December 2017 UK Investor Magazine

UK INVESTOR MONEY // SHARES // INTERVIEWS

ISSUE 28 // DECEMBER 2017

What

will Father Christmas be putting in the stockings of the writers of ShareProphets?

PLUS • 9 great tips • Jingle Bells, Racist Bells - The biggest threat of 2018 is not Brexit but...

UK Investor Magazine — 1 — December 2017

Intro

From The Editor INSIDE 3 Blockchain joins the UK Investor Show party 4 Three resource shares to buy for January Gary Newman 6 24 share tips of the year Tom Winnifrith 7 Sexism and the BBC Tom Winnifrith 8 Sports Direct - drive a bus through the numbers and forecasts!

Chris Bailey 9 What will Father Christmas be bringing the ShareProphets writers this Christmas?

Tom Winnifrith 12 Company of the Month: Character Group

Steve Moore 13 Now Jingle Bells is racist Tom Winnifrith 14 Ashtead - ‘making’ or ‘made’ it happen?

Chris Bailey 15 Three shares to sell for January Tom Winnifrith 16 The House View: Oh, no Jeremy Corbyn

CONTACT US UK Investor Magazine 91 - 95 Clerkenwell Road London, EC1R 5BX E: info@ukinvestorshow.com W: www.UKInvestorShow.com

Welcome to the December edition of the UK Investor Show Magazine, which comes with a front cover someone is bound to find offensive. That is why we used it this time last year as well.

We live in an age when being offended is very much in vogue, especially among the snowflake generation, something I touch upon on page 13.

There are, I hope, many more reasons to read the UK Investor Show magazine from cover to cover. There are the Christmas wishes from all of the editorial team at ShareProphets, five stocks to buy and four to sell, and some strong views from myself and Chris Bailey. Maybe if you are a Newcastle United supporter you should avoid the writings of Mr Bailey this month!

The build up to the highlight of our year, the annual one day investment extravaganza in London, continues. I am not sure where I stand on Blockchain but it joins the main stage on April 21 2018 at the QE2 in Westminster as you can read on page 3. The show is clearly going to be the biggest one day shares event in Britain. Last year we set new records with 123 growth companies manning stands at our show. This year we will beat that easily - we already have 115 companies booked in with more than four months still to go! Go to page 3 to grab a free ticket for the show as it will be spectacular.

But before then it is Christmas. However you celebrate what happens on 25 December the reason we all get a day off work, a holiday, is because it is Christmas, the day on which some of us remember the birth of Christ. To pretend that we are on holiday for any other reason a canard and this I find the politically correct greetings which do not use the C word dishonest if not downright offensive. So, however you spend the day itself, I wish you all a very Merry Christmas. That is unless you are an AIM fraudster like Rob Terry in which case I have another wish for you as you can see on page 9.

EDITORIAL Tom Winnifrith Editor

Tom Winnifrith Editor www.ShareProphets.com www.UKInvestorShow.com www.TomWinnifrith.com

UK Investor Magazine — 2 — December 2017

Blockchain joins the UK Investor Show party

By Lucy Wray

I

am not sure if bitcoin and blockchain are bubbles or the next big thing. And so I want to listen to the experts and with that in mind I have today added a session led by the comedian, radio star and bitcoin guru Dominic Frisby to our main stage line-up at UK Investor Show on April 21 2018.

You may have no interest in the blockchain revolution. Fear not the masters of traditional investing still dominate the main stage: the UK’s top fund manager Mark Slater, Tech Queen Vin Murria, Britain’s Buffett Nigel Wray in conversation with Paul Scott, legendary entrepreneur and Sunday Times Columnist Luke Johnson, Stockopedia’s Ed Croft.. the list goes on and on.

You probably have some idea of how sparky and illuminating our speakers will be. And so we hope you have put the date in your diary (April 21 2018) and today we have another 100 free tickets to hand out to readers of this magazine To make sure you get to hear our array of star speakers we have another 100 free tickets to give away today. Simply go to www.UKInvestorshow. com/tickets and book an investor class ticket using promotional code CHRISTMAS to guarantee your place..

What makes the Global Group UK Investor Show easily the top one day conference for those who want to make money from shares? Two things.

As well as our fantastic speakers, a real reason to go is to meet the men and women behind some of the most interesting companies on AIM. In 2018 we have our biggest and best speaker lineup yet but we will also have more PLCs than ever attending and presenting. Up from 123 last year it will be 133 on April 21 2018 and as of today, 116 stands are already booked in. And the quality and range of companies attending is better than ever.

Among the PLCs booked into attend are ( in no particular order): ICAP, Obtala, Optibiotix, Skinbiotherapeutics, Alliance Pharma, Metal Tiger, Wishbone Gold, Sosandar, Columbus Energy, Premaitha, Powerhouse Energy, Victoria Oil & Gas, Vox Markets, Papua Gold, Altyn, Plastics Capital, Kibo Mining, BMR, TekCapital, Doriemis, Premier African Minerals, Solo Oil, Toger Resources, Xtract Resources, Highland Natural Resources, Ascent Resources, Fox Marble, ValiRx, Tern, Georgian Mining, Cadence Minerals, Eurasia Mining, Falanx, FairFX, Minoan, Amryt Pharma, Jubilee Platinum, Big Sofa and the list goes on and on and on.

To make sure you meet the men and women

behind some of the most exciting stocks on AIM and the main market we have another 100 free tickets to give away today. Simply go to www.UKInvestorshow.com/tickets and book an investor class ticket using the promotional code CHRISTMAS to guarantee your place..

What we can say for sure is that this will be the biggest show that the team have put on in their 16 years of doing such events and that this will be the UK’s biggest such event by a country mile.

Among the speakers making a return after several years absence are Ed Croft of Stockopedia, AIM entrepreneurs Adam Reynolds and Big Dave Lenigas, property legend Nick Leslau, the great Luke Johnson, and Dr Paul Jourdan of Amati. They join the stalwarts including Wray, Slater, Murria, china guru Dr Hon, Tom Winnifrith and the bear raiders Lucian Miers & Matt Earl.

We have 100 free tickets to give away this week. Simply go to www.UKInvestorshow.com/ tickets and book an investor class ticket using the promotional code CHRISTMAS to guarantee your place on April 21.

Myself and the rest of the Wray family who now own this show are determined to expand the event and speaker lineup and also hand out all sorts of goodies on the day to those attending - we remember how popular the sweet cart was in 2017!

The Global Group UK Investor Show is now universally accepted as the dominant one day event for those who want to make money from shares. And with our new big name speakers and huge PLC attendance it just got better still. We hope the date (April 21) is in your diary already so to get these free 100 tickets book now. It will be good to see you again next Spring.

Simply go to www.UKInvestorshow.com/ tickets and book an investor class ticket using the promotional code CHRISTMAS to guarantee your place. See you on April 21 2018.

And before I forget, I wish you and your families a Merry Christmas and the best of luck for 2018.

UK Investor Magazine — 3 — December 2017

Three resource shares to buy for January

By Gary Newman

T

he commodities sector is still presenting plenty of opportunities and I think this is going to continue moving forwards – both for those already at the production stage, and for the smaller companies which have picked up licences during a very tough period for the sector.

has been completed as a producer, with the same expected for Rabul 2, once evaluation of the data has finished.

In Morocco, operations have gone well so far across the Sebou, Gharb Centre and Lalla Mimouna permits, with discoveries at KSR-14 and KSR 15, with the former already connected to the gas network and producing 6.4mmscfd, and the latter expected to be soon. Drilling is also currently being carried out at KSR-16, and I would expect another positive result there.

These operations are costing the company a fair bit of money, but it managed to make a gross profit of over $10 million for the three month period up to the end of September and still had over $30 million in the bank at that point.

In the oil producing sector SDX Energy (SDX) still looks cheap to me, with the share price sliding even further in recent weeks to the current level of around 47.5p to buy, and I would suspect that one of the institutional holders has been offloading.

The company has been producing an average of 3,280boepd during 2017, with the bulk of that coming from its operations in Egypt at the North West Gemsa and Meseda fields, plus 568boepd from Morocco – although that is based on a nine month period up to the end of September, and had the assets been in production for the whole of that time the average would have been 3,587boepd. There is plenty of potential for that to increase rapidly given the amount of drilling activity that the company has been undertaking recently.

At its 50% owned Meseda operation, the processing facility has been expanded so that it can process 20,000 barrels of fluid per day – double the previous limit – and the Rabul 1 well

Operating costs remain very low, and with oil and gas prices now higher on average, the company should continue to perform well and profit from its operations will help to fund the work that it will be carrying out to grow the company moving forwards.

At a market cap of not far off of £100 million it isn’t without risk and certainly the current operations alone don’t underpin all of that, but you are investing for the potential growth of the company moving forwards.

The next company is at the other end of the scale, being FTSE100 listed Randgold Resources (RRS) and is purely a leveraged play on the price of gold improving in the coming months.

There isn’t much point – nor the space here – in going into too much detail on each of its operations or the balance sheet, as the share price

UK Investor Magazine — 4 — December 2017

will pretty much be solely dictated by where gold goes from here.

The company has been incredibly good at managing its reserves in a way that will ensure that it is strong even in periods of lower commodity prices, and it remains pretty much debt free and in a very strong cash position.

Gold has taken a bit of a tumble over the past couple of weeks, and this has resulted in the share price dropping from the peaks of over 8,200p that we saw back in September when gold was flying high, to the current level of around 6,870p.

I am bullish about the gold price going forwards into 2018 and beyond, so would expect to see a decent return for anyone buying at this level.

The company does pay an annual dividend, but it isn’t an amount to get too excited about, having yielded around 1.2% in 2016.

the places have had plenty of chance to flip their shares if they wished to, plus a number of institutional investors and directors took part, I think that it is now worth a look.

The funds that were raised are already being invested into oil and gas projects, albeit indirectly into licenses which already have historic discoveries. There is always the question as to why, if these licences are so good, they haven’t been developed, but technology has moved on and there is only a finite amount of resources around the world to be extracted, so some of these old discoveries have subsequently come good.

The company has already announced a £1.5 million investment in Corallian Energy in return for 34.5%, and this private company has a 60% interest in the Colter field off of the south coast of the UK. Although proximity to existing fields doesn’t necessarily point to a good result, I believe that this licence next to Wytch Farm does have potential. It has previously been drilled by BP, and oil has been recovered with gross mean prospective resources estimated to be around 30 million barrels. An appraisal well is planned for H1 2018.

Corallian has also just farmed out a 40% interest in its Wick prospect in the Firth of Moray to Upland Resources and now has a free carry on a £4.2 million drill planned for late 2018, which will be targeting P50 resources of around 250 million barrels.

Finally I turn to a small AIM outfit called Reabold Resources (RBD) where I hold some shares myself and have bought them to see how things pan out longer term, as I believe that it has potential, despite it being very early days.

With this type of small AIM play, it is worth noting that the majority of them ultimately amount to nothing, but for the ones that do make it, being in at an early stage can yield returns of many multiples of your initial investment – as we have seen in the past with the likes of Encore, Nautical Petroleum, and Cove Energy, amongst others.

This company gained a lot of interest on social media platforms such as Twitter, which is often enough to put me off, soon after it raised over £5.7 million a few months back. But given that

Both are still a long way from production even if the drilling of either ultimately proves to be economically viable – and a lot of money would need to be spent prior to that stage - but the size of the targets means that success would be a game-changer for the companies involved.

Reabold has also just invested £1.5 million in Danube Petroleum for a 29% stake, and this company has 50% of the Parta licence, in Romania, where an appraisal programme is scheduled for H2 2018 to prove up 33Bcf of contingent and prospective resources.

Currently its market cap is nearly £11 million at a share price of 0.75p, so a fair bit of the value is down to the potential value added from successful drilling, but I believe that the risk versus reward is good enough to make this a highly speculative buy, especially with the amount of drilling planned over the next 12 months or so.

UK Investor Magazine — 5 — December 2017

24 share tips of the year - Christmas Eve to January 2nd on ShareProphets Writes Tom Winnifrith

S

ome investors like to take a week off over the Christmas break and not think about shares at all. Others get cold turkey by Boxing Day. Indeed earlier. Running another website many moons ago I was surprised to see that almost 10% of our readers had logged on to check what was happing on Christmas day itself even though no new material had actually been posted on December 25th. Maybe, like I will be this year, they were all seeking some escape from the Mother-inLaw. So for those fearing cold Turkey ShareProphets will be serving up our 24 share tips of the year 2018. Each of Steve Moore, Chris Bailey,

HotStockRockets, Gary Newman, Malcolm Stacey, Darren Atwater and Nigel Somerville will serve up two buy tips while Lucian Miers will produce two shorts. That is 16 tips. I will serve up four buys and four sells.

All of this will be for paying subscribers only.

It costs just £5.99 per month to access our 300 articles and 30 bearcasts each month. You can live with just three articles a month for free but that means missing out on 99% of our articles, all of the bearcasts and all of our 24 share tips of the year.

Just £5.99 - less than a large glass of wine. Treat yourself... sign up HERE

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newsletters.advfn.com/tomwinnifrith UK Investor Magazine — 6 — December 2017

Boys, girls, make-up and sexism in 2017 the strange world of the BBC Writes Tom Winnifrith

B

efore she leaves in the morning, to fill the empty heads of impressionable snowflakes with left wing nonsense, the Mrs always switches on Radio 4. As I wander into the Kitchen to make morning coffees I am treated to some real gems and insight into the mad mindset of the state funded fake news outlet and the mindset of an utterly out of touch metropolitan elite.

On Women’s Hour the other day a lefty academic and a mother were discussing make up for kids in schools. The host summed it up thus. So when girls wear too much makeup they are condemned but if boys experiment with the same make up they are applauded for experimenting....

Right so the schooling system is just sexist.

I give up. Are boys really universally applauded for experimenting with make-up in 2017? Maybe in zone 1 London, where the 1% dwell, they are but I sense that most of us in Britain really would not be happy with schools applauding such things.

And is it really sexist to suggest that 11 year old girls sexualising themselves at an early age is not that wonderful either?

I’m sure that very few folks in Britain share the values of the BBC on this matter. But maybe I am wrong and am just old reactionary who is out of touch with the modern world and the BBC really does speak for the nation as it is today. Somehow I think not.

This article first appeared on www.TomWinnifrith.com

UK Investor Magazine — 7 — December 2017

Sports Direct - drive a bus through the numbers and forecasts!

T

By Chris Bailey

here are two things I know about 2017. The first is that I had not one but two inaugural trips to a Sports Direct (SPD) store (and survived) and the second is that the omnipresent but embattled retailer should have been my tip of the year the thick end of a year ago. However in this world we must look forward and that brings me to this months release of first half profits at Mike Ashley’s emporium.

When people ask me for an investment methodological tip I generally tell them to trust their own judgments after reading some primary research or data such as company regulatory news statements. The Sports Direct update is a classic schizophrenic publication. The Geordie-striped CEO mumbles about a ‘spectacular trading performance’...which seems slightly at odds with UK sports retail revenue down 1%, falling gross margins, higher debt and reported earnings per share down over 60%...unless he missed out the word ‘bad’. Of course underlying profits were up but of course out the window for such numbers includes currency impacts, exceptional costs, acquisition whatevers, pay packets for relatives ( joke) and all those other semi-permanent ‘oneoffs’.

Actually in the wider scheme of things it could have been worse and my aforementioned retail contact with Sports Direct did inform me that the shops are pretty busy, prices are keen and availability was extensive. Actually, talking about availability, one of the main reasons cited for lower margins in the UK was that inventories pushed up. Well that’s...not that exciting for a retailer especially when juxtaposed with lower headline sales. But - on an underlying basis ‘natch - UK profit went up because (and you will love this) aggregate wages were held back among other cost initiatives. Elsewhere international retail was decidedly mixed with some parts doing well and some (especially the US) doing poorly.

Overall though the real key remains the UK. And then we get to that real insight into a business: free cash flow. Underlying free cash flow pushed up to £150 million from c. £130 million a year ago for the first half period. That sounds ok...until you look a little bit lower down the cash flow statement. The aforementioned

inventory issues induce a £90 million outflow, the fascinating ‘purchase of investments’ (sounds like Ashley’s punts as it is not capex or anything like that) is a cool £131 million outflow and buying back shares is £133 million worth of outflow. Of course I am less fussed about the latter but put it all together and net debt has risen by just under £200 million to around £470 million. Ok...that’s x1.5 full year ebitda so no huge disaster but clearly heading in the wrong direction.

And then we get to the finale. No, not the anticipated expansion of the retail network, nor ‘net debt has increased in line with management expectations’ but the wonderful ride-the-busthrough-the-forecasts observation that: “We continue to anticipate that growth in underlying EBITDA during FY18 will be within our forecast range of 5% to 15%”.

What a wide old range...and of course a high quality ‘ebitda’ number. No wonder the shares had sagged 7% odd when I last looked. If I screw my eyes up and hope then maybe the stock is on just about a forward x10 EV/ebit ratio but if you are an investor surely you conclude the wall of death run at 300p the stock was at a year odd ago is the level to get more excited about. Today I would rather invest some money on betting that Newcastle will avoid the drop...under existing or new ownership.

Chris Bailey puiblishes Finacial Orbit. This article first appeared on ShareProphets.com

UK Investor Magazine — 8 — December 2017

Dear Santa: What I want for Christmas is…

By The ShareProphets Team

W

e asked each of the team to say what was their Christmas wish or ideal present. They have all been good boys this year so perhaps Santa Claus will oblige...

LUCIAN MIERS: One day early next year or maybe even later this year please can Santa send me a text saying “Ok: it’s time” Please make that day be remembered ever afterwards for being the day the biggest bubble in history peaked. Grant me the opportunity to short bitcoin on that day and I will never go short of anything ever again. If you can make it Christmas day that would be extra cool.

CHRIS BAILEY: I am not quite sure how Santa is going to arrange this but if he could give me (and the rest of the world) some inspirational politicians in 2018, I think we would all be more positive about the world’s prospects over the next 12 months. The backdrop reality for much

of the world is that the era of cheap money and Central Bank stimulus is progressively over and it is the turn of elected politicians to help along the natural course of economic life. Now I know what you are thinking and I agree that politicians getting out of the way ranks right up there...but things they can do include lowering taxes, encouraging entrepreneurial zeal, cutting red tape, allowing a flexible, well-trained and productive workforce to express themselves fully and most importantly of all inducing a latent optimism about the future.

Fortunately we are not quite starting from ground zero and a little improvement can go a long way in any confidence game. So if Trump can be a little less divisive, Macron and Merkel can chivvy along

UK Investor Magazine — 9 — December 2017

a bit of European economic modernisation, Xi can keep avoiding the Emperor-sized economic traps in China and our own dear Theresa can get business and consumers thinking about something other than Brexit (and Jezza love)...you never know your luck.

CYNICAL BEAR: My Christmas wish is for everyone I know to stop asking me whether I am invested in Bitcoin and to provide them with some investment advice dealing to their decision to invest such a huge amount of their wealth in the “currency”. Each time I want to shout: “WHAT ARE YOU DOING, HAVE YOU ANY IDEA WHAT YOU ARE INVESTING IN? WOULD YOU HAND OVER YOUR LAST COW IN EXCHANGE FOR “MAGIC BEANS”?” Whereas instead I just say: “I don’t understand it myself so am not involved. Am sure you’ll be ok but if I was you I would take out your initial capital to derisk it if you get the chance.” It’s getting wearing!

MALCOLM STACEY: Hello, Share Cookers. Yes, I know it’s the season to be jolly.

But it’s actually a gloomy wish I have to make to Santa. You, see chums, I have a growing fear of death.

Even though I am a Christian, I am still dreadfully frightened the consequences of my advancing age.

by

When I was a teenager I scoffed at all those poets who bemoaned the tragedy of their lost youth. I hated being young, with all my spots, gawkiness, cruel rejection by girls, and GCE exams. But as I get older, all the shine has gone from absolutely everything. When you’re young, everything seems worth seeing or trying out. But at my age the rewards are less and the pleasurable sensations are weaker. It’s the lousy law of diminishing returns.

So I’d like Santa to bring back my youth, please.

With all my enthusiasm, energy and hair.

And Santa, an added bonus would be that I would, at my new age of 18, still have all the financial expertise I’ve picked up over the last half century.

You know the old expression: ‘If I knew at 17 what I know now...’I would, of course, soon become a billionaire.

NIGEL SOMERVILLE: Two thoughts are in my mind as I ponder Tom Winnifrith’s request for my thoughts on what I would like to find in my stocking on Christmas morning.

The first, harking back to last year’s effort, is for some sign that the Oxymorons of AIM Regulation and the Chocolate Teapots at the FCA are actually doing anything at all to protect investors.

Once again the past year has been marked by a series of crooks and dodgy dealings on the AIM Casino being nailed by the team at ShareProphets. But where is the regulatory enforcement? Justice being done and being seen to be done? We have neither and AIM is still wide open to fraud. Mind you, so is the main market….more on that in due course. Will 2018 mark a change of course? Er….

The other thought is far more boring, but perhaps more worthwhile – a clean bill of health.

This has been a very tough year on that score, which has brought perhaps the most basic of gifts to own rather more firmly in to focus at Deputy Sheriff Towers. So with that I wish all readers a restful Christmas - and a very healthy New Year.

STEVE MOORE: An investment-related, but nonshares, Christmas present request from Santa? It has to be the book The Intelligent Investor by Benjamin Graham. Graham was not only a great investor, he’s also the founder of a philosophy value investing - which has brought great rewards to its followers. Investment versus Speculation (‘investment’ must promise safety of principal and an adequate return based upon thorough analysis), The Investor and Market Fluctuations (how the stock market is a manicdepressive and thus decisions based on its price movements are in effect marching in the footsteps of a certifiable lunatic – Value versus Price). It’s all there. Also explained is why “Confronted with a… challenge to distill the secret of sound investment into three words, we venture the motto, MARGIN OF SAFETY”.

Such principles of sound investment the book emphasises do not change from decade to decade - Graham shows markets fluctuate, but sound investment principles remain sound. Fellow investment great Warren Buffett, who was taught, and early on in his career employed, by Graham describes The Intelligent Investor (original publication: 1949) as “by far the best book about investing ever written”. If it’s good enough for Buffett…

DARREN ATWATER: My ask for Father Christmas is for him to put the love of our European siblings back into Theresa May and cancel Brexit. The

UK Investor Magazine — 10 — December 2017

freedom to pick up and move to anywhere in Europe, start a business, go to school, or just live a life is sui generis to this planet and the loss to the happiness of future Brits is incalculable. Also, I’d like a time machine to go back and slap myself into making those wagers on Brexit and Donald Trump winning, and not scoffing at buying a hundred Bitcoins for £100.

GARY NEWMAN: A Canon 5D MK IV camera body would be high on my list of Xmas presents. I am a very keen photographer – as well as it being part of my job and am always looking to upgrade my equipment to the latest models and keeping upto-date with technology. Having spent a fair bit of time reading about this latest model in the range, it offers a fair few advances over my existing camera.

I take a similar approach with shares, and before spending any money on purchasing them I like to know as much as possible about the company and what it does, as well as wanting to ensure that my

money is better spent there than maybe sticking with companies which I already hold.

A new camera body isn’t going to help me make any money on the stock market per se, but I do find that having a break from the markets and doing something which you enjoy – in my case photography – means that you come back feeling refreshed, and this can help when it comes to making decisions.

TOM WINNIFRITH: I could ask for West Ham to win the league and cup double but even Santa has his limits.

So my wish is stockmarket related and it is that quite simply 2018 is the year when some of the crooks and fraudsters we have exposed on this website are arrested and prosecuted with a long stretch at HM’s pleasure resulting. If Santa is still reading and is minded to assist top of the list is Mr Robert Simon Terry of Quindell infamy followed by Costis the dodgy Bubble from Globo and the holocaust denying scumbag Schaer from MySquar. Perhaps Santa might also have a word withe SEC and persuade them to nail the lying blockchain scumbag Larry Cummins of Black Cactus and Milestone infamy.

Hot Stock

ROCKETS Stocks Ready to take off hotstockrockets.com UK Investor Magazine — 11 — December 2017

company profile

Character Group A recovery in-play?

By Steve Moore

H

aving reached 540p in September, shares in designer, developer and international distributor of toys, games and giftware, Character Group (CCT) were particularly hit by an October Trading Update announcement.

Early this month has now seen a full-year results announcement…

The company’s portfolio is derived from both own-developed in-house ranges, including those produced under licence, and others sourced through exclusive distribution agreements. Its leading brands include Peppa Pig, Little Live Pets, Stretch, Mashems and Teletubbies, with product extensions being added and both Peppa Pig and Teletubbies master toy licences recently renewed for a further three years and it appointed as the master toy distributor in UK and Ireland for the Pokémon brand, ahead of a planned Summer 2018 launch. The recent results included that its leading brands “continue to perform well” and that “these exciting lines, together with several other product opportunities being considered for next year, are expected to positively impact the 2018 calendar year”.

The year ended 31st August 2017 results showed an adjusted pre-tax profit of £13.4 million on revenue 4.7% lower than in the prior year, at £115.3 million, generating earnings per share of 52p, up from 47.6p. This was with the company noting sales mix and that “during the year, several initiatives were implemented to reduce product costs”.

“Sales have been adversely effected by a combination of several factors, not least of which is one of the world’s largest toy retailers entering into Chapter 11 bankruptcy protection in the US and Canada, which has had subsequent knockon repercussions in every market where it trades (including the UK). Our international customers are also taking a very conservative approach to purchases. At this early stage of the group’s new financial year the board consider that, based on the latest sales and market data available to them, the group’s performance for the year ending 31 August 2018 is now expected to be significantly below current market estimates.”

The results announcement reiterated “current tough trading conditions” and added “we have recently learned that the UK arm of this major customer is also likely to undergo a restructure”.

However, there remained forecasts for not too far short of 40p of earnings per share for the current year, recovering to more than 45p next year.

With the dividend, if these are met there is likely value here. However, I’m wary of the ability to recover from “anticipated short-term weakness which will impact the first half of the current year” amidst the noted trading environment. As such, for when the trading storm – which the noted balance sheet should at least see the company able to ride out – is over, this is currently on the watch list.

After particularly tax, a net £2.1 million working capital outflow, £2.6 million of share buybacks and £3.6 million of dividends paid, net cash was increased by £4.6 million to £11.5 million. Current assets over total liabilities were £4.4 million higher to £20.5 million and non-current assets £0.5 million lower to £6.3 million. A 10p per share dividend, taking the total for the year to 19p per share – up from a prior year 15p, has been recommended to be paid on 29th January, with an ex-dividend date of 11th January. All sounds good enough – so why a share price decline to a current 440p?

Management

The October update included “anticipate that, group underlying pre-tax profits for the year ended 31 August 2017 are projected to meet current market estimates” and “we are committed to maintaining our progressive dividend policy and continuing our share buy-back programme, as and when considered appropriate”, but also; (the company is Toys ‘R’ Us)

joined in the same year following previous

A member of the Chartered Association of Chartered Certified Accountants, Joint Managing Director & Finance Director Kiran Shah co-established the original business in 1991 and fellow Managing Director Jon Diver marketing experience in the industry. Shah has 2,140,001 shares (10.25%) and Diver has 1,356,003 shares (6.49%).

UK Investor Magazine — 12 — December 2017

Now Jingle Bells is racist - this weeks dose of insanity in academia Writes Tom Winnifrith

J

ingle Bells, Jingle Bells, Jingle all the way, oh what fun it is with Hitler living the Aryan way. Okay I made up the second line but it makes no difference, the original version of the festive tune is racist anyway claims mad prof Kyna Hamill from Boston university.

The problem is that when it was first performed in 1857 it was sung by white guys blacked up to look like African Americans. So “The legacy of ‘Jingle Bells’ is one where its blackface and racist origins have been subtly and systematically removed from its history,” says Ms Hamill.

That white guys used to black up and sing until the 1970s is something that used to happen but is no longer deemed acceptable. But that does not mean that those performing any given song were necessarily racist although in 1857 USA they quite possibly were. But it certainly does not make the song racist in any way.

But we all need to seek out racism and sexism and homophobia in everything these days. The academic highlight of last week came from snow clad Britain where University College London (UCL) tweeted out Dreaming of a white campus? Our campuses

will be open and operating fully today, Monday 11 December, so please make your way in as planned. (We can’t guarantee snow but we’ll try!)

Clearly this is a play on the song “I’m dreaming of a white Christmas” and UCL’s tweet just like the song clearly references the white as being snow not a desire for racial purity. A child of three could see what UCL meant but predictably it was grovelling apologetically before long in the face of a furious new media backlash.

Kumail Jaffer, a PPE student at Warwick University demanded that UCL be made to “retract and apologise”. He added that “if anyone does not understand why the comment is offensive, they should “look into the history of the oppression of the PoC [People of Colour]”.

Kumail you are fucking stupid not because you are a PoC but because you clearly cannot read the original UCL tweet properly before gobbing off.

I predict that you will go far in modern Britain, draping yourself in a state of being offended by everything. The fact that UCL’s critics were spouting obvious nonsense made no odds. It had to say sorry. Such is life in the crazy world of academia today.

This article first appeared in Tom Winnifrith’s weekly newsletter the Tomograph.

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UK Investor Magazine — 13 — December 2017

Ashtead - ‘making’ or ‘made’ it happen?

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By Chris Bailey

have had the horn about Ashtead (AHT) shares for a while now, as noted during my write-up a quarter ago. Another quarter, another update...and boy has it continued to clean up with profits ahead of hopes, assisted by the post hurricane-related spend that tends to benefit the construction equipment and related rental business that the company specialises in.

In addition to a 20% odd year-on-year revenue and profit increase, also announced is a decent rise in the interim dividend and an inaugural share buyback initiative with the scope to return up to 10% of the current market cap back to shareholders over the next year or two. Not too shabby at all - and no wonder the company has dubbed its quarterly report ‘making it happen’.

Two aspects strike me here. First, I cannot see the backdrop getting noticeably better for Ashtead. Certainly there is market share gain to be had in different regions and geographies in the US and the UK domestic business could of course be more rampant buoyed by a better economy here. Even the much lauded hurricane spend was just an extra 5% odd of the 20% headline rise in revenue. However I struggle to get over the notion that right here, right now does not represent a bit of a turning point.

The first clue comes in the announcement that the long-standing Chairman is to retire at the time of the AGM next September. This is all very orderly and under this Chair the company has prospered. Few have long enough memories to go back into the early years of this century but I remember Ashtead from back then: super highly leveraged and struggling with a rather tough economic backdrop. Today’s merry update and strong cash flow feels like it belongs to a completely different company...but it does not.

Whilst I agree that there has been a structural shift towards renting rather than buying construction and related equipment over recent years, this is never deep enough to offset any form of economic slowdown. Pacing through the Ashtead statement today what I note is that

in the more macroeconomic segment there is an acknowledgment that some important exogenous data series which over time have provided some insight into demand for the group’s products are ahead/up but ‘volatile’. Hmm. And then there is the cash return. Yes at sub x2 debt:ebitda leveraged, Ashtead is not ludicrously extended - and as any shareholders from the early part of this century will attest ‘thank god!’

However I would not say it is unleveraged either and whilst today’s cashflows are damn good, the buyback announcement feels like a quick way to lose balance sheet flexibility. For me, I would bring the net debt down to say one times ebitda and then start to buyback shares. You never know what the world - or the share price - might look like back then.

As with any cyclical-tinged company, the valuation (prospectively x10 EV/ebit) in good times is not pushing it but investment is all about looking forward properly and not just doing easy extrapolations. My concluding thought? Time to get off the Ashtead train at this new improved share price north of the nice round number of twenty quid.

Chris Bailey puiblishes Finacial Orbit. This article first appeared on ShareProphets.com

UK Investor Magazine — 14 — December 2017

Three sells for January

By Tom Winnifrith

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his column normally flags up three shares to sell for the month ahead, three shorts.

But this is an end of year article let’s go for three stocks that have the potential to completely implode during 2018.

I believe that 2018 could be the year when the era of silly money and easy credit comes to a close. When it happens I know not but when it does happen, it will do so far faster than most folks expect. For those companies reliant on either ever extended banking facilities and/or investors being prepared to throw good money after bad for “yet another” bailout placing,life will change dramatically and it will change for the worse.

So pick number one is Telit Communications (TCM) at 155p - valuing the company at just over £200 million.

Founded by a fraudster (Uzi Katz), now run by an insider dealer (Yosi Fait), drowning in debt (I estimate c$50 million), burning cash, breaching bank covenants every quarter, guilty of fraud, boosting reported sales with bogus distributors, margins on its real business collapsing at a rate of knots with no relief in sight: what could possibly go wrong?

The company has been trying to flog its auto division since August in order to pacify the banks but has failed to attract any interest. Sooner or later the banks will demand that Telit raises fresh equity to pay them off. Given that the last placing was in May 2017 and was at 340p (before Yosi and Uzi dumped millions of pounds worth of shares while fully cogniscent of adverse price sensitive information) the company’s institutional investors will either refuse to back a placing in which case when the banks pull the plug and this is a zero, or will back it only at a vast discount. I expect the latter. That will see the shares crash.

Pick two is MySquar at 1.75p to sell. At a 1.875p mid the market cap is just over £11 million. This company is run by a Mr Schaer who has a thirty year track record of getting into business “scrapes”. On July 31 2017 it did a placing helped by shareholders believing that sales were surging and that the company was at operating breakeven

or better. Shareholders thought this was the case because the company had told them via RNS statements. But those sales were largely from companies also controlled by Schaer and, worse still, those sales had fallen off a cliff from early July. The company knew full well that sales had collapsed and it was losing money but went ahead and did a placing anyway only letting mug punters know the bad news from July in October..

This is the most blatant case of securities fraud seen on AIM during 2017 and the fact that advisers SP Angel and Beaufort Securities have not, yet, resigned shows them both to be morally bankrupt.

Will regulators do anything? Perhaps. That would see the shares suspended and worthless at once. If not, the horrible truth is that MySquar is still loss making and burning its way through the cash it raised in July 2017. When that runs out the shares will be suspended pending clarification and shareholders will lose everything.

In the end frauds always run out of other people’s money. MySquar will be no different.

Finally we have PurpleBricks (PURP). As I revealed just this week HERE the truth is slowly dawning on folks in the UK as to quite how bad is the service that this company offers through its Local Property Experts who, in many cases, are anything but local and in some cases anything but experts. So despite spending an ever greater amount on marketing, sales growth is slowing.

I suspect that a slowdown in the housing market is not helping but it is the flawed business model and the complete absence of any barriers to new “disruptors” entering the market which will, in due course, see UK sales start to fall. Fledgling Australian and US operations are loss making.

Thus the cash that Purplebricks has ( maybe £55 million) will disappear and that makes the £1.035 billion market cap at 380p just laughable.

This company is drowning in red flags from the colourful track record of its founders and senior managers, to the endorsement of the Jonah of the fund management community, Mr Neil “Nomates” Woodford through to the way it endeavors to use fascist lawyers letters to gag its critics. But the real issue are the crackers valuation and the flakey cash guzzling business model. This will be a spectacular collapse it is just a matter of when.

UK Investor Magazine — 15 — December 2017

the house view

The big Danger is not Brexit but Corbyn

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here is a perceived wisdom that shares in those UK focussed companies that are not unduly exposed to the great consumer debt/lack of savings bubble are now very cheap indeed. The hot money has gone into blockchain or whatever is the mad pump of the day and dull old economy stocks have been abandoned.

Some will say that this is down to Brexit. We rather doubt that. The World Bank says that in a worst case “no deal” scenario the impact would be to cut UK GDP growth by 0.25%. Given that GDP is set to grow by at least 1.5% per annum, that one-off hit is easily digestible. And it must be hoped - and still looks likely - that there will be a Brexit deal of some sorts arranged.

All the predictions of the remoaners and Project Fear of a mass exodus of EU workers or business from the UK have so far proved to be utterly unfounded.

Brexit is a red herring.

The real threat comes from the economic promises made by Jeremy Corbyn’s Labour Party. We are increasingly of the view that the Tories are a lost cause. The lack of purpose and leadership is eerily reminiscent of the Major years 1992-97. Except that while John Major appeared hopeless at the time, with hindsight he looks like a political giant when compared to Prime Minister May. There seems, among the electorate, a clear desire for change. You have to be well over fifty to remember the last time the UK suffered a hard left Government: the winter of discontent, begging the IMF for a bailout in 1976 and all the other horrors of that era are something many voters have no awareness of. And thus when folks demand change they have no ideas of how bad that change will be. The only question is whether Corbyn and his team will implement what they promise when, rather than if, they sweep to power or will go even further. Either way that will be very bad news for Britain.

As in the 1970s entrepreneurs and companies will leave the UK, the deficit and debt will spiral out of control as higher tax rates actually mean lower tax takes. And the costs imposed on businesses will cause only job losses. We believe that the next Government will be a Labour Government and that it is that threat which explains why shares that appear to be cheap are really not that cheap at all.

UK Investor Magazine — 16 — December 2017

Saturday 21st April 2018 | London Save the date!

UK Investor Magazine — 17 — December 2017