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By Steve Moore | Wednesday 22 November 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Writing last week on Van Elle Holdings (VANL), I noted a boardroom shake-up General Meeting requisition from its founder seeking to return. Today brings a response from the company…
This includes a trading update concluding that “expectations for the full year remain unchanged” - though this includes “a seasonal weighting towards a stronger second half” and notes it is “mindful that the group is subject to clients' decisions regarding contract call-off timing”. There is also an announcement that CEO Jon Fenton is to step down as, “due to a serious medical matter within his close family, which has become acute in recent weeks, he will need to commit an increasing amount of time to support his family in the future”.
There is then a “Notice of GM” announcement – with the meeting called for Friday 15th December. The board argues “the proposals would constitute a step backwards from the properly constituted board which he himself put in place at the IPO to run the company effectively and represent the interests of all shareholders” and that “Mr Ellis was non-executive chairman at the time of Admission in October 2016, when the company's strategy for growth was clearly set out in the Admission Document. The strategy remains unchanged and, since Admission, the company has delivered good progress”.
There looks some merit in the above, though I also note there was a profit warning less than 5 months after admission – and present forecasts of 12p of earnings per share for the current year and 13.5p next year compare to earlier forecasts of 15.9p and 17.7p respectively (an adjusted unchanged from the prior year 12.1p was delivered last year).
The company also points to that Thomas Lindup, who Michael Ellis is also seeking to return to the board, is his son-in-law and, prior to joining the company in 2015, a lawyer. It states that “whilst Mr Lindup's previous legal experience was beneficial to the group ahead of its admission to AIM, following his departure in March 2017 the board was satisfied that his responsibilities could be absorbed by other senior colleagues on the executive management team”. It also argues;
“Over the course of the board's engagement with Mr Ellis, he has requested detailed information on the company's strategic direction and its trading performance, above that which is publicly available. The board believes that these requests reflect both a refusal by Mr Ellis to acknowledge that the company is no longer a private family business in which he has majority control and a lack of understanding of the rules related to quoted companies.”
It will be interesting to see how Ellis responds and how the General Meeting goes – it noted “Mr Ellis, along with his wife, two daughters and a related family trust own, in aggregate, approximately 20% of the shares”. Ahead of such further developments though, on the shares it remains just a watching brief.
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