This article is part of the series: Investing Matters Podcast
- Previous: The London South East, Investing Matters Podcast, Episode 13, John Stepek, the Executive Editor of MoneyWeek
- Current: The London South East, Investing Matters Podcast, Episode 14, Tim Rogers, the former CEO of AB Dynamics
- Next: The London South East, Investing Matters Podcast, Episode 15, Chris Dillow, Economics writer
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Peter Higgins 00:17
Hello and welcome to the Investing Matters podcast. My name is Peter Higgins. And today I have the huge privilege of speaking with Tim Rogers, the former CEO of AB Dynamics, he’s worked over the past several decades with lots of different companies, NASDAQ listed companies, AIM listed companies, SMEs, private equity, you name it, Tim’s involved in it and is a highly sought after individual with regards to evaluating the value the prospects and opportunities regarding lots of different companies in lots of different sectors.
We use the privilege to have Tim to give us a little bit of his time today. So thank you ever so much, Tim. So how are you doing today Tim?
Tim Rogers 00:58
I'm fine considering that apparently aren't several decades old.
Peter Higgins 01:02
No, in business several decades. That's what I'm saying. You're very experienced mate, which is why we're speaking today.
So I want to start, if I may, because obviously, with the notes I've got on you, you grew up in rural Oxfordshire, no surprise, got involved in agricultural studies as such, but eventually ended up at Exxon Mobil. That's a massive leap. Do you want to tell us a little bit about that to start with? So we get a little bit of your transition and growth?
Tim Rogers 01:28
Yeah, it was, you sometimes look back and thinking where were the turning points in your life. And first of all, was sitting up to my armpits in cow muck. Thinking agriculture is not really my scene, I noticed that the local farmers guarded their daughters with a great kind of proprietary so there's no way in there either.
It just so happened that down the road was a research centre run by the Exxon Corporation. And it was astonishing the difference between you know what I had seen and what Exxon if you remember, they managed to crash one of their tankers into the reef outside of McMurdo sound. And we will call to arms, basically, anyone able bodied working for Exxon had to get to Heathrow. And three days later, I found myself in a hazmat suit, steam cleaning seals and things off the bay.
At that point, I had a chance to actually move inside the Exxon organisation. And you know, in the 80s, it was very forward thinking they were working on total quality management, they look to raise the potential of people working in the company that already put me on an engineering course. So I was actually re-studying for engineering, I guess it was about then I realised that I was never going to be the best engineer in the world or the greatest scientists.
But I was quite a good generalist, I was able to sort of join the dots between the technology that we're working on, and the commercial opportunity. And at that point, Exxon moved me more towards the technical support and marketing. And then I got a taste for the sales and international travel and never really looked back and was able for the last 30 years to be able to travel around the world and see how does how other cultures managed and survives in the best and worst of humankind sometimes.
And it was really difficult sometimes coming back, having spent three months in Africa, coming back to the UK, and you know, finding people whinging about the fact that their microwave wasn't working. And it just got me thinking about, okay, you've got kind of one life on this earth, you know, we've had the privilege of being born into a democratic and free country, such as it is, and we should make the most of it. And that's when I really knuckle down and started thinking about what I wanted to do in my life and where I wanted to go.
Peter Higgins 03:31
I think that's pretty awesome. What you've said, I think there is a huge element of privilege in the Western world. And then we do moan and groan and gripe about lots of different things. So it is important, and I know that you do quite a lot with regards to giving back as well, which is why we're speaking, because you've got a huge philanthropic side. And I might speak about that later on as well. But I want to go back a little bit because, obviously you you studied agriculture, whilst you're at ExxonMobil, you obviously studied all the engineering aspects. And you went again, Oxford Brookes. So once again, you're mixing with the privileged and the wealthy and the very, very educated, how was that an experience for you?
Tim Rogers 04:06
Well, Oxford Brookes is the former Polytechnic University of Oxford. And it was interesting, I actually got my HNC from Oxford Polytechnic, but actually what happened was that they very quickly when they became a university, sent me a new certificate 20 years later, with the word Oxford Brookes on it.
I always say I studied at Oxford by always qualify, it was it was at the University of Oxford, they do have an awesome engineering reputation. Very lucky to have done that. In fact, it was the other way around when I started mixing with apprentices for the British Leyland works down the road. And that really gave me a view about you know, there's no shortcut for graft and work.
Okay, that's the first thing but there isn't a question of sort of working clever. And that's something I saw quite quickly. You can really make a difference if you a) working hard but b) working in the right way.
There's so many people are working really, really difficult, long, hard jobs, and you're thinking why are you doing that and they just feel are fixed by convention to continue to do what they always did. I didn't find that kind of problem, you know, having already switched careers at the age of 21, from agriculture to engineering, I was quite happy to take anything that came up any opportunity I saw, at that time wasn't particularly interested in getting married.
So I was able to take all the jobs that the married guys didn't want to take. That's really what it was. And I have to say, the lack of formal education because I didn't have a formal degree, it did hold me back for a while, which is why I actually took all the jobs that I saw coming up, because I thought, well, I can have to build this with experience to the point where now when I speak to my friends, we've got PhDs and I said, well, despite that, I'll still give you a job.
Peter Higgins 05:38
I love that. Love that. No, because all your various roles took you all over the world, Middle East, Scandinavia and elsewhere.
So you're building this absolute massive CV, which makes you the incredible person that you are now and sought after.
Now, I want to talk about some of that, because obviously, you've seen all these different cultures, but all these different mindsets regarding leaders and CEOs and business leaders. So in your eyes, in your experience, Tim, what makes a good CEO slash leader?
Tim Rogers 06:05
I don’t think it's a magic formula. Well, I did start to see culturally, as I always would drawn towards Scandinavian model of business, how they did business, I was impressed at the fact that the managing director would get sandwiches down on a Friday morning, and everyone will sit around, and he would talk in casual terms, all the workers, about the business about what they were putting up with what they're having to do, and very honest about things as well. And it was I think it was the honesty and transparency that actually struck me as I started to move up through the Exxon ladder and went to other corporations.
The downside of the American model is it does breed politics, really, really bad politics inside organisations. And there were a couple of times it was a revelation experience to me to actually come across people in departments are headed up departments whose own personal gain was more important than the company's that they were making decisions based on, you know, fiefdoms perceived slights, I was staggered, I didn't think those kinds of things actually happened. And I saw it more and more inside American and quite a few UK companies and Europe, I never saw it in the Scandinavian companies, I just saw a sort of open form of management I agreeably admired. It's not without its flaws, because sometimes you just wish they would make a flipping decision.
But on the whole, that was, you know, I always thought to myself, if I'm ever in a position where I'm managing people and managing teams or managing a business, it's these people I like to see. And in latter life, I got to meet people like Hans Rausing the Tetra Pak owner, while he sold his shares back in 1990. But he was it was quite inspirational, the way he thought about his business.
There's an element of ruthlessness there, don't get me wrong. I mean, every top professional has to have an element of ruthlessness, but also an element of humanity, and acceptance. And without fail, all of them have put their workers front and centre of their business.
To them. It was all about the people, people say this, but don't genuinely mean it. But I actually saw it happening. People would say to me, you need to have people in your business who are cleverer than you, you know, who know more than you, because if you're it, then the company is in trouble. And that's always been my mantra. And I was never bothered by the fact that people could come up to better decisions than me. So no one was no one cared. It took the credit than anything could happen. That was how I felt about it.
Peter Higgins 08:20
Yeah. And it takes me seamlessly to my next question, really, with regards to taking AB Dynamics from private to IPO, to a major size company with global contracts all over the place with OEMs. So you actually use that model. So tell me about that transition from private, IPO, floating, and then woosh? You know, because you were, you know, it was a small company. What size was it when you took over?
Tim Rogers 08:48
It was about four or 5 million turnover, it was quite profitable. It was incredibly well run as a small business. So Tony Best basically was the major shareholder, he was coming up to the age of 75, and really wanted to move the company on and he couldn't persuade his existing directors to do the management buyout that he felt the company was worth. And in truth, they were good engineers. And they were quite happy to let Tony run the business. So they just want to get their heads down and do stuff they enjoyed, which is a good thing and a bad thing.
Because obviously, you have to be sensitive to those people's feelings when you come into a company from the outside. Now prior to that, I had been involved the NASDAQ company, and I'd seen how you can get it catastrophically wrong. You know, I see the egos in play. As in the brokers and advisors running the show. I'd seen all things I thought yeah, this is a really a template of how not to do it. And I got involved in another couple of IPOs that went fairly smoothly. But I was a bit sceptical that AIM was going to be the right vehicle for AB dynamics. I was not at all sure.
So I got my feet under the table and there was an immediate things that had to be sorted but on the whole, it was a well run company. The first thing I noticed was their facilities were awful. almost put me off joining them. Only that amount of thought, this is such a typical thing that you see in the UK, excellent engineering businesses run out of sheds. Whereas you know, to go to Germany and Scandinavia, beautiful..
Peter Higgins 10:08
Lots of businesses have started in sheds and garages, though Tim come on to be fair!
Tim Rogers 10:12
They have, they should not they should not stay there. And that's my, although all they were doing was building bigger sheds. And I just thought the company deserves better than that. And it also needed a bit of a radical overhaul on its management. And I thought, an IPO and a listing would actually make this company investment ready.
But also give us the opportunity to get the company you know, root and branch audited, people don't realise that when you do go down the route of an IPO, you've got legal audit and financial audit companies that come in, and they go through your systems and they look at you. And they then are the nomad will only determine you're ready for listing, if they give you the full clean bill of health.
So they look at the systems and look at the management system, they look at the orders that look at how the things are set up. But look at the health and safety everything is gone through all the legal contracts, the validity of the patents, as a great opportunity to sit down, you know, and you know, the existing directors can't argue with the information they see in front of them and say, look, guys, I think an IPO is right for us.
You own shares in the business, your shares are worth nothing, because you're a private company, no one's gonna buy them as other people inside the company.
This is an opportunity to raise a bit of money, restructure the company and move on. Yeah, they said, but the city is a bit of a lala land. And I said, Well, let me deal with that you handle the company bit can support me when you can, but I'll get the company investment ready.
And I said, but are you risking everything? I said no, I don't think we're risking everything. What we did find back in 2013 is that we're only second company in the UK to go on to IPO a lot of IPOs have been pulled in March and April because all following the credit crunch. It was not an easy experience, actually. But the trick really was in my opinion was to keep the nomad and the broker separate.
They talked about Chinese walls, maybe it's got better. But there were times where I needed the nomad on our side when we had issues with the broker and vice versa. Build the picture, tell the story and select the investors that understand your story. And whatever you do, don't switch the story to suit the investor. And I've seen that a few times. They'll do still happening.
Yeah, we're looking for more IP related Oh, well, you want IP is my other presentation about IP. If the person who wants to invest, they see hundreds of people a week, if you're not fitting their current model, or their current thinking, there's no point trying to force fit it in there. Because in two years’ time, you'll have a huge problem when you try to try and get them out of it. Or they dumped your stock one day without asking you got to get real into the sense that what happens on the week of the actual IPO is incredibly stressful, because the broker doesn't tell you really what's going on.
He doesn't tell you how his bookbuilding is going. He has to sort of speak to other people who is talking to them say well, okay, we're gonna go to market this is the share price. If you want to buy a million is this you want to buy 2 million that's that. And then the other guy's got to work out the other side is okay, as he really got a book that's built, or do I lowball it at the end of the day that what they're trying to do is get an oversubscribed offer. And the other important thing I thought and we've got quite sort of keen advice on this one is it don't overprice your company, whatever you do, it doesn't really matter.
You don't have to raise the money on the first float is whatever you do don't dump all the founder stock, there was a requirement to create stock for liquidity. And there was a requirement to perhaps create new stock, because you want to be able to get that EIS is qualifying and VCT qualifying.
And you also want to be able to use that money to grow the business and have a clear story about what the money is used for. I got involved recently with a company and nearly all the money that they were trying to raise was actually for the founder stock. There was no new money. And I said why don't understand what's in that for anyone. It's okay. But we think it's a bad idea to be out there raising money.
I said, No, it's a good idea because they want to know what you're gonna do with the money. That's all they're asking. If I was to give you a million, what would you do with it? I gave you 10 million? Would you know what to do with it? These are the kinds of questions that the investors would ask or the fund manager would ask. So on the day, it actually went quite well. We all sat there around the balcony in the stock exchange, watch our stock price come up on the market. And to our utter relief it went upwards.
Peter Higgins 14:22
Brilliant. Brilliant. Now I've got to ask you this question because obviously we've seen lots of IPOs recently 2020, 2021, 2022 less so 2022 is this far year today, and lots of them have absolutely gone out the blocks going up 100%, 200%, 300%. And now we've seen them all in the last six months just roll right over, especially the ones that are tech related on the NASDAQ and elsewhere, or coming down to earth.
Now, for me, some of them were grossly overpriced in the first place. Some of them were just marketed to the Ying Yang so that everybody thought this was gonna go to the moon and now it's all coming back. Why do nomad brokers and so on and so forth want to get a get it oversubscribed, you know to make them look good, obviously, but have it so grossly overvalued in the first place. So that's no bias left. So the only place to come down is sellers selling into the price.
Tim Rogers 15:12
Well, I don't know 100% reason why that happens, I do know that use the word nomad broker, the nomad is not interested in the share value to a certain extent, who might advise you on what the share value should be, you yourself will have valuations on the business, the analyst might turn around and say, well, companies in your particular area are 22 PE or 18 PE is where you need to be.
If you classify yourself as a technology company, you're over here, if you catify yourself an engineering company, you're down there, so maybe you're somewhere in between, it was quite imprecise. I mean, someone took all of our previous valuations, you know, net present value, discounted cash flow, there was some valuations on the business, added them all up and divided them by seven. And that's how he came to the price of the business.
But the moment I said to me at best, it's going to be 16 times earnings, just work on that as a value, we actually thought that was a bit expensive, because the long term plan is what the broker made the sort of things first, get yourself onto the market hit that first year number, if the analysts said you're going to do 11 million, do 11 million, if you're going to do more, let us know and break through that. And that was the key thing really was to find when we listed we only had six months to then publish our year end numbers.
And our year numbers was spot on than our half year numbers were ahead of forecasts. And then I'll second it, that's how you manage it. And because it was not a very sexy company, it grew gradually, the time it had a bit of a run was when they decided to allow AIM stocks to be allowed in pension pots, can’t remember when that was it was 2014 or 15. Suddenly, there's massive shortage of AIM stock or decent AIM stock.
Shares ran away with itself. And we were actually about concerned about that. But the good news was it stayed at that plateau for a year and then started going back up again when we started delivering results. So I don't really know there's a lot of companies that go to AIM for the wrong reason, in my opinion.
Just because you've got a good overall plumbing company, you've got a great set of plumbers and your business is really good. That's not a listable company. That's a company that's a good company.
That's all it is. But if it's suddenly developed a heat pump that can be used around the world. And it needs scaling. That's an investable proposition. At the end of the day, all the things that got to be not just obviously scalable, but have a route that is scalable, that an understandable route that follows and that when you don't deviate from too much, there's nothing wrong with turning around and saying actually, the way we're going is slightly wrong.
We're going to pivot slightly. But again, I don't think should use the word pivot. There's nothing wrong with reviewing your plan, your annual report should be as boring as hell, they should say the same thing every year.
You know, that's what we get complain about, oh, this is the same. You said last year. I said, yeah, guess what it is? That's what we do.
We design and we build systems to make cars safer. This year, we sold more systems that make cars safer than last year. And we're going to continue to do that. And we're going to diversify our product portfolio.
But we're not going to totally we're going to become something else. I'm not going to go into flying taxis or you know, rockets. That's where we are. That's what we do. We know our knitting. And again, that to me, it was always the Scandinavia and the German thing. If you ever stopped at a town in Germany, there will an industrialist estate with a company that's number one somewhere in the world and what it does, and that's what I always liked, and that's what I liked about the West Country.
There are lots of little businesses in these industrial estates, like Avon, and Latchways, you know, these, these are niche businesses that did really well. And you know, they've listed and they've done, I've mixed fortunes, but the point is that they were they dominated their niche. And they knew what who they were sorry, I'm rambling a bit now.
Peter Higgins 18:46
No, no. that's absolutely fine. What I'm wanting to touch on what makes a good company. This is I mean, you've touched something there with regards to they've had their fluctuations regarding Avon’s had a bit of bad luck of late, and Latchways and others, all stared and all the rest of it have done well, small companies that have grown steadily. So we're going to talk about that regarding lots of different listed entities on AIM and on the FTSE.
Some of them started off quite small and quite niche, but have grown steadily. Others have come through out of the blocks and gone wash and haven't been overvalued to start with and carried on beyond the valued and then the reality is come down to earth. You grew AB Dynamics steadily, stealthily, smart, shrewdly. And it wasn't a load of acquisitions. It was by growth of revenues and growing into new markets now, why do so many companies want to run before they've learned how to walk Tim?
Tim Rogers 19:38
I think a lot of these companies I mean, if I'm going be wrong here, but a lot of these companies go whoosh out the block, or they pre profit?
Peter Higgins 19:45
Then they're not yes. Especially in the US. Unicorns.
Tim Rogers 19:49
This is the thing you see. This is the lesson I learned from a NASDAQ business I was working in. In the UK I decided to establish a group to supply the London Low Emission Zone with all emission control technology, and we use all our IP from America and we set up a workshop. And we started to actually make a good business and make money.
But the chairman was very concerned. He said, the point is that soon as you start to make revenue, people can put a value on you. If you're delivering a promise, then the value can be anywhere.
That was his words. And I was actually quite shocked. And actually, when I sort of showed him the bank balance at the end of three months of trading, I said, look, we were making money, he sort of nodded, looked at me and said, so we're a product company. How are we?
Peter Higgins 20:31
Wow, that takes me to my next question, right? We've got this situation, right, where everything's almost geared to city regulators and institutional investors, do institutions CEOs, and listed companies underestimate the value of good and authentic communication with retail private investors?
Tim Rogers 20:51
I think it gets a lot of is based on size, isn't it?
You've got those companies that all they do is rely on private investor sentiment, the sort of small cap investment companies having dropped and left years ago. And I've always been a bit concerned about the cult of the celebrity CEO.
I had some situations recently where I was doing some work for a couple of fund managers and some private equity. And I was a bit surprised by the sort of level of naivety of some of the stuff they're looking at, you know, some of this stuff is based on the flimsiest pretext.
It doesn't really seem to be doing anything, why we're doing this as Oh, well, you know, Charlie Thrustworth, Crackstone Funding he's done it, I think it's always the same names, it's always the same names that bring these four or working behind it.
I mean, there was a company that came onto the market about five years ago called Intelligent Energy. And they came on the market and they raised a huge amount of money, and they were so big, they actually went, I think they were actually qualified for 250 company, their mission was to bring fuel cells into the market.
And I actually knew people who were working with them, and they burned brightly for three years, and then fizzled out, who's gonna back that. And then I see that a lot of the same sort of team are back out there, again, is a scandal is a scandal, and there was no accountability for that.
Some people lost a lot of money, it positioned itself as a viable running company, pre profit was predicated on a technology that's still I think, seven years away, you know, we still haven't resolved the hydrogen supply. We haven't got down to the cost of the precious metal, these fuel cells use huge amounts of platinum group metals, where's that going to come from?
It just seems that people just don't, I don't know, they just get blinded by they get caught up in this rush. And they can't stop themselves. And I think this is what happens when, if you communicate to the private investor.
My experience with the private investors was good, I enjoyed it. But they were the most difficult bunch of people to satisfy. Because normally private investors, that's what they do people like yourself, Peter, you, you sit, analyse the numbers, I've always said, I'll get into a secret. A lot of CEOs are not good with numbers, because actually, you don't want them to be good with numbers.
You want them to move, managing the staff and the building in the structures and stuff. You want them to have a good CFO who can answer those questions.
But I do remember being in a meeting once and someone was leafing through our annual report and came up with a question. And mistakenly, I hadn't brought my CFO with me that day. And he said, You know, I'm interested or the ratio of costs to this against this and a percentage of that against x. And I sort of flipped through the annual report. And I looked at my broker who's looked at his feet. And I said, Well, I'm really sorry, actually, I'll get back to you on that.
If you catch me afterwards, I'll talk about it. And then later on, I caught him in, in the bar talking to his friend, he's I wouldn't invest in a company whose CEO doesn't understand the number. And I thought, I feel really bad about that, you know, because I knew the business was good, but I was unable to convey it.
It made me understand that the way that you approach the private investors, the information you give the private investor is slightly different to the one you might give the fund managers, or the fund managers will see you at the half year, they'll see you at the end of the year. And if you have an investor day, you might be invited down and let them play with the machinery.
But they don't actually spend much time looking at the numbers. You know, there's not much analysis going on. But collectively, inside the private investors, there's hundreds of man hours of investigation. And if you are fortunate enough to be getting onto the message boards, it goes mad.
I mean, I was always being berated by our options policy. You know, I said, we can't afford to pay the kind of money that big companies can to get the good engineers, but we can do is share the company's fortunes that will have good bonus systems based on profit. And we'll have options for all staff so that they everyone can enjoy it.
But unfortunately, options have to be costed. And then you start running into these horrible things called adjusted numbers, which I hate when you show your adjusted profit.
Even if you can justify that it wasn't part of the Cash Generation of the business. It still doesn't look good. It doesn't look good. And that's another thing that private investors jump on to very quickly.
So I know CEOs who simply won't engage with private investors because they've been scorched, they treat them a bit like a spider in the corner, it's fine.
If it's standing there, do nothing start moving towards you, they started freaking out. That's the issue, you can get quite a hostile reception with a private investor.
Having said that, I think it's a private investor that drives the prices, especially when you've got fairly illiquid stock in AIM, where you've got 500-300 stocks going through, it's all private investors stuff. And I think that the fund managers take advantage of that. I've seen fund managers dropping stock into the retail market for retailers to pick up and that's not what they should be doing.
You know, large bits of stock should be placed by the broker that should be managed the overhang. That's what the broker is there to do manage the overhang. If he's just dropping stock into the retail market. I think he's well, I don't think is right personally, it's one of my bugbears.
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Peter Higgins 26:05
Takes me on to the next point here about the introduction of the Market Abuse Regulations (MAR) in 2016. And then the people discharging management responsibilities, the PDMRs, which was introduced, but we still see on RNS. Ordinarily, they're meant to come out.
They've got weeks, months to organise these scheduled RNS's. And then they're embargoed, of course, right.
So ordinarily should come out at 7am. With everybody else, we still see these RNS’s is coming out, and he's quite sensitive data coming out after the market has shirts, five o'clock capacity going what you've got a placing last month in RNS, the same financial wise were sound, we don't need any money. Now we're doing a raising, capital raising CFOs just gone, Why don't you share this information with us before? Why is this irregularity going on? So frequently Tim?
Tim Rogers 26:52
I think it's imperfectly applied. I remember when the market abuse regulation first came out, our legal company, that our legal advisors, and the broker, and the nomad all provided interpretation of how this should be applied. And the legal people actually turn around, I said, forget the other ones.
This is the one you should be looking at. But we had to demonstrate to the nomad’s satisfaction that we had a procedure in place, not a procedure in place that suited us, but a procedure in place that met the spirit of the market abuse regulation. So you'd have to show that you had a method for disposing of stock so that the individual will be determined if it was on a list of PDMR’s hours. And the thing is, here's the thing, in a small company, most people are PDMR’s hours, most people are party to information.
When you see people selling stock before the close period, they know what the monthly results are. Because everyone knows what they are, you really got to go on to Sage or whatever system you're using and push the button it'll say right, you're behind or you're above the orders going out.
You know, if you see the guys working in dispatch, working their nuts off, you realise that having a good year. So very difficult. Again, it's another my bugbear as well it is seeing people selling before the close period, then going into the closed period. So that was okay. It's all good.
So I think it's imperfectly applied. And I said my own example was that, you know, three agencies came up with three interpretations of how the market abuse regulation should be applied.
But actually, it was the it was the legal advisors who trumped it and said, Well, this is one that we want. But the nomad turned around and said, that's fine, but I'm the one who's got to approve it. And here's the problem there is although there are the rules inside of AIM, but there's you know, you go into people's websites and it said what you know, your corporate social responsibility, your AIM 28 Rule, most of them say we follow the standards of the was at the quality companies QCA It's not like there's a an FCA thing you do you say we follow the this is what we follow, and never have got around to prescribing an actual method, you know, it's rather like prove yourself innocent if they come in looking for you.
This is why the nomad is so important. The nomad is key. You know, he should be involved in all of the RNS decisions, everything should be passed to him, because ultimately, he's the one who represents you with the stock market with a stock exchange. And unfortunately, I think the quality of nomads, you know, there's still some good ones out there, but I don't think it's improved.
Peter Higgins 29:15
Let me ask you this then. And from your own experience, why is your AB dynamics specifically and NASDAQ companies, when you and your colleagues were buying shares, authentically buying shares and thinking, you know what, I'm feeling that it's worth my while, irrespective of options, I'm going to go into the market and buy some stock because I value my company. And we see that as private investors, we see that and we think, Oh, crikey, the CEO, the CFO or buying so we ordinarily see that as a really good sign to join in.
Tim Rogers 29:44
Yeah, I think that is but I don't think the converse is true. If you see a CEO and a director selling it doesn't mean to say that he thinks is all going to picked on and the thing is that if the person wants to buy a Ferrari, the options don't buy the Ferrari is the selling of the options to get the Ferrari he wants to put get through school, if he's sitting there suddenly realises he's got about half a million pounds worth of shares that are worth something. And yet, he's only got a salary of 70-80,000 Pounds coming in after bonuses, then he wants to access it, it's always been my thing is that the only way that small companies can attract the talent and pay them is to actually make them part of the programme.
If you're going to give them options, and the company starts doing well, you shouldn't be surprised they start to sell, because that's what it was given to them for. You can't say, well, actually, here's the money, but you can't use it. Well, they'll go, they'll leave. But I think you see directors and people buying shares in companies or their own company.
That's definitely a good sign. I can't think any reason why it wouldn't. I remember buying some stock for maybe dynamics initially, because I saw the shop stock price fall. And I thought stupid I can you know, that's ridiculous. I love some of that. And I think Tony had been trying to get rid of his stock at the time, he went in and bought some as well. Now, actually, it had no real effect on the stock price change enough.
Except there were comments and notice boards. So if you've got hundreds of 1,000s of stock, why would you buy 100? More? I didn't get it. But well, that's true.
Peter Higgins 31:09
I want to change things up slightly now. And we're talking about you buying some stocks, obviously, you still got some investments out there other than your bikes and your cars want to talk about stocks, per se, or funds, what's your style? And given your experience, you're able to analyse and look at the RNS’s and the accounts out there. And you're choosing certain funds and stocks, what's your style? And how do you filter down to the what you're going, that's going to have some Rogers’ money backing there, I'm going to buy some of that.
Tim Rogers 31:37
Okay, I think I've come across it before with you. But I actually do my time going around the city and meeting it with fund managers, there were a few ones that I thought, yeah, if I ever had money, this is who I put my money with. And you will think if you'd been a manager of a large company, or medium sized company, you would see how good companies could be.
And I used to go along to some of the share sock meetings and see the CEOs and really buy into it. You know, these guys mustard isn't is great. And the company will be nothing, you know and do things I actually realised that I wasn't very good at spotting them.
In the same way that quite often a salesman is not a good buyer or buyers, not a good salesman, I haven't come I now speak to some other sort of former CEOs recently. And they said the same thing they've ever been trusted most of their stock funds with fund managers that they trust, a bit of guidance here and there.
I do invest in companies myself, but actually I put most of my money into Scandinavia, I just felt that's probably my interpretation of where things like clean energy, and clean air and clean water.
A lot of the fundamental stuffs being done in Denmark and Sweden. That's an area that I understand.
So if I'm going to invest myself, I'll invest in businesses that I understand and the businesses I understand. If I'm going to divest and things work in Amazon and financial stocks and fintech, I'll give that to a broker or a fund manager.
So I'd say a good 80% of my investable stock is with managed funds, companies that I came across and thought yeah, you know, I would entrust my money with them. To be honest, none of them had done well, in the last six months.
Well, except for one. But most of them have all followed the trend down. And none of them have beaten the trackers that are out there. So even the best managers, I mean, I discovered that the fund manager that is able to do well in the rising market is not the same fund manager who does well in the falling market.
And for that reason, I might just change my portfolio around to reflect that, whether that's to do with defensive stocks, you probably know more than me, Peter, but certainly my own sort of basic analysis. The other thing is well as moving out of dock, you know, there's there's the idea of, you know, keeping your physical cash and other things, my wife and I have a nice property portfolio which we've been building up, we grafted on the stuff ourselves sometimes, or we spent a lot of time waiting for tradesmen to turn up, but it's been quite rewarding.
And I do remember after I left AB dynamics in 2018, a fund manager saying I'll say you bought the house, blah, blah, blah, and you think you're going to be able to beat my fund. And I said, well, I don't want to put it all into one basket.
But yes, I like to do that. And of course it has the house prices is exceeded his fund. And the rental income has been really good. And you mentioned classic cars. I've always made great losses classic cars.
Yeah, but I've been more recently I've picked a couple that actually have made good money so yeah, I think it's important to keep a mixed portfolio physical gold bit of art stuff that you know, stuff that you know and enjoy. I mean, it's much more enjoyable collecting cars, bikes, art, antiques, watches, and it is investing stock. I think.
Peter Higgins 34:37
I completely agree to have diversity, several points you made there. I wanted to go back to one if I may, the importance of having access to cash and the flexibility that gives so many people underestimate and I see that across Twitter and across social media.
I'm all in I'm all in and fully invested. I'm going huh? So what happens if the markets declined slightly on another stock? One of your stocks declines significantly. What you're gonna do trying to wait for it to rebound? You've got no cash to invest.
Tim Rogers 35:03
Now I agree, I'm the worst at this, but years of personal experience tells me that you must have cash, it was almost like you should build your reserve a cash before you even think about investing. And it's the same with companies as well, you know, the ones that seem to be the most robust are the ones that actually run a good cash balance that are lightly geared.
I mean, you can be heavily geared you can grow really quickly. But of course, when it turns against you got nowhere to go. The other thing I always look at is when people heavily emphasise their intangible assets on their balance sheet. Again, I went in once and saw an analyst just put a line through it. I said, What does that mean?
Because I don't even look at intangible at all I'm looking at is your asset. And so what about the patent portfolio all about that, and it goes, well, if you can monetize it, good for you. You said, I'll come back in five years’ time. And if I see that your cash flow has gone up, then I know you're monetized it. And I thought that's that's quite interesting. But you know, it's hard. It's, you know, when things start to fall, it's very hard to get your cash out, isn't it? It's almost impossible, very expensive.
Peter Higgins 36:00
Absolutely. Now, you've touched on IP patents and intangibles in this conversation, I wanted to wrap up a little bit because you're involved in all of that space all over the world. So I wanted to ask this question, given all the talk about nanotechnology, graphene, hydrogen, renewables, all this talk about all this money is going to go into ESG.
You're looking at all these different technologies all over the world. If there is one, two or three technologies at the moment, you think, actually, these technologies in two, three years’ time, investors need to be looking into this space now? Because I think the best investors are the ones that look at future tech, not what's there right now going like that on that hype cycle. But early on, investors do best. What ideas do you see in Scandinavia or elsewhere in the world? Are you thinking water, clean tech?
Tim Rogers 36:50
I do advise we stuff occasionally for big family offices. These are the ones that have generated fortunes many many years ago. And they are long, slow investors. And their money is going in food, clean air, clean water. So they are buying up tracts of land or around the world. They are investing in technology for clean water for clean air.
The problem with all of these things is are we at the moment we're back onto carbon emissions, it's all about carbon dioxide, carbon emissions, greenhouse gases. Two years ago, we were concerned that the air quality in London was appalling. It was all about NO2 to NO knocks PM, the Ultra Low Emission zone has nothing to do with global warming.
It's all to do with clean air. And there is a dichotomy there. And we keep coming across this that people politicians sometimes don't understand the difference between carbon and carbon dioxide. They think smoke is carbon, carbon is smoke. And you get a very disjointed thinking now the automobile industry and the regulatory industries have 15 years to work on these programmes.
They can't switch it back and forwards just because politics tells them to do that. At the moment, we're very much clued up to renewables and the issue about renewables has been energy storage. I happen to think that hydrogen is a route, I think, is actually a very, very key route that can be done. And what's interesting me is the mega billions that are now going into hydrogen in green hydrogen production. The other thing about hydrogen is that you can use hydrogen in existing engines. And I've been working with companies that are looking to be able to use the existing heavy duty internal combustion engines but actually use hydrogen instead.
So Locomotives on the rail, large trucks, JCB and Bamford have a huge programme running on looking at internal combustion engines running on hydrogen.
And the issue people is that people drive on electric cars, feeling very smug about things. But all I've done is if your energy is coming from a fossil fuel, you've just transferred the problem.
If we start getting joined up energy policy, there'll be a massive move towards hydrogen. That's an area that I think is is quite key. The second thing I think, is robotics. You know, the actual introduction of automation and robotics and things on the day to day, it's actually been quite slow. And being a couple of companies have been looking at in the southwest that are unlocking the ability of normal organisations to be able to accelerate their robotics programmes.
The chip shortages caused a big problem here because a lot of the things are heavily reliant on chips and a technology but the implementation of fairly conventional technology. None of this stuff is new, by the way.
I mean, hydrogen has been around for ages as a fuel concept. I remember BMW having a programme back in the late 80s. They realised they didn't have a fuel cell programme like their friends Mercedes did.
So they came up with this internal combustion engine that could run on hydrogen. The issue is and are always issues is that if you put hydrogen in the cryogenic tank, after about four or five days, it all leaks away. That's a problem to solve. If you've got wind farms that are generating huge amounts of energy during the day, in theory, you can convert that into hydrogen using electrolyzers.
This is all stuff that people know about. But I think there are genuine solutions coming up now to those issues. On the renewable side. Who would you invest in, you know, the wind farm company?
These don't seem to make money, Siemens and General Electric all seem to be struggling. And any industry that relies on government initiatives or government grants, forget it. To get it, you'll be waiting forever. The other end of the scale right at the bottom end of the scale, all those little companies that are getting launched money and innovate money and survive on this, there has to be a time when you move away from that sort of crutch and become a self standing company.
You know, there are businesses in the UK and in Europe, people and individuals are all they do is scour for the grants.
That's all they do. One job is to look for the next grant. It's counterproductive, it makes you dependent and needy. Likewise, with these EIS thresholds, you know, there should be a time when you move away from that, you don't need it anymore. You can embrace it because you become a mature company. But all the time these entrepreneurs want to raise it EIS threshold, and I think that's wrong.
Peter Higgins 40:53
No, you make several good points that I will ask another cheeky question. Now, you're highly sought. After you're working with all these SMEs, you're a N.E.D with several companies. Is there a chance that within the next 18 months or so two years, we're gonna see Tim Rogers back with a listed company in the US or the UK?
Tim Rogers 41:11
No, because I think I've found something that works for me. I mean, I had to say, I turned 60. Last week. I know, Pete, it's amazing.
Peter Higgins 41:19
I will send you something in the post.
Tim Rogers 41:21
I should say last week, I think it was last month, that’s what ages does to you. The thing about it is that that stint I have with the NASDAQ company was really tiring. And I was in my late 40s, early 50s.
The second stint I did with AB Dynamics for six years wore me out, the thing about small businesses. And I used to laugh at this. We used to go to the city, you know, and we're doing the fundraise, and we would take them out for meals and we come back to the factory in Bradford on Avon and even my PA was standing there, she goes Tim, the latest toilets are blocked, and are thinking oh, bollocks, oh dear, and I’m thinking I bet Elon Musk doesn't have to do this stuff.
You don't have to do everything. Basically, if you see a problem, you've either got to put your own physical person into that problem, which says, okay, let's work late night and get these packages out.
Or some guy comes in and goes, he doesn't like me, he said rude things to me, bring him in and talk to them.
You are doing all those things as you build the structures around you. And I don't ever think you should leave that running. A midsize SME for a manager who cares about his people is exhausting. And there are loads of people happy to give you their advice on how you should be doing it. But not many people are prepared to step in and actually do it.
Peter Higgins 42:36
And it goes back to you've touched on there as well, the likes of Jeff Bezos, when he started in books, just books selling books online, he was packing those books himself. Now that's one of the largest businesses in the world. So it's about you are absolutely spot on about looking in and doing as much as you can support the business when it's that small. And not being I'm better than you sort of thing.
Tim Rogers 42:53
Oh, and I don't think I want to do that again. And never say never. It wasn't like when I got working for AB dynamics. I got loads of offers. But I got offers. I really thought it was just time to I've got I hate to say to sort of stop and smell the roses. But just to ease back and think about it. And there were health issues. I obviously had ignored those things. And I thought I'd get myself back into the thing that I think is most interesting is the question that you asked is do you think you're going to start working for someone else? And this question, my wife asked me the other day.
Peter Higgins 43:22
And we know who is in charge mate? We've all got bosses to answer to!
Tim Rogers 43:25
Yeah, so I think I got a distinct feeling that, you know, having me 24/7 is not really what she had in mind when I said I’m going to spend more time at home.
Peter Higgins 43:33
Fair enough. I'm going to conclude that we've got loads more we could talk about what everyone concluded there, Tim, absolutely wonderful to speak to you. Again, I'm looking forward to seeing your face to face at some point.
That was Tim Rogers, former CEO of AB Dynamics. Please get in touch with him. You can find him on Twitter as well. And on LinkedIn. My name is Peter Higgins. That was the Investing Matters podcast and thank you all again for listening. And thanks Tim. And I look forward to seeing you again soon sir.
Tim Rogers 43:58
Thank you. Bye, bye.
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