Monthly Archives: August 2017

School Fees Planning

Several studies have found that over the last couple of decades school fees rose more than twice as fast as Consumer Prices or Average Wages. Even if this trend does not continue, it is certain you will need much more than an average wage if that is what you are relying upon to pay school fees. Of course it is not just school fees to worry about. University Tuition Fees might be funded by Student Loans, but much of the cost around attending university is not. For most people some additional planning is required.

Whether investing a lump sum, or through a regular savings arrangement, spreading the load across a longer timescale will enable the investments to grow more effectively, making the project more manageable. Planning ahead also permits a longer-term investment strategy that should deliver superior returns. In any case, it is always important to match the investment portfolio’s risk to the school fees’ liability.

For those who have already missed the long-term planning boat, there are some other ideas worth looking at. Re-mortgaging, or drawing cash from a pension, can release a school-fee-fund. For the less adventurous this can be held in an off-set account, mitigating mortgage interest, but, for the more adventurous, it can be invested – ideally within a tax efficient wrapper – to produce returns more in line with school fee inflation.

It is also worth noting that each Grandparent can give up to £3000 per annum without incurring an IHT liability; an efficient way to transfer both cash and knowledge across the generations. A final thought is that around one third of private school pupils receive some sort of scholarship or bursary, so that is always worth investigating too.

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Stocks in Focus: Intertek

This week I am looking at Intertek Group Plc, the global inspection, testing and certification company. The specialist organization has more than 42,000 employees across 100 countries and provides quality and safety assurance to companies across several industries.

The company’s latest interim results were better than expected for the first six months of the year. Revenues were up nearly 14% compared to last year, while pre-tax profit jumped almost 28%. Management also upgraded their profit margin guidance from “moderate” to “robust”. Indeed, it has been a good couple of years for Intertek and this has been reflected in the share price, which has risen nearly 125% since the end of 2015 to its recent all time high of 4880p per share.

The global quality assurance industry has seen rapid growth in recent years as regulators are demanding stricter compliance measures and increased focus on risk management following several high-profile scandals that highlighted gross negligence by the companies involved. Intertek was well positioned to capitalise on the increase in demand.

That said, its resources division, which provides services to the oil, gas and mining sectors, suffered a dip in revenues. This was due to lower capital investment from its clients, but investors seem to have looked past this isolated weakness given the division’s relatively small contribution to overall revenue and the fact that the majority of its oil & gas exposure comes from fairly stable sources of operational expenditure and cargo inspection. The question for long term investors, however, is whether the strong performance and upbeat prospect still leave the stock as an attractively priced investment given the recent rise in the share price.

https://www.nwbrown.co.uk/news/company-report-library/

Stocks in Focus: GlaxoSmithKline

I am once again looking at GlaxoSmithKline (GSK) following the announcement of its first set of results since the appointment of Emma Walmsley as Chief Executive. Ms Walmsley has been with GSK for seven years, having previously worked at L’Oreal in a variety of marketing and management roles. With Pharmaceuticals being the core of GSK’s business, it is unusual to have a CEO whose experience lies outside the core division – although the ability to review the division from a fresh perspective could well be advantageous.

The second quarter results were slightly ahead of consensus, giving Ms Walmsley a solid start to her tenure. Alongside the results she set out her key objectives for the first time, highlighting the need to prioritise improvement of the core Pharmaceutical division. In short, GSK needs to become better at developing and commercialising lucrative drugs. Despite launching high volumes of new drugs, the company has not seen many of these lead to huge sales. Indeed, GSK’s last “blockbuster” product release was the asthma treatment, Advair, which at its 2013 peak made up one-fifth of the group’s revenues.

Ms Walmsley therefore plans to strengthen the pipeline by a) increasing the amount spent on research & development, and b) channelling 80% of this spend on a narrower set of four therapy areas (Respiratory, HIV, Immuno-inflammatory and Oncology). She also plans to bring about a more dynamic/accountable commercial model to help the business make the most of its innovations.

With an enthusiastic, fresh CEO at the helm and a credible plan in place to increase productivity over the long term, GSK looks well set. However, it is fair to say that previous attempts to increase productivity and commercial success have not been entirely successful – and investors may therefore want to wait for some evidence of success before buying into Ms Walmsley’s vision.

https://www.nwbrown.co.uk/news/company-report-library/ 

Stocks in Focus: HSBC

This week I am looking at HSBC, one of the world’s largest banks, which delivered promising half year results at the end of last month.

The results showed a pre-tax profit for the first half of 2017 of $10.2billion, an increase of over 5% on the same period last year.  The better numbers were thanks to a boost from rising US interest rates, which generally enables it to make wider margins on loans, and an improved trading environment. In particular, the bank continues to see growth opportunities in Asia, where it makes three quarters of its profits.

Additionally, management announced a new $2billion share buyback, which will raise the amount of total stock that they have pledged to repurchase in the last year to $5.5billion. On the subject of management, investors are keeping a keen eye on the bank’s succession planning. Mark Tucker has recently been appointed as the new chairman and one of his first priorities will be to find a replacement for existing Chief Executive Stuart Gulliver, who is due to step down next year.

The shares have performed well of late and are currently trading close to a four year high following a rise of more than 50% over the last year. This leaves the shares trading on a relatively high valuation of 1.4x book value at a time of management uncertainty. Set against this, there are still plenty of positives. The bank is financially strong, offers an attractive dividend yield of over 5%, and is well placed to benefit from further normalisation of US interest rates.