ShareSoc Chairman's Blog

In reply to emptyend, post #300

IMO it is really important to get the answers to this.

Rest assured that ShareSoc is investigating vigorously. Watch this space for further information.

emptyend,

I've spoken to Dave and the explanation is as follows:

1. Dave held a small number of stock in a nominee account. He wanted to vote against the proposal and knew that he needed physical stock to do that. He bought more stock equal to about ten times his original holding. Dave thinks that he bought on a T+1 or T+3 basis.

2. By the date of the AGM the second purchase had only partially settled, this was about two weeks after the purchase. A little over 50% of the physical stock had been delivered to settle the bargain. Dave was restricted to voting only those shares that had been physically delivered.

I know from experience that settlement issues are not uncommon but normally they don't matter. There is precedent though in the case of Room Service Group where a broker over-sold stock causing significant settlement issues and was later judged to have created a disorderly market. The facts are different but they may be sufficient to base a claim upon.

The other point to note of course is that at no point in time would the FSA (FCA) judge this bargain to be at risk since cash should only have transferred from Dave's broker to the seller on a matched (delivery versus payment) basis and hence if the trade had failed entirely then Dave's broker would still have had Dave's cash.

JakNife

In reply to JakNife, post #306

OK thanks.

So in summary he didn't have the right to vote stock because he didn't have full title to it at the relevant point.

And we can throw all the stock-lending theories into the bin because it seems to be a "business as usual" inter-broker cock-up and so completely fails to "demonstrate exactly the evils of the nominee system" as was being alleged.

Hi emptyend,

You're paraphrasing my words somewhat!!!!!

But yes, FWIW, this would have happened even if Dave had bought the stock into say a CREST sponsored account, because the same settlement issue would have occured.

Also, FWIW, I'm pretty sure that FSA (FCA) rules prohibit stock-lending of retail punter shares without express authorisation from the retail investor.

JakNife

In reply to JakNife, post #308

You're paraphrasing my words somewhat!!!!!

But yes

Yes of course.....  :-)

Also, FWIW, I'm pretty sure that FSA (FCA) rules prohibit stock-lending of retail punter shares without express authorisation from the retail investor.

That would make 100% good sense - though express authorisations can be buried in pages of Ts & Cs.

Actually needing to be 100% certain about being able to vote shares isn't normally a major concern of investors - but if one needs to vote and then suddenly finds that something or another gets in the way of a reasonable expectation of being able to vote the shares, then that is bound to be extremely irritating!

It shouldn't be beyond the wit of nominees computer systems to indicate in annual statements and restrictions on voting or other shareholder rights that may apply under particular circumstances for each of their shareholdings?

All the best

ee

Posted by ShareSoc at 16:35, April 22 2013.

Asian Total Return Trust Investment Trust - it’s all change

It’s not often an investment company changes its name three times in fewer years, dumps the former fund manager for a new one and buys back half its shares in a tender offer. But that’s exactly the recent history of Asian Total Return Investment (LON:ATR) whose AGM was held today.

Concerns were expressed by several shareholders at last year’s AGM of Henderson Asian Growth Trust (as it was then called), specifically about company past performance against its peer group and the investment policy. I even had a meeting with the Chairman, David Robins, to discuss the situation of the company and to try and get more understanding of the issues. The company undertook a strategic review later in 2012 and decided to appoint Schroders after a beauty parade of 26 fund managers. Soon after they also undertook a tender offer which was taken up in a big way, particularly by institutional investors.

At the AGM today, about 30 shareholders heard from one of the new fund managers based in Singapore, and it seems there has been a total turnover of the portfolio and a new investment strategy has been implemented. The board is surely to be congratulated on this vigorous action to improve matters, but we will have to see in due course what the outcome will be. But with a bit of luck, the company won't have to change its name again.

ShareSoc members can view a full report on the ShareSoc Members Network here: http://sharesoc.ning.com/forum/topics/the-agm-forum?commentId=6389471%3AComment%3A22492

Posted by ShareSoc at 15:51, April 23 2013.

Are you a shareholder? Probably not.

The vast majority of individual shareholders in public companies hold their shares in nominee accounts, i.e. in accounts created by their stockbrokers to record their interest in the shares of companies. Does that mean that in law you are a member of the company with all of the rights and protections provided by Company Law (i.e. under the Companies Act 2006)? The simple answer is no!

This legal position was reinforced by a recent High Court judgement in the case of Eckerle and others versus Wickeder Westfalenstahl GmbH. Mr Eckerle (who was represented by ASB Law) opposed the re-registration of the latter company from being a public company to a private company. There is a little known provision in the Companies Act that enables a holder of more than 5% of the shares in a company to oppose such re-registration as being prejudicial to the financial interests of a minority, by application to the Court.

The defendants (represented by Orrick Herrington & Sutcliffe) simply argued that the plaintiffs had no legal standing in law because they were not “members” of the company (i.e. not shareholders on the share register), and that claim was upheld by the court. Therefore the application was rejected.

Wickeder Westfalenstahl was a company registered in England but formerly traded on a German stock exchange. As is common in Germany, all the shares in the company were actually held by a bank as trustee with the interests of individual shareholders being recorded by them, i.e. they acted as the nominee operator and simply recorded the “beneficial interest” of individual shareholders in their trust records.

The lawyers for Mr Eckerle argued that he was enfranchised by the Company’s Articles of Association and section 145 of the Companies Act. However, the Court determined that the Articles of Association could not be interpreted that widely. This left Mr. Eckerle without redress as a minority shareholder.

Mr Justice Norris stated that this was not a particularly comfortable decision for him to make as it deprived the claimants, as indirect investors, of the sort of protection which those who formulated the Act thought ought to be extended to minority shareholders.

Now you might think that this is of academic interest, or unlikely to be something that will concern you. But that is not the case, for anyone who invests in smaller quoted companies.

For example, consider the recent events at VSA Capital Group which was an AIM listed company and the subject of a delisting proposal. There are more details of what happened at that company in a separate report on our blog and in this newsletter. The directors narrowly won the delisting vote, mainly because a number of shareholders in nominee accounts seemed to have difficulty in voting, or their votes were delayed and hence not counted. In many respects, the vote was questionable. Now another provision of the Companies Act (Sections 342/343) enables any shareholder (or group of shareholders) with more than 5% to apply for an independent review of a vote. But obviously in this case with shareholders mainly in nominee accounts, they may have no legal standing to do so!

Would the nominee operator do so on their behalf? Probably not because although they might have a legal responsibility to vote as requested by the beneficial owner (as applies to ISA accounts for example), they have no duty to take wider action.

In practice VSA Capital Group might now choose to convert to a private company and there would be little to stop them, based on the above precedent.

So in essence, the nominee system not only makes it difficult for shareholders to vote (and act as owners of the company which is what in essence they are), but it also fatally undermines your rights as a shareholder.

Use a Personal Crest Account rather than a Nominee Account

There is one simple answer to this problem that all shareholders should be aware of:

Do not hold your shares in a nominee account. Hold your shares so that you appear on the share register of the company. You can guarantee this by holding a paper share certificate (not particularly recommended in the modern age), or by being a Personal Crest Member (which is highly recommended). The latter is an electronic share registration system which operates similarly to a nominee account and is usually no more expensive. However only a limited number of stockbrokers support such accounts – some of them are Charles Stanley, Brewin Dolphin (inc Stocktrade), Killik, Redmayne Bentley and W.H. Ireland (you can find a complete list by using the search facility on the APCIMS web site here: www.apcims.co.uk/buy-and-sell-shares/find-a-firm ).

Investment Laws and Regulations need changing

That still leaves the problem of ISA and SIPP accounts which currently have to be in nominees. ShareSoc would like to see this situation changed by revision of the relevant Regulations. Please support our stance on this matter.

There should also be a new “name on register” electronic system to replace share certificates, as is being mandated by the EU as part of the “dematerialisation” proposals to ensure all share trading is done electronically.

Investors should be warned

ShareSoc would also like to see all clients of stockbrokers being warned about the dangers of nominee accounts when they open accounts. Apart from the issues covered above, most nominee accounts are “pooled” with no clear identification of individual holdings. This can create enormous difficulties when stockbrokers get into financial trouble and go into administration or liquidation – not an uncommon event in reality. Often there are poor records and inadequate reconciliations of holdings in the nominee name (and hence on the register of the company) with individual holdings. It sometimes takes years to sort out who owns what, with some shortfalls also common.

Summary

To summarise, although ShareSoc encourages investors to invest directly in companies, and act like owners, if you are in a nominee account you are not legally a shareholder. You are simply someone who holds an indirect interest as a “beneficial owner”, i.e. you are entitled to receive any dividends that result, can buy or sell that interest, and may be able to instruct your nominee operator how to vote, but you do not have all of the rights afforded to registered members and your interests may not be protected by the Companies Act as you may otherwise have thought.

This is not only dangerous to your legal claim on those shares, but also fatally undermines your rights as an investor.

Please support ShareSoc to get this changed.

In reply to ShareSoc, post #311

That still leaves the problem of ISA and SIPP accounts which currently have to be in nominees.

Precisely. That is a huge issue for me and many others.

Posted by ShareSoc at 15:47, April 25 2013.

Elementis AGM – a surprisingly bad performance from the Chairman

When a shareholder gets told to shut up by the Chairman for asking a fairly simple question without getting a straightforward answer, you know something is wrong. No, it was not me who was the victim, although I did ask some other awkward questions at the Elementis (LON:ELM) AGM today. And at the end of it I came to the conclusion that this company needs a new Chairman.

A full report is on the ShareSoc Members Network here:

http://sharesoc.ning.com/forum/topics/the-agm-forum?commentId=6389471%3AComment%3A22757

Elementis shareholders should make it essential reading.

Posted by ShareSoc at 08:27, April 29 2013.

Charges can wipe out your gains

Charges can wipe out your gains. Yes that was the title of a fascinating article from Terry Smith in this weekend’s FT Money. He spells out all the charges (both disclosed and undisclosed) taken by the average fund manager on collective funds, and summarises the bad news in the single sentence: “In other words, more than 100 per cent of the expected income on portfolios is being absorbed by charges”. As most of the returns from stock market investment come from dividends and not from capital growth – indeed there have been long periods when capital growth has been nil – this is a recipe for erosion of your real wealth.

He advocates cutting out as many layers of “intermediation” as possible so as to minimise the charges you pay. In addition, even though he runs an actively managed fund himself, he suggests using low cost index tracking funds.

Now this is undoubtedly sound advice. But as is so common when listening to the advice from a city professional, he omits the even more obvious solution. That is simply to invest directly in shares. Cut out all the financial advisors, fund management fees and platform fees. Just buy shares directly through a low-cost on-line stockbroker. Chances are your stock-picking and investment returns will be as good as any professional fund manager (indeed random selection will do as well as them and even better than an index fund), so long as you don’t trade too frequently.

Unfortunately you won’t see any advertisements in the Financial Times or any other publication for this approach and Government policies (such as taxation arrangements) discourage it. But if you really want to get good returns from your stock market investments, you should “do it yourself”.

The next time you talk to your M.P. you might also urge the Government to pay less attention to their investment world advisers and develop a culture of direct stock market investment. The late Margaret Thatcher’s move to establish mass share ownership by privatisations did not achieve that purpose because the basic rules of the game were not changed. The Retail Distribution Review (RDR) is one step in the right direction, but investment taxation and education policy also needs changing to stop the bias against direct investment.

This is of course well summarised in ShareSoc’s adopted policies – see www.sharesoc.org/policies.html for more information.

Posted by ShareSoc at 09:20, May  5 2013.

Should you vote to increase the size of an investment trust?

Should you vote to increase the size of an investment trust? This question came to my attention when a notice of a General Meeting of Scottish Oriental Smaller Companies Trust arrived on my desk. They are asking for approval to issue more shares “to meet the continuing demand for the Company’s shares”.

At their last AGM in January they obtained authority to issue more shares and have subsequently issued about one million new shares at a premium to the prevailing NAV. But they judge that will soon be insufficient, and hence want approval to issue more shares up to a nominal value of £400,000 (i.e. 1.6m shares) representing 5% of the existing share capital.

This company has a remarkably good performance record in the last few years. Total return up 43% over one year and up 95% over three years, well ahead of other “Asia Pacific ex Japan” investment funds which is the benchmark they use. As a result it has recently traded at a premium to net asset value which is of course somewhat unusual for an investment trust. As investment trusts are “closed end” funds, any strong shareholder demand to purchase more shares simply drives up the share price of course, and with such a good performance record you can see the result being reflected in the premium.

But let’s look at the issues. Is maintaining a cap on the share price premium by issuing more shares good for existing investors? Or is it more in the interests of the fund manager? One obvious consequence is the fund grows in size. That certainly increases the overall fund management fees and no doubt trickles down into higher pay for the individual fund management staff (or as they might put it, enables them to attract and retain high quality staff).

Is an increase in fund size otherwise a good thing? It presumably enables larger stakes in larger companies to be purchased, but as this is a “smaller companies” fund that might not be a good thing. As larger companies might be ruled out, and obtaining bigger stakes not appropriate, it might simply mean expanding the universe of holdings to include more companies, i.e. a more diversified portfolio will result. In general, more diversification means more diluted performance, so that would not be a wise move.

In reality it might alternatively mean they buy more of the same stocks already held, thus driving up the share prices – great for the existing portfolio performance but not necessarily a wise policy either.

It is well known that the larger a fund, the worse the performance becomes. To quote from the wisdom of John Bogle: “In the field of fund management it seems apparent that nothing fails like success” (from his book Don’t Count on It!). He demonstrates with actual data that for open-ended funds, good performance draws in large investment inflows, which subsequently damages the fund manager’s ability to perform.

Is there any particular reason why shareholders would worry about a high share price premium to NAV? No particular concern comes to mind. As with all share prices, it would surely have a natural limit, in the same way as high discounts tend ultimately to disappear. In effect, by issuing new shares when the shares are at a premium the company is simply doing the opposite of buying back shares when the discount becomes excessive – and most people might support that in investment trusts to avoid shareholders facing unrealistic prices when they want to sell. But why they would worry about unrealistically high prices seems odd.

Note that the premium at Scottish Oriental Smaller Companies has never been very great – it’s currently 1.4% for example, whereas companies only start to worry about discounts when they exceed 15%.

So the conclusion is surely that issuing more shares in investment trusts should be viewed with scepticism, and in this particular case shareholders should consider voting against.

In reply to ShareSoc, post #315

Must say that I disagree with the above  suggestion.

Whilst I agree that, in general, increases in the size of funds tend to benefit their managers more than fund investors, there are two factors that mitigate that in this case:

1. The increase is relatively small - just 5%, so no major gains for the fund manager, nor would that scale of increase force cash deployment at an inopportune time.
2. More importantly, issuing shares in an investment trust at a premium to NAV adds to NAV/share, which is beneficial to shareholders in the long run.

To illustrate the second point, suppose a trust has an NAV of £1m and 1m shares in issue - NAV/share = 100p. If 100,000 new shares are issued @ 105p (a 5% premium), asets increase to £1.105m whilst shares in issue increases to 1.1m. NAV/share increases to 100.45p.

As Roger says, in the long run discounts & premia tend to even out, so NAV/share is what counts for long term investors. Measures that automatically increase NAV per share - buybacks at a discount and sales at a premium -  are usually beneficial to long-term shareholders.

Moreover, I find a trust with a policy to maintain its discount or premium within a reasonable band more attractive for the following reasons. At some point one may need to sell shares in the trust, for reasons that may or may not have anytthing to do with trust performance. It is reasuring to know that you will not be forced to make that sale at a big discount to NAV. Conversely, when a trust trades at a big premium, I find it hard to continue to hold as many shares in that trust, knowing that at some point in the future that premium is likely to fall and, unless markets continue rising, that means a fall in the SP becomes more likely. Generally, premiums arise when markets are at their most bullish - and a fall in the markets is more likely, whereas the largest discounts occur when markets are gloomier and a gain is more likely!

Whilst I have found trading investment trust shares, driven by those factors, to be generally profitable, it would be preferable to just continue to hold the shares of trusts that I like, with the discount/premium remaining in a reasonable band. The share price would then be driven more by underlying investment performance than by temporary supply/demand issues.

Regards,

Mark

Posted by ShareSoc at 14:44, May  8 2013.

BAE AGM – Olver’s swansong disrupted by political activists

This morning BAE Systems held it’s Annual General Meeting in a converted hangar in Farnborough - the location of the company’s headquarters of course. There were probably about 300 shareholders present, but as many as a third of them seemed to be protestors unhappy with the company’s activities – and mainly of the view that weapons kill people and the company should be a lot more careful about what they sell and who they sell them to.

The meeting commenced with a promotional video for the company ending with the slogan “inspired work”, followed by Chairman Dick Olver giving a thirty minute speech on the progress of the company and the issues it faces. As the company is already looking for a successor, this seemed to be a rather valedictory oration justifying his stewardship of the company and went on rather too long for my preference, even though he seemed keen to rush through it toward the end.

During Mr Olver’s oration he was continually interrupted by noises, coughing and expletives from some shareholders present (at least I presume they were shareholders to enable them to get into the meeting but I doubt if they had any significant financial interest in the company as they were almost all young, and many of them female). It would appear to have been an organised demonstration. I did suggest to the Chairman that they be removed but he carried on after giving them a mild warning.

He gave the protestors a second warning at the end of his speech, and then a third warning and security staff removed the worst protestors at this point and thereafter.

Ian King, the CEO, then gave a short review, but there seemed not to be a single piece of new information in that or the Chairman’s speech. Neither was there anything new of significance so far as I could see in the Interim Management Statement issued early this morning (an “unchanged outlook” in essence, the Salam contract still not concluded and the impact of US defence cuts still uncertain), or in the written Q&A responses the company provided. Questions were then taken from the audience but these were dominated by “politically focussed” questions such as an attendee who wanted to give the Chairman a “whitewash” award for producing “killing machines” (I think he was going to throw something at the Chairman but was blocked by security staff before he got near). Another asked about the change of venue (was it to avoid awkward questions? Answer: No), will drones be displayed at the Excel event, about gender equality in Saudi Arabia and the company’s continuing to do business there, and others.

After over 30 minutes of this and no questions apparent from real shareholders (and more attendees being removed – up to 8 in total), I suggested to the Chairman that he adjourn the meeting but he did not do so. I therefore left as I have better things to do with my time. I will have to write to the Chairman to put the questions I wanted to put.

I will also be giving him some suggestions for his successor on how to turn the meeting into a purposeful event for real shareholders, not a platform for political protestors to make points. For example, shareholders with nominal shareholdings might be cordoned off in a separate area, only allowed a limited number of questions, and larger shareholders could be given priority in asking questions.

Now let no one assume that I object to shareholders, who have real concerns about the activities of a company in which they are invested, raising any issues they care to at AGMs. But such meetings are for shareholders with an economic interest in the company and should not be turned into a bun fight. The Chairman also has the duty and responsibility to keep good order for the benefit of all attendees, which he signally failed to do. As it was many genuine shareholders had no doubt travelled long distances to attend a meeting which turned out to be utterly pointless.

So if Dick Olver thought that he was going out on a high note, he was certainly mistaken.

A fuller report on this meeting is now available on the ShareSoc Member’s Network.

In reply to ShareSoc, post #317

On the matter of whether companies should split the role of CEO and Chairman (as the Corporate Governance code recommends), I should draw ShareSoc's attention to an article in The Wall Street Journal on the topic, which cites a new piece of academic research that tries to ascertain the impact of split roles on investor returns:

Efforts to split the posts of chairman and chief executive at U.S. companies are finding success. Now all that is needed is evidence it actually helps investors.

Studies show a mixed impact on shareholder returns when independent chairmen are named to keep a better eye on CEOs. While the evidence suggests a split could help companies that are struggling, it also shows the step could hurt shareholders in many other cases.

Personally I lean strongly towards having an independent Chairman and separate CEO. But (in part from recent experience of having encouraged this and later regretting that particular change) I would also say that the last quote in that article is extremely important for those who are concerned about the issue to remember:

"There are a million things that can affect shareholder returns and any number of things that are more important than a separate chairman and CEO.''

So my only comment on the article and the principle is that investors shouldn't run away with the idea that separation of roles is always for the best - and therefore policies in this area should lean towards preference ....and not proscription!

ps...this is not intended to be a reply to the post above - but I can't edit that link out

I'm surprised that there were so many "hecklers" there on a Wednesday morning - presumably none of these individuals worked (that, or their human rights/amnesty international or employers of similar ilk gave them time off to protest), Failing that they're most likely students who should be spending their time more profitably.

A list of such people, with their personal details, should be taken and cross referenced with those currently in education or in receipt of welfare benefits of any kind related to looking for work imo - if you're on welfare you don't have time to turn up to such meetings and protest. Having seen the activities of the NUS in my day,and their propensity to causing trouble in some pointless cause, I'm well aware of their loony inclinations. It really wouldn't surprise me if those protesting were there on the basis of owning 1 share, either being associated with the NUS or some "welfare /rights organisation"

During Mr Olver’s oration he was continually interrupted by noises, coughing and expletives from some shareholders present (at least I presume they were shareholders to enable them to get into the meeting but I doubt if they had any significant financial interest in the company as they were almost all young, and many of them female). It would appear to have been an organised demonstration. I did suggest to the Chairman that they be removed but he carried on after giving them a mild warning.He gave the protestors a second warning at the end of his speech, and then a third warning and security staff removed the worst protestors at this point and thereafter.

This kind of behaviour shows that those engaging in such have no etiquette whatsoever.....I thought the Eco inspired disruption of the BP AGM, pertaining to the Canada sands and the same reworded questions being posed on numerous occasions was tiresome enough, but this took the biscuit.

If it's obvious that attendees are clearly not interested in the company, nor invested to any significant degree (holding 1 share is frankly ridiculous) and merely attending to disrupt then they should be swiftly removed from the building - preferably with a forcible boot up the backside.

There will come a point where the majority attending an AGM will sort out such "politically inspired" disruptions themselves. I half expect such to occur first at a BP AGM in the not distant future.

In reply to Fangorn, post #319

This kind of behaviour shows that those engaging in such have no etiquette whatsoever.....I thought the Eco inspired disruption of the BP AGM, pertaining to the Canada sands and the same reworded questions being posed on numerous occasions was tiresome enough, but this took the biscuit.

If it's obvious that attendees are clearly not interested in the company, nor invested to any significant degree (holding 1 share is frankly ridiculous) and merely attending to disrupt then they should be swiftly removed from the building - preferably with a forcible boot up the backside.

There will come a point where the majority attending an AGM will sort out such "politically inspired" disruptions themselves. I half expect such to occur first at a BP AGM in the not distant future.

Quite so.

I'd just add that such activities interfere with the corporate governance process itself - and it is therefore in shareholders' interests to ensure that company boards are being politely held to account (given the few opportunities shareholders actually get to do this) and are not treated at AGMs to the sort of rabble-rousing, inaccurate rubbish with which some people choose to pillory company boards in unmoderated virtual world "discussions".

If those with an economic interest fail to assert themselves and ensure that AGMs are businesslike, then they themselves will ultimately be the losers. AGMs are important events for individual shareholders and they should be treated seriously - and sensibly!

Posted by ShareSoc at 11:08, May 13 2013.

Blinkx results – a good example of how to present them

This morning Blinkx (LON:BLNX) announced their preliminary results. Blinkx is a technology business based on an internet video search engine and advertising platform. The results were better than expected, but the key point worth noting is the live web cast of the analysts’ conference call that anyone could participate in. Why do not all companies do it this way? If a small company such as Blinkx can do it why not others?

The web cast (including the subsequent question and answer session) is available from the Blinkx investor relations web site, plus the associated Powerpoint presentation and it’s well worth listening to.

Here’s a summary of some of the key information from the announcement and the presentation:

Revenue was up 73% at $197m, adjusted earnings were up 94%, and cash on the balance sheet rose 45% to $55m.

Brian Mukherjee, the CEO, said that we started as a technology company and that remains the core of our DNA and 95% of our revenue comes from video advertising. He said you could see the effect of operational gearing in these results. There was a smooth transition of senior management roles last year and the company has several captive growth opportunities ahead of it this year.

Widespread broadband connectivity is driving the massive wave of video use and advertisers are following them on-line. But the following figures give some idea of the opportunity. Some $60bn is spent in TV advertising but only $3bn is spent on on-line video. Blinkx has built an ad-supporting ecosystem around their core technology. Their differentiation is that they do speech recognition and video analysis of video which enhances consumers’ service and advertisers focus.

The CFO, Edward Reginelli, said that margins are now positive and improving. They are very focussed on cash generation.

Questions were then taken. One was about the customer concentration – the answer was only one customer was near 10% of revenue with all others less. Another question was how much is coming from mobile and connected TVs. The answer was very little at present – they are still mainly focussed on PCs (there was some discussion of the opportunities in the mobile space later).

After a question on margins, it was stated that marketing expenditure might grow at 15% this year, but G&A costs are likely to only grow by 3% to 5%. On corporation tax, the rate was forecast to be in the 25% range going forward.

It was noted that currently revenue overwhelmingly comes from the USA (at 98%). There are still lots of organic opportunities there and hence the focus. But the company’s next step would be to focus on English speaking countries and then the rest of Europe. The view on Asia is that the market still needs to mature.

In summary, this company seems to be on a roll with lots of organic growth potential. There was a question about the possible threat from Facebook who are wanting to move into video apparently, but the comment was that this might simply validate video which might be good for the entire industry.

Listen in to the presentation if you want more information on this company.

Posted by ShareSoc at 14:05, May 15 2013.

Presentations at AGMs – Michelmersh Brick is setting a good example

Revitalising the Annual General Meetings (AGMs) of public companies is one of the objectives of ShareSoc. One way to do that is for a company to include a presentation to investors at their AGMs covering the financial results of the last year, the current state of trading and any other useful information about the opportunities and challenges the company faces. Of course the company has typically already prepared and given such a presentation to City analysts when they announced their preliminary results, so it’s little more effort to do such a presentation. Doing so not only helps to attract individual shareholders to attend the AGM, but also turns it into a meaningful and useful event rather than the tedious meetings they often otherwise are. A presentation also helps to stimulate interesting questions, and interesting answers.

Congratulations to Michelmersh Brick Holdings (LON:MBH) who are giving just such a presentation in the hour before their AGM on the 22^nd May commencing at 10.00 am at the offices of Tavistock Communications in the City of London. Investors with an interest in this company may wish to attend.

Perhaps ShareSoc should start a campaign for companies to do such presentations? If you think that is a good idea, please let us know.  Quite a few companies actually do such presentations, but very few announce the fact in advance.

Another recent bad example (after the BAE Systems (LON:BA.) AGM previously commented upon) was the AGM of Royal Bank of Scotland (LON:RBS) yesterday. Only 127 shareholders attended the meeting in Edinburgh, which is well down on the figures in previous years. Perhaps shareholders have become apathetic about the future of their financial interest in the company since it has been eroded so sharply?

Posted by ShareSoc at 09:15, May 18 2013.

Tornados in Texas, and crying Wolf in the FT

Attending the AGM of Amlin (LON:AML) , a major “catastrophe” insurer, reminded me to consider the issues of climate change again. Coincidentally there were tornados in Texas last week and also an article in the Financial Times by their correspondent Martin Wolf entitled “Why the world faces climate chaos”. Without debating the question of whether humans via the generation of CO2 are creating climate change (which Mr Wolf argues is “basic science” in his usual polemical style when many others disagree) it’s worth noting that he simply concludes with the observation that there is no political will do to anything about it. At least the FT did print a letter from someone with a contrary view of climate change science. Mr Wolf is good at crying wolf but fails to offer any practical solutions.

Meanwhile at the Amlin AGM more immediate issues came to the fore. One questioner raised the issue of the recent tornados in Texas (six people dead and widespread devastation) and would this have any impact on the company. The simple answer was no because the company budgets for some catastrophes so shareholders could still sleep at night.

Although climate change is argued to create more “variable” weather and hence more frequent disruptive events such as tornados, cyclone and floods this of course might actually help Amlin’s business as there will be more need for insurance cover and the cover will become more expensive. One comment made at the AGM was that insurance companies were actually moving into the catastrophe segment because it was counter-cyclical, i.e. better perhaps to invest in that than in the financial or commodity sectors.

But it surely is true that if you want to hedge your bets on climate change then investing in catastrophe insurers such as Amlin might be a solution. If the science is true then the business they write will grow. If it is not true then their claims rate will be low but people will be scared enough by all the talk of disasters to buy insurance anyway. Amlin investors should probably encourage Mr Wolf to write more articles of the same tone.

Other issues that arose at the Amlin AGM were the appointment of a new non-executive director who already had seven other roles/directorships, how the company managed to improve the returns it made on bonds last year, and whether the company could insure against an exit from the EU – on the last question the Chairman indicated they were probably self-insured.  

A full report on the Amlin AGM is present on the ShareSoc Members Network for those who wish to learn more.

We all know the Market Makers need to make a profit on AIM stocks, however these two trades show them for what they are.!!

Feedback PLC:

Thur 16th May 2013.

Sale of 900,000 shares @ 0.15p 9.36AM

Buy of 1M shares @0.38p 10.42AM