VOL 21 / ISSUE 21 / 30 MAY 2019 / £4.49

THREE GREAT WAYS TO FIND QUALITY COMPANIES

UNCOVERING SHELL HOW THE LARGEST UK-LISTED STOCK MAKES MONEY

PASSAGE TO INDIA FUNDS TO CONSIDER AFTER MODI’S RE-ELECTION

PENSION INCOME WORKING OUT WITHDRAWALS FROM YOUR RETIREMENT POT EDITOR’S VIEW Why it is worth getting excited about these stock market stars We look at three Shares’ favourites which are heading for mid cap status

ts easy to get sucked into the noise about 280 FTSE ALL SHARE - PRICE INDEX uncertainty in the UK created by Brexit and the 240 4IMPRINT GROUP impact this is having on the markets. AB DYNAMICS I 200 FUTURE This is clearly a live issue, and no-one would deny 160 it is having a tangible impact on market and business confidence. However, there are still lots of excellent 120 80 and thriving companies listed in London. 2018 2019 The upcoming FTSE reshuffle, when stocks are promoted to or relegated from indices like the FTSE money out of content through e-commerce, 100 and FTSE 250, will shine a light on some of these licensing and digital advertising. UK plc success stories. It is also a reminder there are The company also resumed dividend payments some genuinely good quality growth companies out in 2018, while making its largest acquisition to date there if you know where to look for them. in US firm Purch for £101m. Two names who are likely to be knocking on On 17 May it announced a record-breaking first the door of the mid cap FTSE 250 index, with half performance with underlying earnings almost the qualifying mark currently on track to come trebling to £23.7m and lifted its guidance for the in around £600m when the changes are made in full year. mid-June, will be no strangers to regular readers We will likely provide an updated view on the of Shares. investment case in a more in-depth article on the Though it is listed in the UK 4imprint (FOUR) is business in an upcoming issue of Shares. really a US business in terms of its operations. A Another name which featured in our list of tips current constituent of the Great Ideas portfolio, it is for 2018 was automotive testing firm AB Dynamics up 36% since we flagged its appeal in February. (ABDP:AIM). As an AIM-quoted company it The promotional products firm has been wouldn’t qualify for the FTSE 250 but if it were to investing in its own marketing and this appears to make the move to the Main Market, it wouldn’t be helping grab a larger share of an addressable be far away. market which is estimated to be worth $23bn AB Dynamics has positioned itself to benefit from across the Atlantic. the big transition car makers are going through at present. Strong growth in revenue and profit has ENTERING THE STRATOSPHERE been rewarded by near doubling in the share price Publishing firm Future (FUTR) has enjoyed an even year-to-date to £26.85. more stratospheric rise in share price terms. We To put that into context when we first highlighted included Future in our list of top investment ideas the stock in the magazine in October 2013 it was for 2018. At that point the shares were trading at trading at just 134p. less than 400p and today they are around the £11 mark, valuing the company at close to £1bn. Under chief executive Zillah Byng-Thorne, Future By Tom Sieber Deputy Editor has demonstrated its ability to acquire and bring new titles into its transferable platform. This makes

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Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments. Issued by Aberdeen Asset Managers Limited, 10 Queen’s Terrace, Aberdeen AB10 1XL, which is authorised and regulated by the Financial Conduct Authority in the UK. Please quote Telephone calls may be recorded. aberdeenstandard.com 2078 VIEWING SHARES AS Contents A PDF? CLICK ON PAGE EDITOR’S Why it is worth getting excited NUMBERS TO JUMP 02 TO THE START OF VIEW about these stock market stars THE RELEVANT SECTION BIG UK political situation / IQE / ETFs / Merlin / 06 NEWS Galliford Try / Mothercare / Serco

GREAT New: S&U / Ibstock 11 IDEAS Updates: Fundsmith Emerging Equities Trust / Scottish Mortgage TALKING 16 POINT What you need to know about the future of restaurants MAIN 18 FEATURE Standout stocks: three great ways to find quality companies UNDER THE 24 BONNET How does Shell make its money and should you buy its shares? INVESTMENT 28 TRUSTS Understanding why certain investment trusts are so popular 32 ETFS Using low-cost ETFs to gain exposure to sectors 34 FUNDS Funds to play the next era of Narendra Modi in India 37 ASK TOM ‘How do I top up my pension and help my son buy a house?’ MONEY 38 MATTERS Why the 4% rule is dead and 1% could be better instead Why profits and cash flow matter 40 AEQUITAS more to stocks than new prime ministers BOOK 42 REVIEW Revisiting a classic book on investment bubbles 45 INDEX Shares, funds, and investment trusts in this issue 46 SPOTLIGHT Growth & Innovation special

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 Index of companies and funds in this issue 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 | 30 May 2019 Limited, Henderson GlobalInvestors (BrandManagement) SarlandJanusInternational HoldingLLC. Financial ConductAuthority toprovide investment products andservices. Telephone calls mayberecorded and monitored. ©2017, JanusHenderson Investors. The nameJanusHenderson Investors includesHGIGroup 2606646), Gartmore Investment Limited(reg. no. 1508030), (eachincorporatedand registered inEngland andWales with registered officeat201 Bishopsgate, LondonEC2M3AE) are authorisedand regulated bythe Henderson Investment FundsLimited (reg. no. 2678531), HendersonInvestment ManagementLimited(reg. no. 1795354), AlphaGenCapitalLimited(reg. no. 962757), Henderson EquityPartners Limited(reg. no. Issued in the UKby Janus Henderson Investors. Janus Henderson Investors isthe name under which JanusCapital International Limited (reg no. 3594615), Henderson Global Investors Limited (reg. no. 906355), For promotional purposes Janus Henderson financial goals. your exists tohelp you achieve long-term

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BIG NEWS Polarised Brexit views leave investors in the dark Are UK shares cheap enough to offset perceived threats to the economy?

f investors had hoped for clearer direction of FTSE 00 PRICE INDEX the UK economy and its stock markets they 130 US TO U (MR) EXCHANGE RATE 125 have been left sorely disappointed in the wake 120 I 115 of European elections and the news that Theresa 110 105 May has finally called it quits. 100 The centre ground has almost completely given 95 90 way as the UK electorate becomes increasingly 85 80 polarised over Brexit, leaving British businesses 2016 2017 2018 2019 facing all too familiar questions about future trade access to Europe and how or even if they should less expensive, so more competitive with invest for the months and years ahead. overseas competitors, implying firm demand and ‘The uncertainty surrounding Brexit is having a underpinning existing revenue and profit forecasts. real impact on business in the UK, the EU, and those With something like 70% to 75% of FTSE 100 sales around the world that trade internationally’, says coming from foreign markets, this is important. Nigel Green, chief executive of independent advisor Secondly, it also makes UK stocks cheaper for deVere Group. overseas investors, implying a further prop to ‘This uncertainty has created a tangible lack of current share prices. confidence, resulting in falling investment, spending But it remains to be seen whether investors and recruiting across Britain.’ believe that UK share prices are cheap enough to offset the perceived threat of a no-deal Brexit, MIXED MESSAGES a new referendum, a potentially savage race to This creates mixed messages for investors and is replace May at the head of the Conservatives, reflected in UK stock markets that remain stuck in and perhaps most feared by investors, a general drift pattern. At the current 7,272.71 (as of midday election from which a Jeremy Corbyn-led 28 May) the FTSE 100 index has barely budged from government emerges. where it ended March. The next big development to watch is likely to ‘UK gilts have strengthened following the election be the Conservative leadership election, a process results,’ points out wealth manager Killik & Co which which will get underway after May steps down as in theory is encouraging news for safety-seeking party leader on 7 June and is expected to conclude savers. Yet the pound has weakened versus the US by mid-July after first MPs and dollar of late having strengthened in the immediate then Conservative Party aftermath of May’s departure being announced. members have had The softening of sterling in the near-three years their say. since the EU referendum indicates how investor confidence has drained away from UK assets, but there are silver linings. First, a weak pound makes the products and services sold internationally by UK businesses

6 | SHARES | 30 May 2019 BIGBIG NEWSNEWS Huawei technology ban fallout threat to IQE semiconductor earnings Around 20% of forecast earnings at risk in analysts worst case scenario calculations

ompound semiconductor technology on 3 May to 72.65p, a near 20% fall. designer IQE (IQE:AIM) has become the Yet some analysts believe the impact to earnings C first UK-listed business to confirm that its could be significantly worse because of operational revenue is at risk from the US government ban on gearing in IQE’s business. The company has Chinese firm Huawei. substantial fixed costs which cannot be easily The Cardiff-based company said on Friday lowered in the event of weak revenues. 24 May that up to 5% of its 2019 revenue could ‘We believe this would translate into an up to be on the line as supply chain disruption ripples 20% potential earnings per share (EPS) downgrade out across the microchips industry. IQE is forecast for 2019’, says Canaccord Genuity. The broker to make around £174m of sales this year to currently anticipates 2019 EPS of 2p, marginally 31 December. below the 2.1p expectation of the Reuters drawn Confirmation appeared to initially reassure consensus. investors in the company, with IQE shares A worst case 20% cut to EPS would send the apparently stabilising after hefty selling through equivalent price to earnings multiple from 36.3 to most of May. The stock has declined from 95.15p more than 45.

Why this big development is from the first quarter of 2020. The ETFs will be placed within significant for ETF investing the existing IA sectors, which Investment Association to include these low-cost and allow investors to compare increasingly popular passives within its fund sectors open-ended funds by dividing them into groups based on geographical region, asset class TYPICALLY CHEAPER TO own than Investors will soon be able to and investment strategy. traditional funds, exchange-traded compare open-ended active and Galina Dimitrova, the IA’s funds (ETFs) have become a core passive funds with exchange traded director of investment and capital part of portfolio construction and funds (ETFs) for the first time on markets, says: ‘We want to ensure their popularity with investors a sector basis. Over 200 ETFs are that the IA sectors reflect the continues to rise. eligible to apply for inclusion – full range of products the asset And in a significant move that although they have to be ‘physical management industry has to offer recognises how these passive replication’ ETFs and UK-domiciled savers around the world. ETFs are vehicles are fast becoming the (EU UCITs with HMRC reporting a growing part of this market and product of choice, the Investment status) - and the successful ETFs will their inclusion in the sectors will Association (IA) has given the green be added to the 3,500 funds already enable consumers to compare light for ETFs to join its fund sectors. housed in the IA’s 37 fund sectors across a wider variety of products.’

30 May 2019 | SHARES | 7 BIG NEWS Rollercoaster ride for Merlin amid shareholder call for sale Activist ValueAct says the company pushes for a private equity takeover

hareholders in theme park operator Merlin All-in-all Blackstone is estimated to have made Entertainments (MERL), have plenty to 3.5 times its original investment over a five-year S digest at present, not least a downgrade by period. Merlin was eventually floated in 2013, investment bank HSBC on 28 May, which pushed valuing the business at £3.4bn. the shares 4% lower to 337p. One contributing factor to the lacklustre share price On 23 May, the second largest shareholder, since flotation could be that investors perceived the ValueAct, sent an open letter to management, valuation to be pretty full. Shareholders therefore claiming that the business could attract a bid from need to be patient, to see how Merlin’s planned private equity of 450p, giving the shares an 8% investments pan-out over the medium term. boost to 379p. According to PitchBook Data, unspent capital Merlin is no stranger to the world of private committed to private equity touched $962bn last equity, having been owned by a string of different year, putting pressure on firms to deploy capital. private equity companies, ever since Apax Partners Meanwhile, Cambridge Associates reports that financed the original management led buyout of private equity returns have lagged their benchmark Varden to form Merlin Entertainments in 1998. over one, three and five years. This shouldn’t be Apax sold the business to Hermes private equity surprising as capital is being deployed at higher and in 2004 and a year later, after the Legoland theme higher valuations. parks came up for sale, Hermes didn’t want to Debt to earnings before interest, depreciation commit further capital and the business switched and amortisation (EBITDA) levels have entered hands yet again, this time to the Blackstone Group. territory not seen since the financial crisis, close to Blackstone negotiated the purchase of Legoland, six times. and as part of the deal, Kirkbi A/S, the investment vehicle of the family behind Lego, became a major ACTIVE PLAY shareholder in Merlin. ValueAct, the San Fransisco based activist asset manager, usually works behind the scenes, using PRICED FOR PERFECTION? its board representation to coerce managements Whether the group would operate better in the hands into adopting shareholder focused strategies. of private equity is an open question, since much of With Merlin, it clearly wants to speed things up. the uplift in value seems to have been made in the Whether it would be willing to sell its position to a years leading up to the initial public offering. private equity buyer is unknown.

8 | SHARES | 30 May 2019 BIGBIG NEWSNEWS The week’s big news: Galliford Try, Mothercare and Serco

We look at major share price movers and key announcements over the past week nvestors were excited by the prospect of merger activity potentially heating up I across the UK housebuilding sector with shares in Galliford Try (GFRD) gaining 5.6% to trade at 568.5p on 28 May after the Uxbridge- SERCO headquartered company rejected an approach DEAL TO INCREASE for its Linden Homes and regeneration businesses SHARE OF REVENUE from rival Bovis Homes (BVS). FROM AMERICAS FROM Apparently, ‘preliminary’ talks took place between the pair but they came to nothing. Bovis 20% TO 26% informed investors that its proposed deal would have been worth £950m, involved £100m of Galliford Try’s debt and seen Bovis issue shares to Chief executive Mark Newton-Jones also flagged Galliford Try shareholders. ‘some improving UK trends’ in the early stages of That would have left Galliford Try as a UK-listed the new financial year. construction-only concern. And while the deal Though the retailer remains in loss, it has looks dead in the water, investors are maybe completed its UK store closure programme and rethinking the value of Galliford’s overall business, sold both its Watford HQ and Early Learning Centre as well as the scope for corporate activity across a business in order to ‘greatly reduce’ its debt. challenged industry. In a year of major restructuring, group revenue fell Shares in international baby goods purveyor 13.5% to £566m and Mothercare reported widened Mothercare (MTC) spiked 17.7% to 24p on results adjusted losses with UK like-for-like sales down 8.9%, (24 May) for the year to March. Albeit delayed by although encouragingly, the international arm is a day due to their sheer complexity, the numbers showing signs of moderate recovery. confirmed progress with the embattled retailer’s Shares in outsourcing group Serco (SRP) rallied turnaround with the cost base reduced beyond 10% to 133p, their biggest one-day gain in 2019, initial guidance. after it announced (23 May) the acquisition of US ship and submarine design company Naval Services Business Unit (NSBU) for $225m. The deal, which is being financed through a mix of new shares and debt, is expected to be completed in the second half and to add to earnings straight away. The transaction immediately gives Serco greater scale in the US, taking its share of revenue from the Americas from 20% to 26% of the group total and taking the non-UK share of revenue close to 70%. It also takes the share of Defence revenue up from 30% to 35% of the group total.

30 May 2019 | SHARES | 9 A VERY VALUE- DRIVEN APPROACH Despite the uncertainty presented by Brexit, James Goldstone, Fund Manager of Keystone Investment Trust plc and Invesco Perpetual Select Trust plc: UK Equity Share Portfolio, discusses the reasons behind the significant tilt in his portfolios towards UK domestic value.

In this video James gives his views on:

• Where he is currently finding opportunities – and where he believes the biggest risks currently lie • His exposure to mining holdings • Why he is overweight the domestic banking sector

Investment risks Important information The value of investments and any income will fluctuate (this Where individuals or the business have expressed opinions, may partly be the result of exchange rate fluctuations) and they are based on current market conditions, they may investors may not get back the full amount invested. differ from those of other investment professionals and are When making an investment in an investment trust you subject to change without notice. are buying shares in a company that is listed on a stock exchange. The price of the shares will be determined by For more information on our products, please refer to supply and demand. Consequently, the share price of an the relevant Key Information Document (KID), Alternative investment trust may be higher or lower than the underlying Investment Fund Managers Directive document (AIFMD), net asset value of the investments in its portfolio and there and the latest Annual or Half-Yearly Financial Reports. This can be no certainty that there will be liquidity in the shares. information is available using the contact details shown. The products use derivatives for efficient portfolio management which may result in increased volatility in Issued by Invesco Fund Managers Limited, Perpetual the NAV. Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire The use of borrowings may increase the volatility of the RG9 1HH, UK. Authorised and regulated by the Financial NAV and may reduce returns when asset values fall. Conduct Authority. GREAT IDEAS Why you should buy shares in Ibstock This brick maker’s strong market position is not reflected in its valuation

bstock (IBST) is the UK’s leading clay brick IBSTOCK 320 manufacturer and we IBSTOCK I  280 think it could be a useful BUY (IBST) 242.7p building block in any balanced 240 Stop loss: 225p investment portfolio. 200 With close to 80% of new Market cap: £994m 2018 2019 buildings using brick in their construction, you might reasonably be concerned about by the housebuilders. Eclipse factory in Leicester, suppliers, like Ibstock, on signs will add another 100m bricks of a slowing housebuilding MARKET IS STRUCTURALLY to annual capacity as well as market. However, we UNDER-SUPPLIED increase efficiencies. believe those concerns are Private housing construction is Issues with its production misplaced. expected to remain buoyant, facilities affected its ability to There are fundamental supported by the Help to meet recovering demand in reasons why Ibstock might be Buy scheme. 2018 and this hit the share price in a stronger position that it The Department for after we previously flagged the first appears. Communities and Local stock’s appeal. We are hopeful Government (DCLG) projects that these problems are now behind THREE PLAYERS CONTROL the number of households in the the company. TWO THIRDS OF THE UK will grow by 1% per annum to BRICK MARKET 28m by 2039. STRONG MARKET POSITION According to consultancy IBIS Including the existing EQUALS SUPERIOR World, Ibstock has a market shortage, estimated by Heriot- ECONOMIC RETURNS share of 25.1%, Forterra (FORT) Watt University to be around Ultimately in 2018 Ibstock 24.3% and Wienerberger 4m homes, it is estimated that increased revenue by 8% to 19.7%, with other firms like 340,000 new homes will be £391m and pre-tax profit by Michelmersh (MBH:AIM) needed to be built every year. 19% to £93m. This produced a making up the remainder. On our back of the envelope very impressive return on capital This gives the brick suppliers calculations, around 2bn bricks employed of 20%. a good bargaining position and will be needed per annum to Despite these strong some pricing power. In addition, meet the target, using up close credentials, Ibstock trades on brick inventories are low, at less to 100% of current capacity, and only 12 times 2019 earnings than 2% of annual deliveries, keeping the market tight over and offers a dividend yield of according to the construction the next few years. 5.5%, too miserly for such a well- and building materials April After many years of positioned business. 2019 bulletin. mothballing plants, the industry Bricks only make up around is building new capacity to meet 2% of the total cost of building the expected demand for build a home, meaning higher prices new homes. should easily be absorbed Production at Ibstock’s new

30 May 2019 | SHARES | 11 The power of disruption ADVERTORIAL and what it means for Asia

The massive disruption seen in US retail is a useful country’s 560 million internet users, a figure itself which continues to rise, only 120 million reminder to Asian investors of what the future may hold. shop online, providing headroom for huge growth. Meanwhile Indonesian based Go-Jek, a digital transportation and logistics company By Matthew Dobbs, with operations across South East Asia, was Fund Manager, Asian Equities valued at $9.5 billion following a funding round in February this year. and Head of Global Small Cap What is also notable is the comparatively low numbers of people now required to grow When it comes to the pain felt by bricks and grew to become one of the leading players in a company capable of taking market share mortar retailers over the past twelve years, e-commerce in China. Through its subsidiaries and dominating peers. The contrast between few markets are as illustrative as that of the it has since expanded into an array of sectors Walmart and Amazon in the US is marked; US retail sector. Many companies with a including cloud computing, online payments, Amazon has a market value of close to $738 large store presence have suffered in recent fintech and entertainment. Its financial billion but just 647,500 employees, while years, losing market share to online-only services company, known as Ant Financial, has Walmart has a market value of $270 billion competitors. The table below highlights how one of the largest money market funds in the and 2.3 million employees. In an Asia context, consumer spending habits in the US have world, peaking at close to $250 billion in size. Go-Jek reflects a similar story; it has just 3,000 changed as online purchases have grown as a Tencent initially started as an instant direct employees. share of overall retail sales. messaging business in 1998 and is one of Contrasting the market values of the the largest social networking platforms in DISRUPTION HERE TO STAY leading US retailers in 2006 with their market China. Through its WeChat/Weixin messaging For Asia in general, these disruptive factors values in 2018 shows a stark decline for platform it now has over one billion are fanned by the young mass market which the majority of companies. Amazon is the monthly users. The company successfully is increasingly open to new ideas and quick standout winner, with its market value rising entered the online gaming market and has to adopt new products and services. There by over 4,437%. Other major retailers (with subsequently invested heavily in developing is therefore plenty of scope for what might the notable exception of Walmart) have seen its e-commerce business through its strategic referred to as traditional or old companies to their market values fall between 30% and cooperation with online retailer JD.com, with be disrupted. 98% - and in the case of Sears shareholders which it shares its online payment system From an investor’s perspective, these forces have lost almost everything.* PaiPai. Tencent, through its subsidiaries, is result in a combination of opportunities and also now present across a range of sectors challenges. Identifying these trends as they SCOPE FOR DISRUPTION IN ASIA including music, film and finance. develop, understanding businesses and their REMAINS CONSIDERABLE operating models will be key to picking the Of course, these trends and the disruptive NOT JUST IN CHINA… winners and avoiding the losers. Doing so forces behind them are not unique to the In India too, the potential for technological will in our view require investors to take an US. In Asia, similar changes can be seen, but disruption remains enormous. Of the active approach. the scope for further disruption and change Market value 2006 Market value 2018 remains considerable. Company % change In China, for example, the retail sector (US$bn) (US$bn) is seeing similar factors play out as Sears 28.8 0.0 -100 technological uptake increases. Domestic JCPenny 17.4 0.3 -98 department stores with a store network are Kohl’s 22.4 11.0 -51 being pressured by the continued growth of new online retailers which are rapidly Macy’s 20.0 9.2 -54 increasing market share. These changes Best Buy 23.6 14.3 -40 can result in big winners. In China’s case, Nordstrom 12.7 7.8 -39 companies such as Alibaba and Tencent have Target 49.0 34.5 -30 been the winners. Walmart 192.5 270.6 +41 Alibaba began as a business to business online marketplace back in 1999 and quickly Amazon 16.3 737.5 +4,437

Risk warning: Please remember that the value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. This marketing material is for professional investors or advisers only. This site is not suitable for retail clients. Issued by Schroder Unit Trusts Limited, 1 London Wall Place, London EC2Y 5AU. Registered Number 4191730 England. Schroder Unit Trusts Limited is an authorised corporate director, authorised unit trust manager and an ISA plan manager, and is authorised and regulated by the Financial Conduct Authority. *Source: Factset, Data as of December 31 2006 and December 31 2018. Past Performance is not a guide to future performance and may not be repeated. Securities shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell. GREAT IDEAS Why you should buy S & U for growth, income and value

Three reasons to like this fast-growing financial player

otor finance and bridging lender S & U 2800 S & U (SUS) offers a S & U M  BUY 2500 winning combination of growth (SUS) £22.20 2200 at a reasonable price and a high Stop loss: £17.76 dividend yield to comfort income 1900 investors. Market cap: £270m 2018 2019 Profits are up 10 years in a row yet the shares are trading on just policy, its gross average loan nine times current-year earnings size is £375,000, a space the while the dividend yield stands mainstream banks are ‘too at 5.5% with the pay-out covered inflexible and slow to fill’ which more than four times. allows Aspen to develop bespoke products and a fast service. RECORD PROFITS IN Chairman Anthony Coombs is MOTOR FINANCE pleased not just with the growth The Advantage motor finance of the loan book, which now business racked up its 19th stands at £22m, and the record consecutive year of record profits deal pipeline, but the fact that in in the 12 months to 31 January just its second year of operations with pre-tax earnings of £33.6m. the business has made a Despite the slowing economy sizeable profit. and lower levels of consumer He believes that Aspen can confidence, Advantage received generate ‘controlled’ revenue over 1m applications for finance the market, while demand for growth of at least 50% per of which just over 2% or 21,000 hybrid, plug-in hybrid and pure year during 2019 and 2020 as advances were approved. electric cars is growing at a 30% the ‘value’ end of the market The used car market has held annual clip. expands faster than the rest of up much better than the new car the sector. market with almost 8m vehicles BRIDGE FINANCE Market research firm Mintel sold last year, a decrease of just GROWING FAST sees the annual market for 2% according to the Society Using its expertise in consumer bridging loans growing from of Motor Manufacturers and vetting and lending, S & U has £7.5bn in 2018 to £10bn in 2021. Traders (SMMT). branched out into the property On just nine times this year’s In the first quarter of this bridging market with the Aspen forecast earnings and a yield of year the market was flat with brand. 5.5% S & U, looks like a stock to just over 2 million cars sold and Aspen operates in the home tuck away for the long term. used-car values are holding up refurbishment and investment according to both Advantage and end of the property market with the SMMT. loans typically repaid by onward Superminis are the most sale or re-mortgage. popular buy, taking a third of Using a conservative valuation

30 May 2019 | SHARES | 13 LISTEN TO OUR WEEKLY PODCAST Recent episodes include:

How to quiz an investment trust manager, hidden fund fees and everything you need to know about shorting stocks

Unloved income stocks, how the trade war is impacting investors, and a new fund that pays you to own it

Investing in Uber and Beyond Meat, buying overseas-listed shares, and how to plan your dividend calendar

MONEY MARKETS Listen on Shares’ website here

You can download and subscribe to ‘AJ Bell Money& & Markets’ by visiting the Apple iTunes PodcastStore, Google Podcast or Spotify and searching for ‘AJ Bell’. The podcast is also available on Podbean. GREAT IDEAS UPDATES

FUNDSMITH EMERGING SCOTTISH EQUITIES TRUST MORTGAGE (FEET) £11.90 (SMT) 507.5p Loss to date: 3.25% Gain to date: 5.4% Original entry point: Original entry point: Buy at £12.30, 14 March 2019 Buy at 481.4p, 18 October 2018

OUR MARCH ‘buy’ call on Fundsmith Emerging TECHNOLOGY HEAVYWEIGHTS continue to drive Equities Trust (FEET) is 3.25% in the red, performance at Scottish Mortgage (SMT), one sentiment souring slightly on the news (22 May) of the UK’s most popular investment trusts with star manager Terry Smith is stepping back from retail investors. the day-to-day running of the trust. Online shopping giant Amazon, DNA technology The reassuring news is Smith – in his role as designer Illumina, Chinese tech firm Alibaba, plus Fundsmith’s chief investment officer (CIO) – will the US listing of ride hailing firm Lyft all added to continue to lend advice and support to Michael the trust’s net asset value (NAV) in the 12 months O’Brien and Sandip Patodia, appointed to the to 31 March 2019, with Gucci-owner Kering also roles of Portfolio Manager and Assistant Portfolio performing well. Manager respectively. This helped NAV rally 14.6% during the We don’t expect any significant change in year to £8.13bn, far outstripping the 9.9% the investment approach of the trust, which is equivalent return of the global index average. cutting its annual fee by 0.25% to 1% of NAV, That the share price increased by 16.5% over despite Smith stepping back from his role as lead the same time frame is a firm illustration of real manager. O’Brien and Patodia have both been shareholder returns. involved in the management of the trust since Scottish Mortgage has significantly bolstered its 2014 inception and are fully versed with the stakes in the likes of Delivery Hero and Spotify, current holdings. although some readers will be less impressed by FEET puts money to work with established, its still firm commitment to Tesla. well-managed companies with cash generative But to judge Scottish Mortgage on annual brands of consumer staple products able to performance is to miss the long-term point, one deliver compound growth over the long term. its managers hammer home in the results. NAV has increased 152.7% and 647.4% over five and

1350 10 year periods respectively, while the shares FUNDSMITH EMERGING have rallied 157.1% and 737.3%. EQUITIES TRUST 1250

580 1150 SCOTTISH MORTGAGE 1050 520

2018 2019

460

SHARES SAYS:  2018 2019 We believe it is business as usual for FEET with Terry Smith continuing to provide oversight as CIO. We also note he note bought shares on the day of SHARES SAYS:  the announcement in a show of confidence in the A superb investment for those with a longer-run view, promoted pair. our enthusiasm remains undiminished. Still a buy.

30 May 2019 | SHARES | 15 TALKING POINT Our views on topical issues What you need to know about the future of restaurants Why eating out is changing and what it means for the industry

ast week saw the final the focus has been on retailers our favourite leisure activity, but collapse of Jamie Oliver’s and pubs not restaurants. The the combination of stagnant Lrestaurant empire after a government is working on a plan wages and falling consumer year of struggling with mounting to bring shoppers back and has confidence since the referendum debts and insufficient funds. As set money aside to transform has shifted the goalposts, one of the administrators from disused pubs, but it looks as seemingly for good. KPMG observed, the casual- though restaurants are on We’re going out less, and dining environment is ‘as tough their own. we’re spending less. The latest as I’ve ever seen’. Coffer Peach business tracker, It seems a far cry from the start TIMES HAVE CHANGED which gathers sales figures from of the decade when affordable From 2010 until a few years 50 pub and restaurant groups restaurants were popping up on ago, our appetite for affordable with a combined annual turnover every high street on a weekly dining-out seemed insatiable. of £9bn, shows like for like basis. With rising pressure on Restaurants opened at an sales over the four-day Easter consumer spending and tastes unprecedented pace, often with weekend down 3.6% for the changing rapidly, what do little regard to cost thanks to eating- and drinking-out market, restaurants have to do to survive cheap debt and landlords eager with restaurant sales down a in today’s market? to let vacant space. massive 19.4% compared with A 2016 poll put eating out as Easter last year. CHRONICLE OF FORETOLD DEATH Jamie Oliver’s restaurant empire was just the latest in a succession of casual-dining chains to run into difficulties. Last year Prezzo and Strada went into administration and Carluccio’s went into a company voluntary agreement (CVA) to dispose of loss-making sites and negotiate lower rents. Byron also closed its doors after taking the market by storm just ten years earlier, while rival Gourmet Burger Kitchen began shuttering around a quarter of its restaurants last year after it filed for a CVA. While the troubles of the high street are well-documented, Rights:a_marga

16 | SHARES | 30 May 2019 Our views on topical issues TALKING POINT

TASTES HAVE CHANGED, TOO While distinctive brands such as Nando’s and Wagamama will probably survive as fashions come and go, and this explains the presence of Wagamama- owner Restaurant Group (RTN) in our list of Great Ideas, there have been major changes to our eating habits over the last decade. One in three of us eats less red meat than ten years ago, or none at all, while one in eight of us is now vegan or vegetarian. The success of the Beyond Meat and Impossible public

offerings in the US would Parker Steve Rights: suggest that veganism is not a short-lived fad. Closer to home, alternative to farmed meat ‘personalised’ so that what we Pret’s takeover of failing rival Eat which is notoriously bad for the eat is aligned to our need state, and the transformation of its environment in terms of land, blood type or even DNA. stores into Pret Veggie outlets is water and energy intensity, not The Yo! Sushi chain has another clear sign of the times. to mention the use of pesticides partnered with a DNA testing and herbicides. firm to offer personalised DNA SUSTAINABILITY AND SOCIAL Consumers, especially dining. The customer completes MEDIA IMPACT millennials, have been focusing a DNA swab test and a dedicated As consumers we are more their discretionary spending on ‘plate plan’ is produced with informed and more concerned experiences rather than ‘stuff’ for specific items selected according about the environment and our some time. In a 2018 Barclaycard to genetic profiling. impact on it than ever before. survey over half of consumers Scientists are even working on From single-use plastic to said they would rather spend swallowable sensors which will impact investing and sustainable money on entertainment monitor gut health, stimulate resources, consumers are than possessions. damaged tissue or be used increasingly dictating the agenda The impact of social media on to target drug delivery. These to politicians and businesses spending patterns is immense sensors could also be used rather than vice versa. and just as retailers can tailor to monitor glucose, nutrient, For restaurants, sustainability their offerings based on data sugar and alcohol levels in ratings which score on they have about customers, food and with RFID could environmental impact, so our social media data could c o m m u n i c a t e t h e i n f o r m a ti o n t o sustainable sources, carbon mean tailored recommendations a mobile phone. footprint and waste could of restaurants, times to dine The restaurant of the future become as important as and even dishes based on our will have to know a lot more Tripadvisor ratings according to personal preferences. about its customers than the consultancy Think Hospitality. restaurant of today if it wants to Pret’s veggie outlets already A TRULY PERSONALISED stay successful. have small hydroponic gardens EXPERIENCE growing basil and other herbs Along with the increasing trend for their meals. Meanwhile towards healthy eating, the use laboratory-grown meat is of technology, and in particular being discussed as a genuine AI, could see menus and dishes

30 May 2019 | SHARES | 17 GREGGS, BURBERRY AND SOMERO ARE AMONG EIGHT NAMES PASSING OUR QUALITY TESTS he dictionary definition of quality is ‘the degree of excellence of something’. Handmade Hermes scarfs that use high T quality silk would fit this description of quality. However, just because a company makes high quality products, it doesn’t necessarily mean that the business itself would be considered a quality business by investors. Return on tangible equity (ROE) is the net profits This article looks at three different metrics which of a firm divided by the total shareholder equity, indicate quality from an investor standpoint. The excluding intangible assets, such as goodwill, goal is to help you understand ways of screening brands or software. the market and become better at spotting winners A return of 20% or better, sustained over many for your investment portfolio. years and without the use of undue leverage would be considered a high quality company. 1. RETURN ON TANGIBLE EQUITY DOES SUPERIOR ROE PRODUCE HIGHEST RETURN ON EQUITY % SUPERIOR STOCK RETURNS? Diversified Gas & Oil 2069 A 1986 study by Fortune magazine looked at Rightmove 1618 returns on equity for the largest 1,000 companies in the US by market value. Here are some BT 417 interesting facts from that study: Countryside Properties 190 GlaxoSmithkline 185 • Only six of the 1,000 companies averaged over Source: Stockopedia 30% ROE over the previous decade (1977-1986)

18 | SHARES | 30 May 2018 • Only 25 of the 1,000 companies averaged over 20% ROE and had no single year lower than 15% ROE

• These 25 business superstars were also stock market superstars as 24 out of 25 outperformed the S&P 500 index during the 1977-1986 period.

That last statistic is really quite remarkable, and bears repeating, 96% of companies which qualified went on to beat the toughest benchmark in the world.

2. GROSS PROFITS-TO-ASSETS RATIO study in 2013 on gross profits to total assets as a predictor of stock returns. He found that highly HIGHEST GROSS PROFITS-TO-ASSETS % profitable companies significantly outperformed PageGroup 145 the benchmark and with much lower risk. Interestingly, he discovered that deploying this WH Smith 144 metric in combination with value strategies was Greggs 134 even more effective. Games Workshop 133 ASOS 123 3. PIOTROSKI F-SCORE Source: Stockopedia COMPANIES RANKED BY HIGHEST F-SCORE Score/9 Gross profits are the revenues earned minus ConvaTec 9 the direct cost of goods sold. It is the value-added Rotork 9 part of a product or service, therefore it represents pricing power. Sophos 9 For this metric, we divide gross profits by the Petrofac 9 total assets employed. Total assets employed are Spirent Communications 9 sometimes referred to as the balance sheet total. Source: Stockopedia For example, in the 12 months to 30 March 2019 Burberry (BRBY) produced gross profits of nearly Joseph Piotroski, associate professor of accounting £1.9bn and it employed total assets of £2.3bn, at the Stanford University Graduate School of giving a gross profits-to-assets ratio of 83%, a very Business, developed the F-Score in 2000 while at high number. Any number over 70% indicates that the University of Chicago. He was interested in you are looking at a high quality business. finding out if it were possible to weed out poor Gross profits-to-assets is one of the purest performers and winners, in advance, just from metrics available in the sense that it cannot be studying historical accounting data. easily manipulated by management, and it is Piotroski set out to devise a checklist, comprised simple to understand, unlike some ratios further of nine different accounting measures, covering down the income statement. There aren’t any profitability, leverage and operating efficiency. companies that report ‘adjusted’ gross profits A company was awarded a point for each test or total assets. It also means that comparing that it passed. A score above 7 was considered to companies is straightforward. be a high quality company, while those scoring below 3 should be given a wide berth. DO HIGH GROSS PROFITS-TO-ASSETS RATIO COMPANIES PRODUCE SUPERIOR DOES THE F-SCORE WORK IN PRACTICE? STOCK RETURNS? Empirical analysis to test out the strategy in the Robert Novy-Marx, associate professor at UK market seems to be very limited. However, University of Rochester, New York, ran an empirical Piotroski’s research in the US does suggest that

30 May 2018 | SHARES | 19 this type of fundamental analysis can be an ULTIMATE QUALITY SCREEN: effective filter. THE EIGHT STOCKS THAT SHINE By investing in companies with a score greater than 7, over a 20-year test period, from 1976 to Name Market value 1996, the mean return was 7.5% per year better than the market. This was equivalent to 4.2 times Burberry £8.0bn the S&P500 return. Boohoo £2.8bn Furthermore, Piotroski found that buying the 2400 Greggs £1.8bnBURBERRY top stocks in the market and betting against those PageGroup2200 £1.7bn with the worst scores (via short-selling) would 2000 have resulted in 23% annualised gains, more than Dunelm £1.7bn double the S&P 500 return. Games1800 Workshop £1.3bn 1600 What you leave out is just as important as FDM 2018 2019£1.0bn what you select, so it is impressive that weak Somero Enterprises £204m stocks, scoring two points or less, were five times 950 Source: Stockpedia more likely to either go bankrupt or delist due to DUNELM financial problems. HUNGRY850 FOR GREGGS Anyone interested in following both parts of this Food750 retailer Greggs (GRG) surprised the market strategy should note that short-selling is very high again650 earlier this month, the fourth time that risk and you can lose more than you initially invest. management550 have upgraded their expectations 450 Short-selling is not suitable for the majority of retail since November2018 2018. The company said2019 that investors due to the risks involved. the strong start to 2019 had continued and it saw1150 like-for-like sales up 11.1% in the 19 weeks to FDM OUR ULTIMATE SCREEN 111050 May, an acceleration from the 9.6% seen in the first seven weeks. We have shown that having high quality companies The950 success is attributed to customer appetite in a portfolio can be very lucrative. Just as important, for 850vegan-friendly sausage rolls. Once trading levels it can remove potential losers from temptation, settle,750 the underlying like-for-like growth rate is saving investors some potential headaches. likely to be much2018 lower. 2019 We decided to go one step further to see Greggs’ shares have probably moved ahead of 4600 if any UK-listed companies could survive a the fundamentals,GAMES ORKSHOP and we don’t believe the rating combination of all three screens. This would fully4200 reflects the challenging conditions on the high surely be a stronger test of quality and provide street.3800 The shares trade on 24 times current year a list of the crème-de-la-crème of quality stocks. earnings,3400 at the top end of the historic range. This To recap, each candidate needs to meet the is a3000 great business – simply wait to buy it at a more 2600 following criteria: have a five year average return favourable price.2018 2019 on equity above 20%; have a gross profits to assets ratio of at least 75%; and an F-score of at least 7. 2200 We have excluded financial companies because GREGGS there is no F-score for them and they report 1800 gross profits. 1400 You can use financial websites such as Stockopedia and SharePad to help screen the 1000 market using the aforementioned criteria. 2018 2019 We are left with eight names: five consumer cyclicals, two industrials and a technology company. 440 SOMERO ENTERPRISES None of the stocks are what you would describe 400 as classically cheap, but they have attributes which 360

are hard to replicate and each display excellence in 320

their chosen fields of expertise. There are also clear 280

growth opportunities on offer. 2018 2019

20 | SHARES | 30 May 2018 Also on the list is recruitment consultant PageGroup (PAGE) which is trading on a modest 14 times forecast earnings for the current year and has good growth opportunities, amid increasingly tight labour markets globally. In the UK, the latest CIPD survey showed that 70% of all firms are ‘having difficulty’ hiring and 40% of vacancies are proving ‘hard to fill’. The likes of PageGroup should therefore be able to charge clients more to place suitable candidates into jobs. We rate the shares as a ‘buy’. in certain territories, like Japan, to distribute its The business performance of home furnishings products, because this is a capital-light way to retailer Dunelm (DNLM) continues to blow the reach more customers. It creates a long-term lights out, confounding the gloom and doom on royalty stream, increasing returns on capital the high street. In April it reported c10% like-for- employed. Licensing revenue makes up around like growth from the physical stores and 32% 20% of revenue. from online. Full year results published earlier this month Despite highlighting political and economic flagged a ‘very encouraging’ reaction to designer uncertainties, the company guided towards the top Riccardo Tisci’s first collections and included a 3% end of expectations for full year pre-tax profit. The dividend hike. The company said it would also buy shares trade on 17 times forecast earnings for the back £150m of its shares. year to June 2020, towards the top of the historical This is an attractive feature of the business and range. That looks too expensive to warrant buying continues the historic trend. Since 2018 it has at the moment. returned £350m in cash through share buybacks, equivalent to 4.4% of the market value, in 2400 addition to a 2.3% dividend yield. It’s unusual to BURBERRY 2200 find growth and income on offer from a large, quality, global business. 2000 However, recent tensions in US/China trade 1800 talks have created a short term headwind for 1600 Burberry and analysts have become more 2018 2019 circumspect about its prospects. In addition, China’s growth has been showing increasing signs 950 DUNELM 850 2400 BURBERRY 750 2200 650 2000 550 1800 450 2018 2019 1600 2018 2019 BURBERRY’S1150 APPEAL FDM Founded1050 in 1856 Burberry is a distinctly 950 DUNELM British950 brand with broad appeal across the 850 globe. The company has increased its revenues 750 850 and profits over the last few years, driven by 650 750 increasing consumer wealth in emerging 550 2018 2019 markets. Aspiring consumers in China, India 450 and South America seem happy to spend more 2018 2019 4600 of theirGAMES disposable ORKSHOP incomes on well-known 4200 Western brands. 1150 3800 FDM We like that the company uses licensing partners 1050 3400 950 3000 30 May 2018 | SHARES | 21 2600 850 2018 2019 750

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550 450 2018 2019 450 2018 2019 of slowing from the 6%-plus levels of recent years. 1150 While1150 it has the hallmarks of a decent business, FDM 1050 anyone buying the stock today will need to be FDM 1050 patient. Recent sales growth hasn’t been as good 950 950 as expected so market sentiment may be weak 850 850 towards the stock until it can provide evidence of 750

stronger750 trading. 2018 2019 2018 2019 QUALITY SMALL CAP 4600 GAMES ORKSHOP 4600 4200 The onlyGAMES small ORKSHOP cap to make our final list is laser-guided4200 equipment manufacturer Somero 3800 Enterprises3800 (SOM:AIM). It delivered record 3400 revenue3400 and profit for 2018, with revenues rising 3000 10%3000 to $94m and pre-tax profit up 13% to $29.1m. 2600 2018 2019 In addition,2600 the company paid £12.3m in dividends. The company is2018 upbeat about future prospects2019 and 2200 sees2200 healthy growth opportunities. marginGREGGS so it may be that the shares have already GREGGS discounted1800 a lot of the good news. This is a great 1800 business1400 but the price looks too high at the 1400 moment, trading on 52 times forecast earnings for1000 the year to February 2020. 1000 Games Workshop2018 (GAW) trades on 19.52019 times 2018 2019 earnings, at the upper end of the historical range.

Its440 recent trading statement guided for £80m 440 2400 SOMERO ENTERPRISES pre-tax400 profit for the year to 2 June 2019. SOMERO ENTERPRISES BURBERRY 400 The company has a strong global brand in 3602200 360 Warhammer and operates a simple and repeatable 3202000 320 business model. The focus on fantasy miniatures provides2801800 almost unlimited scope for product 280 innovation,1600 which 2018should drive future growth2019 2018 2019 2018 2019 opportunities. We rate the stock as a ‘buy’ despite the high rating. 950 Somero has very little direct competition FDMDUNELM (FDM) was one our recent Great Ideas and its patents give some protection to its high selections,850 so it is reassuring that the screen returns and market position. It is noteworthy identified750 the company as high quality. that penetration of China has been slow, perhaps 650It has significant growth opportunities both in reflecting a lower adoption of intellectual the550 UK and overseas and we rate it as a superb 450 property rights. The shares trade on 11.4 times stock to buy. 2018 2019 earnings, despite a solid growth record and high

returns on equity. 1150 We’ve been big fans of the company for a FDM 1050 long time and have previously written about its attractions in Shares. Although this is a cyclical 950 business, we do see merit in buying at the 850 current price. 750 2018 2019 AND THE REST 4600 Online fashion retailer Boohoo (BOO:AIM) GAMES ORKSHOP delivered strong results for the year to 28 February 4200 2019, with sales up 48% to £857m. 3800 The medium-term guidance is for 25% annual 3400 sales growth with a 10% EBITDA (earnings before 3000 interest, tax, depreciation and amortisation) 2600 2018 2019

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2018 2019 The number cruncher

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AJ Bell includes AJ Bell Holdingsplc and its Limited wholly andowned its wholly subsidiaries. owned AJ subsidiaries. Bell Management AJ Bell LimitedManagement and AJ Limited Bell Securities and AJ Bell Limited Securities are authorised Limited are authorisedand regulated and by regulated the Financial by the Conduct Financial Authority. Conduct All Authority. companies All companiesare registered are in registered England andin England Wales at and 4 Exchange Wales at 4Quay, Exchange Salford Quay, Quays, Salford Quays,Manchester Manchester M5 3EE M5 3EE UNDER THE BONNET We explain what this company does How does Shell make its money and should you buy its shares? We reveal where the FTSE 100 giant gets the cash to fund its mighty dividends

ith a market cap of the separate components of more than £200bn the business in more detail and WAnglo-Dutch oil major what they contribute in terms Royal Dutch Shell (RDSB) is of earnings. We will also discuss comfortably the largest company Shell’s strategy and how this on the UK stock market. To put underpins its long-term track its position into perspective, it record of generous dividends. accounts for around 10% of the FTSE 100 index on its own. INTEGRATED GAS AND NEW Given its heavyweight status ENERGIES DIVISIONS in London and the generous stream of dividends it pays, there is a good chances many of us will have at least some exposure to the stock either directly or INTEGRATED GAS through an investment fund. = 44.2% OF 2018 Bottom line: if you are a UK EARNINGS investor, Shell really matters. But how much do you know about where and how Shell makes its money? For all that it has pledged to reduce its carbon footprint, Shell still derives nearly In a nutshell it is involved in all of its revenue from fossil fuel- everything from drilling and related activity. A structural shift finding new sources of oil and gas INTEGRATED GAS to renewable energy in many to selling you petrol at the pump. – RECENT EARNINGS TREND parts of the world therefore This gives it almost unrivalled raises questions over the long- insight into the energy market, $11.4bn term sustainability of its dividend. the downside being that its many At the current share price of moving parts make it difficult to £25.52 Shell is yielding 5.7%. value. For example, while higher oil prices are generally good UNDERSTANDING THE news for Shell, they also have $5.1bn DIFFERENT PARTS a negative impact on margins Shell is an integrated energy in its refining operations. The $2.5bn business. This means it has situation is further complicated operations in oil and gas by the fact the different parts of exploration, production, Shell sell products and services to marketing, refining, each other. 2016 2017 2018 transportation and distribution. In this article we will examine Source: Royal Dutch Shell

24 | SHARES | 30 May 2019 UNDER THE BONNET

Shell’s main response to the DOWNSTREAM DIVISION changing patterns in energy The Downstream division consumption and growing encompasses the refining of political pressure over climate UPSTREAM the crude oil which comes out change has been to target = 26.4% OF 2018 of the ground to generate oil natural gas. EARNINGS products such as petrol, jet fuel In a June 2015 speech Shell and heating oil. Globally the chief executive Ben van Beurden company has 21 refineries with said of natural gas: ‘It is flexible. the capacity to process a total of Its supply is abundant and 2.8m barrels of crude oil per day. diverse. Its range of uses is still expanding. It is a low-carbon, clean-burning ally to renewables such as solar and wind. And it UPSTREAM makes economic sense.’ – RECENT EARNINGS TREND DOWNSTREAM Expanding in this area was a = 29.4% OF 2018 key rationale behind its £36bn $6.8bn EARNINGS merger with BG in 2016. It now has a leading footprint in liquefied natural gas, which involves cooling gas to a liquid state so it can be shipped and stored. It also includes the conversion of natural gas to GTL $1.5bn (gas-to-liquid) fuels. DOWNSTREAM This part of the business also – RECENT EARNINGS TREND encompasses the New Energies $8.3bn division. This is in effect the 2018 2017 2016 $7.6bn ‘green’ part of Shell and it has $6.6bn plans to invest between $1bn and $2bn a year out to 2020 in areas like wind and solar power, electric vehicle infrastructure and biofuels. Source: Royal Dutch Shell $-3.7bn This might sound like a significant outlay, but it should improvements in technology. be seen in the context of overall The Upstream division also capital expenditure of between encompasses the marketing 2018 2017 2016 $25bn and $30bn a year. and transportation of crude oil Source: Royal Dutch Shell and natural gas as well as the UPSTREAM DIVISION operation of infrastructure such It also markets refined Upstream includes exploration as pipelines which help deliver products like petrol and and production of conventional these resources to market. lubricants with 44,000 Shell- oil and gas, deep water This part of the business is branded petrol stations in more exploration and an increasing most exposed to commodity than 75 countries. contribution from shale – the price volatility, reflected in the In addition, the division rock containing previously recent earnings trend which, manufactures chemicals for a untapped sources of oil and as the chart shows, saw this range of industrial customers. gas which, in the past decade, part of the business chalk up a These products are used in has been exploited through loss in 2018. the manufacture of everything

30 May 2019 | SHARES | 25 UNDER THE BONNET We explain what this company does

from cars and detergents to bike helmets. It includes the oil sands business, from which Shell has increasingly retreated of late. S ROAL DUTH SHELL B HOW SHELL SEES THE TOTAL RETURNS DIFFERENT PARTS OF ITS BUSINESS Shell puts its businesses in three different categories. • Cash engines – which as their name suggests are expected to provide reliable THE INVESTMENT CASE compensate shareholders for cash flow to fund dividends Despite its big step out into the the scrip dividend, introduced and to strengthen the natural gas market, Shell has not in early 2015, which allowed balance sheet. really been a rapid growth story investors to receive their • Growth priorities – areas in in recent years. dividends in shares or cash. which the company is investing An uptick in revenue and Although this reduced to create the cash engines of earnings has been driven pressure on Shell’s balance the future. by recovering commodity sheet, by increasing the number • Emerging opportunities – areas markets and Shell has been of shares in issue it was also which could become growth selling off assets to help reduce dilutive to shareholders. priorities once they have been borrowings built up amid the An investor day in June might further developed and could oil price crash and through the spell out plans for further capital prove to be a substantial source takeover of BG. returns to investors. of future cash flow. As investment bank Berenberg A near 6%-yield is highly observes: ‘Shell has an attractive attractive to investors and we slate of assets starting up over rate this as an excellent stock to CASH ENGINES the coming years, including own, particularly if you rely on profitable developments in income from your investments. Conventional oil and gas Brazil and further LNG projects. However, you do need to keep Integrated gas Production is not growing a close eye on regulatory and however, due to the substantial political developments as Oil products divestment programme climate change becomes more Biotechnology under way to de-lever the of an issue. balance sheet.’ Equally the world will not Shell nonetheless is very much wean itself off fossil fuels GROWTH PRIORITIES an income play for investors. It overnight and there is reason to has not cut its dividend since the believe the company can extend Deep water Second World War and its leaner its proud 70-plus year dividend Chemicals structure and more efficient track record into the medium- operations help underpin its term at least. We give Shell a dividend credentials. solid ‘buy’ rating. EMERGING OPPORTUNITIES Unlike its rival BP (BP.), Shell has not increased its dividend despite the recent surge in By Tom Sieber Shales oil prices. It has been buying Deputy Editor New energies back its own shares to help

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www.sharesmagazine.co.uk/videos INVESTMENT TRUSTS Understanding why certain investment trusts are so popular We reveal the top names and their 10 year returns

desire to generate investors, trading on a 3.5% returns through income premium to net asset value A and/or growth is a long- (NAV) at the time of writing. standing goal for investors but Scottish Mortgage invests do you know the most popular in a high conviction, global investment products to achieve portfolio of companies which this goal? the managers believe are strong, We’ve looked at the 30 well-run businesses offering the most widely-held investment best potential durable growth trusts among AJ Bell Youinvest opportunities for the future. customers to see which Top holdings include retailer products resonate with UK Amazon, genetic analysis investors and why they might specialist Illumina and electric be attracted to them. car maker Tesla. Stock Exchange, and Murray THE SEARCH FOR International (MYI) with its 120 100 RISING INCOME generous 5.7% yield. 80 Delivering a high and rising Despite concerns over the 60 income is where investment potential for a radical, Jeremy 40 trusts come into their own, Corbyn-led policy programme, 20 helped by their ability to investors continue to warm 10 11 12 13 14 15 16 17 18 SCOTTISH MORTGAGE FTSE ALL SHARE squirrel away income in the to HICL infrastructure (HICL), TOTAL RETURN good times to boost payouts in offering diversified exposure the bad times. to international infrastructure 4000Owning a portfolio primarily of Unsurprisingly, with interest assets and delivering a growing high3000 growth names, many highly rates still at historically low levels dividend backed by predictable rated2000 on conventional valuation

and cash on deposit earning next cash flows and strong inflation measures,1000 has served Scottish to nothing, investors are hunting correlation. Mortgage well. One risk factor 0 for a real and rising income to weigh00 02 is that04 06 during08 10 12 periods14 16 18 RIT CAPITAL PARTNERS FTSE 100 through diversified global funds STELLAR PERFORMERS when valuationsTOTAL RETURN are questioned such as F&C Investment Trust Performance over the long haul or investors rotate away from (FCIT) and Witan Investment is another reason why certain growth and tech companies, Trust (WTAN), thereby reducing investment trusts are popular parts of the portfolio could come exposure to Brexit-induced with a large number of people. under selling pressure. uncertainties on home turf. And the returns generated by Also popular from an income Scottish Mortgage (SMT) are TECHNOLOGY WINNERS perspective is City of London certain to be a key reason why While investors should never (CTY), which focuses on the investment trust remains assume that a strong run for companies listed on the London a real favourite with retail the share price will continue

28 | SHARES | 30 May 2019 INVESTMENT TRUSTS indefinitely, one can look at past performance to see if funds have TOP 30 MOST WIDELY-HELD INVESTMENT TRUSTS a track record of consistently AMONG AJ BELL YOUINVEST CUSTOMERS doing well. Investors should look Investment Trust 10-year total return (%) for fund managers with skill and not simply ones that have got Polar Capital Technology Trust 676 lucky for a short period. Allianz Technology Trust 666 Long-term superior BlackRock Smaller Companies 600 performance certainly isn’t Jupiter European Opportunities Trust 541 restricted to Scottish Mortgage. Scottish Mortgage 529 Two technology trusts also stand out for their large returns over Biotech Growth Trust 511 the years, being Polar Capital Henderson Smaller Companies 494 Technology Trust (PCT) and Baillie Gifford Japan Trust 477 Allianz Technology Trust (ATT). Worldwide Healthcare Trust 435 Collectives exposed to the fast-moving world of technology Edinburgh Worldwide 429 might sound high risk to Finsbury Growth & Income 404 some, yet between them, the 3i Infrastructure 341 portfolios of these two trusts Monks Investment Trust 269 have benefited from exposure to Witan Investment Trust 240 world changing tech giants such as Amazon, Microsoft, Alphabet, F&C Investment Trust 228 Apple and Facebook that have Primary Health Properties 180 made investors an absolute mint. City of London 168 The fund managers at Polar Edinburgh Investment Trust 173 Capital and Allianz would Caledonia Investments 145 argue that technology is well- positioned to remain a major Murray International 145 driver of market returns. Scottish Investment Trust 144 And despite high valuations for RIT Capital Partners 144 some high growth companies, Merchants Trust 143 the tech sector is the domain of some massive addressable Templeton Emerging Markets Investment Trust 120 markets and provides fertile Henderson Far East Income 114 ground for some of the best HICL Infrastructure 96 absolute and relative return Personal Assets Trust 94 opportunities in equity markets. Woodford Patient Capital n/a As such, a bigger risk for growth investors would be Smithson Investment Trust n/a ignoring the space when The Renewables Infrastructure Group n/a technology is disrupting existing Source: Shares, SharePad, AJ Bell Youinvest. Data as of 23 May 2019 business models and carving out entirely new industries. SEEKING PROTECTION money into products that could Other star 10-year performers A key theme among some protect their capital in hard popular with AJ Bell Youinvest investors is to buy shares in times, essentially giving up customers include BlackRock investment trusts that aim to some of the potential rewards in Smaller Companies (BRSC) deliver growth but without exchange for more security. and Henderson Smaller taking too much risk. Here Nonetheless you could still Companies (HSL). investors are seeking to put lose money with these products.

30 May 2019 | SHARES | 29 INVESTMENT TRUSTS

Personal Assets (PNL) aims to avoid permanent capital loss 10 EXAMPLES OF while growing income over TRUSTS AND THEIR time; and RIT Capital Partners (RCP) is focused on long-term INVESTMENT PROCESSES capital growth twinned with capital protection. Interestingly RIT Capital has managed to deliver very decent gains over the years, perhaps even better than many trusts ALLIANZ Walter Price-managed trust puts money to work which are happy to take large TECHNOLOGY TRUST with global technology stars risks. It says anyone who invested in RIT Capital when it launched BLACKROCK Smaller companies portfolio run with a in 1988 and still holding today SMALLER COMPANIES tried-and-tested quality growth bias would have enjoyed 12.1% F&C Managed by Paul Niven, it has a diversified annual share price total return. INVESTMENT TRUST portfolio providing exposure to most of the world markets STAR MANAGERS FINSBURY Concentrated capital growth and income trust We aren’t surprised to see GROWTH & INCOME seeks out excellent companies ‘that appear the list of the most widely- mostly undervalued’ Highly-diversified, inflation-buster of an held investment trusts include HICL products linked to three of the infrastructure fund with a growing dividend 120 INFRASTRUCTURE backed by predictable cash flows most100 famous fund managers in the80 UK. After all, these managers JUPITER Run by Alexander Darwall, the trust invests have60 earned their reputation EUROPEAN in European names offering prospects for through40 delivering good returns OPPORTUNITIES capital growth over20 the years. Whether they 10 11 12 13 14 15 16 17 18 PERSONAL Defensive fund aims to avoid permanent capital canSCOTTISH all sustain MORTGAGE this trendFTSE ALLover SHARE the ASSETS TRUST loss while growing income over the long term very long termTOTAL is RETURN open to debate. Global portfolio of ‘strong, well run businesses’ SCOTTISH 4000 offering ‘the best potential durable growth MORTGAGE opportunities for the future’ 3000 Invests for the long term in high-quality mid 2000 SMITHSON caps globally that aren’t excessively valued, in 1000 line with Terry Smith’s proven process at Fundsmith 0 00 02 04 06 08 10 12 14 16 18 WOODFORD Managed by Neil Woodford, this long-term RIT CAPITAL PARTNERS FTSE 100 capital growth-focused trust invests in quoted TOTAL RETURN PATIENT CAPITAL and unquoted firms alike Terry Smith isn’t the fund Source: Shares manager on Smithson (SSON) & Income (FGT) remains popular a battering, Britain’s most but investors still want a piece of with UK investors, offering famous fund manager Neil his proven investment strategy a concentrated portfolio of Woodford still retains a semi- which is being deployed by the companies which either generate loyal following with Woodford named manager, Simon Barnard. lots of cash and/or are embracing Patient Capital (WPCT). This investment trust is less than technology to improve how they a year old and so investors are do business and deliver goods By James Crux putting a lot of faith in Barnard to and services. Funds and Investment repeat Smith’s success. And despite the fact that his Trusts Editor Nick Train’s Finsbury Growth reputation has recently taken

30 | SHARES | 30 May 2019 Only SHARES magazine subscribers benefi t from an investment INVESTMENTtoolkit that gives them the edge and helps them make the very FACTS.Do you have best investing decisions. WHO CAN YOU TRUST? the SHARES • Live share prices • Customisable live watch list In uncertain times, when the • Portfolio manager economyadvantage? is buffeted by change, • Fund selector and prices it can be hard to know who to • Intraday and historic charts trust when investing. • Latest broker forecasts with alerts • Latest director deals with alerts Shares magazine is produced by our expert editorial team, offering 24/7 coverage and insight into today’s vibrant • Fundamentals and investor tools investment markets. • Online discussion forum A subscription to Shares gives you access to the SHARES • Priority booking for investor digital investment hub and a host of benefits including: events > Your weekly digital magazine brimming full • Educational and company videos of investment ideas • …and of course, the weekly > Market news and company updates digital Shares magazine with the > Exclusive investor tools including live share prices latest news and views from the Shares experts Try it now for just £1 for the 1st month and then just £12 a month*. £

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* The £1 for 1 month and then £12 a month offer is only available to new subscribers. Your fi rst payment will be £1 and thereafter subscriptions will automatically continued, billed at £12 per *month The £1 unless for 1 monthcancelled. and thenSubscriptions £12 a month can offer be cancelled is only available at any time to new by callingsubscribers. 020 7378 Your 4424 first between payment 8am will - be4.30pm £1 and on thereafter Monday tosubscriptions Friday. No refunds will automatically are offered duringcontinued, the cancellationsbilled at £12 per monthperiod unlessbut all cancelled.outstanding Subscriptions issues and services can be cancelled will be fulfi at lled.any time For enquiresby calling contact 0207 378 us 4424 at [email protected] 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] EXCHANGE-TRADED FUNDS Using low-cost ETFs to gain exposure to sectors We explain how to filter the market and the key points to consider

here is an ever-growing list of exchange-traded T funds (ETFs) providing investors with low-cost access to specific industry sectors. While the costs may be slightly higher than broad market-based ETFs such as those tracking the FTSE 100, these sector products can be cheaper than actively-managed funds pursuing underlying index being tracked on its list for the financial exposure to the same industries. before making an investment. services sector. Investors need to decide Picking an ETF simply because Some of these products whether they want to pay it tracks a specific sector such as will track the same index and more for an actively-managed healthcare is only the first stage you may see several different fund in the hope that the fund of your research process. You versions of the same product manager can outperform the should also understand how it is where you can choose the market or pay less to simply going to get exposure and which currency in which it is priced track a relevant index. companies would, or would such as US dollars or British Anyone choosing the passive not, qualify for inclusion in the pounds. route, i.e. buying an ETF, should underlying index being tracked. You will also be able to see make sure they understand the You should be able to find the ongoing charges that come this information by looking at with the products, data on past the product description for performance and Morningstar EXAMPLES OF SECTORS each ETF and identifying the will also display its star rating on BEING TRACKED BY relevant index. The next step is certain products. LONDON-LISTED ETFS to visit the ETF issuer’s website It is worth noting that other where they should provide more sector ETFs will be available on Agriculture information, or you could look at the market as Morningstar’s Alternative Energy the index provider’s website for search system doesn’t cover Biotechnology further details. the full range. Simply check that Communications any products you wish to buy HOW TO BROWSE THE are listed on the London Stock Consumer Goods & Services RANGE OF SECTOR ETFS Exchange as it can be difficult Financial Services Financial data specialist to buy ETFs listed on overseas Healthcare Morningstar offers a free tool on exchanges. Industrial Materials its website where you can search You may find the odd Infrastructure for London-listed ETFs across 16 European-listed ETF available sectors. Some of these sectors via a UK investment platform Technology only contain a few products, but in general overseas-listed Utilities others provide far greater choice. products are off limits to retail Source: Shares, Morningstar For example, 24 ETFs appear investors in the UK.

32 | SHARES | 30 May 2019 EXCHANGE-TRADED FUNDS

includes well-known names in the consumer staples category such as Procter & Gamble, Coca-Cola, Walmart and Colgate- Palmolive. All of these companies provide products many people use every day in their home such as toothpaste, nappies and washing powder, as well as food and drink. A good example of the EXAMPLES OF HEALTHCARE SECTOR ETFS consumer discretionary category is Invesco Consumer Discretionary S&P US Select Code OCF Sector ETF (XLYS) which has done Amundi ETF MSCI Europe Healthcare CH5 0.25% very well in recent times with Invesco Health Care S&P US US Select Sector XLVS 0.14% 20.2% annualised returns over iShares Healthcare Innovation HEAL 0.40% the past five years. Lyxor MSCI World Health Care HLTW 0.30% It tracks the performance of Xtrackers MSCI USA Health Care XUHC 0.12% consumer discretionary stocks Source: Morningstar. OCF = Ongoing charges figure on the US S&P 500 index – essentially companies providing Let’s now take a look at exposure to financial stocks in goods and services that are some of the sector choices the UK, mainland Europe and part of everyday life such as and products available via the Canada. Over the past three popular places to buy everyday London market. years the ETF has achieved 15.2% goods, the manufacturer of your annualised returns, according to favourite car, or coffee shops FINANCIAL SERVICES SECTOR Morningstar. selling your daily caffeine hit. There is quite a wide selection of London-listed ETFs tracking CONSUMER GOODS the financial services sector AND SERVICES including products tracking the This broad industry tends to performance of banks in Europe be split into two categories: and the US. consumer staples which refers Amundi ETF MSCI Europe to companies that produce Banks (CB5) tracks an index of items such as food, drink and large and mid-cap banks across non-durable household and 15 developed market countries personal products; and consumer in Europe. Top holdings within discretionary which refers to ‘nice However, should times get hard, the index include HSBC (HSBA), to have’ goods and services such one could easily see individuals Banco Santander, BNP Paribas as entertainment and leisure, but cut back spending in these areas. and Lloyds (LLOY). not essential to one’s life. Names in the index being You can also get exposure to On the former category, tracked by Invesco’s ETF include a broader selection of financial relevant ETFs include iShares Amazon, McDonald’s, Nike, companies around the world S&P 500 Consumer Staples Starbucks and Ford Motor. via SPDR MSCI World Financials Sector ETF (IUCS) which provides (WFIN). Half of the underlying diverse exposure to US-listed index tracks US-listed companies companies, many of which do By Daniel Coatsworth including JPMorgan Chase and business around the world. Editor Bank of America. You also get It is tracking an index that

30 May 2019 | SHARES | 33 FUNDS Funds to play the next era of Narendra Modi in India With the election settled investors can look forward to more reforms-backed returns

s the dust settles on the Equity (B8DHHC4) are the three largest, and possibly best performers over the past Amost drawn-out three years among 18 open- democratic election process ended options featured in the anywhere, Narendra Modi has accompanying table, while there retained power in India. This is are also various investment likely to settle the nerves of UK- trusts and exchange-traded based investors that already have funds (ETFs) providing access to an appetite for investing in India. the Asian market. We’ll now look at some of the ways you can access the thanks to manager Avinash WHY IS THE ELECTION country via open-ended funds. Vazirani’s long-term track record RESULT IMPORTANT? Jupiter India Fund (B4TZHH9) of great returns. Modi is widely seen as the chief is one of the most popular Fidelity India Focus architect of an Indian economic products among UK investors (B51RZC1), BlackRock GF India boom since coming to power seeking exposure to the region, (B6TJT02) and HSBC GIF Indian in 2014, thanks to sweeping reforms. Changes to the taxation system, hefty infrastructure investment, putting the brakes INDIA SPECIALIST OPEN-ENDED FUNDS on inflation and curbs on fraud have all paid handsome Three year OCF* dividends for the nation, and performance investors. Fidelity India Focus 68.7% 1.09% During the past five years the BlackRock GF India 64.3% 1.22% Sensex, India’s benchmark stock HSBC GIF Indian Equity 62.8% 1.05% market index, has soared more Schroder ISF Indian Equity 61.7% 1.34% than 60%. Understandably the Pictet Indian Equities 60.2% 1.40% six-week election process had led Pictet India Index 56.3% 0.46% to wavering investor sentiment Mirae Asset India Sector Leader Equity 54.6% 1.07% and more volatile share GS India Equity 54.1% 0.85% performances, yet investment Aberdeen Standard SICAV I Indian Equity 51.1% 1.31% experts remained calm. Stewart Investors Indian Subcontinent Sustainability 51.1% 1.14% As JPMorgan investment Invesco India Equity 50.8% 1.48% manager Ayaz Ebrahim told Shares, reforms already in place Matthews India 49.2% 1.25% are ‘unlikely to be reversed’ even Franklin India 46.2% 1.08% if Narendra Modi was ousted JPM India 38.1% 0.95% from office. Neptune India 35.6% 1.31% JGF-Jupiter India Select 33.5% 0.95% WHY INDIA? Jupiter India 31.6% 1.07% Make no mistake the sub- First State Indian Subcontinent All-Cap N/A 1.25% continent represents a structural Source: Trustnet, AJ Bell Youinvest

34 | SHARES | 30 May 2019 FUNDS growth story to match China that oozes socio-demographic ALTERNATIVES TO INDIA FUNDS and economic-backed investment opportunities. INVESTMENT TRUSTS The government’s reform Three year agenda is designed to make performance OCF* doing business in the country Aberdeen New India Investment Trust 52.4% 1.25% easier and its infrastructure India Capital Growth 41.7% 1.91% improvement policy will also be contributing factors by JPMorgan 38.1% 1.80% attracting more foreign Ashoka India Equity Investment Trust N/A N/A investment into the country. ETFs India’s enviable growth Three year projections will be driven by performance OCG* low energy prices, corporate Xtrackers Nifty 50 Swap UCITS 52.9% 0.85% deleveraging programmes and Xtrackers MSCI India Swap UCITS 46.5% 0.75% demographics, where half the Amundi MSCI India UCITS N/A 0.80% population is aged 25 or under. Lyxor MSCI India UCITS ETF 46.3% 0.85% That’s a favourable growth environment compared to the Source: Trustnet, AJ Bell Youinvest rapidly ageing population in Japan and most of Europe. UK this year to rank fifth. ‘Of all the reasons to 40 Recent projections by Standard invest in India, the country’s 36 SP BSE (SENSEX) Chartered rank India as one of demographics are arguably the 32 the fastest growing emerging most compelling,’ say experts at 28 markets over the next decade or Aberdeen Asset Management. 24 so with GDP set to expand 387% 2014 2015 2016 2017 2018 by 2030, adjusted for purchasing EMERGING MIDDLE CLASS power parity (PPP). That implies That includes the significant urbanisation and growth in its equivalent $9.5trn economy rise of India’s middle class, personal wealth. According to in 2017 IS emerging as the estimated at 100m-plus and one report, assets owned by world’s second largest on a growing fast. Powered by the Indian individuals (property, GDP PPP-adjusted basis worth third largest education system, business interests, investments, $46.3trn in 11 years’ time. according to the World Bank, cash) grew 96% between 2008 China is projected to be that is known the world over for and 2018, and are forecast to number one in 2030 at $64.2trn, producing a stream of advanced jump 180% again during the the US falling to third ($31trn), mathematicians, top scientists decade to 2028. while the UK wouldn’t even and thousands of doctors and feature in the top 10. IT professionals, India is also ECONOMIC EXPANSION expected to see significant These drivers have led some NAVIGATING HAZARDS advances as a consumer nation market watchers to predict that India is by no means a one-way over the next decade. India will replace Japan as the ticket to portfolio profit and the ‘Total consumer spending in world’s third largest economy same or similar risks apply India is expected to hit $3.1trn by 2025, behind the US and to India as they would by 2030, from $1.4trn in 2017,’ China. India ranked seventh in anywhere else. says Kristy Fong, an investment the world in 2018, according to There’s always the chance that manager at Aberdeen New India International Monetary Fund export growth slows, producer Investment Trust (ANII). (IMF) data, and the nation is set prices decline or softer domestic This is backed by rapid to overtake both France and the spending linked to limited rural

30 May 2019 | SHARES | 35 FUNDS

wage growth put the brakes on stock market returns. Oil prices are another risk since India is a heavy importer. That said, Nitin Bajaj, who runs the Fidelity Asian Values (FAS) investment trust believes India offers an enticing opportunity, where US-China trade bickering has limited impact and internal investment has stayed firm. SHARES SAYS: Arguably the most sensible Two of our preferred funds to play the region are JPMorgan Indian way for UK investors to gain a Investment Trust (JII) and Stewart Investors Asia Pacific Leaders slice of the Indian growth story is (3387476). The latter has a broader focus on Asia with India representing through some form of collective nearly a third of its assets. It provides geographical diversification which investment. Once a notoriously should help smooth out any bumps along the way with India. difficult market for outside investors this has changed considerably over recent years, By Steven Frazer News Editor with efforts to liberalise the rules on foreign investors. LATER IN THIS ISSUE

Shares Spotlight on Growth and Innovation brings together listed technology companies with sophisticated private investors.

This publication keeps readers up-to-date with all aspects when developing a portfolio of innovation and growth technology stocks from 14 March 2019 | SHARES | 36 understanding the basics through

36to | evaluation.SHARES | 28 June 2018 07 June 2018 | SHARES | 36

Read the latest issue of Shares Spotlight, Growth and Innovation Online

36 | SHARES | 30 MayWWW.SHARESMAGAZINE.CO.UK/SPECIALIST-SUPPLEMENTS 2019 your retirement questions answered ASK TOM ‘How do I top up my pension and help my son buy a house?’ We explain the rules around dipping into your pension while still paying into it

I’m a 55-year-old planning to sell should be able to tell you if this my house in North London to applies to any of your plans. pursue my dream of living by the At the moment there is sea (most likely in Bournemouth nothing stopping you saving or Brighton). I plan to do this £20,000 tax-free into a pension in the next couple of years and scheme. In fact the annual want to get my pensions in order allowance is double this level at including potentially your 25% before I move. £40,000, although this is limited pensions tax-free cash. I’ve got decent-sized pensions to 100% of your UK relevant Finally, if your son is a first- from my last two jobs but I earnings in any given tax year. time buyer he should consider was also paid into plans in two If for example your taxable opening a Lifetime ISA (which you other previous jobs. I suspect my earnings were £30,000 then can then fund if you wish). The total funds are worth around this is the most you could Lifetime ISA is available to anyone £300,000 and I want to top this pay into a pension in that aged 18 to 39, with contributions up by at least £20,000 a year 12-month period. up to £4,000 in a tax year boosted (my current salary is £90,000). If you take any taxable income by a 25% Government bonus (up Can I also use my pension to from your pension your annual to £1,000). help my son onto the housing allowance will be cut from Your son would then be able ladder? £40,000 to just £4,000 – this to access the money tax-free for Geoffrey is called the ‘money purchase a first home purchase (provided annual allowance’. Given the size it is valued at £450,000 or less Tom Selby of your planned contributions and the property is bought AJ Bell this is likely to be a significant at least 12 months after the Senior Analyst says: consideration. Lifetime ISA is opened and It’s worth noting that only funded), from age 60 or if he fell First of all you should try to taxable withdrawals trigger this terminally ill. locate all your pensions and annual allowance drop, so you However, early withdrawal consider consolidating them might want to consider using for any other purpose will be hit with a single provider. This other income sources first – with a 25% Government charge. could benefit you through lower charges and easier monitoring of DO YOU HAVE A QUESTION ON RETIREMENT ISSUES? your underlying investments and retirement strategy. Send an email to [email protected] with the words Care needs to be taken ‘Retirement question’ in the subject line. We’ll do our best to Shares when transferring as some respond in a future edition of . Please note, we only provide guidance and we do not provide older-style policies come with financial advice. If you’re unsure please consult a suitably valuable guarantees which can qualified financial adviser. We cannot comment on individual be lost if you move your money investment portfolios. elsewhere – your providers

30 May 2019 | SHARES | 37 MONEY MATTERS Helping you with personal finance issues Why the 4% rule is dead and 1% could be better instead We consider a new approach to making your pension last long enough

ou’ve spent years income will last you in later life This is why a new book, Your building up your nest you’re at the mercy of markets Retirement Salary, has devised a Y egg and now it’s time falling in the first few years after new method, called the 1% rule. to retire, but the big question retirement, and your capital Rather than relying on cashing in looms: how do I work out what becoming eroded. This is called units or shares in order to fund income I can take from my ‘pound cost ravaging’. your income, the authors instead pension pot? When you take money out of People will have spent their your pension you sell down your lifetime building up their pension portfolio to generate income, and are nervous of splurging too and when investment values much of it straight away, while drop, you need to sell a higher others will be over-optimistic proportion of your portfolio to about how much they can afford generate the same income. It to take out in the early years. means you’re depleting your To help avoid this experts have portfolio more quickly, and also come up with rules, to help guide makes it harder to recover from people on a sustainable income any losses. to withdraw from their fund. The A good example is to look at most common of these is the a single fund that has seen its ‘4% rule’, which has used lots of unit price drop from 100p to modelling to work out that 4% 90p. If you wanted to take £500 is a relatively safe withdrawal of income you’d need to sell to take from your pot and not 500 units if the price is 100p, exhaust it too quickly. but you’d need to sell 556 units Even if you use whizzy financial to generate that same £500 of modelling of how long a certain income if the unit price was 90p.

38 | SHARES | 30 May 2019 Helping you with personal finance issues MONEY MATTERS

receiving a monthly salary, and so want their pension income to replicate that. But if you withdraw this 1% annual amount each month (so 1/12 of your 1% each month) you’ll WE HOPE IT WILL incur trading costs that will likely eat a big chunk out of REDUCE THE RISK your pension income. It means THAT PEOPLE WILL you’ll effectively be wasting some of your income on TAKE TOO MUCH OUT unnecessary fees. OF THEIR POT AT THE Instead you should aim to take the money either annually or, at WRONG TIME most, quarterly. The latter still gives you four regular payments throughout the year, but means that you’re only incurring selling costs four times a year too.

HAVE CASH IN RESERVE suggest focusing on dividend- investments that have risen The fourth element to the 1% producing assets and getting the most throughout the year. This rule is having a cash pot to hand, bulk of your retirement income might seem counterintuitive, for emergencies or to dip into from there. To supplement this but it’s crucial to being able to if needed. Even when you’re you take 1% out of your pot generate income at the same working and have a regular each year. level, the authors argue. monthly income, it’s advised ‘The “1% rule” is intended to As you’re relying on these that you have a cash pot worth build on the idea that you could investments to produce an around six months’ expenses, withdraw 4% of your pension income, you don’t want to so that you have a fall-back in an a year. We hope it will reduce deplete the units in any single emergency. the risk that people will take fund too much. You should adopt the same too much out of their pot at the ‘This preserves the income- approach in retirement, and wrong time and do irreparable producing potential of each ensure that you have a sizeable damage,’ says Richard Evans, fund and avoids having to take pot of cash to avoid having to one of the authors of the book. a bet on which ones are likely raid your investment pot should to perform better in the future. you have unexpected expenses. POINTS TO CONSIDER It also means that you are Taking an unplanned, sizeable But there are a few important preserving the overall portfolio’s withdrawal from your pension things you need to remember original division of income- portfolio could eat into your when taking this 1%. Firstly, it generating potential between future income dramatically, should be 1% of the original the various types of assets,’ particularly if the withdrawal value of the pension pot, not Evans states. occurs when the market 1% of the value it has reached has fallen. each year. WITHDRAWAL FREQUENCY Secondly, the authors The third aspect to take on recommend you sell 1% of board is ensuring you don’t each holding you own, rather withdraw this 1% too often. than just taking it from the Many people are used to

30 May 2019 | SHARES | 39 AEQUITAS Insightful commentary on market issues Why profit means more to stocks than PM Focus on the fundamentals not who is occupying Number 10

t the time of writing, the FTSE All-Share index is trading around the 4,000 mark. A To accentuate the positives this is just 8% below its May 2018 all-time high and more than a fifth higher than its post-Brexit-vote lows of and 2015 elections, as did Theresa May after 2017’s summer 2016. ballot). This is hardly a robust endorsement. If you prefer a glass half-empty view, the Moreover, history suggests it takes more than a benchmark is no higher now than it was in March new incumbent in 10 Downing Street to really get 2017, more than two years ago and it looks to be the stock market going. going nowhere fast. President Trump’s trade war with China, concerns over global growth and the SHORT, NOT SWEET UK’s uncertain political outlook, in view of Brexit It is unlikely that Theresa May enjoyed her time and the apparent collapse of the centre, can all be in office, as her entire tenure was spent wrestling said to be having a negative impact. with Brexit rather than outlining any major philosophy or legislative programme. THE UK STOCK MARKET HAS PADDLED SIDEWAYS If she can take any comfort at all, it is that she FOR MORE THAN TWO YEARS looks set to survive for pretty much three years in office by the time the new leader is appointed so she is not the shortest-serving PM of modern times (as defined by PMs elected since the Second Great Reform Act of 1867). That said, she may rather fancy taking Andrew Bonar Law’s mantle of being ‘the forgotten prime minister’ though her Brexit travails are likely to prevent that. More importantly for advisers and clients, three Prime Ministers have taken office mid-way Source: Refinitiv during a parliament, following the departure of It will be intriguing to see if markets latch on their predecessor since the inception of the FTSE to the appointment of a new Conservative party All-Share in 1964 – James Callaghan and Gordon leader, and thus prime minister, as a potential Brown for Labour, in 1976 and 2007, and John catalyst for performance. The governing party’s Major for the Conservatives in 1990. clear hope is that a new leader can break the On average, the FTSE All-Share made no progress Brexit impasse, provide certainty on what Brexit at all under the trio during their first 12 months does – or does not mean – and stave off the in the hot-seat, rising 2.4% over the first three prospect of an early General Election, before its months of the new PM’s tenure, falling 1.5% over scheduled date of 2022. six months and coming in flat over a year. This may, however, be looking at the situation through rose-tinted spectacles. Whoever becomes DIFFERENT CIRCUMSTANCES PM, they will be the third consecutive incumbent We must accept that the past is no guarantee for in 10 Downing Street to hold the land’s highest the future and must also acknowledge that this is office without winning a clear majority in a General a wide range of performance under new PMs may Election (David Cameron coalitions after the 2010 well be a reflection of the different circumstances

40 | SHARES | 30 May 2019 Insightful commentary on market issues AEQUITAS

SHORTEST PRIME MINISTERIAL TERMS OF THE MODERN DAY

Prime minister Party Term in 10 Downing Street Days Andrew Bonar Law Conservative 1922 210 Sir Alec Douglas-Home Conservative 1963-1964 363 Earl of Rosebery Conservative 1895-1895 474 Sir Anthony Eden Conservative 1955-1957 644 Henry Campbell Bannerman Liberal 1905-1908 852 Theresa May * Conservative 2016-2019 1,046 Gordon Brown Labour 2007-2010 1,049 Neville Chamberlain Conservative 1937-1940 1,078 James Callaghan Labour 1976-1979 1,124 Arthur Balfour Conservative 1902-1905 1,241 Source: History Today, www.gov.uk, BBC * As at 24 May 2019 under which they came to power – stagflation under for much more than one full term of office, at least Callaghan, recession under Major and a galloping since the inception of the FTSE All-Share in 1964. boom that was about to crash under Brown. Fresh convulsions in Westminster and Brussels This makes it clear that while politics can be one could therefore be an opportunity to reassess the near-term factor, there are many other issues at work case for UK equities, especially if the pound or when it comes to how the stock market performs. FTSE All-Share come under pressure and valuations The economy is one but ultimately it is corporate become more attractive. profits and cash flows - and the price (or valuation) After all, the arrival of a new PM, coupled with that advisers and clients are prepared to pay to the European Parliamentary election results, may access them - that really dictate how the FTSE All lead to further delays in the Brexit negotiating Share will perform over the long term. process and even increase the prospect of the With a dividend yield of around 4.5%, the ‘no-deal’ scenario, whereby the UK leaves the EU FTSE All-Share can be seen as a 22.5-year duration under World Trade Organisation terms, from which bond (as this is how long it would take advisers the equity market has run scared ever since the and clients to get their money back, assuming no referendum result in June 2016. change in dividends or share prices). This is a reminder of exactly why shares should be treated as a (very) long-term investment and why By Russ Mould the role of short-term politics should not be over- AJ Bell Investment Director emphasised, as very few prime ministers have lasted THE ARRIVAL OF A NEW PM MID-TERM HAS NOT TENDED TO GALVANISE THE UK STOCK MARKET

FTSE All Share performance

Before came to office In office Term 12 6 3 3 6 12 months months months months months months Term James Callaghan 1976-79 35.9% 16.6% 2.8% (3.3%) (18.6%) 2.4% 71.8% John Major 1990-97 (8.2%) (10.7%) (0.5%) 11.5% 15.9% 13.9% 107.7% Gordon Brown 2007-10 16.8% 4.2% 2.7% (1.1%) (1.8%) (16.4%) (18.2%) Average 14.8% 3.4% 1.7% 2.4% (1.5%) (0.0%) 53.8% Source: Refinitiv

30 May 2019 | SHARES | 41 BOOK REVIEW Revisiting a classic book on investment bubbles Extraordinary Popular Delusions and the Madness of Crowds is still relevant 178 years after publication

Money poured into Holland from all directions and inflated the value of land, houses and even horses and carriages. Interest spread through Dutch society until ‘the rage to possess tulips was so great that the ordinary industry of the country was neglected and the population, even to its lowest dregs, embarked in the trade’. Once prices began falling, confidence was destroyed and panic gripped the nation. Mackay wrote: ‘Substantial merchants were reduced almost to beggary, and many a noble line saw the fortunes of their house ruined beyond redemption.’ A hundred years later the rarest tulip bulbs isted by the Financial However it is Mackay’s were worth less than 1% of their Times as one of the 10 exploration of the role of crowd peak value. L best books ever written psychology in fuelling the great on investment, Charles Mackay’s financial manias of the past for FRENCH FOLLIES study of how manias start, which the book is best known. The second great speculation develop and eventually pass is involves financier John Law as relevant today as it was nearly TULIPS FROM AMSTERDAM and the ‘Mississippi scheme’. 170 years ago. The first financial craze analysed Following the death of the In his own words, Extraordinary by Mackay is ‘Tulipmania’. extravagant King Louis XIV in Popular Delusions and the Introduced into Europe in the 1715, France’s finances were in Madness of Crowds is ‘a mid-1500s, by the early 1600s complete disorder. The Duke of miscellany of delusions’, some tulips were so sought-after that it Orleans assumed control and was financial, others social or moral. was deemed ‘proof of bad taste in convinced by Law to issue paper It includes the history any man of fortune to be without money backed by property and of alchemy, belief in relics, a collection of them’. tax receipts. prophecies, astrology, devil Amsterdam became the centre Law set up a bank and made his worship, the burning of witches of the tulip trade, and by 1636 notes payable in the coin which and even slow poisoning, which jobbers on the stock exchange was current at the time they were became strangely fashionable who were ‘ever alert for a new issued, which meant there was no among well-to-do ladies in 17th speculation’ had taken up trading risk of devaluation. Law’s notes century France. bulbs instead of stocks. quickly traded at a premium to

42 | SHARES 30 May 2019 BOOK REVIEW their face value, stoking demand crook: as Mackay reflects, he Legend had it that South and bolstering the Treasury’s understood the principles of America’s gold and silver mines coffers, while government bills credit but ‘he did not calculate were inexhaustible, and despite traded at a hefty discount. upon the avaricious frenzy of a the fact that England and Spain whole nation; he did not see that were at war, the company – GOLDEN DREAMS confidence, like mistrust, could backed by the government – Given his success in stabilising be increased almost ad infinitum’. promoted itself as having free the economy, Law was granted reign to trade with the Spanish an exclusive trade licence with THE MOST INFAMOUS territories of Mexico, Chile Louisiana, where there was BUBBLE OF ALL and Peru. alleged to be huge deposits At the same time that Law was As ‘visions of ingots danced’ of precious metals, as well attempting to rescue France’s before investors’ eyes, as the East Indies and China, finances, the South Sea Company the company’s stock rose to continue financing the took on the British government’s unrelentingly and new shares national debt. debt in exchange for 6% annual were issued at higher and Bonds in his Company of the interest and a monopoly on trade higher prices, spawning dozens Indies soared and, ‘induced by to the South Seas. of imitators. the golden dreams of the whole Some were plausible, others nation’, more and more new less so such as the company set bonds were issued. Again money up to create a wheel of perpetual flooded in from abroad and ‘an motion. The most absurd, ‘which illusory prosperity shone over showed more completely than the land’. any other the utter madness of Inevitably confidence in the the people’, was the pitch for Mississippi scheme waned, an investment scheme during investors fled and the company this bubble. It described the was stripped of its privileges. The investment proposition as: “A national debt was no smaller company for carrying on an than at the start of the exercise undertaking of great advantage, but people swept up in the but nobody to know what it is”. speculation lost everything. After raising the equivalent of Opinion is divided as to £250,000 in a day, the proposer whether or not Law was a fled to the Continent and was never heard of again. Within eight months the South WE HAVE TWO copies of Sea bubble had burst, causing Extraordinary Popular Delusions and a run on the Bank of England the Madness of Crowds to give away. and sparking a Parliamentary enquiry which concluded that Simply answer this question: the scheme, which ‘had fixed What was behind the dotcom the eyes and expectations of all bubble? Europe’, was founded on nothing more than ‘fraud, illusion, Email editorial@sharesmagazine. credulity and infatuation’. co.uk with ‘book competition’ in the subject line by 7 June 2019. We will pick two names at random and announce the winner in Shares on 13 June 2019.

30 May 2019 | SHARES | 43 JUNE 25 2019

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KEY Games Workshop 22 Scottish 15, 28 Stewart Investors 36 • Main Market (GAW) Mortgage (SMT) Asia Pacific Leaders • AIM Greggs (GRG) 20 Serco (SRP) 9 (3387476) • Investment Trust Henderson Smaller 29 Smithson (SSON) 30 Witan Investment 28 • Fund Companies (HSL) Trust (WTAN) Somero Enterprises 22 • Exchange-Traded Fund HICL 28 (SOM:AIM) Woodford Patient 30 Infrastructure (HICL) Capital (WPCT) SPDR MSCI World 33 HSBC (HSBA) 33 Financials (WFIN) HSBC GIF Indian 34 4imprint (FOUR) 2 Equity (B8DHHC4) AB Dynamics 2 Ibstock (IBST) 11 (ABDP:AIM) Invesco Consumer 33 KEY ANNOUNCEMENTS Aberdeen New India 35 Discretionary S&P Investment Trust US Select Sector OVER THE (ANII) ETF (XLYS) Allianz Technology 29 IQE (IQE:AIM) 7 NEXT WEEK Trust (ATT) iShares S&P 500 33 Full year results Amundi ETF MSCI 33 Consumer Staples Europe Banks (CB5) Sector ETF (IUCS) 31 May: Charles Stanley, DCD Media, Wizz Air. BlackRock GF 34 JPMorgan Indian 36 3 June: Sirius Minerals, Tatton Asset Management. India (B6TJT02) Investment Trust (JII) 4 June: AO World, Carclo, Palace Capital. 5 June: BlackRock Smaller 29 Jupiter India Fund 34 GBG, Workspace. 6 June: Auto Trader, Camellia, CMC Companies (BRSC) (B4TZHH9) Markets, First Property, Mitie, Stenprop. Boohoo (BOO:AIM) 22 Lloyds (LLOY) 33 Merlin 8 Half year results Entertainments (MERL) 4 June: Driver Group, Gooch & Housego. Michelmersh 11 5 June: Impax Asset Management. (MBH:AIM) Trading updates Bovis Homes (BVS) 9 5 June: Card Factory. 6 June: Go-Ahead, Joules. BP (BP.) 26 Burberry (BRBY) 19 City of London (CTY) 28 WHO WE ARE Dunelm (DNLM) 21 EDITOR: DEPUTY NEWS Mothercare (MTC) 9 Daniel EDITOR: EDITOR: F&C Investment 28 Coatsworth Tom Sieber Steven Frazer Murray 28 @Dan_Coatsworth @SharesMagTom @SharesMagSteve Trust (FCIT) International (MYI) FUNDS AND SENIOR REPORTER CONTRIBUTORS FDM (FDM) 22 PageGroup (PAGE) 21 INVESTMENT TRUSTS Ian Conway Holly Black EDITOR: @SharesMagIan Russ Mould Fidelity Asian 36 James Crux Personal Assets 30 Tom Selby Values (FAS) @SharesMagJames REPORTER: (PNL) Yoosof Farah Laura Suter Fidelity India 34 Polar Capital 29 Focus (B51RZC1) Technology ADVERTISING PRODUCTION Finsbury Growth & 30 Trust (PCT) Senior Sales Executive Head of Design Designer Income (FGT) Nick Frankland Darren Rapley Matt Ely Restaurant 17 020 7378 4592 Forterra (FORT) 11 Group (RTN) [email protected] Shares magazine is published weekly every Thursday (50 times per year) by Fundsmith Emerging 15 RIT Capital 30 CONTACT US: AJ Bell Media Limited, 49 Southwark Bridge Road, [email protected] London, SE1 9HH. Equities Trust (FEET) Partners (RCP) Company Registration No: 3733852. Future (FUTR) 2 Royal Dutch 24 All Shares material is copyright. Shell (RDSB) All chart data sourced by Refinitiv Repro­duction in whole or part is not permitted Galliford Try (GFRD) 9 unless otherwise stated without written permission from the editor. S & U (SUS) 13

30 May 2019 | SHARES | 45 MAY 2019 2019 THIS WEEK: 15THIS PAGESWEEK: OFBONUSCONTENT INCLUDES COMPANY PROFILES, COMMENT ANDANALYSIS NELGN ULTRASOUND INTELLIGENT REAL ESTATE INVESTORS ALLIANCE PHARMA LOOPUP ISSN 2632-5748 ISSN ANGLE DISCLAIMER IMPORTANT Shares Spotlight is a mix of articles, written by Introduction Shares magazine’s team of journalists, and company profiles. The latter are commercial presentations and, as such, are written by the companies in question and reproduced in good faith.

Members of staff may hold shares in some of the securities written about in this publication. This could create a conflict of interest. Where such a conflict exists, it will be disclosed. This publication contains elcome to Spotlight, a As such, they cannot be information and ideas which bonus report which is considered unbiased. are of interest to investors. distributed eight times Equally, you are getting the It does not provide advice Wa year alongside your digital inside track from the people in relation to investments or copy of Shares. who should best know the any other financial matters. It provides small caps with a company and its strategy. Comments in this publication platform to tell their stories in Some of the firms profiled in must not be relied upon by their own words. Spotlight will appear at our readers when they make The company profiles are investor evenings in London their investment decisions. written by the businesses and other cities where you Investors who require advice themselves rather than by get to hear from management should consult a properly Shares journalists. first hand. qualified independent adviser. They pay a fee to get their This publication, its staff and message across to both Click here for details of AJ Bell Media do not, under existing shareholders and upcoming events and how any circumstances, accept prospective investors. to register for free tickets. liability for losses suffered by These profiles are paid- readers as a result of their for promotions and are not Previous issues of Spotlight investment decisions. independent comment. are available on our website.

Shares Spotlight ISSUE XXX 47 Shares Spotlight MAY 2019 49 Give your portfolio a spring clean

he new tax year is your ‘real return’, which takes underway, spring is in account of the impact of full bloom and now is an inflation. Texcellent opportunity to take a fresh look at your portfolio ACTION POINT – Calculate of savings and investments to the real return from your determine if you are getting investments – the step-by- the most out of your hard- step guide below shows how: earned cash. The following step-by-step guide should 1. Start with the current value help you shape your portfolio of your investment or decisions. investments. 2. Subtract the value at the 1. Assess your goals beginning of the time period you’re assessing. Your reason for investing will 3. Add any income or have a direct impact on the dividends paid out in that way you invest and the assets time, as long as they have you invest in. You could be not already been included looking to top up a pension in the current value. pot, building up the necessary 4. Take off any fees, trading readies to buy that dream costs, administration or holiday home or just have legal charges – this gives the aspiration of achieving you the actual return. financial independence. 5. Divide the actual return Whatever your aim you need by the value at the start to decide on a targeted of the period and multiply return which will help you by 100 – this gives you the reach it within an acceptable percentage rate of return. timeframe. 6. Then deduct the rate of inflation over the time ACTION POINT – Update your period – this gives you a long-term and short-term quick figure close to the goals total real return from the investment over the period. 2. Accurately measure your performance 3. Learn from your mistakes Ensuring you are on track to meet your goals means If any of your investments are accurately measuring your not performing in line with your performance. As a starting expectations then you need point it is worth calculating to consider why this might be

48 Shares Spotlight MAY 2019 Give your portfolio a spring clean

the case. You might not be managing them efficiently enough or you could be failing to close out loss-making positions before they do real a more consistent level of risk damage to your portfolio. exposure and also encourages There is no shame in admitting the discipline of selling assets your mistakes – after all that have appreciated and nobody gets it right all the time buying those that may – but the important thing is to have become relatively ensure you learn from them. undervalued.

ACTION POINT – Review all of ACTION POINT – Check the the investments (including current allocation of assets shares, funds and bonds) in your portfolio and ensure which have underperformed it is in line with your strategy. in the period and analyse If exposure to one asset carefully where you have class has fallen below or Listed firms are required by gone wrong. risen above your targeted the London Stock Exchange threshold react accordingly. to report any price sensitive 4. Rebalance your portfolio information and this could The proportion of your portfolio 5. Stay informed include half year and full year you allocate to distinct financial results, a trading asset classes will depend on It is crucial you are aware of update ahead of these results, your investment profile and when news which could details of management appetite for risk and in order to affect the market perception changes, share dealing by keep these proportions in line of your investments is due to directors or acquisitions. you will need to manage your come out. portfolio actively. Interest rates and economic ACTION POINT – Although it is If, for example, you started growth are probably the two important to maintain a long- out with 40% of your portfolio in key variables on which all term perspective, you should equities and 60% in bonds and investors should have a grasp. be prepared to adjust your share prices went up while the In theory growth in Gross portfolio based on events in the bond market crashed, those Domestic Product (GDP) leads outside world. If, for example, proportions would move out of to higher company earnings, there is significant downturn line with your targeted mix. while interest rates help in the global economy or This is where rebalancing determine how an equity is substantial market correction comes in. The idea is to valued and the attractiveness you could consider moving periodically sell assets that of the main alternative asset some of your portfolio to lower have gone up and buy more classes, cash and bonds. risk equities, such as utilities or of those that have fallen, to In stock specific terms it is pharmaceutical stocks, or even help get back to your planned important to keep tabs on different asset classes such as allocation. This helps to keep company announcements. bonds or cash.

49 Shares Spotlight MAY 2019 Shares Spotlight Alliance Pharma

Alliance Pharma reaches for International Stars

Peter Butterfield, Website: www.alliancepharmaceuticals.com CEO of Alliance Pharma

he transformation of Alliance Pharma (APH: T AIM), the Chippenham- based pharmaceutical company, into a truly international healthcare business was underlined by the company’s full year results announced in March this year. For the year ending 31 December 2018, Alliance’s overseas sales exceeded sales in the UK for the first time, marking an important milestone in the ongoing internationalisation of the business. The results also ‘Our international sales and Alliance now has offices in highlighted the increasing international infrastructure nine countries – in the UK, scale of the business, grew significantly during 2018. Europe, Singapore, China and particularly in its portfolio In addition to our established the US – and sales in more of growth products, its position throughout Europe, than 100 countries worldwide. international footprint we now have a trading For the year ending 31 and its ability to deliver operation in the US and our December 2018, Alliance growth organically and fastest-growing region is reported group revenue up through acquisition. Asia Pacific.’ 22% at £124m and underlying Peter Butterfield, Alliance’s pre-tax profit of £28.1m. chief executive officer, says: BUY-AND-BUILD STRATEGY According to Alliance this Alliance was founded significant growth reflects INTRODUCING… in 1998 and has evolved its astute deal-making through a successful buy- and the success of the ALLIANCE PHARMA and-build strategy in which company’s growing portfolio 35 acquisitions have been of growth products, known as A PHARMACEUTICAL COMPANY completed over 20 years International Star brands. WHICH SPECIALISES IN THE to create a profitable, cash There are now five of generative, healthcare these International Stars, all ACQUISITION AND LICENSING business with a progressive of which were acquired in OF PRODUCTS AND THEIR dividend policy. the past four years and all Its headquarters remain in represent important drivers of DELIVERY TO PATIENTS Chippenham, Wiltshire, but organic growth.

50 Shares Spotlight MAY 2019 Shares Spotlight Alliance Pharma

These International Stars, International Star portfolio is the most recent of which was Vamousse, acquired in 2017. acquired last year, are the This innovative pesticide-free focus of the company’s sales product for the prevention and marketing investment. and treatment of head They are complemented by lice achieved sales up 16% a wide portfolio of around at £5.8m. 90 products, which together have broadly stable sales DIVERSIFICATION and generate significant AND GROWTH cash flows. The portfolio of International Stars combines significant INTERNATIONAL growth potential with a high STAR BRANDS level of diversification in terms 2018’s financial results showed of products, geographies and an outstanding performance opportunities. from Kelo-cote, a scar Alliance believes it is well treatment product that was positioned to continue acquired as part of a portfolio to drive the growth of its of other products in 2015 for International Stars through £127.5m in Alliance’s biggest with Alliance’s expectations the company’s strong cash transaction to date. Kelo- and augurs well for the flow, commercial expertise cote delivered sales up 68% product, which recorded and growing geographic at £22.5m in 2018, reflecting sales of £18.5m under J&J’s presence. In addition, the strong growth across the ownership in 2017. increased scale of the Asia Pacific region and also in business has increased mainland Europe. This strong PIVOTAL YEAR the size of acquisition performance compares with Looking back, 2015 was a opportunities available, annual sales of just £7.7m pivotal year in the formation ensuring that targeted at the time the product was of the International Star acquisitions remain an acquired in 2015. portfolio. Not only was Kelo- important part of the Asia-Pacific, the cote acquired but there company’s strategy. world’s second largest were two other important Alliance CEO Peter pharmaceutical market acquisitions: the £10.8m Butterfield comments: ‘We after the US, has emerged purchase of MacuShield, have a clear strategy to as a particularly exciting the eye health supplement; generate revenues principally opportunity for the company. and the £1.5m in licensing from organic growth, In June last year, Alliance of UK rights to Xonvea from complemented by targeted announced the £60m Canada’s Duchesnay Inc. acquisitions that meet our acquisition of the exclusive MacuShield’s sales have financial criteria. marketing rights in the Asia- doubled since acquisition, ‘Our strong sales and profit Pacific region to Nizoral, growing a further 6% to £7m growth in 2018, and the a medical anti-dandruff in 2018, a year during which organic growth opportunities shampoo. The rights, it was named by Boots as currently available, put us in acquired from Johnson & Best Eye Health Product. a good position to continue Johnson, and currently sold Xonvea also made major on our growth path in 2019 in 14 countries in the region progress in 2018, gaining UK and beyond.’ including Japan, Thailand, marketing approval for the 105 South Korea and China. treatment of “nausea and ALLIANCE PHARMA Under Alliance’s ownership vomiting of pregnancy where 90 in the second half of 2018, conservative management Nizoral generated sales of has failed”. Xonvea was 75 £10.9m, positioning it as a launched in the UK last year key product in Alliance’s and has since been approved 60 International Star portfolio. in the Republic of Ireland. This performance was in line The fifth product in the

51 Shares Spotlight MAY 2019 Shares Spotlight ANGLE

ANGLE‘s revolutionary liquid biopsy system

Website: www.angleplc.com

IM-quoted ANGLE (AIM: AGL) has A developed the Parsortix system, a unique patent protected microfluidic technology enabling the capture, harvest and analysis of intact cancer cells from a simple blood draw. This capability is creating a leading position in the emerging liquid biopsy market, forecast to be worth in excess of £15 billion globally.

GROWTH MARKET Growth in liquid biopsies is leading the way in providing critical because 90% of cancer being driven by the rising accurate information through related deaths result from number of new cancer a simple non-invasive metastasis - the spread of patients globally each year blood test. CTCs in the blood. CTCs have (2018: 18m), those living with Parsortix has a unique significant utility as they the disease (2018: 44m) and approach to capture intact enable DNA, RNA and protein the need to reduce healthcare living cancer cells detaching analysis to be undertaken costs. The faster and more from the primary tumour, allowing the complete accurately a patient’s cancer known as circulating tumour picture of the cancer to be can be identified, treated cells (CTCs), which can be understood. The ability to and monitored the greater harvested and analysed capture and monitor these the likelihood of a positive to enable personalised cells on a repeat basis is outcome. treatment for the cancer crucial for optimal patient The traditional tissue biopsy patient. Accessing CTCs is care. requires a surgical procedure Commercially, Parsortix to obtain samples from is positioned upstream to sometimes difficult to access capture and harvest CTCs, areas such as the brain, lungs INTRODUCING…ANGLE providing scope to work or pancreas. The procedure is with partners who have invasive, costly, and difficult STRENGTHENING A LEADING downstream analytical to repeat. Liquid biopsy is POSITION IN THE LIQUID platforms. In 2017 ANGLE the alternative and ANGLE’s acquired its own downstream Parsortix system, pictured, is BIOPSY MARKET capabilities in HyCEAD Ziplex,

52 Shares Spotlight MAY 2019 Shares Spotlight ANGLE

extending the company’s relationships will accelerate abilities to capture the whole commercialisation. value chain. Parsortix has been used in over 60,000 PROMISING OUTLOOK blood tests and has been Cancer treatment is moving shown to work with 22 towards personalised care different cancer types to date. requiring technologies that can deliver results in a FOUR PILLAR STRATEGY cost effective, non-invasive, The first pillar is obtaining efficient and reliable manner data and evidence that is easily repeatable. demonstrating the value Repeat testing is a key factor of its technology through as when a patient has been clinical studies run by leading diagnosed with cancer there cancer centres. ANGLE’s is a need for regular testing ovarian cancer pelvic mass as part of their ongoing care triage validation studies (400 as cancer is complex and patients - 200 Europe, 200 US) constantly changing. achieved best in class results Cancer is not the only end with the latter achieving 95% market for this platform accuracy. A clinical verification technology as evidence has study is in progress to support been published of other the commercial launch of applications, including the test. prenatal diagnostics. The second pillar is seeking the first company to be given ANGLE is uniquely placed regulatory approval. ANGLE FDA regulatory clearance for in the fast-growing liquid is currently undertaking a the harvesting of cancer cells biopsy market, where FDA study in metastatic breast from blood for analysis. The regulatory clearance will lead cancer and is at the analysis aim is to establish Parsortix to significant opportunities stage following completion as the global standard in CTC to drive the business forward of subject enrolment. A liquid biopsy. globally. The company has submission will be made The third pillar is building a a highly leveraged business to the US Food & Drug body of published evidence. model that is scalable, with Administration (FDA) with This has gathered pace high value and low cost the opportunity that by the with 16 peer-reviewed products for the instruments end of 2019 ANGLE may be publications in the last and the related consumables two years demonstrating a generating gross profit wide range of utility. Barts margins in excess of 70%. Cancer Institute and Cancer Research and development Research UK, amongst is the foundation to the ANGLE’S MISSION many international cancer company’s strategy and IS TO ENABLE centres, have extolled the further applications are being performance and unique generated internally and by PERSONALISED capabilities of Parsortix. the breakthrough research CANCER CARE BY The final pillar is taking place at leading establishing partnerships cancer centres. PROVIDING THE with healthcare companies COMPLETE PICTURE where Parsortix can benefit 80 OF THE PATIENT’S from their existing products in downstream analysis and/ CANCER FROM A or solid tissue biopsy while 65 SIMPLE BLOOD TEST ANGLE benefits from access to their customer base. 50 Partnership arrangements ANGLE exist with Abbott, 35 – ANDREW NEWLAND QIAGEN, and Philips; such

53 Shares Spotlight MAY 2019 Shares Spotlight Intelligent Ultrasound

Intelligent Ultrasound is making a big noise Website: www.intelligentultrasound.com

ntelligent Ultrasound (MED:AIM) focuses on Itwo areas – providing advanced ultrasound training simulators that make it easier for medical professionals to learn how to use ultrasound; and then following the medical professional into the clinic and providing artificial intelligence (AI) based clinical ultrasound software that can support, guide and speed up ultrasound scanning. Ultrasound is one the world’s leading diagnostic modalities components to these Ultrasound to develop its and the group’s aim is to algorithms are an excellent, ScanNav image analysis increase the numbers of growing database of curated software and pilot the first medical professionals who obstetric images to drive of these algorithms in two can use ultrasound, as well machine learning, combined leading UK hospitals. as increasing the speed and with sophisticated deep quality of the scanning itself. learning models, developed by SCANNAV AUDIT Professor Noble and her team. The ScanNav Audit software CLINICAL DIVISION This has enabled Intelligent provides real-time support Based on the work of world- for obstetric ultrasound renowned University of Oxford practitioners performing academic, Professor Alison INTRODUCING anomaly scans at 20 weeks Noble OBE FREng FRS, the gestation. ScanNav Audit aims Intelligent Ultrasound Clinical INTELLIGENT to ensure that a complete set AI Division has developed AI of scan images which are fit based real-time image analysis ULTRASOUND for purpose and conform to software for ultrasound a company which develops the required scanning protocol by utilising deep-learning are captured during the techniques and sophisticated and commercialises procedure. computer algorithms along software-based The software will also with researched insights disruptive technologies provide a record of each into patient, clinician and sonographer’s performance, healthcare provider needs. in the ultrasound allowing managers to monitor There are two key healthcare market. staff and form part of the

54 Shares Spotlight MAY 2019 Shares Spotlight Intelligent Ultrasound

record keeping requirements of the clinic. ScanNav Audit, which has been piloted in St George’s Hospital, London and the RUH in Bath, is currently a CE marked product in the UK only, and will require further development and regulatory approval to meet the US and global scanning protocols.

SCANNAV AUTOCAPTURE The ScanNav AutoCapture software automatically captures and analyses procedures to support less 30 resellers in the rest of all the ultrasound image experienced practitioners. the world. During 2018 the planes in real-time, as the PNB is a form of local Simulation Division grew sonographer moves the anaesthetic that can be used revenue by 27% to £5.3m in ultrasound probe over the in certain surgical procedures 2018 (2017: £4.2m) and patient’s abdomen during as an alternative to general established itself as one the 20-week fetal anomaly anaesthesia. of the gold standard scan and has the potential to It is currently expected that providers of ultrasound speed up scanning workflow; development of ScanNav training simulators in the and improve accuracy and AnatomyGuide will be obstetrics, echocardiography consistency of image capture. substantially completed in and emergency medicine The current version of the 2019 and that the regulatory markets. software automatically selects approval process for its sale in and saves the key images Europe and the United States OUTLOOK required to meet the FASP will commence thereafter. After a well-received protocol in the UK. Further The group is therefore in showcasing of the group’s development will be required discussions with several AI technology at RSNA to integrate this software OEMs to bring ScanNav 2018 in Chicago, the world’s into OEM machines, as well AnatomyGuide to market and largest radiology exhibition, as expanding the image expects to develop further the group believes there is recognition to meet the ACR ultrasound guided needling considerable interest in its protocol in the US and the variants of the software. ScanNav software algorithms ISOUG global protocol. from both manufacturers and The group is in discussions SIMULATION DIVISION end users. The potential of with several OEMs to Based in Cardiff (UK) and this new AI based real-time bring ScanNav Audit and Alpharetta (US), Intelligent ultrasound image analysis AutoCapture to market and Ultrasound’s Simulation software combined with the expects to develop further Division designs, develops group’s existing revenue obstetrics variants of ScanNav and sells some of the generating simulation AutoCapture to complement world’s leading hi-fidelity business enables the the 20-week protocol software ultrasound training systems group to look forward with described above. for teaching ultrasound considerable confidence. scanning to medical SCANNAV ANATOMYGUIDE professionals. 20 ScanNav AnatomyGuide is an Its three simulator systems INTELLIGENT ULTRASOUND GROUP AI based ultrasound software (ScanTrainer, HeartWorks 16 product which can identify and BodyWorks Eve) the and highlight anatomical global medical institution 12

structures on a live ultrasound market are sold to through 8 image. The product is being the group’s direct sales developed for use during forces in the US and UK, as 4 Peripheral Nerve Block (PNB) a well as a network of over

64 55 Shares Spotlight MAY 2019 Shares Spotlight LoopUp

LoopUp delivering growth in the company of giants

Website: www.loopup.com

oopUp (LOOP:AIM) is a Software-as-a-Service L (SaaS) provider of remote business meetings. The company prides itself on the premium experience it delivers to mainstream, discerning conference callers for their important, day-to-day conference calls. The company’s most recent set of results to 31 December 2018 showed growth to £34.2m revenue (+96%), £7.7m EBITDA (+121%), and £4.5m operating profit (+521%). These were driven by continued strong organic growth, in the industry, nearly 70% noise?’ Research shows that augmented by the acquisition of enterprise users are still 15 minutes are wasted on of MeetingZone in June 2018. ‘dialing in’ to calls with phone a typical conference call, The company offers its numbers and access codes. whether getting things product on a zero-licence, They’re not using software for started or dealing with pay-as-you-go basis, a better experience. distractions. That’s around a and targets mid-large The time-wasting third of the time the business enterprises and professional frustrations of dial-in are world spends on conference services firms. all too familiar: ‘That access calls – wasted. But why does LoopUp code isn’t recognized.’ And arguably more exist, and how is it managing ‘Who just joined?’ ‘Who is concerning still, more than to grow as it does, in this it with all the background 50% of frequent conference competitive market with so callers confess that they don’t many big players? really know exactly who’s on their conference calls – a WHY LOOPUP EXISTS INTRODUCING… major security flag. No question, conference calls LOOPUP So, why does dial-in have become an important prevail with the mainstream part of everyday business, a Software-as-a-Service majority? now accounting for 50% of all (SaaS) provider of remote The answer, LoopUp enterprise voice calls. And yet believes, lies in the way people after 30 years of innovation business meetings tend to learn software. For

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most, this is a process of trial revenue loss rate of just and error, over time. But, host 5.5% (historically in the 5% of a call, you’re live in the ’hot to 6% range). They have seat’ with multiple guests, also extended their track and there simply isn’t time for record of negative net trial-and-error-based learning. churn – i.e. net growth – in The last thing you want is for their long term established anything to go wrong. Dial-in customer base, which may well be a poor experience, removes the impact of at least it’s the safe bet. new business but takes Plenty of feature-rich into account all other software products have tried gains and losses across to drag conference calling out its base. of the dial-in ‘dark ages’. And they’ve had some success New business economics: with tech-savvy early adopters • The company sells in a and specialist user groups, differentiated team-based such as IT and Training teams. organisational structure, But none has ‘crossed the which they call ‘Pods’. chasm’ into the mainstream Bottom line: every £1.00 majority of professional users, invested into pods returns who are intimidated rather to them on a phone of their new annual recurring than impressed by their choice and then naturally gross margin of 73p and bells and whistles. Instead, guides them to a helpful as above, this annual the majority continue to visual interface where they gross margin recurs very play it safe with dial-in; their can see ‘who just joined’ effectively. meeting experience remains and ‘who’s speaking.’ With poor; and IT decision-makers such a high percentage of Inorganic amplification: remain frustrated by the ‘eyes on screens’, LoopUp • The company recently meagre adoption of ‘better’ can then entice its users into overlaid an inorganic software options. more visual capabilities, such dimension to its growth So, are we doomed to a as their simple one-click profile via the acquisition future of painful dial-in? screen sharing. of MeetingZone, a LoopUp says not and they’ve The company shows a video UK-headquartered taken a contrarian approach version of its market value conferencing services to changing the status quo. proposition at https://loopup. company, in June 2018. Rather than trying to wow com/en/meetbetter. The strategic rationale early adopters, LoopUp is was to amplify the specifically designed for the HOW LOOPUP DESCRIBES established network effect 70% mainstream majority. ITS INVESTMENT CASE in its product: 30% of new LoopUp keeps features User engagement: LoopUp business is driven to an essential minimum, • The LoopUp product is by non-customer guests advocating that ‘less is more’ successfully changing the on LoopUp meetings, when it comes to remote behaviour of mainstream customer referrals, and meeting software design business users, who have non-marketing driven for the mainstream. The previously resisted change inbound approaches. product is designed to guide and persisted with dial- users through an intuitive in. Furthermore, 80% 550 experience, without the need have adopted optional for training. applications for Outlook/ LOOPUP GROUP And this contrarian iOS/Android. 450 approach seems to be working. LoopUp users are Customer retention: 350 now foregoing dial-in on 76% • Driven by this strong of their calls. Instead, when product engagement, 250 instructed, LoopUp calls out LoopUp boasts a low gross

57 Shares Spotlight MAY 2019 Shares Spotlight Real Estate Investors Plc

Real Estate Investors taps into the rebirth of a region Website: reiplc.com

eal Estate Investors (RLE:AIM) has a diverse, Rmulti-sector property portfolio and is producing an attractive, fully covered dividend, yielding over 6.5%. The company has a stated progressive dividend policy. In 2006, chief executive Paul Bassi and finance director Marcus Daly joined the company and have since invested, together with other board members, £10m of their own money. The company has grown steadily and today REI has a diversified and sustainable portfolio of 1.55 million sq ft of commercial property externally independently valued at £225m (as at 31 December 2018). The portfolio is internally managed by a well-established team with over 100 years of combined real estate experience and a deep knowledge of the Midlands property market. It is REI’s regional expertise and unparalleled Midlands property network that has given INTRODUCING REAL ESTATE INVESTORS the UK’s only Midlands- focused and Birmingham- based Real Estate Investment Trust

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the company a competitive advantage and has enabled Paul Bassi and the team to build a reputation for identifying value enhancing assets, making opportunistic acquisitions, and achieving a consistent financial track record. REI is not a passive investor and the company operates a strict criteria to identify compliant assets at high initial yields. Value creation is achieved via rent reviews, lease renewals, lettings, change of use and refurbishments. Underlying PBT excludes profit/loss on revaluation, sale of properties and interest rate swap Once capital enhancement has been achieved and all asset management initiatives London to just 49 minutes, has economy outside of London have been exhausted, assets magnified the region’s appeal and the South East with are retained for income or and suitability to businesses productivity across the region sold on an opportunistic basis and commuters as being a expected to grow by 1.7% Gross at or above book value, with viable alternative to London. Value Added per annum (GVA capital from disposals recycled Following substantial is the measure of the value of into further criteria compliant investment from the UK goods and services produced opportunities. Government into HS2, in an area, industry or sector of Birmingham and the an economy) over the period BIRMINGHAM TO LONDON IN surrounding region is being 2018 - 2021. JUST 49 MINUTES transformed. In addition, Birmingham The imminent arrival of HS2, Cranes dominate the has also been named as which will reduce the journey Birmingham skyline and huge the host City for the 2022 times from Birmingham to infrastructure changes and Commonwealth Games, along transport improvements are with Coventry being awarded all paving the way for new the 2021 City of Culture. These ‘Real Estate Investors commercial and residential wide-reaching changes provides me with a focused, schemes that are on a scale underpin property valuations well managed commercial never seen before in the region. and support the case for further real estate exposure to the According to EY’s Regional uplifts as these substantial vibrant Midlands economy. Economic Forecast 2019, the projects drive activity The management team with West Midlands is gaining the and demand. many years of experience in title as the fastest growing This is also reflected in this region have successfully managed to assemble a portfolio of high yielding assets which benefit from good demand for commercial property with development optionality and positive rental growth. The company has a strong income focus with a growing dividend and yields 7.0% historic.’ Mark Barnett, head of UK equities at Invesco Perpetual, May 2019

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recent M&A activity with LondonMetric‘s £414.7 million takeover bid for our regional peer AJ Mucklow, being announced on 23 May 2019

DELIVERING CONSISTENTLY FROM A STABLE PLATFORM Delivering capital growth and income enhancement are the fundamental aims of the business. On 1 January 2015, the company converted to become a REIT (Real Estate Investment Trust), thereby enhancing its stable platform. The company uplift on the valuation of the ability to pay increased returns is conservatively geared portfolio could be significant. to shareholders by no longer with a loan to value ratio of In March 2019, REI being liable for corporation 39% and has a contracted successfully secured tax on rental income or capital rental income base of £17m, residential planning consent gains tax from qualifying generated from a portfolio that for 100 units in Coseley activities. For 2018, REI paid is 96.1% occupied. Revenue and this site is now being a total of 3.562p in dividends has grown year on year for 10 marketed to residential representing a 6.5% dividend years. The average cost of debt developers for significantly yield based on 55p share price is 3.7% with 67% of the debt more than book value. It is (30 April 2019). Each year for the being fixed. Importantly, the therefore noteworthy that last six last years, REI has paid a portfolio is diversified across the West Midlands enjoyed steadily increasing dividend to many sectors with no material a 6% increase in house shareholders and the company reliance on any single asset or prices in 2018, compared to remains committed to a occupier. the 0.7% decline in London progressive dividend policy. In addition, there are existing house prices. Annualising the current 2019 asset management activities quarterly dividend produces a especially relating to permitted BUILDING MOMENTUM dividend yield of 6.8%. development opportunities REI says its main objectives REI does not aim to be a for conversion of commercial for the year are to continue to high risk, high return business. properties to residential. increase shareholder value, Instead, REI is a proven Prospects for REI in 2019 and refinance unencumbered business operating from a beyond are good. properties and deploy the The company has £25 million funds generated in criteria of cash and facilities available compliant investment ‘REI released another for possible acquisitions, properties, continue its impressive set of results in including those arising from progressive dividend policy, March. Naturally, this reflects any Brexit uncertainty. and increase its underlying the recent performance of profit before tax, EPRA the West Midlands economy 250,000 SQ FT IDENTIFIED earnings per share and net and the fundamentals of FOR POTENTIAL assets per share. the property sector. Growth CONVERSION TO has been strong, inward RESIDENTIAL 59 investment has been The REI team has identified REAL ESTATE INVESTORS 56 resilient, and the number of 250,000 square foot of

jobs in the region has risen permitted development 53 steadily.’ where there is the potential The Mayor of the West to convert commercial space 50 Midlands, Andy Street into residential development opportunities. The potential

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