Event programme for MelloMonday, on 30th November

How to join the Zoom webinar:

1. Buy your ticket (unless you are an Annual Pass holder in which you case you already have a ticket).

2. The link will be sent to all those with a ticket on the morning of the event and you will be asked to Register & you can log in to the Webinar.

3. Spaces are limited (500 people), so please only register if you’re confident you will attend.  If you can’t attend, we’ll send all ticket holders a recording afterwards.

MelloBASH (Buy, Avoid, Sell, Hold)

The MelloBASH features a mix of Fund Managers and Private Investors including Kevin Taylor, Alan Charlton, Leon Boros, Paul Scott and Rosemary Banyard.  They will be giving their verdicts together with the audience on listed companies selected by you…our Mello delegates.  Companies that may be covered include Wey Education (WEY), Staffline (STAF), Kainos (KNOS), Versarien (VRS), Synairgen (SNG) and Carnival (CCL).

Donations will be made to their chosen charities to show our appreciation of their excellent research and diligent coverage of the selected companies.  This MelloMonday we will be covering Versarien.

Do let us know which companies you’d like analysed in future MelloMonday BASH panels. 

Leon is a recently retired professional investor. Prior to his retirement he was founder and managing director of Equity Strategies, a boutique corporate finance firm. Leon started his career at EY where he qualified as a Chartered Accountant.

Leon has been investing since his late teens. In 1993 he opened his first PEP and has since achieved annualised returns of 18.42% (to Dec 2019).

Leon was previously a non-executive director of ShareSoc. Twitter: Leon Boros @Boros10  

Rosemary Banyard began her career with James Capel & Co where she was a senior investment analyst for 12 years before becoming a fund manager at AIB Govett. She rose to prominence and developed a reputation as one of the leading female fund managers in the UK after she joined Schroders in 1997. For almost 20 years she was known for running the acclaimed Schroder UK Smaller Companies Fund  with Andy Brough, and was for many years lead manager of the award-winning Schroder Mid Cap Fund PLC as well as heading up several other segregated UK equity mandates, managing total assets of circa £1 billion. In 2016 she joined Sanford DeLand to launch and manage the Free Spirit Fund. The Schroder UK Mid Cap trust returned 16%[1] pa while she was manager and in her two and a half years managing money at Sanford DeLand the Free Spirit Fund returned 31%[2] placing it in the top decile of the IA UK All Companies sector.

[1] Schroder UK Mid Cap Fund plc,  1st May 2003 to 31st March 2016. (Lead manager).

[2] Sanford DeLand Free Spirit Fund, 3 January 2017 to 30th June 2019

Alan is a Full Time Professional Investor, having enjoyed a 30 year career working  the Retail Industry, and been a Director of many well know High Street names. He has been fortunate to work directly for some of the greatest Retailers of the last generation, including Lord Kirkham, Sir Philip Green (interesting experience!!) and Sir Stuart Rose. Fortunate to have learned from some of the very best. 
Alan posts occasionally on message boards as “Simso”…going right back to PaulyPiliots Pub and the old Motley Fool days! Current investment strategy is specifically focussed on stocks which benefit from the current environment.

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!

Then spent 8 years as FD for a ladieswear retail chain called “Pilot”, leaving on great terms in 2002 – having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.

I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.

Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese!

Occupation

Analyst, Blogger, Company Director, Entrepreneur, Event Organiser, Private Investor

Investment Strategy

I search for fundamental value in smaller caps, especially companies which are overlooked, or where price has become irrationally low due to negative sentiment. I like businesses with decent cashflow, strong balance sheets, and like dividends. I tend to hold for 6 months to 10 years, but a typical investment is 2-3 years. Special situations, and situations where the market has not yet priced in an improving commercial outlook for a company particularly interest me, as do turnarounds. But above all, shares which are cheap!

Kevin began his City career 27 years ago, training as an actuary with a focus on defined benefit pension schemes. In 1997 he moved over to Investment Banking and joined a structured finance team working on complex projects and debt finance for large corporates. During those 27 years of financial markets experience Kevin has been a keen small cap investor looking after his family’s portfolios and trading on both the long and the short side of markets. Kevin is one of the more sceptical member of our panel and likes to see proof that demonstrate management’s claims before investing in a management team.

Specialist insights

Steve Clapham

Stephen Clapham of investment research and training consultancy Behind the Balance Sheet will be here again with the third instalment of his accounting red flags and investing tips series. In accounting red flags he will talk about comparing operating cash flow to earnings, and give some tips on adjustments to ensure you are comparing like with like. In the investing tips series, he will explain why supply is often a much better indicator to use than demand when evaluating the outlook for industry pricing.

Steve will also launch his book, The Smart Money Method, How to Invest Like a Hedge Fund Pro, and there is a free competition to enter to win one of three giveaway copies. The questions are good fun, too, so be sure to enter at Behind the Balance Sheet

Behind the Balance Sheet is an investment research consultancy which creates bespoke research for large institutional investors and produces training programmes for their analysts and portfolio managers. The firm was founded in 2012 by Steve Clapham, who has 30 years of experience analysing and investing in equities. He spent some 20 years as a rated sell-side equity analyst before becoming a partner of a multi billion hedge fund in London in 2005.

An interview with leading fund manager, Rosemary Banyard

Rosemary Banyard began her career with James Capel & Co where she was a senior investment analyst for 12 years before becoming a fund manager at AIB Govett. She rose to prominence and developed a reputation as one of the leading female fund managers in the UK after she joined Schroders in 1997. For almost 20 years she was known for running the acclaimed Schroder UK Smaller Companies Fund  with Andy Brough, and was for many years lead manager of the award-winning Schroder Mid Cap Fund PLC as well as heading up several other segregated UK equity mandates, managing total assets of circa £1 billion. In 2016 she joined Sanford DeLand to launch and manage the Free Spirit Fund. The Schroder UK Mid Cap trust returned 16%[1] pa while she was manager and in her two and a half years managing money at Sanford DeLand the Free Spirit Fund returned 31%[2] placing it in the top decile of the IA UK All Companies sector.

[1] Schroder UK Mid Cap Fund plc,  1st May 2003 to 31st March 2016. (Lead manager).

[2] Sanford DeLand Free Spirit Fund, 3 January 2017 to 30th June 2019

Company Presentation – Aquis Exchange PLC

Aquis Exchange PLC is an exchange services group, which operates pan-European cash equities trading businesses (Aquis Exchange), growth and regulated primary markets (Aquis Stock Exchange/AQSE) and develops/licenses exchange software to third parties (Aquis Technologies).

Aquis Exchange is authorised and regulated by the UK Financial Conduct Authority and France’s Autorité des Marchés Financiers to operate Multilateral Trading Facility businesses in the UK and in EU27 respectively. Aquis operates a lit order book and does not allow aggressive non-client proprietary trading, which has resulted in lower toxicity and signalling risk on Aquis than other trading venues in Europe. According to independent studies, trades on Aquis are less likely to lead to price movement than on other lit markets. Aquis uses a subscription pricing model which works by charging users according to the message traffic they generate, rather than a percentage of the value of each stock that they trade.

Aquis Stock Exchange (AQSE) is a stock market providing primary and secondary markets for equity and debt products. It is authorised as a Recognised Investment Exchange, which allows it to operate a regulated listings venue.

Aquis Technologies is the software and technology division of Aquis Exchange PLC. It creates and licenses cutting-edge, cost-effective matching engine and trade surveillance technology for banks, brokers, investment firms and exchanges.

Aquis Exchange PLC (AQX.L) is listed on the Alternative Investment Market of the LSE (AIM) market. For more information, please go to www.aquis.eu 

Here below, Alasdair has kindly answered the questions from the event, which went unanswered due to time constraints. 

How exactly are you going to ban short selling of Apex stocks on the AQSE Growth Market?

Through rules and technology. We have updated our trading rules to incorporate this ban. Our surveillance system is able to flag potential short selling activity and this is monitored by our surveillance team.

 

Personal investors are often excluded from analyst briefings. What are your thoughts on whether this is fair?

Aquis believes strongly in the concept of fairness and equal access. When Aquis Exchange PLC releases annual and half yearly results we follow the analysts briefing by a presentation to private investors by using a variety of different 3rd party operators such as PI World and Investor Meet Company. This content is later put on our website for those who are not part of these networks or were not able to participate in the live event. The reason why analysts and private investors are not invited to the same briefing is that the 2 stakeholder groups have very different requirements and thus questions, which would make a single session overly long and not focused enough for either party. We urge companies quoted on AQSE to follow suit and make presentations direct to private investors whenever possible.

 

Why have you taken a different approach to stopping predatory high frequency trading than IEX’s speedbump?

Firstly, I should make it clear that do equate high frequency trading with predatory behaviour but we do think that certain strategies used by proprietary trading firms can effect price movement and we wish to differentiate Aquis  liquidity by preventing this type of flow reaching our platform. We believe that taking a rules based regulatory approach to keeping non-client proprietary traders from aggressing on the Aquis markets is a very elegant and effective way of achieving a protected liquidity pool where we have lower rates of toxicity than any other lit book in pan-European trading.

 

Will Level 2 type data be available for free?

Level 2 AQSE data is available on retail investor sites such as ADVFN and London South East and we are working on growing this out to other retail investor sites.

 

Given the lighter regulation proposed and the ban on shorting, won’t the AQSE market naturally attract a higher percentage of frauds?

We are absolutely not proposing lighter regulation. AQSE’s new rules for the 2 segments of the Growth Market are raising the barre not lowering it. Rules for Apex and Access stocks will be different to each other, they will be more appropriate for the 2 groups to reflect the differences in size and stage of a company’s development. It’s all about proportionality. AQSE is going to be much more involved in the life of companies quoted on its market. We will be ruthless in turning away companies that do not adhere to our strict rules on things such as corporate governance, transparency and accurate reporting.

 

Do you feel that the Listings Review is a sign that the FCA/UKLA will support your call-to-arms?

I can’t speak for the FCA or anyone else, but we feel we have the regulator’s support in transforming AQSE into a more robust competitor to the incumbents and providing UK companies with choice when it comes to seeking an IPO. I am looking forward to speaking with Lord Hill and his review team.

 

Can you tell us about Aquis growth rates and customer churn?

At our interim results in September we were able to post our first period of profit. This is a major milestone for a start up like Aquis, which was only founded in 2012. Analysts are expecting us to continue  in 2021 posting results in the black and we’re not disagreeing with them! We now have 3 different divisions and 4 separate income streams within the business and despite the issues of Brexit and Covid-19 we feel there is much growth to come. On the point of customer churn, I can say that it is not really something we are seeing. The trend among brokerages is towards consolidation and this is reflected by a slow rise in absolute client numbers in our main pan-European trading business. However, this is more than offset by existing clients moving into higher tiers of usage and thus paying us higher subscriptions.

Alasdair is the founder and CEO of Aquis Exchange PLC. The Company, which is listed on AIM, is a leading exchange services group. It operates a pan-European MTF business (Aquis Exchange) covering stocks from 14 European countries and also develops and licenses exchange software and services to third parties (Aquis Technologies). In March 2020, Aquis acquired the primary listings business NEX Exchanged and rebranded it Aquis Stock Exchange (AQSE).

Alasdair is the former CEO of Chi-X Europe and was responsible for growing the business into Europe’s largest equities exchange and into profitability before its sale in late 2011. Prior to that, he spent 11 years heading up ITG’s international business, pioneering the introduction of electronic trading and crossing into the European and Asian marketplaces. Alasdair began his 30 plus-year career in the City with Morgan Grenfell and has held senior positions at a number of investment banks including HSBC and UBS.

Gamechangers – which company is transforming this month?

The second in our series of “Gamechangers” – An introduction to a company that has had a transformational announcement which may not have been fully understood by investors. The company will not be pre-announced beforehand but leading investors and directors talk us through the company gamechanger. 

Company Presentation – Ten Lifestyle Group plc

Ten Lifestyle Group plc is a leading technology-enabled, global concierge platform, helping wealthy and mass affluent individuals and their families to discover, organise, and enjoy dining, live entertainment, travel and premium retail with better results and quicker than they could themselves.

Underpinned by industry-first technology, Ten provides its services to more than 2 million members 24/7, 365 days a year, worldwide. Ten’s services are available through branded partners including HSBC Jade, Coutts, Royal Bank of Canada, China Merchants Bank, SMTC, Westpac and SwissCard. By providing concierge, our corporate clients get a return on investment from better customer acquisition through to retention and over time, increased card spends, assets under management and Net Promoter Score. 

Founded in 1998, the business listed on the AIM market of the London Stock Exchange in November 2017 (AIM: TENG). Ten Lifestyle Group’s vision is to become the most trusted service platform in the world

Here are the answers to the questions that were not unanswered at Monday’s webinar:

  • How has the IT investment been accounted for – w/o or capitalised?

Of the £12.2m spend in the current year £5.3m was capitalised as an intangible asset and then is written off through the Profit and loss account over 5 years. The remaining £6.9m has been expensed in the year.

  • How has your Net Promotor Score changed since IPO?

As we have invested in our technology this has improved the quality of service we can provide to our members. In addition, the content, offers and events we can provide has improved over this time, and with scale, and we have also developed a  more personalised approach to our member interaction. All of these improvements have led to driving up our NPS scores to record levels in the past year and our NPS has risen every year for over 5 years. Our NPS score is also the main measure of our Lifestyle Managers performance.

The reason we don’t report NPS as a global KPI is because some regions (e.g. Latin America) give higher NPS than others (e.g. Japan) so the member location mix can affect the global NPS in a way that is not indicative of like-for-like changes in service quality.

  • Covid is likely to discourage Corp Travel what impact will this have?

The majority of our travel is organising leisure travel for our members (the clients of our corporate clients who are mostly banks and credit card providers). Given this, we actually see an opportunity to grow our leisure travel business. Given our High Net worth (HNW) and mass affluent member base, airlines especially, but also many hotels in business cities (e.g. NYC, Paris, Hong Kong), are keen to attract high spending leisure customers and we have been able to secure through contracting, very competitive rates on premium class seats for our members in the future.

  • Looking back two years, in FY18 the FY19 pretax f/c was +£0.4m. Yet the outturn was a £6.9m loss. (Stockopedia numbers). Doesn’t this show poor profit visibility?

 We assume that Stockapedia took analyst projections as at November 2018 as their forecast basis. We can’t quiet tie in the numbers in your question as FY19 loss before tax reported was forecast by analysts to be £8.3m and actual loss before tax was £7.3m.The loss before tax forecast for FY20 by the analysts was £3.6m and we had an actual loss of £5.9m – the higher actual loss due primarily to the impact of Covid on our Net Revenue growth although we managed our costs to maintain a healthy cash position. 

To give you some context on our financial performance, when we listed in November 2017, the proceeds from the IPO were used to accelerate both our technology capabilities primarily through building our self-serve transactional digital platform but also to expand geographically across EMEA, Asia Pacific and the Americas. The period post IPO was always one of investment and losses were budgeted and planned for over this period. We did however have delays in our technology roll out in 2018 and this pushed out Net Revenue growth assumptions at the time and impacted our share price. Our technology is now up to date and working well in market with 22 client brands.

Whilst we became profitable at EBITDA level this year and cash generative in H2, as highlighted COVID has impacted our Net Revenue growth ambitions (Net Revenue CAGR since 2014 has been 24%). Our ultimate aim post COVID is to return to Net Revenue growth, move to profitability at PBT level whilst continuing to reinvest our cash to continue to grow the business. Please refer to our Growth Engine video on our website which provides an overview of our business model.

  • When you talk about ‘corporate clients’, do you mean that you’re organising entertainment for your clients’ customers, or is it something else

The service we provide is to the  High Net Worth or Mass Affluent customers of our corporate clients (banks, wealth managers or credit card issuers).  The customers usually either bank with the corporate client and/or hold a premium credit card. Our main products are Travel, Dining, Entertainment and Offers as well as other services some of which we developed during the COVID crisis which will continue to be relevant to our clients and our members in the future.  The corporate clients typically pay for their customers to have access to our service – this revenue stream formed over 90% of our Net Revenue in 2019/2020.

Alex Cheatle founded Ten in 1998 to become the world’s most trusted service business. Prior to Ten, Alex was a marketing manager at P&G and studied PPE at Oxford. He sometimes speaks at schools and reports that teenagers often understand the Ten model quicker than many 50-year old businessmen.

Mello delegates can register for updates at tenlifestylegroup.com/investors and follow us at www.linkedin.com/company/tenlifestylegroup/

QQ – Quickfire Questions

Edwyn Newman is a Chartered Electronics Engineer and a former Group MD in Thorn-EMI, at a time when it was the 18th largest company in the FTSE.  His professional career came to a halt in 2002, after three redundancies, at which point he decided he was fed up with building successful businesses for other people and that he would instead spend his time investing his own savings. 

Edwyn joined the Motley Fool in 2002, posting as KingMcKong, and initiated a series of regular investor dinners in Edinburgh, mainly, but not exclusively, attended by Scottish Fools. He has tripled his portfolio since then, using a mixture of pinching ideas, sticking a pin into the FT and dumb luck. He is a genial character who will be well known to TMF posters and Mello attendees.

KingMcKong

Andrew Robinson is third generation running a food and drinks distribution business in Yorkshire. He has been company secretary since 1999 as well as a director of two other companies. His back ground is finance and accounting.

An investor for over 35 years, the secret is simple ….. make sure the winners are greater than those that go wrong.  Married to Hilary a successful children’s author and BBC producer he has 2 daughters who both work in the City of London. One for the government and the other at Dulwich college.

Contact Andrew via Twitter @castlefordtiger or ADVFN Castlefordtiger