STOCKS | FUNDS | INVESTMENT TRUSTS | PENSIONS AND SAVINGS

VOL 19 / ISSUE 13 / 06 APRIL 2017 / £4.49 SHARES WE MAKE INVESTING EASIER

WHY NOW IS THE PERFECT TIME TO INVEST IN SAGA FTSE 100 DISCOVER DIVIDEND THE FUND WITH SWEET A REFRESHING SPOTS ATTITUDE

USE AIM STOCKS TO AVOID 40% INHERITANCE TAX Adventurous

Moderately adventurous Appetite for risk varies. Appetite for charges doesn’t.

AJ Bell Passive funds range in risk from ‘Cautious’ to ‘Adventurous’, but with a 0.5% capped annual charge, the risk of unexpected costs is always zero.

Also, until January 2019 we will waive our custody charge for these funds. Balanced youinvest.co.uk

Full details of the capped annual charge are outlined in the Key Investor Information Document for each fund.

The value of investments can go down as well as up and you may get back less Moderately cautious than you originally invested.

Cautious

AJ Bell includes AJ Bell Holdings Limited and its wholly owned subsidiaries. AJ Bell Management Limited and AJ Bell Securities Limited are authorised and regulated by the Financial Conduct Authority. All companies are registered in England and Wales at Traff ord House, Chester Road, Manchester M32 0RS EDITOR’S VIEW Don’t lose sight of what stocks can deliver Dividend reinvestment unlocks the wealth generating potential of equities

he old Chinese curse ‘may you those offered by cash on deposit. live in interesting times’ has T rarely felt more apt than it does SPIRIT OF ADVENTURE in 2017. Amid all the noise about Trump, In our main feature this week we Brexit, European elections and the rest make the case for including some high it can be useful to take a step back and conviction stocks in your portfolio. appreciate just what the humble share It is not sensible to invest in individual can deliver in the long-term. shares with money you cannot afford AJ Bell’s latest edition of its quarterly to lose and nor should you take Dividend Dashboard spells out the kind unnecessary risks. However, there of returns you can achieve through is a case to be made for retaining at reinvesting the dividends from shares. least some spirit of adventure in your The report assumes the FTSE All-Share continues investing. to generate the compound annual growth rate After all, the stock market’s origins lay in backing since inception in the early 1960s of 6.8% a year the ventures of 16th and 17th century merchants and pays the same annual dividend of 3.8%. targeting distant and exotic markets. On this basis if you had invested last year’s ISA Being part-owners of the latest names looking allowance of £15,240, and subtracted 1% a year to the public markets to back their plans for for platform administration and dealing fees, you growth and wealth generation can be exciting would be sitting on £231,577 after 30 years with and fun as well as potentially boosting the returns dividends reinvested. This level of return dwarves from your hard-earned cash. (TS)

WHO WE ARE BROKER RATINGS EXPLAINED: EDITOR: DEPUTY NEWS Daniel EDITOR: EDITOR: We use traffic light symbols in the magazine to illustrate Coatsworth Tom Sieber Steven Frazer broker views on stocks. @SharesMagDan @SharesMagTom @SharesMagSteve FUNDS AND REPORTER: JUNIOR REPORTER: CONTRIBUTERS Green means buy, Orange means hold, Red means sell. INVESTMENT TRUSTS David Stevenson Lisa-Marie Janes Emily Perryman EDITOR: @SharesMagDavid @SharesMagLisaMJ Tom Selby James Crux The numbers refer to how many different brokers have that @SharesMagJames rating.

PRODUCTION ADVERTISING MANAGING DIRECTOR Eg: 4 2 1 means four brokers have buy ratings, Head of Production Sales Executive Mike Boydell Michael Duncan Nick Frankland two brokers have hold ratings and one broker has a sell 020 7378 4592 rating. Designer [email protected] Rebecca Bodi The traffic light system gives an illustration of market views Shares magazine is published weekly every Thursday (50 times per year) by AJ Bell Media Limited, 49 Southwark Bridge Road, London, SE1 9HH. Company Registration No: 3733852. but isn’t always a fully comprehensive list of ratings as some All Shares material is copyright. Repro­duction in whole or part is not permitted without written banks/stockbrokers don’t publicly release this information. permission from the editor.

06 April 2017 | SHARES | 3 INTERACTIVE Contents PAGES CLICK ON PAGE NUMBERS TO JUMP 06 April 2017 TO THE RELEVANT STORY 03 Don’t lose sight of 12 GCP Student Living’s what stocks can capital comforts deliver 14 SciSys ignites growth 26 ISAs: Where to put 06 FTSE 100 dividend flame your £20,000 delight on overseas earnings boost 16 We update our views 34 Profit from private on Luceco and Iomart equity 07 Polar Capital makes a mint after Miton raid 18 The hazards of client 36 This fund has a concentration refreshing attitude to 07 Brace yourself for making money more British 20 Why now is the perfect takeovers time to buy Saga 38 Results, trading shares updates, AGMs and more over the coming 22 SSE dividend ‘safe week for now’

08 CityFibre seeks fresh funding deal 39 How Lifetime ISA 09 Genus gets green light can work WITH to launch GSS 24 Important turning automatic enrolment point for Be Heard 10 AO World’s catastrophic earnings 25 Bleak future for 40 Use AIM stocks to downgrade and other Pebble Beach avoid 40% inheritance stories in numbers tax

securities, derivatives or positions with spread betting organisations that they have an interest in should first clear their writing with the editor. If the editor DISCLAIMER agrees that the reporter can write about the interest, it should be disclosed to readers at the end of the story. Holdings by third parties including families, trusts, IMPORTANT self-select pension funds, self select ISAs and PEPs and nominee accounts are included in such interests. Shares publishes information and ideas which are of interest to investors. It does not provide advice in relation to investments or any other financial matters. 2. Reporters will inform the editor on any occasion that they transact shares, Comments published in Shares must not be relied upon by readers when they derivatives or spread betting positions. This will overcome situations when the make their investment decisions. Investors who require advice should consult a interests they are considering might conflict with reports by other writers in the properly qualified independent adviser. Shares, its staff and AJ Bell Media Limited magazine. This notification should be confirmed by e-mail. do not, under any circumstances, accept liability for losses suffered by readers as a result of their investment decisions. 3. Reporters are required to hold a full personal interest register. The whereabouts of this register should be revealed to the editor. Members of staff of Shares may hold shares in companies mentioned in the magazine. This could create a conflict of interests. Where such a conflict exists it 4. A reporter should not have made a transaction of shares, derivatives or spread will be disclosed. Shares adheres to a strict code of conduct for reporters, as betting positions for seven working days before the publication of an article that set out below. mentions such interest. Reporters who have an interest in a company they have written about should not transact the shares within seven working days after the 1. In keeping with the existing practice, reporters who intend to write about any on-sale date of the magazine.

4 | SHARES | 06 April 2017 ADVERTORIAL ALIGNED WITH OUR INVESTORS Seeking the best equity opportunities, globally

AT SARACEN FUND MANAGERS, WE ALIGN OUR INTERESTS WITH THOSE OF INVESTORS – WE ARE 100% EMPLOYEE OWNED AND HAVE SIGNIFICANT PORTIONS OF OUR PERSONAL ASSETS INVESTED INTO OUR FUNDS.

he TB Saracen Global Income and Growth Fund, Currently ranked second out of 41 funds over 12 months co-managed by Graham Campbell and David Keir, aims to the 31st March 2017, the fund has delivered top quartile to grow both capital and income over the long-term by performance over 1 year, 5 years and since launch in June 2011. Tinvesting in market leading businesses at attractive valuations and supportive dividend yields. Cumulative Performance after all ongoing charges to 31st March 2017 The most important part of any investment decision is the 1 year 3 years 5 years Since price you pay. We aim to identify and invest in 40-60 leading 1 global businesses which we believe will be able to grow profits launch and increase dividends over the next 10 – 20 years. TB Saracen Global Income +37.3% +42.4% +93.7% +100.1% The fund is independently rated by RSM and “A” rated by and Growth Fund B Acc Square Mile Research. TB Saracen Global Income and Growth IA Global Equity Income +25.4% +38.7% +75.8% +79.0% Fund has an active share of 90%. Sector Average Fund Performance since inception (from 06/11 – 03/17) Quartile Ranking 1 3 1 1 1Source: Financial Express; launch date 07 June 2011

The historic dividend yield is 2.6%2, which rose 8% year on year3. There is an annual management fee of 0.75% and an ongoing charges figure of 0.97% (B shares) and there is no entry or exit fee and no performance fees. We offer Income and Accumulation shares. Saracen Fund Managers has a rigorous investment process. We have a long-term investment horizon and we focus on factors that drive returns, namely; cash and growth. Many investors require income and capital to fund their aspirations. Banks and government bonds offer very low levels of return for savers. In comparison, equities still appear attractive and with signs that economic growth is strengthening, we believe we have identified a portfolio of quality businesses Source: Financial Express that offer value and will benefit from the persistence of global Total Return, Bid to Bid, GBP terms. Past performance is not a reliable indicator of economic growth. future results. The value of your investment and the income derived from it can go down as well as up and you may not get back the money you invested. Click here to find out more information

Discrete Performance Table

31/03/2016 to 31/03/2015 to 31/03/2014 to 31/03/2013 to 31/03/2012 to 31/03/2017 31/03/2016 31/03/2015 31/03/2014 31/03/2013 % % % % %

TB Saracen Global Income & Growth B Acc in GB 37.3 -6.6 11.0 10.2 23.5 IA Global Equity Income TR in GB 25.4 -1.8 12.6 7.1 18.3 Quartile Ranking 1 4 3 2 1

Source: Financial Express as of 31/03/2017 Total Return, Bid to Bid, GBP terms. Past performance is not a reliable indicator of future results. The value of your investment and the income derived from it can go down as well as up and you may not get back the money you invested.

2 Based on 4.27p per share on Income shares for 2016 - 3 2017 rate was 3.94p per share

Issued by Saracen Fund Managers Limited. This document represents the views of Saracen Fund Managers Limited at the time of writing. This information should not be construed as an invitation, offer or recommendation to buy or sell investments, shares or securities or to form the basis of a contract to be relied on in any way and is by way of information only. If you have any doubt whether the TB Saracen Global Income and Growth Fund is suitable for you and you wish to receive advice you should contact your Financial Adviser. Please note that Saracen Fund Managers Limited do not provide financial advice. This Fund may not be appropriate for investors who plan to withdraw their money in the short-term (within 5 years). The Fund should be viewed as a medium to long-term investment only. A full list of the risks and costs applicable to this Fund can be found in the Prospectus. Subscriptions will only be received and shares issued on the basis of the current Prospectus, Key Investor Information Document (KIID) and Supplementary Information Document (SID). These are available, in English, together with information on how to buy and sell shares, on-line at: www.tbaileyfs.co.uk. Taxation levels, benefits and reliefs may all vary depending on individual circumstances and are subject to change. The historic yield reflects distribution payments declared by the fund over the previous year as a percentage of its share price. The value of investments and the income from them may go down as well as up and you may get back less than the amount invested. Past performance is not a guide to future performance. Saracen Fund Managers Ltd, 19 Rutland Square, Edinburgh, EH1 2BB. Tel: 0131 202 9100 and on-line at www.saracenfundmanagers.com. Saracen Fund Managers Limited is authorised and regulated by the Financial Conduct Authority. Registered in Scotland No. 180545. BIG NEWS FTSE 100 dividend delight on overseas earnings boost Payouts look generous but watch out for the risks too

he FTSE 100’s approximate 4% yield could very positive near-term outlook for dividends provide a useful way to combat rising from the wider universe of FTSE 350 stocks, T inflation, according to AJ Bell’s latest Dividend forecast to rise by 25% to a record £20.7bn in the Dashboard report. second quarter of 2017. With 75% of earnings from the FTSE 100 coming Most of the hike is expected to come from from overseas, the devaluation of sterling has currency translation benefits and a good chunk provided a significant boost to constituents of the (circa £3bn) comes from National Grid (NG.) alone. blue chip index which can feed through to more generous dividend payments. Dividend dependence The report shows consensus profit forecasts for Company Forecast contribution to Forecast the FTSE 100 have increased from £171bn at the FTSE 100 2017 dividend time of the EU referendum to £197bn with forecast dividend payments cover 2017 Royal Dutch Shell 15% 0.95x dividends rising from £75bn to more than £80bn. (RDSB) HSBC (HSBA) 10% 1.35x RISK WARNING – 50% OF DIVIDENDS COME BP (BP.) 8% 1.07x FROM JUST 7 STOCKS GlaxoSmithKline 5% 1.43x There are some reasons for caution. Half of the (GSK) £80bn of dividends from the FTSE 100 index are British American 4% 1.60x forecast to be paid out by just seven companies. Tobacco (BATS) Only one of these seven companies has a Vodafone (VOD) 4% 0.63x dividend covered more than 1.5 times by forecast AstraZeneca (AZN) 3% 1.06x earnings and two look to be paying dividends out Total 49% of debt or retained earnings with cover of less Source: AJ Bell than 1.0. A quarter of the constituents of the FTSE 100 Dividend sweet spot are defined by the research as being in the Company 2017 2017 2017 ‘dividend danger zone’ with dividend cover of less forecast forecast forecast than 1.5 and dividend yield of more than 4%. dividend dividend dividend Some are utilities which have predictable cash growth cover yield flows while others are housebuilders with net cash Next (NXT) 0% 2.57x 3.9% on the balance sheet but the majority do not enjoy ITV (ITV) 11% 2.01x 3.9% these advantages. EasyJet (EZJ) -29% 2.02x 3.8% International Cons. 10% 3.66x 3.7% DIVIDENDS IN THE SWEET SPOT Airlines (IAG) On the positive side of the ledger there are 14 WPP (WPP) 12% 2.01x 3.7% firms with forecast yields of more than 3% whose RSA Insurance (RSA) 36% 2.02x 3.7% dividends are covered more than twice over by earnings. Kingfisher (KGF) 6% 2.14x 3.4% Of that list, both airline EasyJet (EZJ) and insurer 7% 2.86x 3.4% Old Mutual (OML) have cut their dividends in the (BAB) last 12 months. Old Mutual (OML) 24% 2.81x 3.3% A separate report from IHS Markit implies a Source: AJ Bell

6 | SHARES | 06 April 2017 BIGBIG NEWSNEWS Polar Capital makes a mint after Miton raid Asset manager enjoying healthy inflows off the back of successful fund launch

sset manager Polar Capital (POLR:AIM) Broker Canaccord Genuity, which has a ‘buy’ rating is riding high having snaffled star fund on the stock, estimates Polar’s total AUM could have A managers from a rival outfit. It could enjoy hit £9.2bn at the end of February up from £7.3bn earnings upgrades if its current momentum is year-on-year. sustained. The analyst attributes growth in AUM to two Polar, currently trading at 358p, launched Polar factors; inflows into Polar’s insurance, technology Capital UK Value Opportunities (IE00BD81XX91)in and UK Value Opportunities funds of £200m January with £111m of assets under management (partially offset by outflows from its Japan funds) (AUM). By the end of the following month it had and strong market performance which added AUM of £151m, up 36%. £600m. In April 2016 the firm raided Miton (MGR:AIM) for the current manager of UK Value Opportunities SHARES SAYS:  Georgina Hamilton and George Godber, who will Polar looks to be on a good run. Canaccord has a price join her in later this month. When the departures target of 385p. Buy at 358p. (DS) were announced, Miton lost 20% of its market 2 1 0 value. BROKER SAYS

M&A candidates Brace yourself for more Company LBO free cash flow yield British takeovers Go Ahead (GOG) 25.4% Further weakness in the pound could see more foreign Costain (COST) 15.5% companies swoop on UK firms Schroders (SDR) 15.3% TP ICAP (TCAP) 15.0% FURTHER WEAKNESS IN the sterling £100m in the six months after Staffline (STAF) 14.8% could lead to a second wave of the Brexit vote, the frequency for Impellam (IPEL) 14.3% incoming M&A as foreign companies mergers has now stepped up a gear,’ would find it even cheaper to buy UK says Canaccord Genuity Wealth WS Atkins (ATK) 14.2% businesses. Management. Wilmington (WIL) 12.6% Already in 2017 consumer goods Its senior equity analyst Simon (WIZZ) 11.7% giant Unilever (ULVR) has fought McGarry has identified 14 stocks Galliford Try (GFRD) 11.6% off a £115bn bid from Kraft Heinz. which look particularly attractive (CPU) 11.6% Engineering consultant WS Atkins to foreign companies including Henderson (HGG) 10.7% (ATK) earlier this week received a transport firm Go-Ahead (GOG) and RPS Group (RPS) 10.7% £2bn takeover approach from a civil engineer Costain (COST). Hays (HAS) 10.4% Canadian rival. The exercise involved looking Source: Canaccord Genuity ‘Although there were, on average, at the free cash flow yield of firms more than two deals per week with based on them being acquired in takeover at least partly funded by a transaction value of more than a leveraged buyout (that is a debt). (TS)

06 April 2017 | SHARES | 7 BIG NEWS CityFibre seeks fresh funding deal Company wants better financing terms as it eyes ambitious growth igabit city fibre networks operator come from one or more of the big UK mobile CityFibre Infrastructure operators. O2 and Three are thought G(CITY:AIM) is looking secure to be very keen to add fibre muscle new financing arrangements to to bolster multi-play offers to arm itself for the next leg of its customers, where a single supplier ambitious growth plans. The provides landline, mobile, digital company wants to renegotiate TV and other services. Vodafone around £100m of debt because (VOD) may also be interested of onerous interest charges, once it has fully untangled its believed to be close to 10% per Cable & Wireless network assets. year. It has access to an extra Equity financing to fuel growth £80m of funding. is currently ruled out because CityFibre has 42 city networks of the disappointing share price nationwide backed by long-term anchor performance. The stock is currently tenants that provide the funding for the changing hands for 51p, a 15% discount to its initial network build. Anchor tenants are typically 60p IPO price in January 2014. (SF) local authorities or internet service providers. A new deal could replace existing facilities on SHARES SAYS:  improved terms but also provide the firepower to Avoiding heavy dilution of existing shareholders is meet a more rapid national scale-up of its network. the right move and we continue to like the long-term Management are hopeful that such a deal could investment story. (SF)

Special dividend on Sophos shines and Margin pressure cards for Central shares at record high hits ASOS Asia Metals? SURGING FOURTH QUARTER ONLINE FASHION RETAILER ASOS COPPER MINER CENTRAL Asia demand and currency tailwinds (ASC:AIM) is coming under pressure Metals (CAML:AIM) has hinted to will see cyber security business after first half results (4 Apr) Shares it may pay a special dividend Sophos (SOPH) outperform market revealed a fall in profit margins. later in the year if surplus cash isn’t expectations for the year to 31 Although guidance for sales needed elsewhere for acquisitions March 2017. That news sparked growth for the year to the end of or exploration work. Its capital a 12% rally in the share price to August was increased to 30% to 35%, expenditure requirements are 303.6p, the stock’s highest level profit guidance was left unchanged greatly reduced this year, since its London IPO at 225p on 1 as it charged lower prices for non-UK having completed work to expand a July 2015. Sophos is one of Shares’ customers. tailings reprocessing operation top picks, currently up 30%. (SF) Discounting, alongside weakness in Kazakhstan. The miner already in sterling, helped international sales pays a generous dividend, yielding grow 42% year-on-year in the first 7.1%. (DC) half. (TS)

8 | SHARES | 06 April 2017 BIGBIG NEWSNEWS Genus gets green light to launch GSS Animal genetics specialist set to benefit from favourable ruling t’s all systems go as animal genetics specialist Genus (GNS) can launch its Genus Sexed Semen I(GSS) technology in the US and other global markets as legal issues are resolved. Using GSS, farmers can produce female calves for milk. A ruling by the US District Court in Wisconsin removes contractural restrictions which prevented Genus subsidiary ABS Global from launching an alternative to existing solution Sexing Technologies, using GSS, which may slow uptake. owned by Inguran. The court decision effectively Peel Hunt analyst Charles Hall says the ruling breaks the latter’s monopoly on this market. provides Genus with the chance to greatly reduce Other companies in the US who use Sexing its GSS license fee, expand its market and supply its Technology have to provide a year’s notice before products to third parties. (LMJ)

Equally weighted | Concentrated | Quality Global portfolio companies | Growing dividend |

£20,000 Guinness Global Equity Income Fund (TR, in GBP) IA Global Equity Income sector average (TR, in GBP) £18,000 Dividend generated based on £10,000 in £446

a £412 £16,000 £402 £366 £373 £14,000 £349

£12,000

£10,000

£8,000 2011 2012 2013 2014 2015 2016

Calendar year performance to month end (% Total return, GBP. Source: Financial Express) 2011 2012 2013 2014 2015 2016 2.9 5.69 26.57 10.54 2.24 26.89

Guinness Funds are built on an investment philosophy that should serve investors well. Our global equity Income portfolio is equal weight but concentrated (35 stocks) giving high active share but well controlled stock specific risk. The stocks in it are quality companies (defined by a record over 10 years of high return on capital each successive year) that should rise when markets GUINNESS rise and not fall so much when markets plummet – giving sensible protection against large market INCOME EQUITY GLOBAL moves. We don’t chase yield and target companies with a good record of paying growing dividends over time. With a value bias to give extra protection and enhance return. A strong candidate to be a core holding in your SIPP / ISA. Available on AJ Bell Youinvest W: guinnessfunds.com Past performance is not a guide to future returns. The value of your investments and the income received from them can fall as well as rise. 06 April 2017E: |[email protected] SHARES | 9 You may not get back the amount you invested. The OCF is taken from the fund’s capital which will a ect future performance. T: 0845 519 2161 STORY IN NUMBERS

APPROXIMATELY 2,300 $1.49bn websites are used by XLMedia’s (XLM:AIM) PLAYING AND WATCHING 2,300 publishing division to drive 100P OF ESPORTS TO SOAR users to its clients’ gambling and social gaming platforms. UPLIFT ANNUAL GLOBAL revenues WEBSITES Berenberg, which rates the from esports are set to explode shares a ‘buy’ with a 150p by 2020, with 200%-plus growth price target, reckons only a predicted by analysts. This is 100 of these are generating down to increasing numbers BULL CASE substantial revenue with the of people not only playing, remainder in ‘build-up’ phase. but also tuning in to watch. ON XLMEDIA It is optimistic the publishing The League of Legends World arm could beat a 13% growth Championship is the world’s estimate for 2017. biggest esports tournament with prize money topping $2m in 2016. Staggeringly, 43m people watched the finals, according to researchers at Newzoo. AIM- quoted Gfinity (GFIN:AIM) is 275,213 tonnes one way to invest – it promotes THIS IS THE total amount of meat processed by esports events. (SF) (HFG) over the course of 2016. It was a 9% increase on 2015 and marked the the highest growth level since 2009, as carnivores in the UK, Ireland and Australia tucked into more meaty dishes. Panmure Gordon analyst Peter Smedley says the meat packing business is in top form as it has the financial firepower to simultaneously fund investment in the business and maintain its healthy dividend. It has a 2.7% prospective yield.

EARNINGS DOWNGRADE FOR AO WORLD SLOWER THAN expected amortisation) forecasts for UK sales growth, pressure the financial year to March on profit margins and 2018 by 87.5% to a mere guidance for no change £2m. in trading patterns near- ‘While we have no reliable term has led stockbroker industry data to corroborate Numis to dramatically slash this, management is firmly forecasts for fridges-to- of the view the softer trading washing machines seller AO performance is being driven World (AO.). by a significantly tougher It has reduced EBITDA white goods market,’ says (earnings before interest, Numis analyst Andrew 87.5% tax, depreciation and Wade.

10 | SHARES | 06 April 2017 STORY IN NUMBERS

HARGREAVES SERVICES’ 100P PLANNING JOY £20.80 WS ATKINS IN UPLIFT $2.6BN APPROACH

CANADIAN GROUP SNC-LAVALIN has proposed to pay £20.80 per share for engineering consultancy WS Atkins (ATK). This values the firm at $2.6bn and supported a 27.3% rise to £19.50, THE GRANTING last week of planning permission to convert suggesting the market does not an old mine site into a property development adds 100p to expect rival bid interest. Atkins’ Hargreaves Services’ (HSP:AIM) net asset value, says N+1 Singer. board seems satisfied with the The broker’s new intrinsic value for the business is now 460p proposal, saying it delivers value to which compares to the trading price of 333.5p as of 4 April 2017. shareholders and all that is left is Last August Hargreaves said it had amassed an 18,500 acre to reach agreement on other terms portfolio of property which included a range of agricultural and and conditions. Investment bank development land. Liberum says the deal is a stretch It has been working on this portfolio to clean up the land and try for SNC but is likely to be well and extract significant value through a mix of property, industrial supported. and energy developments.

BEST PERFORMING CONSTRUCTION BEST PERFORMING SUPPORT SERVICES STOCKS SO FAR THIS YEAR STOCKS SO FAR THIS YEAR Morgan Sindall 33.1% WS Atkins 35.2% Costain 28.7% Grafton 30.5% Marshalls 22.3% Exova 30.3% 16.9% G4S 30.2% Polypipe 16.3% IWG 29.4% Forterra 14.4% Robert Walters 26.3% Henry Boot 13.5% Paysafe 24.8% Ibstock 12.8% Communisis 24.8% Volution 12.3% Sanne 18.6% Low & Bonar 9.5% RPS 17.8% FTSE All-Share constituents only. FTSE All-Share constituents only. Source: SharePad. Source: SharePad. Data to 4 April 2017 Data to 4 April 2017

06 April 2017 | SHARES | 11 GREAT IDEAS GCP Student Living’s capital comforts London focus is attractive given strong fundamentals

tudent accommodation is a This is likely to support continued specialist asset class which GCP STUDENT LIVING rental growth. Soffers investors returns  BUY relatively uncorrelated to the (GCP) 150p BANKING ON INTELLIGENT wider financial markets. Stop loss: 120p DESIGN Within this subset, we view Ward says the model involves real estate investment trust Market value: £506m offering mid-level pricing to (REIT) GCP Student Living (DIGS) target the broadest market as being in a particular sweet segment. Teaming up with spot and therefore attractive to delivered rental growth in excess leading architect Ab Rogers, investors looking to secure an of retail price inflation in 15 out Scape uses customised design, inflation-busting income. of the last 17 years. including fitted furniture, to The company currently offers a In the UK there were 183,000 squeeze more studios in its dividend yield of 3.8% based on more applicants than places to developments and keep rental consensus forecasts. study at university in 2016/17 prices for individual students Raising £70m alongside its with most of the growth coming relatively low. stock market listing in May 2013, from international students. On average six Scape studios the REIT has gone from having a The focus for GCP Student can fit into every five typical single asset to six, comprising a Living is predominately on studios with rent around 20% diversified portfolio of more than London where the supply- lower than the typical level for 2,000 beds. demand dynamics look London. This expansion has been particularly favourable due to The capital has the largest supported by a partnership with heavy competition for land. international student population development manager Scape In 2015, for example, there with more than 100,000 Student Living and generously was demand from 275,000 students but could Brexit see backed by shareholders. students for just 75,000 beds. this population shrink if EU students stay away. That is a risk SUPERB RETURNS to consider, however Ward says Aiming to generate an annualised he is positive on UK universities’ total return of between 8% and ability to ‘pick up a lot of 10%, it has done substantially numbers’ from outside the EU. better. Managed by Gravis Capital Partners through Tom BROKER SAYS: 1 0 0 Ward and Nick Barker, since IPO GCP STUDENT LIVING it has delivered an annualised FTSE ALL SHARE 165 Rebased to first return of 16.3%. 160 As an asset class student 155 150 accommodation has low 145 volatility and does not react in 140 135 the same way as commercial 130 125

property. Source: Thomson Reuters Datastream 120 According to Tom Ward it has 2016 2017

12 | SHARES | 06 April 2017 authorised andregulated bytheFinancialConductAuthoritytoprovide investmentproductsandservices.Telephone callsmayberecordedandmonitored. Gartmore Investment Limited (reg. no. 1508030), (eachPartners incorporated and registered in England and Wales Limited (reg. no.2606646), with registered office at 201 Bishopsgate, London EC2M 3AE) are Henderson InvestmentFunds Limited (reg. no.2678531), HendersonInvestmentManagement Limited(reg.no.1795354), HendersonAlternativeInvestmentAdvisor Limited(reg.no.962757), HendersonEquity Henderson Fund by Henderson Global Investors. Henderson Global Investors is the name under which Management Limited (reg. no. 2607112), Henderson Global Investors Limited (reg. no. 906355), Issued in the UK marketplace It’s aglobal

ARE YOU A GLOBAL INVESTOR? amount originallyinvested. fluctuations, andyoumaynotgetback the well asrisearesultofmarketandcurrency investment andtheincomefromitcanfallas a guidetofutureperformance.The valueofan Please rememberthatpastperformanceisnot meet yourinvestmentneeds. Investors hasarangeofsolutionswhich aimsto growth oramixtureofboth,HendersonGlobal If yourpriorityishighincome,longtermcapital experts. strategies professionallymanagedbyregional offer awiderangeofinvestmentobjectivesand investment approach, ourmanagedcompanies of dynamicglobalmarketsorwantacautious advantage for yourchildren, lookingtotake Whether youareretirementplanning,investing Henderson hasaglobalviewofthemarket. investment trustsandcompanies, rangeofmanaged diverse andestablished innovation anddevelopment.Now, witha has beenattheforefrontofinvestmenttrust years,HendersonGlobalInvestors For over80 managed byHenderson investment trusts,expertly Take aglobalviewof 5656 856 0800 www.hendersoninvestmenttrusts.com For moreinformationvisit by Henderson Investment Trusts, managed Find usonFacebook @HGiTrusts H021717/0316ad GREAT IDEAS SciSys ignites growth flame Expansion firmly back on the agenda for project software firm

fter several years of ANNOVA is a newsroom treading water SciSys SCISYS  BUY software supplier to many of (SSY:AIM) has at last found (SSY:AIM) 110.5p the biggest European media A Stop loss: 88p its growth groove and Shares organisations. It has a 12- believes there is a substantial Market value: £32.1m year deal with the BBC. SciSys profit opportunity for investors. sees ANNOVA IP as a perfect Our back of an envelope fit to develop existing and calculations suggest that a new products, plus it brings a modest price to earnings (PE) substantially bigger international multiple re-rating to 14 by the presence. end of this year could see the The deal led analysts to share price hit the 170p mark, increase their 2017 earnings implying 54% upside. The current forecasts for SciSys by 25%, 2018 PE stands at just 9.1. which gives you some idea of the Chippenham-based SciSys potential. provides project based IT skills Management are a naturally and services to large public cautious bunch, demonstrated sector (the ESD division), by the company’s solid cash broadcast media (M&B) and generation and dividend that will space industry clients. yield 2% this year. The Ministry of Defence (MoD) So if FinnCap sees earnings is a big public sector client. SciSys per share jumping from 9p to also does a lot of work with the 11p in 2017 (a 22% increase), European Space Agency (ESA), it’s because the company is including its Galileo project very comfortable with that and on Mars missions, and the estimate. This puts the possibility satellites industry. A similar development root of beating expectations on the This has previously made the produced its PLENITER advanced cards too, and positive newsflow company look rather disjointed metrological system. through the year could act as with a hotch potch of software a catalyst for a share price re- enterprises with little reason to EXCITING OPPORTUNITY IN rating. (SF) sit under the same corporate BROADCAST MARKET umbrella. But more recently Exciting in the near-term is the BROKER SAYS: 1 0 0 management has been able potential from its broadcast SCISYS to spin internally developed media arm, its most profitable FTSE ALL SHARE 115 Rebased to first intellectual property (IP) into division with operating profit 110 105 multiple applications. margins of a 31.25% in 2016 (ESD 100 95 For example, it has piggy- 26.9%, Space 21.1%). 90 85 backed initial project information Up until the £23.8m 80 75 management work for the RNLI acquisition of German business 70 65 to build its MACSYS integrated ANNOVA in November 2016 it 60 Source: Thomson Reuters Datastream marine management platform. was also its smallest division. 2016 2017

14 | SHARES | 06 April 2017 DON’T LET YOUR NEW ISA ALLOWANCE GET AWAY £

Make the most of your new £ ISA £20k tax-free allowance £ • 2017/18 £20,000 allowance

With the government’s new £20k 2017/18 allowance fast approaching you need ideas and practical tips to make the best use of your savings.

Subscribe to the new Shares digital bundle and receive the latest investment coverage and tools for just £1 for the 1st month and then just £12 a month*.

The SHARES experts offer 24/7 coverage and insight into today’s vibrant investment markets. Helping you easily choose the right investment for you and your money.

A subscription to SHARES gives you access to the SHARES digital investment hub and a host of benefits including: > Your weekly digital magazine brimming full of investment ideas > 24/7 market news and company updates > Exclusive investor tools including live share prices

SHARES - Catch the best investment news and latest share prices

Subscribe today at www.sharesmagazine.co.uk/subscribe

* The £1 for 1 month and then £12 a month offer is only available to new subscribers. Your first payment will be £1 and thereafter subscriptions will automatically continued, billed at £12 per month unless cancelled. Subscriptions can be cancelled at any time by calling 0207 378 4424 between 8am - 4.30pm on Monday to Friday. No refunds are offered during the cancellations period but all outstanding issues and services will be fulfilled. For enquires contact us at [email protected] GREAT IDEAS UPDATES

LUCECO IOMART (LUCE) 215.54p (IOM:AIM) 295.5p

Gain to date: 43.7% Gain to date: 14.3% Original entry point: Original entry point: Buy at 150p, 20 October 2016 Buy at 258.5p, 23 June 2016 BETTER THAN EXPECTED full year results on 3 MORE ORGANIC GROWTH at an accelerating April have given another lift to shares in Luceco pace is the key takeaway for Shares from what (LUCE). They are now nearly 45% ahead of the is another reliably fine pre-close trading update price at which we said to buy six months ago. for Iomart (IOM:AIM) (31 Mar). The company Luceco makes and sells wiring accessories, USB pulled off 17% headline revenue growth, which charging plugs and LED lighting. Post-tax profit translates into rough high-single digits on an increased by 67.2% in 2016 to £9.7m. underlying basis. It has a policy to pay 20% of profit after tax as Shared hosting arm Easyspace is also back a dividend. It has declared a maiden dividend on the growth path, putting up 9% organic of 0.3p, a lower figure than you might expect expansion, a solid bounce after a period of when doing the maths. That represents the decline. portion of profit after tax for the two and a half The resulting free cash flow (FCF) growth

LUCECO months it was a provides justification for its capital deployment FTSE ALL SHARE listed business strategy of bolting on small, value-adding 220 Rebased to first 210 (it floated in acquisitions while maintaining infrastructure 200 190 October 2016). investment so kit remains at the cutting edge. 180 170 Unfavourable It also gives confidence that Iomart’s decision 160 150 foreign exchange to lift the dividend payout ratio upper cap from 140 rates could 25% to 40% of adjusted diluted earnings is more 130 120 Source: Thomson Reuters Datastream mean retailers than merely playing to the cheap seats. We see OCT NOV DEC JANFEB MAR have to put up the move as a real attempt to satisfy shareholder the prices of Luceco’s goods. It says this hasn’t demands regardless of income or capital growth happened yet because retailers have currency objectives. A ‘pick-and-shovel cloud play’ is hedges in place – although it warns these hedges how one analyst describes the company. We

could soon run out. Retailers account for 40% of IOMART GROUP completely FTSE ALL SHARE its sales. 330 Rebased to first agree and it 320 310 remains one of 300 the best ways SHARES SAYS:  290 280 to invest in the Chief executive John Hornby says the biggest risk 270 wider cloud 260 to Luceco would be a recession in the UK. For now, 250 story on the UK

240 Source: Thomson Reuters Datastream Hornby claims demand is strong from its core 2016 2017 market. customer base of housebuilders, construction firms and retailers. We remain positive, albeit keeping a SHARES SAYS:  close eye for any signs of trading weakness which Even at 360p the implied forward earnings multiple could be a trigger to lock in profit. (DC) of 18.9 would still not be too demanding. Firmly a buy. (SF) BROKER SAYS: 2 0 0 BROKER SAYS: 3 1 0

16 | SHARES | 06 April 2017 WINNERS GROWTH COMPANY OF CORPORATE SPONSOR OF THE YEAR (sponsored by THE YEAR (sponsored by Shares) Progressive Equity Research) finnCap Boohoo.com Plc BEST CUSTOMER FOCUS M&A TRANSACTION OF (sponsored by AJ Bell) THE YEAR (sponsored by Squire Metro Bank Plc Patton Boggs) International Plc CEO OF THE YEAR (sponsored by Redleaf Communications) FUNDRAISING OF THE YEAR David Lewis - Tesco Plc (sponsored by Squire Patton Boggs) Sirius Minerals Plc FD OF THE YEAR (sponsored by Redleaf Communications) IPO OF THE YEAR Carole Cran - Plc (sponsored by Squire Patton Boggs) Blue Prism Plc BEST PERFORMING SHARE (sponsored by PrimaryBid) INNOVATION OF THE YEAR Plc (sponsored by NEX Exchange) Purplebricks Group Plc AIM COMPANY OF THE YEAR (sponsored by PrimaryBid) INVESTOR RELATIONS TEAM Boohoo.com Plc OF THE YEAR (sponsored by Shares) MAIN MARKET COMPANY OF Sound Energy Plc THE YEAR (sponsored by KPMG) GVC Holdings Plc FINANCIAL PR TEAM OF THE YEAR (sponsored by Shares) ENTREPRENEUR OF THE YEAR Camarco (sponsored by KPMG) Andy Michuda - Sopheon Plc

SPONSORS TALKING POINT Our views on topical issues The hazards of client concentration Apple u-turn highlights risk of being too reliant on a few customers

he devastating slide in Imagination T Technologies (IMG) shares on 3 April after being ditched by its largest customer Apple is just the latest and most high profile in a string of setbacks for firms with heavily- concentrated client bases. Shares in the microchip designer fell by more than 60%, with more than £500m wiped off its market value, as Apple said it would stop using the group’s of the two firms any battle on compound materials designed graphics intellectual property the issue looks a mismatch. to cut noise nuisance and reduce (IP) within the next 18 months to wasted heat, largely used in the two years. WHO ELSE IS IN THE automotive industry. SAME BOAT? Jaguar Rover is thought BIG CHUNK OF REVENUE In October 2016 PREMIER to account for half According to one forecast before electronics and FOODS GETS 80% of Autins’ annual the news, Apple was expected to high performance revenue. And it be worth £65m of Imagination’s materials firm Laird OF ITS BUSINESS was reportedly £140.3m revenue for the year to (LRD) also saw a FROM FOUR a contract with 30 April 2017. bite taken out of its SUPERMARKET Jaguar Rover, where The share price collapse was share price thanks to CHAINS the terms of a supply compounded by the market also its reliance on Apple. deal saw volumes effectively removing a takeover Around 20% of its cut and the timing of premium previously applied to business came from providing deliveries altered, which blew the stock. Investors had long radio frequency shielding for an estimated 15% hole in Autins’ expected Apple to make a bid for iPhones. Softer handset sales forecast revenue for the year to Imagination. were a big factor behind Laird’s 30 September 2017. The companies clearly significant profit warning. won’t be getting hitched In February 2017, a PLAYING WITH A WEAK HAND now that Apple has 60% little over six months This illuminates the other key decided to develop after joining AIM, issue with being reliant on its own graphics OF COHORT’S Rugby-based Autins just one or a handful of major solution internally. WORK IS FOR (AUTG:AIM) shocked customers, namely you are left in Imagination THE MOD the market with its a very weak negotiating position. is crying foul over own profit warning In early 2017 food producer potential patent linked to a single (PFD), which in its infringements but given the customer. previous financial year derived relative size and balance sheets Autins supplies specialist 80% of its revenue from four UK

18 | SHARES | 06 April 2017 TALKING POINT

supermarket chains, And with the shareholders have been cut its full year profit APPLE HAD shares currently rewarded with a four-and-half- guidance by 10%. ACCOUNTED trading at 44.9p, fold increase in its share price The company said FOR 46% OF it’s little wonder in the last five years to the it was taking longer IMAGINATION’S management are current 434.5p. than expected to continuing to take Investors should be aware of agree supply deals FORECAST heat from activist a risk to earnings from having with food retailers. REVENUE shareholder Paulson & so much business with one The maker of Mr Co over rejecting a 65p party, particularly given recent Kipling cakes and Bisto gravy per share offer from US rival reports of a £1bn shortfall in has been trying to pass on higher McCormick in April 2016. the MoD’s budget. input costs resulting from the Another stock deriving a devaluation of sterling. IN THE FIRING LINE? decent portion of earnings from Given Tesco (TSCO), in We note that cash-generative one customer is online payment particular, was widely perceived defence outfit Cohort (CHRT) processing firm Paysafe (PAYS). as having won a battle over derived more than 60% of its It generates 20% of revenue pricing with a much more revenue from the UK Ministry from a single merchant in Asia. heavyweight opponent in the of Defence (MoD) in its financial Admittedly the percentage form of consumer goods giant year to April 2016. of group earnings from this Unilever (ULVR), it is hard to The acquisitive firm has undisclosed party has been slowly fancy Premier’s chances. been on a growth tear and decreasing over the years. (TS)

Introducing the Downing Strategic Micro-Cap Investment Trust

Find out more Please note, capital is at risk and returns are not guaranteed.

Seeking the best value in smaller companies

ffLong-term growth: targets 15% p.a. compound growth over a 3 - 7 year investment period (please note this is a target only and is not guaranteed). ffFocused portfolio: aims to invest in12 - 18 UK micro-cap companies. ffStrategic investments: aims to take influential positions of 3% - 25% in each underlying business to help drive shareholder value. ffExperience: drawing on Downing’s 30 years of experience, we employ a private equity style investment approach and an extensive due diligence process. Find out more www.downing.co.uk/strategic 0207 416 7780

This advertisement is a financial promotion approved under the Financial Services and Markets Act 2000 by Downing LLP, which is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 545025). You should note that your capital is at risk with this investment. Past performance should not be seen as an indication of future performance. The value of shares and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested. The price of shares in the Company is determined by market supply and demand and may be different to the net asset value of the Company. Investments in the Company are also subject to risks associated with investments in the UK property market. Please refer to the Prospectus for full details of the Offer, risks and charges. Registered office: Downing LLP, Ergon House, Horseferry Road, London, SW1P 2AL. UNDER THE BONNET We explain what this company does Why now is the perfect time to buy Saga shares Over-50s specialist could be on cusp of major growth breakthrough

e are no longer an ‘We are also setting ourselves gone anywhere over the past insurance company a new target. We will increase few years? ‘W with a small travel travel profit by four to five times At the moment few analysts business on the edge,’ proclaims this year’s level over the next seem to be truly excited about Saga’s (SAGA) chief executive five years, helped by having two the business (that’s a good sign, Lance Batchelor. The FTSE 250 new cruise ships.’ in our view). We’ve also heard stock has been trying to get The company is very excited comments from retail investors this message across ever since about its future prospects; you that they view growth as being floating on the stock market should be too. too pedestrian. That might in 2014; and now it has clear explain why the share price evidence to back up this claim. WHAT DOES IT DO? seems to be stuck in an 180p to Full year results published on Saga is known as a specialist 220p trading range. 29 March revealed a 10.4% rise in the provision of holidays Fundamentally we think Saga in pre-tax profit from its travel and insurance for the over-50s could be one of those stocks division to £14.9m. While only market. It has a very well-known where people in 10 years’ time a small fraction of the £215.1m brand; it is highly profitable; look back and kick themselves profit it made from insurance, and it pays decent dividends. for not buying when no-one was Saga says it has reached a turning It should also benefit from really interested in it (i.e. now). point in terms of how travel favourable demographics, such contributes to the group. as people living for longer and ENVIABLE POSITION ‘Three years ago when we many retirees being financially Saga is a rare beast on the floated, we set ourselves a comfortable. stock market in that many of its five year ambition to double We believe it has right customers are extremely loyal to the travel arm’s profitability,’ ingredients to reward investors the brand. They have multiple Batchelor tells Shares. ‘That will handsomely over the long-term. products from the company and now be delivered a year early. So why hasn’t the share price some even consider themselves

20 | SHARES | 06 April 2017 UNDER THE BONNET as being part of a community. The third pilot is retirement How many other retailers or Saga could be one villages. It is identifying suitable insurers can say the same? of those stocks residents from its database and Batchelor says 20% of Saga’s introducing them to a retirement customers account for 80% where people in village operator. The CEO says he of the group’s profit. The 10 years’ time look wants to expand this pilot in the company has spent a long time back and kick next year or two. understanding how this segment themselves for A membership scheme will be came to become so loyal, so launched later this year under that it can a) try and sell more not buying when the banner of ‘Saga Possibilities’. relevant products to them no-one was really It is billed as a loyalty initiative (483,000 individuals) and b) see interested in it and every customer will be which other customers have enrolled in the scheme. ‘We similar characteristics. (i.e. now) will provide access to events, ‘We’ve looked at where they opportunities for people to live, what they’ve done, where learn new skills, help build they go on holiday, among communities, have discounts; all many other attributes,’ says the as a way of saying thank you for CEO. ‘We’ve then analysed our customers’ loyalty.’ database to see who else is a similar match.’ The company says POWERFUL PLANS it has found 511,000 relevant The combination of all these customers. initiatives to interact with customers and try and get them A CLEARER FOCUS to do more with Saga could have This isn’t the first time the very powerful results, in our company has explored ways opinion. in which to have a deeper Earlier initiatives are already relationship with customers. It proving successful. In 2015 it already has three operational added a panel of independent pilots to see if there is merit in underwriters alongside its own developing new strands to its underwriter to provide a broader business. range of motor insurance The first is financial services, policies. That is now having a namely Saga-branded credit positive impact on profit. cards, savings, loans, wealth It has also ordered a new management, share trading and cruise ship that will offer equity release. modern facilities and use less A home care pilot is going fuel, so more profitable for the so well that Saga has now group. Initial customer interest announced plans to expand for the ship has been very the service. ‘We are sending positive. carers to look after Saga Saga’s new growth target members in their own home as for the travel division assumes they get older,’ says Batchelor. another new ship is ordered, That certainly plays to the most likely costing £300m. Government’s desire to reduce You certainly cannot accuse pressure on hospitals and the business of being pedestrian. increase the amount of care This is an essential stock to own, given in the home. so buy at 201.7p. (DC)

06 April 2017 | SHARES | 21 LARGER COMPANIES SSE dividend ‘safe for now’ Payout looks secure in the immediate future despite earnings shortfall

ncome seeking shareholders of SSE (SSE) can breathe a sigh of relief as the Igroup reassures on its dividend next 6.2% year despite a squeeze on earnings. The energy supplier says operating PROSPECTIVE profit from its Networks business will DIVIDEND be around £100m lower in the year to 31 March 2018 than the previous YIELD 12 months. A series of complex issues are being blamed for the shortfall, including lower income from electricity transmission charges. There is also going to be a revenue hit for its gas distribution unit, in which it sold a 16.7% stake in October 2016.

COMPLEX ISSUES Operating profit forecasts have been nudged lower, with the consensus now pitched at a little over £1.7bn. ‘The operating environment has presented SSE with a number of complex issues to manage, but in this financial year we have been able to offset the impact of disappointing renewable energy output caused by drier and less windy weather conditions,’ says Gregor Alexander, group finance director. Importantly, SSE expects dividend cover this year to be within the expected range of around 1.2-times to 1.4-times, albeit towards the bottom end of that range. ‘We are on course to deliver adjusted earnings per share (EPS) of between 122p and 125p,’ spelled out Alexander. City analysts This has put profits from the firm’s retail division anticipate 123p EPS on a consensus basis, which under pressure. ‘Retail operating profit is expected implies 1.3-times cover of the currently predicted to be slightly lower than in 2015/16,’ was one of 94.1p dividend this year. the bullet points of its most recent trading update. Full year to 31 March 2017 figures will be The 13 March announcement of a hefty consumer reported on 17 May. tariff price hike may imply a new wave of customer departures. BIG SIX SQUEEZE The group then unveiled an average 6.9% annual As one of the UK’s so-called big six energy increase in a typical dual fuel bill that included an suppliers, SSE has faced stiff competition for average 14.9% electricity supply increase thanks customers from a swathe of new and existing to rising wholesale pricing. That came amid a independents. The group revealed in January that swathe of energy tariff price increases from major its customer numbers had dropped to 8.08m from providers, including Eon, Scottish Power, Npower 8.21m at the end of March 2016, although SSE and EDF. (CNA)-owned British Gas has added it had begun to halt the exodus. extended its own price freeze until August. (SF)

22 | SHARES | 06 April 2017 LOOKING FOR NEW INVESTMENT OPPORTUNITIES FOR YOUR ISA? COME AND FIND OUT MORE ABOUT ARIANA RESOURCES (AAU), AVACTA (AVCT) AND EG SOLUTIONS (EGS) ON 26 APRIL 2017

If you are looking for new investment opportunities there is no better starting point than coming along to our Shares Investor evening event on 26 April. You will have the chance to meet the directors of three fast growing companies and find out about their plans for 2017.

REGISTER FOR YOUR COMPLIMENTARY TICKET TODAY

Sponsored by

Companies presenting

Ariana Resources (AAU) Kerim Sener, Managing Director Ariana have just started to produce and pour gold on their Red Rabbit venture in Turkey. Managing Director Kerim Sener will be updating investors at the Shares Investor evening on progress to date, plus what else is in planned for the company in 2017.

Avacta (AVCT) Alastair Smith, Chief Executive Officer 4 out of the top 10 global large pharmas and more than 10 other biotech and pharma companies are evaluating/collaborating with Avacta on their Affirmer technology which is an engineered alternative to antibodies. eg solutions (EGS) Elizabeth Gooch, Chief Executive Officer The rapidly growing creators of enterprise workforce optimisation software and a services company, eg solutions has seen its share price grow by 50% this year on the back of some substantial licensing deals. Elizabeth Gooch will give an update on these deals and others in the pipeline.

More to follow...

Why attend? Event details The chance to network with other private investors, wealth Location: Novotel Tower Bridge, managers, private client brokers, fund managers and financial 10 Pepys Street, London, EC2M 7UR institutions. Registrations 18:00 For any enquiries, please contact: Presentations to start at 18:30 Chris Williams, Spotlight Manager Complimentary drinks and buffet available [email protected] | 0207 378 4402 after presentations

Register free now www.sharesmagazine.co.uk/events SMALLER COMPANIES Important turning point for Be Heard Four acquisitions provide platform to start chasing decent deals

igital marketing buy-and-build venture buyer Agenda21, web and app designer Be Heard (BHRD:AIM) is starting to MMT Digital, content marketing agency look very interesting now it has Targeted Kameleon and marketing analytics Dlaid the foundations for an ambitious revenue per outfit Freemavens. These businesses growth push. will be brought under one roof before Investors should accept the business employee = the end of the year. may need to keep issuing new shares to £100,000 All four businesses were in Portugal raise money for acquisitions. That’s one in March to pitch to the world’s second of the key reasons why companies list on largest wine producer and the quartet are the stock market in the first place – to access already acting in concert for four clients, the capital markets. We believe equity dilution is a largest of which is mobile telecoms giant Vodafone price worth paying given the inherent potential in (VOD). the business. Scott says the team will only make an acquisition Finance director and chief operating officer Robin if the existing stable of companies would be happy Price says using debt to fund deals may become an to leave their clients alone with the targeted firm. option from 2018 onwards, assuming the company ‘To be honest we take a private equity approach. has reached sufficient scale by that point. For every 100 companies we get information on, 80% go in the bin. Of the remaining 20%, a further PILLARS OF STRENGTH 80% go in the bin. We are very prudent and we Executive chairman Peter Scott is a veteran of the know what we are looking for.’ advertising industry with a successful track record. He is helping Be Heard to create an integrated CAPITALISING ON YOUTUBE SCANDAL digital marketing agency built around four key The head of Agenda 21, Rhys Williams, says the pillars. These are media planning/buying; design, YouTube scandal, which has seen big advertisers build and user experience; creative and content; pull their adverts from the site after they and strategy, innovation and analytics. featured alongside extremist content, is creating It has completed four deals since inception in opportunities for the Be Heard subsidiary. November 2015. Be Heard has acquired media Williams explains his business can help brands get the ‘right ads, at the right time in the right environment’. Be Heard’s full year results (30 Mar) were in line with house broker Numis’ forecasts with normalised pre-tax profit of £700,000 on revenue of £9.5m but only included a full year contribution from Agenda21. Scott’s medium-term ambition is to hit £100m of revenue.

SHARES SAYS:  We think Be Heard has significant potential to generate value for shareholders. Buy at 3.6p. (TS)

BROKER SAYS: 1 0 0

24 | SHARES | 06 April 2017 SMALLER COMPANIES Bleak future for Pebble Beach Broadcast technology firm’s existence in jeopardy

hareholders in beleaguered broadcast technology firm Pebble Beach (PEB:AIM), Sformerly known as Vislink, are almost certainly facing a painful sale process that could leave their stock virtually worthless. The divestment of its Vislink Communications Systems (VCS) business to NASDAQ-listed XG Technology has failed to shore up the 2016. ‘The results confirm below-expectations threadbare balance sheet and the company performances across both the Pebble Beach and anticipates breaching its banking covenants in the VCS businesses,’ says Rob Warensjo, analyst at the ‘foreseeable future,’ casting the company’s very IT analysis group Megabuyte. existence into doubt. The company’s ‘future appears uncertain, and Shares twice warned of the threat that the VCS very much reliant on the lenience of its bankers,’ sale may not provide the silver bullet solution to Warrensjo concludes. Pebble Beach’s debt problem. We first flagged possible problems in October, and again in January. SHARES SAYS: Since then the company’s share price has collapsed Shareholders can do little more than cling on in the from 16.25p to 4.62p. hope that their stock proves to be worth something Developments finally came to a head on the more than nothing. (SF) publication of full year results to 31 December

Touchstone eyes Hayward Tyler Battle for Trafalgar software scale in play after revenue

START-UP commercialisation ORDER DELAYS could cost warning firm Touchstone Innovations embattled pumps specialist MICRO-CAP residential property (IVO:AIM) plans to double Hayward Tyler (HAYT:AIM) its developer Trafalgar New Homes its software investment independence after it admitting (TRAF:AIM) is under some portfolio as it looks to expand ongoing talks over a possible pressure after confirming it will more significantly beyond its takeover by niche engineer post no revenue in the second healthcare and biotech roots. Avingtrans (AVG:AIM). The half of its March 2017 financial It recently upped its stake in company says negotiations are year. The guidance stems from London-based cyber security at a ‘very early stage’ and there the fact it is yet to sell a unit business Garrison Technology are no details of an implied at two developments in Kent. to 22.5%, having first backed price. Hayward Tyler warned Marketing began in February the business in 2015. Well- in February of delays to £30m and sales from the sites are known fund manager Neil worth of contracts. (SF) expected to contribute to the Woodford remains a big fan of financial year ending March Touchstone’s ambitions. (SF) 2018. (TS)

06 April 2017 SHARES | 25 20 [ENDS] holdings is often considered the maximum number of stocks you would need for a decent portfolio

20 holdings is often considered the maximum number of stocks you would need for a decent ou can now tuck £20,000 into a tax-sheltered longer-term time horizon. portfolio ISA every year, a 31% increase on the On a related note, anyone previous tax year. To help you take advantage new to investing may prefer to first of this generous allowance, we’ve produced invest in funds in order to spread risks and Ya list of 10 must-have stocks to fill your ISA. develop a strong backbone to their portfolio before The list includes a mix of selections from the adding individual stocks. Read our recent articles Shares team and some picks from leading equity on filling ISAs with funds here and here to get a analysts. We’ve split them into five groups, making head start. it as easy as possible for you to pick and choose certain types of investments. HOW SHOULD I ALLOCATE MY MONEY? The five groups are income, growth, recovery So how should you spread up to £20,000 across a trades, picks for investors with an appetite for new ISA? Anyone able to invest a large lump sum higher-risk investments and top quality businesses. needs to think about the risks of putting all that All the stock ideas are aimed at an investor with a money in just a few stocks – or whether they would

26 | SHARES | 06 April 2017

£20,000 be better served by spreading the cash Many stockbrokers offer something among five or more holdings. annual ISA called a ‘regular investment service’. What about those who can only allowance for You can place an order for a specified afford to invest a little bit out of their 2017/18 tax amount of money to buy the same pay packet every month? We’d suggest year share or a fund each month in the same you consider prioritising investments way you’d set up a direct debit to pay your that will enhance your portfolio, rather than utility bill or a gym membership, for example. duplicate existing holdings. Transaction fees are generally much lower than normal trading costs, often as little as £1.50 a time GO FOR QUALITY OVER QUANTITY versus £10 typical dealing fee. Many experts believe 20 holdings, whether Investing regularly also enables you to take individual shares or funds, is the maximum you advantage of an effect known as pound cost need in an investment portfolio. averaging. This process can iron out the ups and Anyone new to investing and fortunate enough to downs in the price of a fund or share over time. Your have a large lump sum of cash to invest may wish to money buys you more shares or fund units when the spread some of their £20,000 ISA allowance across price is low and fewer when the price is high. 10 funds, investment trusts or exchange-traded That can be better than mistiming the market funds (ETFs). That would form the foundations of and only making one transaction and buying when your portfolio, so you could then invest in five or so the price was high, for example. ‘high conviction’ stocks at any one time. The hypothetical example below compares the return on £1,000 invested as a lump sum versus THE BENEFITS OF REGULAR INVESTING regular investment over five months. It shows how Many of you will not be fortunate enough to have buying regularly at higher and lower prices can £20,000 to invest straight away but the good news sometimes result in you owning a greater number is you can drip feed funds from your monthly pay of shares than via lump sum investing. packet into the market. Regular investment even This is just an illustration and not a guarantee offers some handy benefits. you will make more money this way.

WHY INVESTING AT REGULAR INTERVALS CAN OFTEN BE A GOOD APPROACH REGULAR LUMP SUM INVESTING INVESTING Regular investment Shares Lump sum Shares Month Share Price (made at start of purchased investment purchased month) 1 £5.00 £200 40 £1,000 200 2 £4.50 £200 44 3 £4.25 £200 47 4 £4.75 £200 42 5 £5.25 £200 38

Average share price: TOTAL INVESTED: TOTAL SHARES TOTAL INVESTED: TOTAL SHARES £4.40 £1,000 HELD: 211 £1,000 HELD: 200 Portfolio value at the £1,086.65 Portfolio value at the £1,030.00 end of five months, end of five months, based on a £5.15 based on a £5.15 share price share price Dealing costs Dealing costs 5 x £1.50 = £7.50 1 x £9.95 Source: Shares

06 April 2017 | SHARES | 27 TASTY YIELD STOCKS: GREAT FOR INCOME

£ National Grid (NG.) homes and businesses get their Investors £ power regardless of supplier. also stand £10.18 Like most utility stocks, income to share a NATIONAL GRID (NG.), the UK’s is the big attraction and National potential £4bn largest listed utility worth just shy Grid’s implied yield of 4.5% windfall in the of £36.9bn, sits in an enviable for the year to 31 March 2018 near future from the group’s sale position. stands roughly in line with the of US gas assets. That implies While increasing competition wider sector. It comes with an a rough 85p per share special bites across the retail energy field RPI-beating growth promise, dividend, according to analysts, as consumers are encouraged adding a level of natural hedge if plus an accompanying share to switch, National Grid owns inflation does hang around for a consolidation and £1bn share the infrastructure through which prolonged spell. buyback. (SF)

Card Factory (CARD) 271.6p SPECIALIST GREETING CARDS- TO-GIFTS retailer Card Factory (CARD) is a ‘highly attractive’ business paying very attractive dividends, according to investment bank . Its vertically integrated model, spanning in-house design, printing and retailing, is a key point of differentiation. It reduces external costs which Card Factory can pass on to customers and enables it to generate industry-leading margins and prodigious sums Card Factory continues to Card Factory dividends of cash. expand via new store openings Company Share price gain The model enables Card and sees scope to improve 2016 (A) 23.5p Factory to keep prices low, the performance of its Getting 2017 (A) 24.1p despite currency-driven cost Personal website. 2018 (E) 24.2p headwinds; competitors will The company lifted its ordinary 2019 (E) 24.6p be forced to raise prices and dividend by 7.1% to 9.1p in its 2020 (E) 25.4p close stores. We don’t believe most recent financial year. It also Year ending 31 January, includes special digital greeting cards are a paid 15p special dividend on top. dividends structural threat. Investec expects another Source: Investec Securities Record full year results batch of generous payments revealed 3.8% growth in to shareholders in the current Looking at the forecasts underlying pre-tax profit to a financial year. It forecasts 24.2p beyond 2017, it seems Investec better-than-expected £85.1m, per share in total (including expects the special dividend albeit on slower like-for-like sales another special dividend) which to be a regular feature every growth of 0.6% (2016: 3%). implies 8.9% yield. year. (JC)

28 | SHARES | 06 April 2017 GROWTH FIRMS: ON A WINNING STREAK

£ Renishaw (RSW) causing some concern about ‘Revo’ 5-axis lumpy orders. scanning £31.31 The company likes to invest probes SHARES IN PRECISION engineer heavily in new products, are making Renishaw (RSW) have been on a facilities and people when it inroads with roll since December 2016, hitting spots a growth opportunity. US auto original equipment an all-time high in late March Costs have sometimes risen manufacturers, the new US 2017 at £32.42. much faster than sales. That too HQ (with enhanced product We think this is a fantastic has been a turn-off for some demonstration facilities) has business. It deserves a place in an investors. The problem now opened and healthcare has a investment portfolio for anyone seems to have been fixed with strong order book for the second seeking to own a high-quality revenue now rising faster half of the financial year,’ adds company on a long-term basis. than costs. Investec. ‘This growth has been It is a world leader in ‘Demand for encoding and achieved in the absence of any metrology equipment that calibration products is strong, one-off large orders.’ (DC) monitors and analyses the work of sophisticated cutting tools in factories. Renishaw also has a healthcare division that provides specialist equipment for neurosurgery and dentistry. It is easy to see why investors have warmed to the stock again after a patchy period clouded by the non-repeat of major contracts in the Far East,

COST RSA Insurance (RSA) TARGET HAS and ahead of the consensus BEEN UPGRADED forecast of £626m. The 584P combined operating ratio, which THE MAN AT the top of non- >£400M measures the performance of its gross annualised cost savings life insurer RSA (RSA), Stephen by 2018 (was >£350m) underwriting business, came in Hester, may have fallen short at 94.2%. Anything below 100% £290M in his efforts to turn around cost savings to date implies a profit. troubled bank Royal Bank of Source: RSA, 23 Feb 2017 A deal to dispose of £834m Scotland (RBS) but he is enjoying worth of legacy insurance much greater success in his liabilities in the UK is being well current ‘Mr Fixit’ role. received and simplifies the Results for 2016 came investment bank Morgan Stanley. investment case. in substantially ahead of It believes RSA’s share price Hester and his team are bullish expectations, illustrating how RSA could reach 650p over the next on the outlook, hiking the full is on a winning streak. Investors year, helped by an improved year dividend by 52%, raising the have been rewarded with 20%+ balance sheet feeding into ‘a return on assets target from 12%- share price gains in the past 12 strong capital return’. 15% to 13%-17% and pledging months and there could be much Group operating profit in 2016 that in performance terms ‘the more to come, according to was up by a quarter to £655m future can be brighter still’. (TS)

06 April 2017 | SHARES | 29 RECOVERY STOCKS: THE COMEBACK KIDS

TELECOM PLUS (TEP) access to cheaper third party of room goods and services via its to grow. £12.00 discount card. The cost of THE STOCK MARKET has been This year should see Telecom deepening its a fickle master for the past three Plus add insurance (home, car, claws into UK years but (TEP) travel, etc) and water, with households is capped surprisingly remains a true quality company, the latter being opened up low thanks to its word-of-mouth in our view. to competition by its Ofwat distribution model. (SF) The multi-utility supplier regulator. This could help to make remains a unique play on customers even more sticky and Customers by service customer expansion thanks to valuable. 600,000 a scalable platform, low capital Energy tariff price hikes make cost requirements, high recurring the big six suppliers increasingly 500,000 revenues and improving earnings unpopular while many smaller quality and visibility. independents are being squeezed 400,000

Trading as Utility Warehouse, by unhedged rising wholesale 300,000 the company typically starts costs, putting Telecom Plus supplying gas and electricity to in prime position to pinch 200,000 customers. It then progresses customers. to cross-selling home phone, To date it has only got a 1.5% 100,000 Source: Company accounts half year 2017 half year accounts Company Source:

broadband and mobile calls, texts share of an estimated £40bn UK Electricity Gas calls line Fixed rental line Fixed Broadband Mobile card Cashback and data, offering its ‘members’ energy market, leaving plenty 0

SPECTRIS (SXS) improvement in its end markets. 15 analysts who cover the stock. The bulk of last year’s £1.35bn is a fine and innovative £24.88 of sales come from slower- British company with years EGHAM-BASED SPECTRIS burning developed economies, of experience and expertise. (SXS) supplies the sort of labour such as North America, Europe Management deserve credit for saving, productivity aiding and Japan, where capital pulling the right levers during instrumentation and controls investment has been stuck in a a challenging spell over which used by manufacturers around rut for the past few years. it has had little control, a point the world. Sales have been Expansion across emerging reflected in the 24% share rally stagnant for many years, but markets in Latin America, China over the past six months. (SF) analysts now predict a brighter and Asia Pacific is now becoming future. increasingly important. Investec believes there is good New product lines should also potential share price upside support growth expectations, for anyone prepared to wait. In thanks to Spectris’ ongoing February it said: ‘Prospects of commitment to research and sales growth are welcome, after development. several years of flat (or worse) The £3bn company remains momentum.’ Shore Capital cautious on its near-term future says the shares could keep but analysts seem reasonably rising if Spectris meets its cost confident of ongoing progress, saving goals and there is further with ‘buy’ ratings from eight of

30 | SHARES | SHARES | 06 April 2017 HIGHER-RISK STOCKS: FOR THE MORE ADVENTUROUS INVESTOR AA (AA.) 264.7P BULL CASE and allows • Strong recurring revenues them to be ALTHOUGH AA (AA.) is best • Should start to see fixed before known for its road side assistance improvement in operational a breakdown business, the £1.6bn cap efficiency occurs. also generates revenue from • Attractive dividend yield The AA wants to be seen insurance services and driving (3.7%) as a business which helps instruction. drivers across the board – not We believe it could be a good BEAR CASE necessarily just saves them after stock over the long-term as its • Large debt a breakdown. strong cash flow is dependable • Insurance is highly Liberum says longer term enough in our view to keep competitive market concerns about the outlook reducing borrowings. Net debt • Insurance industry subject to for the roadside market have stood at £2.62bn as of 31 January tougher taxes been overstated. Many people 2017 which is about 1.6 times its suggest electric vehicles – which market cap. are becoming more popular A new IT system is helping to 2017 when all the data is fully – are more reliable, so there deliver costs savings with more uploaded. is less need to use the AA’s efficient processing, among many The company has finally halted services. ‘The biggest cause other areas. A new customer its decline in membership due in of breakdowns for the AA is relationship management part to the higher adoption of its batteries and wheels; electric system should be ready to phone app. It has also launched and self-drive vehicles have support more personalised and ‘Car Genie’ which spots issues both,’ says the investment targeted marketing from Autumn with a car before they arise bank. (DC/DS)

SuperGroup (SGP) The analyst is confident the at a steady clip in Europe, shares could hit just shy of £19 SuperGroup is progressing £14.59 over the next year. in North America and has RISK-TOLERANT INVESTORS Admittedly we have a very a promising joint venture wanting exposure to an cautious view towards the UK in China. international growth story may retail industry at present, in For the year find multi-channel fashion light of rising inflation and our to April 2017, retailer SuperGroup (SGP) forecast for a drop in consumer Stewart appealing, according to bullish confidence levels. SuperGroup is forecasts a comments from Panmure a bit different as the growth story pre-tax profit Gordon analyst Michael Stewart. is focused overseas, accounting jump to He claims SuperGroup is one for more than half its sales. That £83.5m (2016: of the most undervalued global said, we would class this stock £72.4m) brand roll-out stories within the as one for a more adventurous and a 27.3p UK retail sector. He believes the investor because of the near- dividend, market is not fully appreciating term risk to the UK proportion rising to £96m SuperGroup’s best-in-class of sales due to tough market and 31.4p revenue growth and profit conditions. respectively by margins. Growing its store portfolio April 2018. (JC)

06 April 2017 | SHARES | 31 TOP QUALITY FIRMS: ESSENTIAL STOCKS TO OWN

HALMA (HLMA) £10.25 strong returns from resilient forecast growth drivers based on earnings for FTSE 250 MEMBER Halma advances in safety regulations, 2018. It has (HLMA) is an excellent ageing and urbanising consistently example of a high quality populations, and other been an expensive share – business that would sit well in demographic trends. yet it consistently rewards an ISA portfolio. The impressive formula shareholders with tasty dividends It is a global manufacturer works. It creates a virtuous circle and has an excellent track record and supplier of health, safety of reliable growth and cash of capital appreciation. The share and environmental equipment generation that pays for the next price has increased by 355% over typically designed to meet the stage of investment. Operating the past 10 years. (SF) ever-widening regulations net. margins have been reliably Halma should, theoretically, maintained in the low-20% range see revenue and profit growth for many years. whatever the economic weather. There is incrementally more For that reason, we believe surplus cash to pass on to it is the sort of share that can shareholders. We note that be tucked away and largely Halma has increased the dividend forgotten about. That’s ideal for by more than 5% every year since medium to longer-term investors. 1979; a staggering achievement Organic growth is bolstered that feeds superior returns of by carefully selected, bolt-on compounding growth stories. acquisitions. Don’t be put off by its premium Halma typically looks for equity valuation of 23 times

MICRO FOCUS (MCRO) ‘This slick, efficient operating business use. It is also involved company represents a rare with software testing, data £23.50 opportunity to invest in a centre solutions and security MICRO FOCUS’ (MCRO) key private equity dynamic around management among many other attractions are cash generation restructuring gains, cash business lines. and its total shareholder return generation and cash returns,’ Highly cash generative, Micro track record, says Stifel analyst says O’Connor. ‘Merging with Focus also has a long history of George O’Connor. Its applications HPE Software helps Micro Focus recycling surplus cash back to help companies bring together to super-size its model – making investors, via ordinary dividends existing IT and emerging it more appealing to a broader and special payments. A 91.5c technologies, as well as bridging investor audience.’ forecast dividend for the year the gap between old and new IT We calculate that £5,000 to April 2018 equates to a innovation trends. invested in Micro Focus shares 10 prospective 3.1% yield. Its latest deal, the $8.8bn years ago would now be worth Shares has written about Micro merger with software assets of £66,217, if you had reinvested all Focus on many occasions, first US IT group Hewlett Packard your dividends. flagging the stock back in 2011 Enterprise, will make Micro Micro Focus is the market at 313p. Stifel has a ‘buy’ rating Focus one of the world’s largest leader for COBOL development on the stock and believes the software providers. The deal and deployment tools. COBOL company’s involvement in the is expected to complete in is a computer programming mergers and acquisitions space September this year. language designed for has further to run. (SF)

32 | SHARES | 06 April 2017 VIDEOS WATCH THE LATEST SHARES VIDEOS

SAMPLE Brian Mitchener, Executive Vice VIDEOS Dr Wolfgang Rencken, CEO of President Exploration of Sound CLICK TO Sphere Medical (SPHR) Energy PLC (SOU) PLAY

Dave Mutton, Chief Operating Officer Paul Welch, CEO of SDX Energy (SDX) of PrimaryBid Visit the Shares website for the latest company presentations, market commentary, fund manager interviews and explore our extensive video archive

www.sharesmagazine.co.uk/videos INVESTMENT TRUSTS Profit from private equity Sector is attractive for its wide discounts, deal flow and dividends

nvestors seeking asset value move up exposure to innovative 4.3% to 361.2p in the Igrowth businesses quarter to December. should look at private Strategy changes, equity funds. They can including more be a terrific source of than doubling the opportunity despite the dividend to 12p for high leverage 2017, the removal of and fees size and geographic associated with restrictions, and the industry. simplifying its QuotedData management fee senior analyst structure, should Matthew Read explains: help narrow its ‘Private equity is an discount to net asset asset class that is value. less correlated with traditional equity WAYS TO PLAY markets and thus, The private equity sector, another means of one requiring patience diversifying returns. given its long-term ‘Private equity nature, also includes investments tend to be the likes of buyouts-to- managed with a more infrastructure focused absolute mindset and so, at a still appear to be quite high and 3i (III), Northern Investors (NRI) time where listed global equity so funds such as Standard Life and NB Private Equity Partners markets are trading at or close Private Equity (SLPE) should be (NBPE). to all-time highs, this could well positioned in the event of a Continuing to deliver a strong prove to be particularly useful market dislocation.’ NAV performance is HgCapital and offer some resilience on the Standard Life Private Equity, Trust (HGT), offering exposure downside.’ a European-focused private to a portfolio of high-growth Read says managers in the equity fund of funds, saw net unquoted companies in Europe. sector will argue that although their investments are less liquid A SELECTION OF WAYS TO ACCESS PRIVATE EQUITY they have more information and Investment company Share price NAV Discount/Premium can exert greater influence. Electra Private Equity £49.30 £54.38 -9.3% The QuotedData man claims HarbourVest £12.15 £14.56 -16.6% private equity managers took Standard life Private Equity 305.5p 357.15p 14.5% advantage of a capital raising window in 2016. Encouragingly, £17.32 £20.88 -17.1% with a generally improving HgCapital Trust £15.60 £16.78 -7.0% economic outlook, ‘managers are F&C Private Equity 314p 351.13p -10.6% gradually putting their cash piles *Princess Private Equity 9.55 10.45 -8.6% to work. That said cash levels *Euros

34 | SHARES | 06 April 2017 INVESTMENT TRUSTS

‘While there are better value opportunities in the listed private DIVIDENDS FROM PRIVATE EQUITY INVESTMENT TRUSTS equity sector at present,’ writes Investment Trust Dividend yield* Winterflood Investment Trusts, Dunedin Enterprise 5.0% ‘we continue to regard HgCapital F&C Private Equity 4.0% Trust as “best-in-class” and Northern Investors 3.3% worthy of trading on a premium Electra Private Equity 3.1% to its peers.’ HgCapital Trust 2.9% Standard Life Private Equity Trust 1.7% PANTHEON APPEALS ICG Enterprise Trust 1.6% Pantheon International (PIN) is the longest established Mithras Investment Trust 0.5% Source: SharePad private equity fund-of-funds *Based on dividend payments in most recent financial year on the London Stock Exchange and trades with ordinary and a helping hand from currency. whose 2016 results revealed redeemable share lines. Cash-generative Pantheon, a 23% net asset value total The trust is managed whose 10 largest managers return (including dividends), by Pantheon, one of the include well-known buyout comfortably ahead of the FTSE world’s leading private equity funds Texas Pacific and Warburg All-Share’s 16.8% total return. specialists. It has outperformed Pincus, ‘offers investors well‐ The Hamish Mair-managed the FTSE All-Share and MSCI managed, highly diversified trust generated almost £70m World since inception in 1987. exposure to the private equity of realisations in 2016, nearly It seeks to maximise capital asset class and it remains one matching 2015’s record breaking growth for shareholders of our recommendations in this year, as well as earnings progress by investing in a diversified sector,’ according to Winterflood in the underlying portfolio. portfolio of private equity funds Investment Trusts. Exposure to around 400 and occasionally directly in companies, through over 80 private companies. PRINCELY PROGRESS funds and 20 co-investments, With the ordinary shares Also making positive progress is means the trust is reassuringly trading at a 17.1% discount to F&C Private Equity Trust (FPEO), diversified. NAV, the trust may tempt value investors. ‘We’re trying to invest in the best managers globally,’ says seasoned private equity investor Andrew Lebus, a senior member of Pantheon’s investment team. Lebus insists ‘long-term investors that don’t need liquidity should absolutely be trying to get access to private equity. We are constantly getting cash in from our portfolio distributions and we can redeploy those distributions over a four to five- year period.’ Pantheon’s half year results (14 Mar) show NAV increased by 12% to £20.90, while net assets increased to £1.32bn with

06 April 2017 | SHARES | 35 FUNDS This fund has a refreshing attitude to making money Saracen Global Income & Growth manager explains why benchmarks do not factor in his strategy

any fund managers believe their job is to Mbeat a benchmark. That doesn’t necessarily mean they will make money for shareholders. Think about a benchmark like the FTSE 250 index. If it falls 5% and a fund manager’s product only falls 2%, the latter would SARACEN GLOBAL argue they have INCOME & GROWTH outperformed PERFORMANCE and therefore have done what they are paid 13.8% to do. Annualised returns Strictly speaking over the past 5 years they would be Source: correct; but most Morningstar investors would argue they aren’t paying a fund Income Sector. But deep down by domicile; we care about manager to lose money. it doesn’t manage the fund companies’ sales and valuations,’ With this situation in mind, it with benchmarks in mind; it’s says Graham Campbell, co- can be refreshing to find a fund all about making money for manager of the fund. which doesn’t pin its fortunes investors. Campbell says he ‘searches on beating a particular index. everywhere’ for companies, The managers’ goal is to deliver DISTANCING ITSELF claiming to look at 110,000 firms positive total shareholder returns FROM RIVALS a week. The current portfolio every year, which is growth in the Some global funds aren’t as contains 45 stocks. The fund value of the investment portfolio broad in coverage as you might charges 0.97% a year and has a and cash payments in the form think. For example, we’ve heard dividend yield circa 2.5%. of dividends. of some products that have more Rather than stressing the The fund in question is TB than half of their holdings tied to need to meet companies in Saracen Global Income & the US alone. person and look at their plants Growth (GB00B3XPLG55) which As for the Saracen fund, the or factories when making an looks around the world for its latest data implies it has about a investment decision, Campbell is investment opportunities. third in the US, a quarter in the happy enough with the company Admittedly it reports against Eurozone, 19% in the UK and a accounts. His sweet spot is firms two benchmarks: FTSE All-World small bit in Japan, among others. with a five year price to earnings (Sterling) and the Global Equity ‘We don’t view the world ratio (PE) of less than 10-times.

36 | SHARES 06 April 2017 FUNDS

‘Earnings have gone nowhere THE FUND’S SWEET SPOT IS and its debt has gone up.’ Campbell also sold Unilever IDENTIFYING FIRMS WITH A FIVE (ULVR) at the end of 2015 as it YEAR PRICE TO EARNINGS RATIO had reached a level of valuation that could not be justified by OF LESS THAN 10-TIMES the anticipated future level of earnings, in his view. The fund has clearly reduced The portfolio contains little to buy cheaply at a time when its exposure to consumer staples known gems such as Anta the market appeared to have and is now increasing its position Sports, a Chinese sportswear given up on the firm’s growth in areas such as technology and company that supplies the capability. financials including positions in Chinese national basketball team JP Morgan and Japanese firm among many others. This stock CLOSE EYE ON CASH Mizuho Financial. has a dividend yield of 3.2% and The fund manager pays close its share price has been in an attention to a company’s cash AVOIDING BIG LOSSES upwards trend since 2012, apart position and cash generation A strict sell discipline should from a short-lived blip in 2016. capabilities in order to make a be viewed as a positive factor. view whether it can comfortably Many investors hold on to their CONFIDENT ON HEALTHCARE pay dividends. investment too long when things Pharmaceutical stocks are He sold Coca Cola mid-2015 go wrong, in the hope that favoured by many income-style after becoming concerned about problems will be fixed. funds and predictably feature in cash generation. He says the Saracen pays particular Saracen’s fund. famous brand’s dividend yield attention to potential losses it Campbell likes pharma doubled and it was paying out could incur on investments. companies with access to 80% of earnings as dividends. It has ‘early warning signals’ emerging markets due to their when it reconsiders the growing middle class and investment case. subsequent increase in spending For example, it bought power. The fund has both education group Pearson (PSON) AstraZeneca (AZN) and Pfizer in in June 2011. At that time it had its portfolio partly due to their a strong balance sheet, decent access to the Chinese market. dividend, market leading position He’s also a pharma fan due to and a fairly cheap valuation. ageing demographics in many The fund sold in April 2015 just developed nations such as above £13 a share following US England, Germany and Japan, contract losses and increasing with the latter predicted to have online headwinds. It was the over 120m people aged over 60 right call as Pearson now trades by 2020, according to Campbell. at half this price. Novo Nordisk caught This active approach leads to a Campbell’s eye when its share fairly high turnover rate, namely price retreated by 40% during the the amount of stocks changed in course of 2016. It is the biggest the portfolio. Campbell says the provider of insulin products for figure is about 25% per year. diabetics in the world. With a portfolio of 45 stocks, Campbell bought Novo that’s over 11 firms lifted out shares in the final quarter of a year – all of which will incur last year, seeing an opportunity transaction costs. (DS)

06 April 2017 | SHARES | 37 WEEK AHEAD

FRIDAY 7 APRIL ECONOMICS EX-DIVIDEND FINALS UK AFH FINANCIAL GROUP AFHP 3P AFI DEVELOPMENT AFRB CPI ARBUTHNOT BANKING ARBB 18P ECONOMICS HPI T CLARKE CTO 2.7P UK PPI GLOBALDATA DATA 4P CONSTRUCTION OUTPUT RPI ESUR 10.5P MANUFACTURING PRODUCTION WEDNESDAY 12 APRIL GULF MARINE SERVICES GMS 1.2P INDUSTRIAL PRODUCTION FINALS INTERNATIONAL US TESCO TSCO PERSONAL FINANCE IPF 7.8P UNEMPLOYMENT RATE INTERIMS JPMORGAN AMERICAN IT JAM 2.75P MONDAY 10 APRIL CARRS CARR WH SMITH SMWH JOHNSON SERVICE JSG 1.7P INTERIMS NORTHAMBER NAR 0.1P EMPIRIC STUDENT PROPERTY ESP TRADING STATEMENTS DUNELM DNLM PRIVATE & COMMERCIAL ECONOMICS FINANCE PCF 0.1P BRC RETAIL SALES MONITOR PAGEGROUP PAGE AGMS RECKITT BENCKISER RB. 95P TUESDAY 11 APRIL TMT INVESTMENTS TMT STANDARD LIFE SL. 13.3P FINALS SECURE TRUST BANK STB 58P JD SPORTS FASHION JD. THURSDAY 13 APRIL STV STVG 11P INTERIMS FINALS SVS 10.1P EGDON RESOURCES EDR AVOCET MINING AVM SAVILLS SVS 14.5P TRADING STATEMENTS TRADING STATEMENTS TPK 29.75P RAMSDENS RFX HAYS HAS TAYLOR WIMPEY TW. 2.29P PZ CUSSONS PZC For complete diary go to www.moneyam.com/forward-diary

CPIH INFLATION RAMSDENS (RFX:AIM) UK inflation recently hit a Jewellery retailer, pawnbroker two-and-half-year high. Are and currency exchange specialist we in a firm upwards trend, or XP POWER (XPP:AIM) Ramsdens (RFX:AIM) issues has inflation peaked? We’ll find Power switching technology a pre-close trading update on out on 11 April when the next designer XP Power (XPP:AIM) got 11 April, its first missive since official data is published. Most off to a roaring start this time last joining the stock market on 15 market commentators expect year and we wouldn’t rule out a February 2017. inflation will keep rising. repeat of this scenario. The Middlesbrough- The Office for National We anticipate the first quarter headquartered company is Statistics recently moved to a trading update on 11 April to growing organically and is on the new headline rate of inflation show robust order intake as lookout for acquisitions. CPIH. Unlike its predecessor end markets continue to firm, Updates on current trading, CPI, this new measure takes especially with the company’s branch estate improvements and into account owner-occupiers’ more extensive product lines to expansion are keenly awaited by housing costs and council tax. tempt clients. investors.

38 | SHARES | 06 April 2017 MONEY MATTERS How Lifetime ISA can work with automatic enrolment Weighing up the new savings vehicle versus pensions

he new Lifetime ISA could pensions, and it’s more flexible if be a boon for basic-rate you need to get at the money in Ttaxpayers saving for an emergency. retirement, providing a flexible However, watch out for that top-up to automatic enrolment exit penalty – because it’s on savings. the total funds withdrawn, it You can save into a Lifetime typically works out as more than ISA either for a first home or the Government bonus you’ll retirement. The key features have received. include: For example, someone • Available to those aged investing £4,000 in a Lifetime between 18 and 40 ISA 2017/18 will get £1,000 • Contribute up to £4,000 a year reform that will eventually Government bonus. They then and receive a 25% Government require all companies to decide to withdraw the entire top-up (same as pension tax match your first 3% of pension fund (£5,000) in May 2018 to pay relief for a basic rate taxpayer) contributions. for a new kitchen. • Continue paying in and If you’re thinking of quitting Because the 25% applies to receiving Government top-up your auto-enrolment pension in the whole £5,000, the charge until age 50 favour of a Lifetime ISA for your is £1,250 – the bonus plus an • Withdraw tax-free for first retirement saving, you might additional £250 penalty. home purchase (below want to think again. £450,000), at age 60 or if in You effectively get a 100% LONGER TERM BENEFIT terminal ill health boost to your money through Holding the funds in the Lifetime • Exit penalty of 25% of funds matched contributions as well as ISA until age 60 will give you an withdrawn in all other tax relief. extra tax-free element to draw circumstances on alongside the 25% tax-free • That’s up to £32,000 in free HOW MUCH ARE cash available from your pension. money on offer from the YOU SAVING? That means you can leave your Government if you pay in the Only paying in the minimum total pension invested for longer – maximum contribution every contribution of 8% through auto- potentially benefiting from extra year from age 18 to age 50. enrolment (4% from you, 3% growth – while you use your from your employer, 1% through tax-free income to fund the early ADDRESSING NEGATIVE tax relief) may not be enough to stages of your retirement. COMMENTS fund a decent retirement. For many – and particularly You may have read some Basic-rate taxpayers under higher and additional rate negative remarks around 40 years old, earning less than taxpayers who get tax relief at the Lifetime ISA. Some £43,000, should consider the 40% and 45%, respectfully – a commentators have pitted Lifetime ISA for any savings pension will remain the best the product against workplace over and above their workplace home for their retirement savings. pensions and warning it could pension. undermine auto-enrolment. The bonus is the same as TOM SELBY, That’s the flagship Government the tax relief available through senior analyst, AJ Bell

06 April 2017 | SHARES | 39 MONEY MATTERS Helping you with personal finance issues Use AIM stocks to avoid 40% inheritance tax Many companies on the junior market can be reward you in more than one way

f you want to invest in companies qualify for BPR, your of benefitting from BPR, it’s companies with significant descendants will be spared a worth looking at the stocks I growth potential and 40% IHT bill on your ISA. that specialist AIM portfolio cut your estate’s inheritance managers invest in. There are tax (IHT) bill on your death, PICKING QUALIFYING several organisations which run investing in AIM-listed stocks COMPANIES ISA portfolios that are specifically could be the answer. Trying to identify which designed to be IHT-exempt. Certain AIM companies benefit stocks will qualify for BPR is The Octopus AIM Inheritance from business property relief when problems can arise. Tax ISA invests in around 30 (BPR), which makes the shares Unfortunately there isn’t a stocks including pub company exempt from IHT as long as you definitive list because the Young & Co’s Brewery hold them for at least two years qualification status of a company (YNGA:AIM), café and cake and at death. can change over time. shop Patisserie (CAKE:AIM), AIM-quoted stocks are eligible For example, BPR will no pharmaceutical company for inclusion in ISAs, meaning longer be available if the Clinigen (CLIN:AIM), document you can also shelter them from company is sold or wound up, storage company Restore income tax and capital gains tax. unless either event results in the (RST:AIM) and engineering It’s possible to benefit from business carrying on. services provider Renew BPR by buying AIM shares BPR is not available for (RNWH:AIM). through your stockbroker/ companies that mainly deal investment platform. The with land or buildings. This isn’t USING A PORTFOLIO executor of your estate will claim always easy to determine and it MANAGER the tax exemption when you can be quite subjective. Although these companies die, so as long as you’ve met the To ensure you give your currently qualify for BPR, there is two-year holding rule and the descendants the best chances no guarantee they will do in the

40 | SHARES | 06 April 2017 MONEY MATTERS future. The downside of using a it’s important to realise that Alex Davies, chief executive manager is it will be a lot more investing in AIM stocks is risky. of Wealth Club, claims this expensive than investing via your Most of the businesses are uncertainty means a lot platform. If you invest directly younger and smaller than Main of investors shun the DIY with Octopus (i.e. not through Market listed companies and investment route and go via a financial adviser) you’ll have the share prices can swing a manager instead. These to pay an initial charge of 1% as significantly. Having said that, providers tend to use third well as an annual management the average market cap of the party accountants to verify charge of 2% plus VAT. stocks in the Octopus portfolio qualification. Richard Power, head of quoted is £470 million, which is by no We believe it is possible to smaller companies at Octopus means tiny. pick the investments yourself Investments, claims these fees Power reckons AIM portfolios and not have to resort to the are justified because there is a are only suitable for people who services of a wealth manager, team of eight people running understand the risks of investing unless you are short of time the portfolio who conduct site in small companies. and/or prefer someone else to visits to each company and check ‘It is possible to do IHT do the hard work. the stocks still qualify for BPR. planning in other, less risky One obvious way is to contact Investors also get updates sent ways although you wouldn’t an AIM company directly as they to them so they can follow their be exposed to as much growth may well know if they qualify. investments. potential. Academic studies Some companies even publish Since its launch in 2005, the show that over five to six years, this information on their website. Octopus AIM Inheritance Tax small caps will outperform large Investor’s Champion has an online Service, which is managed in the caps,’ he says. search tool to identify qualifying same way as the ISA, has grown Most experts advise looking at AIM companies, although there is by 186% in value. This compares the investment merits of stocks a fee for this service. with a 7% decline in the FTSE first and then viewing the tax AIM All-Share and 119% rise in benefits as an added bonus. SCREENING FOR STOCKS the FTSE All-Share. If you would like more Chris Hutchinson, manager of information, click here to read the Unicorn AIM IHT Service, BEWARE THE RISKS a longer article we published says his team has a stringent set Whichever route you go down, last year on AIM/IHT. (EP) of investment criteria in order to screen the index. The team typically looks AIM STOCKS – HOW TO BE for three characteristics: IHT EXEMPT the company must produce • You must hold the shares for consistent earnings and dividend at least two years growth, without masses of debt; • You must continue to hold it must sell a product or service the shares at death that delivers a tangible benefit • The company must qualify to its customers; and, ideally, the for business property relief – founder and/or management this excludes companies that team should retain a meaningful are not for profit, subject to equity stake in the business. a contract for sale or being ‘It’s not so much about picking wound up, or only generate the winners, but avoiding the investment income (for howlers and this approach has example, a property letting been effectively employed by business) the team for almost two decades now,’ says Hutchinson.

06 April 2017 | SHARES | 41 INDEX

Deal online and from £4.95 never pay more than £9.95 The value of investments can go up and down and For more details visit you may not get back your original investment www.youinvest.co.uk

KEY F&C Private Equity 35 Northern Investors 34 SciSys (SSY:AIM) 14 • Main Market Trust (FPEO) (NRI) • AIM Sophos (SOPH) 8 • Fund GCP Student Living 12 Old Mutual (OML) 6 • Investment Trust (DIGS) Spectris (SXS) 30 Pantheon 35 Genus (GNS) 9 International (PIN) SSE (SSE) 22 3i (III) 34 Gfinity (GFIN:AIM) 10 Patisserie (CAKE:AIM) 40 Standard Life Private 34 AA (AA.) 31 Equity (SLPE) Go-Ahead (GOG) 7 Paysafe (PAYS) 19

AO World (AO.) 10 SuperGroup (SGP) 31 Halma (HLMA) 32 Pearson (PSON) 37

ASOS (ASC:AIM) 8 TB Saracen Global 36 Hargreaves Services 11 Pebble Beach 25 Income & Growth (HSP:AIM) (PEB:AIM) (GB00B3XPLG55) AstraZeneca (AZN) 37 Hayward Tyler 25 Polar Capital 7 Telecom Plus (TEP) 30 Autins (AUTG:AIM) 18 (HAYT:AIM) (POLR:AIM) Tesco (TSCO) 19 Avingtrans (AVG:AIM) 25 HgCapital Trust (HGT) 34 Polar Capital UK 7 Value Opportunities (IE00BD81XX91) Touchstone 25 Be Heard (BHRD:AIM) 24 Hilton Food (HFG) 10 Innovations (IVO:AIM) Premier Foods (PFD) 18 Card Factory (CARD) 28 Imagination 18 Trafalgar New Homes 25 Technologies (IMG) (TRAF:AIM) Ramsdens (RFX:AIM) 38 Central Asia Metals 8 (CAML:AIM) Iomart (IOM:AIM) 16 Unilever (ULVR) 7, 19, Renew (RNWH:AIM) 40 37 CityFibre 8 Laird (LRD) 18 Infrastructure Renishaw (RSW) 29 Vodafone (VOD) 8, 24 (CITY:AIM) Luceco (LUCE) 16 Restore (RST:AIM) 40 WS Atkins (ATK) 7, 11 Clinigen (CLIN:AIM) 40 Micro Focus (MCRO) 32 Royal Bank of 29 XLMedia (XLM:AIM) 10 Cohort (CHRT) 19 Scotland (RBS) Miton (MGR:AIM) 7 XP Power (XPP:AIM) 38 Costain (COST) 7 RSA Insurance (RSA) 29 National Grid (NG.) 6, 28 Young & Co's Brewery 40 EasyJet (EZJ) 6 Saga (SAGA) 20 NB Private Equity 34 (YNGA:AIM) Partners (NBPE)

42 | SHARES | 06 April 2017