales growth continues to be driven by increased customer visits apparently but as many of their outlets are now not on the High Street I suggest that should not be seen as a revival for other retail businesses. But Greggs certainly seem to have a winning formula of late as they consistently report positive news.

I tend not to react to short term changes in exchange rates because the impact can be more complex that first appears. I will not therefore be taking any steps as a result. In any case my overall portfolio is up 0.5% on the day so this might just reflect more confidence that the political log-jam will finally be resolved in a few weeks’ time. Investor confidence has a big influence on markets of course.

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

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Market Bouncing Up or Down – Sophos, Greggs, Apple and Fundsmith

 

After a dire market performance before Xmas, we seem to be back to the good times in the last 3 days. Is it time to get back into the market for those who moved into cash as the market fell down and down and down in the autumn? Rather early to generalise I suggest although I have been picking up some shares recently.

One which I purchased a small holding in was Softcat (SCT). Yesterday it issued a trading update simply saying that trading was strong and they are materially ahead of where they expected to be at this stage in the year. The share price promptly jumped by 20%. I no doubt should have bought more. But there was a wider rise, no doubt driven by a rise in US markets and effectively ignoring the political turmoil in the UK.

Another company issuing a trading update yesterday was Greggs (GRG). They reported total sales up by 7.2% in the year and like-for-like sales up by 4.2% in the second half. The share price rose over 6% yesterday and it rose again this morning. CEO Roger Whiteside has done a remarkable job of turning around this company from being a rather old-fashioned bakery chain to a fast “food-on-the-go” business. New products have been introduced and new locations opened. The latest product initiative which got a lot of media coverage was vegan sausage rolls, now combined with “vegan-friendly” soup in a meal deal for just £2.25! A good example of how new management with new ideas can turn a boring and financially under-performing one into a growth story. But this comment of Lex in the FT is worth noting: “The positives, like the mycoprotein, are baked in. At almost 20 times forward earnings, the stock rating is well above the long-term average. Investors should wait for this dish to cool before taking a bite”. I remain a holder.

There have been lots of media comment on the profit warning from Apple with questions about whether we have hit “peak i-Phone”. Sales in China are slowing it seems and folks everywhere are not upgrading as frequently as before. Apple phone users may be loyal but they are now tending to upgrade after 3 years rather than 2.

Having just recently upgraded from a Model 6 to an 8, I can see why. The new phone is slightly faster but battery life has not significantly changed. Phone prices have gone up and I could not justify the even higher priced models. Software functionality is of course identical anyway.

Apple is the sort of company I do not invest directly in for two reasons. Firstly it’s very dependent on one product – iPhones are more than 50% of sales revenue. Secondly, all electronic hardware is vulnerable to being leapfrogged by competitors with newer, better products. With growing price competition in smartphones, particularly from low-cost Chinese producers, the world is surely going to get tougher for Apple.

Hargreaves Lansdown have reduced their recommended fund list down from 85 funds to 61 and it’s now called the Wealth 50, but Fundsmith Equity Fund is still not included even though it was one of the best performing funds last year. But they have kept faith in the Woodford Equity Income Fund which is most peculiar given its recent performance. It seems they think the big bets that Neil Woodford has been making on companies and sectors will come good in the long term, as they have in the past. We will see in due course no doubt.

But their reluctance to recommend Fundsmith seems to be more about the discounts on charges that some fund managers give them, which they do pass onto customers of course. It’s worth pointing out that the lowest cost way to invest in the Fundsmith Equity Fund can be to do it directly with Fundsmith rather than via a stockbroker or platform. That’s in the “T” class with an on-going charge of 1.05% which achieved an accumulated total return of 2.2% last year, beating most global indices and my own portfolio performance.

Indeed one commentator on my fund performance reported in a previous blog post suggested that an alternative to individual stock picking was just to pick the best performing fund. Certainly if all of my portfolio had been in Fundsmith last year rather than just a part then I would have done better. But that ignores the fact that my prior year performance was comparable and having a mix of smaller UK companies helped to diversify while Fundsmith is subject to currency risk as it is mainly invested in large US stocks. Backing one horse, or one fund manager, is almost as bad as buying only one share. Fund managers can lose their touch, or have poor short-term performance, as we have seen with Neil Woodford. Incidentally the Fundsmith Annual Meeting for investors is on the 26th February if you wish to learn more. Terry Smith is always an interesting speaker.

Stockopedia have just published an interesting analysis of how their “Guru” screens performed last year. Very mixed results with an overall figure worse than my portfolio. For example “Quality Composite” was down 19.7% and Income Composite was down 13.9%, with only “Bargain” screens doing well. It seems to me that screens can be helpful but relying on them alone to pick a few winning stocks which you hold on for months is not a recipe for assured success. It ignores the need to do some short-term trading as news flow appears, or to manage cash and market exposure based on market trends. As ever it’s worth reiterating that there is no one simplistic solution to achieve good long-term investment performance without too much risk taking.

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

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Blue Prism, GB Group, Gooch & Housego, Greggs, IDOX, Pets at Home, Victoria, Brexit and Pre-Pack Administrations

Lots of results and trading statements this morning of interest. Here’s a few brief comments on some of them in alphabetic order (I hold some of these stocks), with the share price movement on the day at 14:00 hours (at the time of writing):

Blue Prism (PRSM) – down 12.3%. This was one of the ultimate go-go technology stocks until mid-September when it started a sharp decline like many other such stocks. It has some very interesting technology to automate business processes which is why everyone wanted to buy the shares. The trading statement had some positive comments about sales and cash flow (without giving any specifics which is annoying), but it also said “The EBITDA loss is expected to be larger than current expectations due to continued investments into the Group’s growth strategy and increased sales commissions arising from the strong fourth quarter”. With rising losses already forecast and no prospect of a profit in sight, the share price predictably fell. This company has a market cap of over £1 billion when revenue in the current year might be £55 million. I have seen technology companies before (e.g. in the dot.com boom era) that managed to grow sales at a terrific rate but with rising losses. Often they never did manage to show they had a profitable business as competition eroded their USP before they got there.

GB Group (GBG) – up 5.0%. Half year results much as expected taking into account the big one-off deal in the previous half year. Like Blue Prism the share price was down by 30% since early September in the technology stock rout. The valuation is now back down to a more sensible level and with revenue growth of 9%, cash up by £14.5 million and a positive outlook statement there seems to be little to be concerned about. The company provides on-line id verification and location services which is clearly a growth area at present and accounts for the consistently high valuation of the company.

Gooch & Housego (GHH) – down 1.8%. The share price fell sharply after the market opened but that seems to be a frequent occurrence after announcements by small technology stocks as a few insiders take the opportunity to sell. But the new chairman bought a few shares today. The shares in the company are also thinly traded which means they tend to be volatile. The preliminary results were slightly better than forecast on an “adjusted” basis although the reported accounts of this company are heavily distorted by the number of exceptional items including a large write-off of goodwill, restructuring costs (including a site closure) and transaction fees on acquisitions. The share price has been declining like other technology stocks and the announcement today about the departure of the CFO, but not until summer 2019, may not help the share price. The company has moved into a net debt position due to heavy investment in property, plant and equipment and an acquisition but it’s still quite lowly geared.

Greggs (GRG) – Up 11.6%. The share price jumped after the company reported sales up 9.0% in the last eight weeks – no particular reason was supplied. Also forecasting profits to be substantially ahead of forecasts. Greggs went through a share price dip in the middle of the year probably due to poor figures after bad weather hit this “food-on-the-go” seller. But it seems junk food is still a growth market if you adapt to sell it in new locations and less on the High Street, and the weather is good – not that Greggs are not into selling healthy options now of course.

IDOX (IDOX) – up 1.6%. A year-end trading update showed declining revenues even ignoring the disposal of the loss-making Digital business which will have a negative impact on the final results. The company is in cost-cutting mood so as to increase profitability and so as to “align the cost base more directly with its re-focused business model”. There was a new Chairman appointed recently with a very relevant industry background. The business should at least report a profit this year unlike last, and the valuation is lowly due to past problems. But investors may be getting impatient for better results.

Pets at Home (PETS) – down 0.1%. Interim results reported good like-for-like growth in both the retail business and the vet practices but a restructuring of the vet business is going to result in very substantial write-downs including cash costs of £27 million. The reason the share price did not fall is probably because of the positive trading figures and a commitment to hold the dividends both for the interim and future final ones. It’s on a prospective yield of 6.5% at present. With a new management team this may be a good share for those who like “value” plays but being in the general retail sector which is a bloodbath for many such stocks does not help.

Treatt (TET) – Up 5%. This manufacturer of flavourings issued very positive final results – revenue up 11% and adjusted earnings up 10%, with positive comments about likely future results in addition. This is one of John Lee’s favourite stocks and no doubt he will have been talking about it in the last couple of days at the Mello London conference. Unfortunately I could not attend that event, which is one reason for this long blog post today.

Victoria (VCP) – up 1.6%. Interim results were generally positive and they look to be on target to make the full year estimates. But Exec Chairman Geoff Wilding probably summed it up well with this comment: “Finally, I am acutely aware that Victoria’s share price is not where I believe it should be given our current trading and prospects. As one of the largest shareholders, you can be assured that I, and the other directors and management, are focused on building the confidence of investors and delivering the financial results expected of Victoria. It is important to remember, together we own a very robust, well-managed, and growing business with over 3,000 employees who manufacture and sell some of the finest flooring in the world. The events of the last couple of months have not distracted management from delivering and for that reason I am highly confident of Victoria’s continued long-term success”. The events he refers to were the growing concerns about the level of debt in the company and the aborted proposal to convert bank debt into a bond. Floor-covering businesses can be somewhat cyclical, as results from the Australian subsidiary in these figures indicate. Investors can get nervous about high debt and what will happen when it is due for repayment. You need a lot of confidence in Geoff Wilding for him to steer through this situation to buy the shares even at the current level.

It is remarkable looking back over these results and the share price performance of the companies over the last few months that share prices seem to have been driven by emotion and trend following even more than usual. Brexit also seems to be making investors nervous and overseas investors particularly so. That explains why the dividend yield on the market overall is at record levels. Current yield is not everything of course as future growth is also important to market valuations which depends on profit growth. But apart from Brexit there are few clouds on the horizon at present.

Brexit. Mrs May is apparently trying to sell her agreed Brexit deal directly to the general public, i.e. over the heads of politicians. But with no unanimity in the Conservative party nobody sees how she can get the Withdrawal Agreement through Parliament even if she manages to persuade the DUP to support it. It’s not easy to see how even a change of leader would help unless they can tweak the Agreement in some aspects to make it acceptable to the hardliners. That might just be possible whatever the EU bureaucrats currently say but otherwise we are headed for a “hard” and abrupt exit in March. Am I worried about such a prospect? Having run a business which exported considerably into Europe before we joined the Common Market, the concerns about the required customs formalities are exaggerated. The port facilities may suffer temporary congestion but it is always remarkable how quickly businesses can adapt to differing circumstances. For those who think we should simply go for a hard Brexit and stop debating what to do there is an on-line Parliamentary petition here: https://petition.parliament.uk/petitions/229963/signatures/new . With the Brexit Withdrawal date set for March 29th 2019, I confidently predict that the matter will be settled by March 28th or soon after, probably based on Theresa May’s Agreement which actually does have many positive aspects. It’s just the few glaring stumbling blocks in the deal that are annoying the Brexiteers.

Incidentally Donald Trump was incorrect in suggesting that the current Agreement would prevent the UK signing a trade deal with the USA. See https://brexitfacts.blog.gov.uk/2018/11/27/response-to-coverage-of-the-uks-ability-to-strike-a-trade-deal-with-the-us-when-we-leave-the-eu/ . There’s just as much fake news from politicians than there is from digital media platforms these days.

Pre-Pack Administrations. There was an interesting article on the subject of Pre-Pack Administrations in the Financial Times yesterday (26/11/2018). I have covered this topic, many times in the past, always negatively. For example on the recent case of Johnston Press – see https://roliscon.blog/2018/11/19/johnston-press-trakm8-and-brexit/ where creditors were dumped and a payment into the pension scheme due in just days time was not made with the result than the Pension Protection Fund is likely to pick up the tab. That not just means pensioners in the Johnston scheme will suffer to some extent, but the costs fall on all other defined benefit schemes so you could be contributing also.

They are not the only losers though. The FT article pointed out that one of the biggest losers are HMRC as it seems some pre-packs are done to simply avoid paying tax due to them. There is now an advisory group called the “Pre-Pack Pool” that was set up to try and stop the abusive use of pre-packs, but it is reported that even when they gave a pre-pack proposal a “red card” many were put through regardless. This looks another case where self-regulation does not work and abuses are likely to continue.

That’s not to say that all administrations could result in a better return to trade creditors and the taxman than zero, but a conventional administration with proper marketing and the sale of a business as a going concern is much more likely to do so. The insolvency regime needs reform to stop pre-packs and provide better alternatives.

Have I got a bee in my bonnet about pre-packs because of suffering from one or more? No, but I know people who have even though they are relatively rare in public companies. But I just hate the duplicity and underhand shenanigans that go along with them.

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

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Two AGMs (Accesso and Foresight VCT) in one day

Yesterday I attended the Annual General Meeting of Accesso (ACSO) in Twyford at the somewhat early time of 10.00 am with the result that I got bogged down in the usual rush hour traffic on the M25. What a horrendous road system we have in London! A symptom of long term under-investment in UK road infrastructure.

Accesso provides “innovative queuing, ticketing and POS solutions” to the entertainment sector (e.g. theme parks) although they have been spreading into other application areas. The business has been growing rapidly under the leadership of Tom Burnet who moved from being CEO to Executive Chairman a while back.

Tom opened the meeting by introducing the board, including new CEO Paul Noland who is based in the USA where they now have 5 offices apparently. He also covered that morning’s trading statement which was positive and mentioned deals with Henry Ford Health System and an extension to an existing agreement with Cedar Fair Entertainment. Expectations for the year remain unchanged. Questions were then invited – I have just covered a few below.

I raised a concern about the low return on capital in the company (now less than 5% irrespective of how one cares to measure it). I suggested the reasons were large increase in administrative expenses (up 43% last year) and the cost of acquisitions. Did the board have any concerns about this? Apparently not. The reason is partly the acquisitions and the costs might come down as they rationalise operations but they are in no rush to do so.

The Ford deal was mentioned and Tom said this is one deal where the acquisition of TE2 has provided the technology to assist closure. This is what the company said about TE2 when they bought it: The Directors of accesso believe that TE2’s cloud-based solution offers market-leading personalisation capabilities and data orchestration technologies which capture, model and anticipate guest behaviour and preferences not only pre- and post-visit online, but in the physical in-venue environment.  Personalisation is achieved via many heuristics, including machine-learning-based recommendations, in order both to enhance guest experiences and to provide actionable analytics and insights to the operations, retail and marketing organisations.”. I am sure all readers understand that. Hospital systems are clearly one target for this technology.

The vote was taken on a show of hands so far as I could tell, although the announcement the next day of the votes suggested it was done on a poll which is surely wrong. But there were significant numbers of votes (over 2 million) against several directors and against share allotment resolutions. I asked why and was told it was because of a proxy advisory service recommending voting against, allegedly because of some misunderstanding. The answer to my question seemed somewhat evasive though.

In summary, shareholders are clearly happy with the progress of the company but with a prospective p/e of 41 (and no dividends), a lot of future growth is clearly in the share price. Corporate governance seems rather hit and miss.

I then drove into London to the offices of Foresight in the Shard, again journey time a lot more than it should have been due to road closures, lane removal for cycle lanes, etc, etc. Interesting to note a large hoarding on the elevated section of the A4 inviting anyone who had a complaint against RBS and the GRG operation to contact them.

Also interesting to note when I stopped for fuel at a service station on the M4 that at the desk they were serving Greggs food and coffee as well as taking payment for fuel. I know that Greggs have kiosks in some motorway service areas but this is perhaps a new initiative to expand their market. It’s rather like the small Costa coffee outlets that are in all kinds of places. I am a shareholder in Greggs but this was news to me. Obviously I need to get out more to see what is happening in the real world.

The visit to Foresight was to attend the AGM of Foresight VCT (FTV) one of my oldest holdings. Effectively I have been locked in after originally claiming capital gains roll-over relief. It’s also one of the worst of my historic Venture Capital Trust holdings in terms of overall performance over the years.

I did not need to tell them again how dire the performance of the company had been over the last 20 years because another shareholder did exactly that. But I did query whether the claimed total return last year of 6.5% given by fund manager Russell Healey in his presentation was accurate. It was claimed to be so. Perhaps performance is improving but I am not sure I want to stick around to see the outcome.

One particularly issue in this company is the performance fee payable to the manager which I wrote about in my AGM report and on the Sharesoc blog last year. You can see why the manager has such plush offices as they have surely done very nicely out of this and their other VCTs over the years while shareholders have not, and will continue to do so.

Several shareholders raised questions about the reappointment of KPMG bearing in mind that in Foresight 4 VCT the accounts were possibly defective and a dividend might have been paid illegally. But the board seemed to know nothing about this matter. KMPG got about 6 hands voting against their reappointment and the board is going to look into the matter.

The above is just a brief report on the meeting as I understand Tim Grattan may produce a longer one for ShareSoc.

To conclude, both AGMs were worth attending as I learned a few things I did not already know. For example it seems my holding in Ixaris, an unlisted fintech company where Foresight have a holding, may be worth more than I thought. But I still think their valuation is a bit optimistic.

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

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