July 2017 UK Investor Magazine by UK Investor Magazine

UK INVESTOR MONEY // SHARES // INTERVIEWS

ISSUE 24 // JULY 2017

THE WALKING DEAD: After the

Tories, what’s next? 8 share tips / CEO interviews of Wishbone Gold & Optibiotix / Special book offer

UK Investor Magazine — 1 — July 2017

INSIDE 3 Here’s to you, packaging Chris Bailey

Intro

From The Editor

4 Three resource shares to buy for July Gary Newman 6 Q&A with Optibiotix CEO Stephen O’Hara Tom Winnifrith 10 It’s a political crisis Tom Winnifrith 11 Is Sanderson Group a buy? Steve Moore 12 What does the political turmoil mean for the markets? Tom Winnifrith 13 UK Investor Show special offer ends 30 July 15 CEO Interview: Richard Poulden of Wishbone Gold Tom Winnifrith 17 My sympathy for the Grenfell victims ebbs fast Tom Winnifrith 19 Three shares to sell in July Tom Winnifrith 20 The hard data shows that public servants are getting richer Tom Winnifrith 21 The House View: The Best Argument for buying shares

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

Welcome to the July edition of UK Investor Show Magazine which, by our standards, arrives fairly early in the month. This is achieved despite Steve Moore spending most of the past fortnight watching paint dry, that is to say going to Wimbledon and despite this issue being longer than most other recent editions. Well done to us! We hope that there is something of interest for you all in here. There are eight share tips for starters - 5 buys and three sells, yes that regular column from myself is now back. Of course the big non-market but market affecting news of the past month has been the election. The worst result would have been Government by a Labour led coalition of chaos. We have, instead, the next worst result, a Tory led coalition of incompetence and spinelessness. We look at what this means for us all and for our portfolios on page 7. In the background the team at UK Investor Magazine continue to work incredibly hard on the one day event that gives this magazine its name, Britain’s leading one day conference for those interested in making money from shares - www. UKInvestorShow.com. As I am sure you are aware, the event takes place on April 21 2018 which seems like a long way away. I suppose it is. But you cannot organise an event like this in just a few weeks. The behind the scenes work is immense. The main stage speaker lineup was finalised weeks ago and is our strongest yet as you can see on page 8. For 2018 we have made room for a record 135 companies to attend and present and man stands. We now have just over 90 of them booked in, with those joining the line-up in recent days including Victoria Oil & Gas, Berkeley Energia and Georgian Mining. And our team of writers and all the star speakers are now starting to put together the very special limited edition book for the day containing essays from all of the main stage speakers. This book will be printed as a limited edition and some copies will be on sale at £12.99 but those buying tickets to the show get a free copy, even if they buy the discounted tickets on offer on page 9. Anyhow, as the summer heat intensifies we will continue to work hard on the show as well as on the www.ShareProphets. com website. We hope this magazine offers something of interest to you and wish you all a relaxing and prosperous summer. Tom Winnifrith Editor www.ShareProphets.com UK Investor Magazine — 2 — July 2017

I just want to say one word to you: Packaging By Chris Bailey

ans of The Graduate will recognise the form, if not the precise wording of the title. Life has thankfully moved on from the 1960s and in today’s world of internet delivery and crowded consumer choice, packaging matters from both a practical and differentiating perspective. Longer-term readers here have heard me say all of this before. Just over a year ago, I opined on DS Smith (SMDS) that; ‘Numbers-wise if you put the stock on a forward x12 EV/ebit basis you can easily get a target price above 450p. More than double digit upside plus a healthy and growing dividend yield wrapped around an attractive packaging-advertising theme is good enough for me.’ Well finally, the shares appear to have decisively broken above this level. Happy days. Even more interestingly, they have done this on a day when the company announced a big acquisition and the placing of the equivalent of 7% of the share capital - events which often lead to a share price decline and not a rise. The reason for the increase? The company is copying the strategy it has successfully rolled out across Europe over recent years and is taking it to the US. Or as it puts it itself in the presentation document ‘global convergence of DS Smith’s customer requirements’. The glowing testimony

from a couple of chocolate companies (Nestle and Cadbury’s successor Mondelez) about the company and the anticipated strategy says it all. Well that’s a first…normally Europe – especially the much criticised Continent – is way behind the US of A. But apparently in that fine area of (wait for it) ‘performance packaging’, the US could learn a trick or three from Europe. And DS Smith believes it is the company to help bridge that gap via the purchase of Interstate, a familyowned packaging company based on the East coast of the US for a total cost of just over $1.1 billion. The multiples do not look overly crazy and, unsurprisingly in this low interest rate world, the deal is immediately accretive. More importantly – with the help of the capital raising – it not does horribly stretch the DS Smith balance sheet with net debt to ebitda pushing up to just over two times. Given the company’s history and focus on deleveraging via cash flow generation from its business exposure, I am not overly worried about this. Bottom-line, it is always smart to back sensible deal-making companies focused on cash flow generation and driving global standards and trends. The future is…packaging. Just ask Mrs Robinson.

Chris Bailey is editor of FinancialOrbit.com

UK Investor Magazine — 3 — July 2017

Three resource shares to buy for July By Gary Newman

ommodity markets continue to show high degrees of volatility and are very hard to read at the moment, due to so many different factors having an impact – they can be up one day on positive news and then swing wildly to the downside the very next day if news that could have a negative impact emerges. Although commodity prices themselves have less of an impact on the smaller AIM companies that aren’t yet producing anything, general sentiment surrounding the sector still plays a part. Amongst the smaller miners I do like to hedge my bets a bit and go for something that is unlikely to suddenly plummet a large amount overnight, and given that copper is still looking quite bullish moving forwards, you could do far worse than putting some money into Central Asia Metals (CAML) at the moment. Currently its market cap is around the £233 million level with a share price of 209p, and I believe that makes it look very attractive when you consider that made it a net profit of over $26 million for 2016, and at the end of June 2017 it had nearly $42 million in the bank and was debt-free. Now there are some other natural resources stocks on AIM that are profitable, but most of them need that money to either develop new assets or to keep existing assets running at the same production level. What is great about Central Asia Metals is that it is already paying a substantial dividend, with 15.5p in total paid out last year (as compared to 12.5p for each of the two previous years), and at the current share price that equates to a yield of around 7.4%, which makes the company worth investing in for that alone. Its production comes from the Kounrad operation in Kazakhstan, and for the first six months of 2017 that was slightly up at 7,027 tonnes

for the period, and with the Western Dumps now operational and having produced 1,300 tonnes since April, the company is on track to meet its full year guidance of 13,000 to 14,000 tonnes. The main risk here is the copper price, but given that the company is a lower cost producer even those risks are limited. The lower oil price over the past couple of years has meant that even some larger companies have taken a real hit, but if you can pick the ones that have put themselves in a position where they have a good chance of surviving, then if we do see an oil recovery to higher levels in the future, then you could be in for some substantial rises. One that I have covered here before and which I still think definitely fits the bill is Premier Oil (PMO) and with a market cap of just £241 million it is hard not to see upside at some point. The company had been struggling financially and at one point there were some doubts as to whether it would be able to carry on, but it has now all-but-completed a refinancing of its debts, along with the conversion into equity of some of those, and that is now just subject to ratification by the courts, having already been accepted by the debt holders. Although it is having to be cautious with its spending at the moment, it is still investing into projects when it needs to, in order to keep production growing. It has also taken advantage of the suppressed market to acquire assets as well where it makes sense to do so, and it recently announced it had taken a further 3.71% of the Wytch Field, adding a further 2.7mmboe of 2P reserves and 2C resources. It now holds 33.8% of this asset, which produces 15,000boepd, gross. Production has continued to see impressive growth, with the last update for the four moth period up to the end of April showing that it was up 44% on the same period in 2016, and now stands at 82.6koepd, and with guidance for the full year of

UK Investor Magazine — 4 — July 2017

75kboepd – excluding Catcher which should be online later this year.

contingent resources of 523mmstb currently and with possible significant further upside.

This will see plenty of volatility short term, but ultimately it is in the longer term as an investment where you could see the biggest gains.

The existing institutional holders didn’t seem happy about the placing, but I think that buying around this level and looking to hold for a few years, you give yourself a good chance of a very healthy return.

With the oil sector the way it is currently, I find it hard to ignore companies that have been able to raise large amounts of capital in this climate, as I feel it suggests that the institutions have confidence that the projects will succeed, and I think that is the case with Hurricane Energy (HUR). Arguably, this is one of those AIM companies that is typical of the AIM market, and having made a large oil find the share price did get ahead of itself. But now it is back down to around the 30p area following a $300 million placing at 32p, along with $200 million of convertible bonds being issued at the same time, subject to shareholder approval. This will enable it to get to first oil in 2019 at the Lancaster field off of the coast of west Scotland, and the Early Production System which it will pay for will initially produce 17,000bopd from the field, which has 2P and 2C reserves and

Hot Stock

ROCKETS Stocks Ready to take off hotstockrockets.com UK Investor Magazine — 5 — July 2017

Q&A Optibiotix Steve O’Hara takes some tough questions from Tom Winnifrith We have a large number of shares in Optibiotix (OPTI). We think they are very cheap at 65p other wise we would not be holding on. But the share price performance of the past year has been disappointing. I put this and other matters to Optibiotix boss Steve O’Hara. STEVE O’HARA: First of all I would like to say I appreciate the opportunity to answers these questions as I believe CEOs and boards have to be held to account by shareholders. I am also very happy to have a call with you to follow up on my answers. TOM WINNIFRITH: Steve, shares in your company have fallen by more than a third from their peak. That is taken by some folk as suggesting that something is wrong or that you are not making any real progress. How do you explain the share price performance? S O’H: I am sure all shareholders are disappointed with the current share price. This includes myself as the largest private shareholder and my family who invested substantive amounts at 75p. We also recognise their is uncertainty in small caps in general and with our large retail investor base we will get peaks and troughs as some shareholders take profit, and the uncertainty in the external environment can lead some retail investors taking a shorter term view. However, I can reassure shareholders that there is nothing wrong and as you will see in my answers to other questions we are in a stronger position today than when the shares were trading at 80p+ and the investment case continues to improve across all platforms. We are building a £200m+ company and are progressing through the phases of creating the science, building the IP, proving the science in laboratory and clinical studies and then commercialising innovative products. I believe the next phase of substantive share growth will come as we gain commercial traction with our products, which based on the high level

of interest and 30+ ongoing discussions, look extremely promising. Investors who attended my Investor Show or results presentation will be aware that this is all part of a structured plan and the reason we appointed a new Commercial (Per Rehne) and Sales Director (Christina Wood) in Jan 2017. They joined us at the end of March and as planned we launched products in May. As previously announced we have extensive global interest from our launch at Vitafoods and the next few weeks and months should see these deals closing out whereupon we will announce to the market which could transform the trading range. Investors should gain reassurance from our partnerships with DSM, Tata, etc as these are substantive industry players and these deals were developed over periods of up to 18 months with extensive due diligence of both our technology and IP. We believe this industry interest will continue with other partnerships with major players across all our platforms . We also appreciate that investors want news on revenues and this will come as we build our commercial partnerships and a trading history with our commercial partners ( see also answer to later question). TW: In the absence of any big sales contracts some fear that you are running out of money. Is there another placing on the way? S O’H: We have around £2m in the bank and have no plans to have another placing to cover

UK Investor Magazine — 6 — July 2017

the delivery of our existing plans. However, we are always looking for opportunities. This could be a dual listing on NASDAQ linked to support product launches in the USA, or an opportunity of strategic interest similar to SkinBiotherapeutics (SBTX) , potentially in cognitive health. In the case of SBTX we used the funds from a £1m placing to acquire IP from Manchester University for £260K in March 2016, and then an additional £400K using a convertible loan to support its development as a separate division and to prepare it for a future IPO (a total of £660K). The listing of SkinBioTherapeutics materialised value with OptiBiotix owning 41.9% of a well funded company valued at listing at £11m (giving us a value of £4.6m) with prospects for strong future share growth in the biotherapeutics market. In effect in 12 months we spent £660K to build £4.4m of value, hopefully with more to come (see later answer). TW: Last week you handed out large numbers of share options to key staff at 69.5p. Some of your shareholders who paid up to 103p for their shares wonder why staff get to enjoy such a large one way bet on the cheap? Why cannot you specify the individual sales targets for these staff which trigger the options package? S O’H: Share options are used to incentivise staff and help attract high calibre staff without having to pay out large salaries. They are particularly useful for commercial executives where, as in this case, we have linked the options to sales targets for each of their areas of responsibility, SlimBiome® for Christina, and LPLDL® for Per. I am uncomfortable giving our personal remuneration details but recognise that shareholders need to be reassured so will try to balance these two requirements. The options provided to Per and Christina do not become exercisable (i.e sellable) until they achieve significant triggers which release increasing portions of exercisable shares according to sales revenues in their areas of responsibility. These sales targets are significant with the lowest value for either allowing 10% of share options to be exercised and at a point where sales in that area alone would cover the company’s annual running costs. If either achieved the higher revenue target in their areas (SlimBiome® for Christina, and LPLDL® for per) the company would have a value based on revenues for that product alone in the region of £60+m. Clearly if both Per and Christina achieve the higher revenue the company valuation would be in the region of £120m+ based on these two products alone (i.e without taking into account our 42% holding in SkinBiotherapeutics, our SweetBiotix® products, etc). I am sure most shareholders would agree that incentivising staff to focus both effort and activity on rapidly growing revenues to build substantive shareholder value is of benefit to all concerned

TW: It was, from memory, almost two years ago that you announced a partnership with what was believed, and widely reported to be, to be P&G but since then nothing. Has P&G walked or kicked this into the long grass? S O’H: I am sure you can appreciate I cannot divulge commercial sensitivities as that is the easiest way to damage a relationship and scupper any deal. However, I can confirm we are in ongoing discussions with a number of major consumer goods company across our portfolio of SlimBiome®, LPLDL®, and SweetBiotix®. TW: Earlier this year you announced a partnership with Tata but again there has been radio silence since. I must ask again has that been pushed into the long grass? If not how big could it be? S O’H: This is very much in the short grass and progressing nicely with the prospect of new pastures. We are in weekly dialogue with Tata over SlimBiome’s® launch in Asia, and a number of other areas where we hope to develop further partnerships. Just to give an indication of the relationship I have met the CEO approaching a dozen times, the latest being last Monday in London, and we are in constant email dialogue (including this weekend). I am sure shareholders who have worked in the consumer goods industry understand there are commercial sensitivities over the launch of products and they should not mistake ‘radio silence’ for lack of activity or progress. Tata is a substantive partner and shareholders who have met me will recognise I won’t breach commercial sensitivities, particularly as we hope this is the first of a number of agreements. In terms of scale this is a substantive opportunity. Tata chemicals is one of India’s leading suppliers of food ingredients with many well known and respected brands with local knowledge, reputation, and sales and distribution capability which will help bring the benefits of SlimBiome® technology to India’s 29.8m obese men and women. I would hope that on the next occasion we will be able to announce Tata’s name in an RNS. It was frustrating after so much work went into the agreement that we were unable to gain approval to mention Tata’s name in any RNS. Tata Chemical’s view was that releasing their name via an RNS would likely require Tata group approval in addition to Tata Chemicals approval, and this could take another 6-9 months at substantive legal costs. After some negotiation we reached a compromise which allowed me to release the RNS and mention their name through an interview as the most cost effective and expeditious route to inform and update investors. TW: I read that you have successfully launched Slimbiome but we poor shareholders have been given no idea of when and where it will be on sale and what the potential revenues are for us or perhaps, more importantly, what

UK Investor Magazine — 7 — July 2017

sort of profits we might earn on it. Can you elaborate? S O’H: Currently SlimBiome is sold as snack bars and shakes as part of a weight management program under the GoFigure range of products via our majority owned subsidiary, The Healthy Weight Loss Company (THWLC). In our interims we reported that GoFigure® has gained over 1,300 customers, retail listings in over 86 stores, and 4 distributorships in the UK and Iceland. In the accompanying retail presentation we showed sales of £83K for GoFigure® from its launch in August to the end of our reporting period, November 30th (i.e approx £20K per month). This was achieved without any marketing giving us confidence in the products ability to achieve weight loss and consumer acceptance. The next stage of development for GoFigure is to increase the number of retail listings, particularly with major retail outlets, selling GoFigure® products both within the UK and internationally. As previously reported we are in discussions with a number of major retailers and would hope to be able to announce something on this in the not too distant future. This needs proper planning with the retailers who charge you for space in store, promotions (typically seasonal), to maximise our return. We do not see getting a retail listing as a major challenge as we have a lot of interest but need to do it properly to ensure we build sustainable sales and achieve a good commercial deal. This is part of Christina’s remit and you will increasingly hear of her involvement in this area. As part of a listing with a major retailer we will have to invest in product marketing at key seasonal periods and provide the marketing required to support their promotions (BOGOF etc). Whilst sales volumes and revenues with these outlets can be high (~£5m) they come with marketing, and promotional requirements which can erode margins (a retail listing can typically take 50% of margin). This means improving our supply chain so can meet the high volumes, scheduling production, filling, and packaging runs, improving formulations, and renegotiating with suppliers (or changing suppliers) to obtain a lower cost of goods at the substantially higher volumes to ensure we maintain our product margins. This takes times and whilst we recognise this can be frustrating to shareholders the end game is not just to gain a deal with a major retailer but to make sure we structure the business properly so we build sustainable sales and create long term shareholder value. TW: We still own 44% of AIM listed Skinbiotix. a) why have its shares not exactly flown and b) why not distribute the shares Optibiotix owns to your own shareholders as a dividend in kind? S O’H: I remain optimistic on the future of SkinBiotherapeutics as it has good technology and

is targeting large markets multi-billion dollar global markets where there is a real need for new science. The company is at an early stage in its development similar to the beginnings of OptiBiotix in August 2014 where it is creating the science and as such there is little news to promote share buying. I note the recent RNS announcing the progress in human skin models and the forthcoming start of human trials. I also note the RNS commented on building relationships with potential commercial partners. I would hope progress in each of these areas will provide shareholders the necessary clinical and commercial industry endorsement to provide an uplift in value. In terms of distributing the value in SkinBiotherapeutics (SBTX) to OptiBiotix shareholders we are looking to achieve this in the most tax efficient way, most likely as a ‘dividend in specie’ . The Skin distribution is quite complex but I am steadily making my way through the tiers of regulatory, legal, and tax issues with advisors and hope to have something in place in the near future. My challenge has been that Per and Christina’s only joined in March (we announced their appointment on contract signature in Jan but at executive level 3 months notice is standard) so given the high level of interest in both products and commercial focus I have had to provide a level of support which has impacted on the detailed discussions with SBTX share distribution. However, we made clear our approach to SBTX in my presentations at the Investor Show and recent investor meeting. This being :1. Our focus is on building value in SBTX 2. Our aim is to release value back to shareholders without unduly impacting on both SBTX and OPTI value. 3. We are working on the best way of achieving this with our advisors 4. We hope to have the details worked out in the near future and announced so shareholders will see how they can benefit TW: I note your announcements about the deal with HLH Biopharma. Since I’d never heard of this company and you have given no indication how much this deal is worth can you understand why I, and others, might not be so excited about it? Perhaps you could put me straight? S O’H: HLH is a well known supplier of probiotic and natural products who are one of Europe’s leading suppliers of probiotics to the pharmacy market. They are based in Germany and have a reputation for providing high quality scientifically validated innovative products. We are awaiting revenue forecasts but expect these initially to be

UK Investor Magazine — 8 — July 2017

more 6 figure than 7 figure. The value to OptiBiotix is in their reputation for scientifically validated products, speed of decision making, and their ability to access the European pharmacy market where margins can be much higher. There is a growing trend in ‘pharmabiotics’ products of this type as they build up a clinical evidence base and gain acceptance as pharmaceutical products. This decision to go with HLH was a mixture of tactical and commercial as it helps build confidence in the product from the pharmaceutical industry, provides early revenues, and starts to build sales momentum. Expect to see a mixture of deals with a range of national and international partners as I stated in May’s RNS: “We look forward to building commercial partnerships, market presence, and multiple revenue streams in both consumer health and pharmaceutical markets around the world.”

in both LP-LDL and SlimBiome. If this interest develops into deals I can see a path to revenues of £6m+ per year for each of these products in the not too distant future (some of these deals individually can be worth in the regions of £5m per annum). I am sure you can see that given the multiples in this industry (10-20) even if you use the lower multiple and more conservative estimate (and exclude a big deal) this would give a market valuation of £60m+ for each product or £120m+ based on these two products alone (i.e without taking into account our % holding in SkinBiotherapeutics, our SweetBiotix® developments, and our microbiome modulators, etc). Investors should also note that whilst our focus is currently on the European market we are receiving growing interest from the US, and Asia. This creates another scale of opportunity.

TW: With your enlarged sales team how soon do you expect to have announced enough deals for your brokers to put credible sales and profits forecasts out there?

TW: If you believe the shares are cheap why are you and your fellow directors not buying shares in the market?

S O’H: Per and Christina joined us in March of this year as Commercial Director and Sales and Marketing Director respectively and are focusing on converting the high interest from Vitafoods into commercial deals. Whilst trying to get deals across the line we have to be careful we don’t compromise on deal quality and create problems for the future. Typically we look to includes sales targets with minimum guarantees and penalties if a partner fails to perform (e.g. loss of exclusivity). This normally requires the distributor to carry out a market analysis with its sales team which informs the numbers. As these companies are launching a new type of product in a new market their sales teams often struggle to relate it to existing offerings and as such many distributors are reluctant for us to disclose commercial sales targets publicly.

TW: And finally where, in 1, 3 and 5 years do you see your company being and what sort of value is achievable?

We appreciate that investors want news on revenues and this will come as we build our consumer and pharmaceutical commercial partnerships across national and international territories and develop a trading history. The key word in your question is ‘credible’ and as I have often alluded to we are just transitioning from the R&D phase to the commercial phase. At this stage without all the deals being in place and a history of distributor performance (not all will deliver on what they promise) any forecast would be nothing more than a guess and lack any credibility. As we conclude more deals in the next few months and can share how they are structured (e.g profit share, royalties, minimum guarantees -which vary by territory and channel) we can look at building projections which have an element of reliability. Just to help inform investors I have worked with distributors for years and they can be very difficult and dismissive over new products so was pleasantly surprised at Vitafoods at the high level of interest

S O’H: We are in discussions with partners on a number of deals on at different stages of development. Some of these are quite late stage which if concluded, despite being no guarantees, could lead to a substantive increase in share value and call into question the appropriateness of shareholder dealings.

S O’H: Future valuation is always difficult to predict but given the growing interest in the microbiome, our R&D developments, and early sales interest I remain extremely optimistic about the company’s future and its valuation. The Board believes OptiBiotix is at the leading edge of an emerging market, forecast to become one of the world’s fastest growth areas with and Markets and Markets forecasting the microbiome market “ Growing at a CAGR of 22.3% during 2019-2023” and clinicians in the USA describing the microbiome as ‘healthcare’s most promising and lucrative frontier’. OptiBiotix now has a broad portfolio of IP, multiple technology platforms, and an increasing range of products entering the market. Provided we can convert interest into revenues can build a microbiome business with significant future value for shareholders. Everything is building nicely both in the external environment with growing interest in the microbiome and OptiBiotix building its strategic capability. Whilst there are no guarantees we would be disappointed if we were unable to build OptiBiotix into a £200m+ company in the next few years.

UK Investor Magazine — 9 — July 2017

Yes it is a political crisis, what happens next?

Writes Tom Winnifrith

f there was an election tomorrow the Tories would lose and Jeremy Corbyn’s Labour would either have an overall majority or would be ruling with the support of a coalition of chaos. That is the awful fact that faces those of us on the right and there is no escaping it. At one level we must be honest and accept that the national mood has changed. For seven years the Tories have increased Government spending at a record rate and failed to - as promised - clear the deficit. Britain has the highest National Debt in Europe. Yet somehow, our fellow citizens have become convinced that evil “austerity “ must end and that we need to start believing in money trees. We businessmen, we entrepreneurs, we wealth and job creators are pariahs who deserve to be taxed more heavily to pay for “fair pay” for the non productive sector. The zeitgeist has quite simply changed. It gets worse than that as the Tory party looks and acts like a joke. All we need now are a few sex scandals and we are back to the hilarity of John Major’s “back to basics” era. Mrs May has no majority to implement radical change and so she probably could not even get Parliament to accept John Major type proposals on traffic cone regulation. She is a dead duck Prime Minister leading a party seen even by its natural supporters, like myself, as squalid and pathetic. There is that parlour game where you are asked to say what animal a political party or a politician reminds you of. Mrs May’s Tories is on old horse, once a proud stallion it is now, ravaged by fleas and disease and almost begs for a one way ticket to the glue factory. Perhaps a new leader will

revive its fortunes but switch leaders too close to the last poll and the calls for a fresh election would be tumultuous so perhaps the May nag will be shot post Brexit or least well into 2018. But given the lack of a obvious replacement who can unify a fractious party and also inspire the electorate ? It is hard to see the Tory’s zooming in the polls whoever is in charge. Tory MPs are a scheming, ruthless bunch who care about themselves before all else. If they see that an election will see some of them lose their seats and those who remain cast into opposition they will do whatever is needed to postpone that grim day. If they have to swallow principle and unite they will do just that. If they have to bribe the DUP with even more cash they will. In short the outlook is for this Government lasting far longer than many suggest, possibly even for five years. The Tories will cling onto power until the bitter end. But it will be a feeble sort of power. Sure they may draw ministerial salaries, they may Govern in name but they will not have the power to push through any meaningful legislation at Westminster. Maybe a watered down Brexit bill will get through but that is about it. Then after the limbo the Tories will, rightly, be punished. Brace yourselves my fellow capitalists. The Tories will be hopeless, the deficit will widen, the debt will balloon, workers rights will strengthen as the party of capital tries - and fails - to buy support. But then it will get worse for us all as the next Government will, I fear, without doubt be Labour led.

UK Investor Magazine — 10 — July 2017

company profile Sanderson Group Does (digital) opportunity knock? By Steve Moore

anderson Group (SND) recently announced results for its half year ended 31st March 2017 and that “the good order book, healthy balance sheet, strong reputation and track record provide a good level of confidence that the group will continue to make further progress”… The group is a software and IT services business specialising in digital retail technology and enterprise software for, primarily small and medium-sized, businesses operating in the manufacturing, wholesale distribution and logistics sectors. Its business model is to generate a high proportion of sales from pre-contracted recurring revenue (50% of total revenue in the recent halfyear period), complemented by incremental and new sales. Particular emphasis is being placed on enhancing the range of mobile and ecommerce solutions in Digital Retail and on further strengthening the proposition in its Enterprise Software division, especially in food & drink processing and wholesale distribution - “where further investment is planned together with complementary products covering the logistics, fulfillment and supply chain market areas”. The recent half-year results showed an adjusted pre-tax profit of £1.4 million on revenue 10.5% higher than in the corresponding prior year period, at £10.9 million, generating earnings per share of 2.4p, up from 2.2p. After particularly £0.8 million of equity dividends paid, cash (net) increased to £4.5 million, whilst the interim dividend per share was increased by 10% to 1.1p – with it added “the board remains committed to maintaining a progressive dividend policy”. It was also added that “there does seem to be a slightly more considered approach from some customers”, but also that “the general economic environment still seems good” and I continue to

look for full-year earnings per share comfortably above last year’s 5.5p and a total dividend per share of 2.6p+ (last year: 2.4p). The shares are now just over 70p, capitalising the company at sub £40 million. I consider circa 90p a fairer current share price - and expect delivery of a stated focus on “both organic and acquisitive growth, achieving ‘on target’ results, increased earnings, maintaining good cash generation and a robust balance sheet” to take them there.

Management With board experience from ACT Group, the second UK IT company to be listed on the London Stock Exchange, Chairman Christopher Winn joined Sanderson in 1995. Following restructuring and the demerger of the original group, he led Sanderson Group plc to AIM admission in 2004. Chief Executive Ian Newcombe has more than 30 years’ experience in software and IT services and became Managing Director of the multi-channel retail division of Sanderson in 2005. He was appointed to the group plc board in 2013 and appointed Chief Executive in 2015.

UK Investor Magazine — 11 — July 2017

A country in limbo - what does it mean for the markets? Writes Tom Winnifrith

arkets do not like uncertainty. That is one of those old stockmarket truisms like “Wear shorts in summer” or “Sell in May” but it is a truism which is actually er... true. As such the uncertainty as to whom will be PM after Mrs May, that is the next Tory leader and what legislation this feeble DUP backed Tory Government can enact is not good for shares. Worse still is the uncertainty of just how extreme the next Government, that is to say the one in charge after Labour wins the next election, will actually be. All of that is clearly bad for shares. But... The FTSE 100 is barely moved since the election. While those inside the Westminster bubble really do believe that the whole country revolves around them hanging on every word they say, the reality is that they do not. And for market watchers there are wider issues afoot: will UK economic growth slow this year and next? Will that put base rates on hold so see Sterling slip further? Will the house price correction accelerate and turn into a crash and what affect will that have on consumer spending? At a wider level, will the China debt fuelled bubble burst and what effect will that have on the Rest of the World? How about oil prices? Or the unwind of QE & ZIRP in the US? If America sneezes we all catch a cold. These are the big macro issues and how they will play on both investor sentiment and corporate

earnings are what will drive the UK stockmarket higher or lower over the next year. However, having dismissed the antics of the creeps at Westminster as less than critical there is a longer term issue which does matter for shares. It is now clear that the Tories will try and row back on austerity, or fauxsterity as it should more accurately be termed. George Osborne pretended that he would balance the books by 2020. Phil Hammond had said he wanted to have a balanced budged by 2025. It is a slam dunk that even that target will now be abandoned as the Tories implement Labour light policies in a vain and doomed attempt to buy popularity. And after the Tories deservedly lose the next election we will get the real thing. The UK already has the biggest Government debt in Europe. Our debt to GDP ratio is c90% and will increase steadily during this Parliament and more quickly in the next under Labour. The mood music is set - taxes on the wicked rich and on business will go up over the next decade. In due course such profligacy will have a number of certain outcomes: higher base rates, reduced tax receipts, a weaker pound and lower economic growth. This is the elephant in the room, the reason to be more bearish on UK PLC. It is a reason for all of us to increase our holdings of non UK stocks and collectives, it is another reason to reduce weightings in UK equities. There is no workaround on this one.

UK Investor Magazine — 12 — July 2017

Book UK Investor Show tickets NOW, save 33% and get a very special book worth £12.99 Offer ends July 30

he Global Group UK Investor Show is now recognised as the dominant one day event for folks who want to make money from shares. Now what is in store for 2018? Great things! But first... Book your seat NOW at a 33% discount and make sure you get a very special limited edition book worth £12.99 The Global Group UK Investor Show 2018 will be the 16th show organised by the team. The event may be many months away, on April 21 2018, but we have already secured our biggest and best ever main stage line-up. The stars of 2017 are all coming back: Mark Slater, Nigel Wray, Paul Scott, Jonny Hon, David Lenigas. Tom Winnifrith, Lucian Miers, Vin Murria, Matt Earl, Chris Bailey, Dominic Frisby et al. But there are new big name speakers joining the main stage lineup. We start with Nick Leslau, the secret millionaire and legendary property investor. Will the housing market have imploded by then? Is commercial property a busted flush? Nick is

the man with all the answers. Then there is the founder of Pizza Express, Giraffe and acerbic Sunday Times columnist Luke Johnson who will also be doing a special breakout room session. And then there is Ed Croft the genius behind Stockopedia - the man who shows how using stock screens and data can make you a better investor. For a limited time only we are selling tickets for the show with a 33% discount. That means if you book now it is only £8 for an investor class seat and £60 for a golden ticket (which gets you access to the after show drinks, guaranteed front row seats and a ticket to the Saracens cabaret featuring Luke Johnson in conversation with Nigel Wray, Private Eye’s Chris Booker and Dominic Frisby the comedian). You can get your discount seat by using the promotional code 66UK18 when booking at www.

UK Investor Magazine — 13 — July 2017

ukinvestorshow.com In terms of the companies attending... we are still nine months away but..... In 2017 there were 123 stands. In 2018 we have made room for 135 stands and already many companies from 2017 have committed to coming back including Nostra Terra, Skinbiotherapeutics, Ariana Resources, Optibiotix, Orogen Gold, Red Rock Resources, Alliance Pharma, Amryt Pharma, Powerhouse Energy, Kefi Minerals and Regency Mines... the list grows by the day.... as things stand we have 85 of the 135 stands booked in already and that list grows daily as you can see at www.ukinvestorshow.com

to the show you will be given a free copy. Buy a golden ticket and it will be autographed by the key speakers. Manage to scrounge a ticket for free and there is no book. UK Investor Show is now clearly the dominant one day event for those who want to make money from shares. And with our new big name speakers it just got better still. We hope the date is in your diary already so to get your copy of this limited edition one off book, get your cheap seat now. Just go to www.UKInvestorshow.com and use the promotional code 66UK18 when booking your seats.

And there are also new breakout session including a panel lead by Adam Reynolds on making money from biotech and small pharma. More on that later. The Big question is why book your ticket for April 21 2018 now? There are TWO Compelling reasons 1. We are selling tickets priced at a 33% discount for just a few weeks. Then the price goes up. That means £8 for an investor class seat and £60 for a golden ticket (which gets you access to the after show drinks, guaranteed front row seats and a ticket to the Saracens cabaret featuring Luke Johnson in conversation with Nigel Wray, Private Eye’s Chris Booker and Dominic Frisby the comedian). Prices go up in a few weeks but IF YOU BOOK TODAY you can get a discounted seat by using the promotional code 66UK18 when booking at www.ukinvestorshow.com 2. There is the book. Next April we will publish a book “The 21 top investment ideas of the UK Investor gurus.” Every main stage and big name speaker from Nigel Wray via Dave Lenigas and Adam Reynolds down to Darren Atwater will contribute 600 words on the most important lesson he or she has learned from investing. This is a VERY limited edition print run but while stocks last you will be able to buy the book at £12.99 from 21 April 2018. But if you buy a ticket UK Investor Magazine — 14 — July 2017

CEO INTERVIEW Wishbone Gold Q&A with Richard Poulden By Tom Winnifrith We are loyal shareholders in Wishbone Gold (WSBN) with shares held by the FIML company and also in my pension. Even my nine month old son Joshua has some... start them off early! But with the shares at 0.78p neither Joshua or I can bank on an old age lived in luxury just yet. So we have a few questions for Chairman Richard Poulden. TOM WINNIFRITH: In your most recent results statement you barely mentioned your Australian gold exploration assets. I regard them as worthless, is this as admission that you finally agree with me? RICHARD POULDEN: Actually what we said, Tom, is that we met our exploration commitments in order to retain the key EPM acreage. I do still believe there is value in this and the change in the rules in Queensland mean that we can surrender peripheral acreage in order to retain in full the areas we believe have most potential. TW: You have been a long term gold bull. Long and wrong some might say. Where do you see gold heading this year and longer term and why? How does that affect Wishbone? RP: I discuss this in most presentations I give and I have attached a couple of graphs for you from the most recent one. You are right that gold has been flat over the last couple of years at around the $1,200 mark falling from the 2012 high of $1,800. As long as there is shorting pressure from the USA I think this price will persist. At these prices Wishbone can make consistent profits. The big wild card in all this is a reset led by China. Around 50% of the physical gold traded in the world is traded via Dubai and the bulk of this is moving East to India and China the largest and second largest importers of gold in the world. I think the

world economy remains unfixed from the GFC so some reset led by China is perfectly possible. If this occurs it will include the re-monetisation of gold: that means $12,000 per oz. How will that reset affect Wishbone? All the shareholders buy boats I guess….. TW: The key to Wishbone is its Black Sand gold trading operation. Can you explain how that works, what makes you qualified to run such a show and the financial metrics behind it? RP: The three main elements of Black Sand’s operations, probably in reverse order of importance, are 1) trading in the local market where small turns can be made trading with in the Dubai market or sourcing for offshore purchasers. Although each trade may be small margins this is a good use of unemployed capital as it can generate far higher annualised returns than any other placing of those funds. 2) Importing gold from suppliers in South America and Africa which are typically imported against the security of a letter of credit. This turns the capital less frequently but generates higher margins. 3) The reverse integration strategy of supplying management and equipment to supplier mines of which Honduras is the first example. This provides the highest margin returns of all. How am I qualified to run it? Well, what qualifies me to run anything? The knowledge that ALL businesses must satisfy a reachable, measurable, profitable

UK Investor Magazine — 15 — July 2017

user need…..and that “industry expertise” is usually (but not always) an excuse for being a one trick pony. TW: Will you accept that Black Sand has been slower to ramp up volumes than you expected and why is that? RP: Yes, it has been slower and that mainly revolves an early reliance on too few suppliers so if one dropped out that accounted for a disproportionate amount of volume. TW: Can you explain the rationale of funding gold mines in Honduras as part of Black Sand? This was not part of the original business plan was it? RP: Firstly, it was always part of the original plan but we are not just “funding mines”. Our strategy is to secure the supply chain to Black Sand by gentle reverse integration back up the supply chain. What we are doing is very similar to the strategy followed by Marc Rich & Co before they became Glencore and then merged with Xtrata. We are funding EQUIPMENT which is fully insured and run only by trained operators. This equipment is being supplied to existing small mines which are already in production. These are all fully permitted and not illegal but they are operating with makeshift equipment and manual labour. By putting in modern machinery we can increase the output of ore and the yield gained from that ore by 5-6 times current production. These mines are then contracted to supply Black Sand for 10 years. The mines benefit because the increased production put more money in their pockets, Black Sand benefits because it has a secure, integrated supply chain at higher than simple trading margins, the government benefits because all taxes are paid and the gold is accounted for in the GDP calculation and the country benefits because we enforce proper environmental disciplines. We expect the payback on each loan to be around 5 months and until it is paid back 95% of the net profit come to Black Sand. This is a model which may well be applicable in other countries and we have had approaches from some of our other suppliers already. TW: In the recent results you say you expect quite a few Honduras deals to come through soon - how soon will they make a bottom line impact and how big could or will that be? RP: We are budgeting for the first Honduras mine to be in production with the new equipment by the end of August. We will see how that develops but we have others planned to follow on. I have said that this is the most profitable part of our operations

but I can’t really say anything else for fear of the thought police: we will announce as soon as we can! TW: There was a hugely discounted placing with Beaufort a while back which really kicked the shit out of the share price. How much cash do you have now and is another placing looming? RP: Tom, I am the largest shareholder of Wishbone and since I am paid in shares the last thing I want to see is a falling share price. However in this game performance always dwarfs dilution; of course if there is no performance at all then you are stuffed! So within this it is always a balancing act of matching different lines of finance to the company’s needs. Placings have a role in that: it cannot just be the Animal Farm view of “no placings/four legs = good” “Placings/two legs = bad”. As regards the cash we have just announced our results for 2016 where we said: “At the end of the period under review, Wishbone Gold held cash balances totalling US$1,065,161 (2015: US$263,741). The Directors are all paid minimal salaries and, at the Company’s option, these can be paid in ordinary shares. During the period under review and during the current year all Directors’ salaries have been paid in shares in this way”. A further point being we still run a low overhead operation. In conclusion, if we see a viable opportunity for growth we will always raise funding to pursue that opportunity. Because we cannot tell the market, under the rules, day to day, what we are doing, our reasons for pursuing funding may not be immediately obvious. If you look back now you can see that without last years equity we would not have been able to pursue Honduras as we have as the debt facility we have is limited solely to trading. We do have a plan. TW: Finally where do you see Wishbone being and what will it be valued at - and why - in 1, 3 and 5 years? RP: Our objective is to make Wishbone the premier exposure to gold on AIM. I believe the mixture of trading and controlling our supply chain is the optimum route to that and contrasts strongly with the typical AIM pure exploration company which is capped at $20m and needs to raise $200m to get to revenue. Valuation? Tom, the Ministry of Truth will be after me if I make any serious comment on that but I would say I expect it to be valued substantially higher than it is now if our strategy plays out as we plan. We will continue to expand the team when strong candidates become available and as you know I am never averse to sensible acquisitions.

UK Investor Magazine — 16 — July 2017

My sympathy for the Grenfell Tower victims ebbs fast - demands are not rights Writes Tom Winnifrith

f course it was an appalling tragedy. Of course ones heart goes out to those who died and to those who were injured and to those who grieve after the Grenfell Tower fire. But four weeks on the demands of the survivors grow louder and they are in many cases just plain unreasonable. Anyone who dissents from their demands for justice (on their terms), free unicorns and whatever else is their “right” is flamed as an uncaring, heartless bastard. At the risk of being viewed thus... There are some who say that the old, rather posh and Cambridge educated white Judge appointed to lead the enquiry should be fired as he cannot relate to and empathise with the victims. Hell’s teeth the man’s job is to find out the truth, the whole truth and nothing but the truth. Not to hug a victim. That is what Prince William or Jeremy Corbyn are for. These calls display a wider prejudice that is abroad in Britain today. Perhaps, as an aging, white, fairly posh but certainly upper middle class man who went to Oxford I am not allowed to suggest that some of us in that category - and even some fellows from Cambridge - are actually quite clever. Surely we want clever folks heading up enquiries like this? But we live in an era when affirmative action is regarded as universally

welcome and meritocracy seen merely as a mechanism to keep folks like Sir Martin MooreBick in well paid jobs. Move over Sir Martin for someone more “qualified” in a post fact sort of way. I note that 14 families from the tower have so far been rehoused. Only 14? That is a disgrace say you. But then we learn that 149 offers of accommodation have been made but 135 have been rejected as not good enough. Let us be straight most of these folks were Council tenants but they are rejecting properties that are the same size because they are not good enough. As one chap told Radio 4’s Today show this morning as he justified turning down a place without seeing it “they had not read my demands.” He added that the place was 30 minutes walk away. Hell’s teeth, if you are not picking up the tab is a 30 minute walk really a breach of your human rights? Simply because your flat burned down you have no right to demand an upgrade to a place & location of your choice. But to demand sympathy when you do not get your “demands” met really is pushing it. The victims equate “demands” with “rights”. There are no rights here. And we also have the thorny issue of subletting. One reason that we cannot know exactly who died yet is that subletting was rife at Grenfell

UK Investor Magazine — 17 — July 2017

Tower as indeed it is in council accommodation across central London and even into the newly fashionable parts of the East End. Here is how it works. I pay a minimal amount to the Council for my 2 bed flat in Grenfell Tower. I then sub let that flat at market rates - £2000 pcm which sounds a lot but when the new “tenant” can claim the lot back on Housing Benefit it is really not that hard to find. With that £2000 I go and rent larger property like a 2 bed terraced house in a downmarket part of London - try East Ham - for £1100 pcm ( yes I found a place on the Internet at that price). I thus net £900 pcm tax free for doing nothing. Chuck in all the usual welfare benefits and bob’s your uncle. What is not to like? Well what is not to like is that you are stealing from the taxpayer and by sub-letting you are allowing someone to jump the waiting list for a Council flat in Kensington. You wonder why there are big waiting lists for Council properties in London? Endemic sub-letting is a real issue. As far as I have seen those who were illegally sub-letting are now being offered new free accommodation. Why? So is the Egyptian tenant of Grenfell Tower who was initially feared dead but then appeared alive and kicking saying he had been on holiday in

Egypt. Oddly this fellow - living on benefits - was in the UK having gained political asylum because he would have been persecuted in Egypt. Natch he too has a “right” to new free accommodation. As of course do the various illegal immigrants who lived in Grenfell Tower. They now have a “right” to demand not only permission to stay here though there is not standard factual basis for that but to get full benefits and free housing too. We ignore the fact that more unicorns for the illegals means fewer unicorns for those who are genuinely entitled to free housing and welfare. Meanwhile folks from miles around appear to be complaining that they remain traumatised and have yet to be offered the counselling they were promised which is, of course, one of their “human rights”. One wonders how our grandparents managed to survive the blitz with this basic human right not on offer. Slowly some folks are starting to ask these awkward questions but to do so risks being slated and demonised. I suspect that as some residents hold out forever and a day insisting that their demands, however unreasonable, are simply a basic human right, more and more folks will stand up and say that compassion has to have some limit.

This article first appeared on www.TomWinnifrith.com

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newsletters.advfn.com/tomwinnifrith UK Investor Magazine — 18 — July 2017

Three shares to sell in July By Tom Winnifrith

he FTSE 100 remains in the mid 7000s and is far too high in my view. That is if one looks at it in old fashioned terms by contrasting sky high PE ratios wi8th pretty unexciting and uncertain prospects for earnings growth. But young people tell me that “it will be different this time.” base rates will stray low forever, inflation is so 20th century and there is an app to cure every ill that faces us. The great robber barons of the 21st century have built industrial edifices such as facebook and Tesla that will improve and transform the outlook for mankind. So what about Tesla’s losses or facebook’s sky high PE? This is the new paradigm. I am unconvinced and remain sure that the world will be swallowed up in a sea of unrepayable debt and that the great funny money, ZIRP and QE experiments, will end in tears. But pro tem it is pretty hard to be a bear. Companies can come out with the most awful news and investors just shrug it off. “So what if it has committed fraud, is almost out of cash and the FD has been sending out photos of him with his dick in the office cat? The bad news was already discounted” And so shares just head higher. For we bears our time will come but we need patience until then. And so what to sell just to while away the time? Let us start with the Bulletin Board Moron current ramp de jour. That is to say MySQUAR (MYSQ) at 4.2p which values this Cloudtag (CTAG) of the East at £24 million. My target here is 0p as this company is simply drowning in red flags in the same way that Bulletin Board threads covering this stock are drowning in bullish comments from folks who are quite obviously not your first picks for the pub quiz team. I have done quite a bit of work on this company and the first thing to flag up is that its CEO Erik Schaer is no Bill Gates. His business record over 20 years in the US was a litany of failures and allegations of corporate wrongdoing. In 2015 he surrendered his US passport having moved to Vietnam. Why? Mysquar’s reported income seems to come almost entirely from other strange entities controlled out east by Schaer. The breakdown of this is not made explicitly clear and indeed the company does it best to pretend otherwise. The company claims to be on the brink of profitability but is clearly burning cash, another red flag, even with all the related party revenues. Without them it would have been insolvent eons ago. One thing is for sure: its flurry of misleading RNS announcements tells you that a bailout placing is looming. Since there is no institutional support this

is a bucket shop special but will even a deeply discounted offering to City spiv flippers get away? As with Cloudtag, folks such as myself and the great Northern bear Waseem Shakoor are on the war path and the shares are starting to tumble as new facts emerge, new inconvenient truths and as the reported metrics are - at last - subjected to real analysis and scrutiny. If there is no placing then this will be another AIM Casino casualty by the Autumn. The great uncertainty is whether - as with Cloudtag - the Nomad, in this case SP Angel, a firm that specialises in floating resource stock shite so probably sees listing this shite as prudent diversification, tires of signing off on nonsense and quits. No-one else will act for Schaer so if that happens it is game over. However you look at it this is the sell of the month. So what are my two other sells? As I noted above, in a late stage bull market more or less everything goes up however bad is the news it serves up,, however appalling the fundamentals. Those that buck the trend must surely be doomed. My old pal the bear raider Evil Knievil says that the best time to kick a man is when he is down and so I return at this point to two old favourites both of which see their shares at all time lows but both of which are heading for 0p. Avanri Communicatioins (AVN) shares peaked at almost 800p at which point the CEO David Williams, a man who boasts of misleading investors with faked demonstrations to raise cash, made out like a bandit selling his own shares. The stock is now c 8.5p. So: CEO a wrong’un, drowning in debt, guzzling cash, business model a proven failure, panned by regulators for dodgy accounting ( after I tipped off the FRC!), macro-economic trends in its industry getting worse, it is almost a perfect storm. Avanti debt is rated sub junk and that tells you all you need to know about the value of the equity. It has none. The fat lady will sing it is just a matter of when. Advanced Oncotherapy (AVO) is not drowning in debt it is running out of cash. It has just a few weeks money left and keeps going with a death spiral on steroids from Bracknor. But as its shares (once 350p at peak ramp but now 12.5p to sell) slump that form of funding becomes ever harder to sustain, there is just not the liquidity. The business model is a proven failure, so-called orders have disappeared, the company does not even have a working product, its board are overpaid and colourful, it has serially misled its investors and thus its own check list of doom is almost perfect. The fat lady is waiting on the edge of the stage and could waddle into the spotlight at any time.

UK Investor Magazine — 19 — July 2017

Public sector pay has gone up by just 1% since 2013 - the hard data that shows that is not true By Tom Winnifrith

he debate about public sector pay is predicated on the myth that it has gone up by just 1% since 2013. The liberal media, the Labour party and indeed almost everybody just accepts this is a fact. But it is not true. It is fake news spun and reported by those who cannot be arsed to check their facts. If you actually bother to check the data from the Office of National Statistics you will see that it is a lie. In 2013 the average wage for public sector employees was £26,933. That was above the overall national average wage showing that public sector workers actually earn more than private sector workers. By 2016 the ONS shows that number had increased to £27,974 - which works out at an average wage increase over three years of not 1% compounded but of 1.3% compounded. That is a striking difference is it not? It is a 30% difference in the annual claimed increase. So how has that happened? It is very simple. All public sector workers received a standard 1% increase per annum. But in vast swathes of the public sector - certainly across the NHS, schools and universities there are what are termed grade increases. You do the same job with the same title but move up a grade and so earn more. These grade increases are not decided on you having achieved certain goals or delivered on certain targets as would be the case in the reviled private sector but simply are a recognition of years of service. In the real world of the private sector they would thus be described as a “pay increase” but in the make believe world of public sector finances they are described otherwise. I have written before about how when you hear

public sector workers bleating on about how they have to go to food banks, have had no pay increases or earn less than the private sector they are telling straight lies. But now the hard data from the ONS shows the biggest lie of all. Public sector pay has not been increasing by 1% a year but by 1.3% per annum since 2013 - it has been going up in absolute terms by far more than its claimed.. Of course there is nothing wrong with that. The economy is growing and that means that private sector pay is going up by more. But public sector workers should remember the dark days of 20082010 when the economy was in crisis. At that point average private sector pay actually fell while in the public sector it carried on rising in both real and in absolute terms. In bad times the public sector wins and in good times..it wins as well. In the private sector it is very much a case of the years of the lean calves and the fat calves. Indeed if the calves get too lean there is no calf. In the public sector a recession does not bring the risk of job losses as it does for we evil capitalists. Next time you hear the BBC, Channel 4 Fake News or the rest of the liberal media banging on about this wicked 1% pay cap please remember it is just not true and if they could be bothered to check their facts or had a desire to report non fake news they would be behaving otherwise. They should also put the pay rises of 2013 onwards in the context of what happened in 2008-10 and remember that public sector workers simply do not earn less than those of us in the accursed private sector. They earn more, get better pensions - paid for by the grateful taxpayer - have, on average, more sick days and get longer holidays..

This article first appeared on www.TomWinnifrith.com

UK Investor Magazine — 20 — July 2017

the house view The best argument for buying shares...

he stockmarket remains defiant and at levels that any rational being would find hard to justify. Bulls argue that “it will be different this time” in that we now exist in an era of permanently low base rates or in one of such dramatic technological advance that all historic concepts of normality no longer apply. Those of us who remember even as far back as 2001 let alone 1987 or 1974 or who have read about the 1920s (loose money, massive technological advance) will know that it won’t be different this time. It never is. Bulls will also tell you that the PE ratios for FTSE 350 stocks are not extreme by historic standards. In that respect they are correct but only partially so. PE ratios have been higher but not at this point of the economic cycle. That is to say they have been higher when E’s (Earnings) have been crushed at the low point of the economic cycle. The market is prepared to pay a very high multiple of those earnings because it knows that E’s will bounce sharply from the lows. That is the cyclical nature of capitalism for you. But the low point of this economic cycle was 2008 to 2010 as the great financial crisis caused chaos across the ball park. Since those dark days E’s have been rising steadily as demand has gone up and as companies - in the early part of the recovery - took out costs. Here we are in year 8 of a bull market and there is no reason at all why earnings will jump sharply next year. If anything the macro risks are on the downside and we expect EPS growth to be, at best, pedestrian. As such, for this part of the cycle the sky high PE more than discounts the earnings growth on offer. So again the bulls are wrong. There is however one compelling argument for equities and that is where else do you put your cash? Do you really fancy the idea of getting a yield of anywhere between sod all and minus sod all for lending to the most profligate wasters of other people’s money on this planet? That is to say, buying Government bonds. We don’t either. How about property? That looks even more insane. The bubbles there are starting to burst already. Against that the idea of buying a portfolio of FTSE 100 stocks all yielding 3%+ and with what appear to be relatively safe dividends does not look that crazy. We can’t say that we are rushing to buy but where else do you stick your cash? It is a weak argument for overpaying for equities but it is an argument that seems to be winning the day. For now at least

UK Investor Magazine — 21 — July 2017

Saturday 21st April 2018 | London Save the date!

UK Investor Magazine — 22 — July 2017