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Private shareholders requisition AGM resolution at RBS

Over 100 shareholders in the Royal Bank of Scotland (RBS), supported and coordinated by ShareSoc and UKSA, have requisitioned a resolution to install a new "Shareholder Committee" at the company that could include representatives of retail investors.

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Dart Group Plc: another AIM review by UKSA

In 1983 the current Chairman and Chief Executive took control of a company flying fresh flowers across the channel. This has been developed into a business with a fleet of UK based passenger aircraft specialising in package holidays and charter flights. The leisure travel division is complemented by a logistics division distributing temperature controlled products for the food industry. Revenues have grown at 20% pa over the last 5 years to reach £1.4bn. The company appears to be performing well but is there a risk that it will over-reaching itself? Shareholders’ equity is £319m and orders have recently been placed for c. £2bn of new aircraft. How robust is the strategy that underpins this investment?

Full Dart Group review here

All UKSA AIM reviews here

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Majority of investors in UK companies do not have shareholder rights

The ownerless corporation, so christened by Lord Myners more than 10 years ago, is upon us. In its response to a BEIS consultation on corporate governance UKSA has drawn attention, once again, to the scandalous erosion of corporate control arising from the unrestrained spread of multi-owner nominee accounts (sometimes called pooled nominee accounts).

ONS statistics show that 59% of shares in UK quoted companies were held in such accounts (in 2014, latest year reported). It included most shares held by private investors and all shares held in SIPPs and ISAs. Such investors do not have the rights of shareholders, and in particular do not have voting rights. Worse, those rights are not cancelled but belong to the owner of the account – typically a financial institution with different interests to those of the beneficial owners of the company.

The unjustified explosion in executive pay (still understated because the reporting rules allow substantial amounts of value accumulating in Long Term Incentive Plans to be ignored) is one consequence of this absence of control. It has allowed – to take one example – remuneration consultants to be retained by, and accountable to, those on whose pay they are reporting together with their peers.

UKSA believes that beneficial change depends on the recognition of four underlying truths:
1) Good governance requires that complex balances of special interests and socially desirable outcomes must be monitored by a representative balance of voices.
2) Individuals, investing their own money, must be one of those voices.
3) Transparency (or openness) is the most powerful (and cheapest) basis for public oversight.
4) Whatever changes are advanced there will always be an important role for shareholders and it is fundamental that intermediaries should not be shareholders. Only beneficial owners, or the appointed representatives of beneficial owners, should be shareholders and have shareholder rights.

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Park Group Plc: another AIM review by UKSA

Park Group claims to be “the UK’s leading multi-retailer gift voucher and prepaid gift card business.” It started in 1966 as a savings scheme for Christmas hampers and has built on that base to reach a revenue total last year of £302.5m. Cash conversion is good with a steadily increasing dividend currently yielding 3.7%. The Chief Executive talks of ‘a steady rise in billings’ but the record shows a setback in 2014 due to weakness in the retail sector. So how well is the company really performing, what is the outlook for the future and how easy is it from the accounts to follow what is really going on?

As an increasing number of private investors are now inevitably being drawn to AIM companies in which to invest their savings, a team of UKSA’s members has begun to examine selected AIM companies’ annual reports, with the objective of exposing directors’ reporting practices to public scrutiny by publishing our findings.

Full Park Group review here

All UKSA AIM reviews here

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Plus500 Limited: another AIM review by UKSA

This is an unusual and profitable company which, although quoted on AIM, is based in Israel. It has an attractive dividend policy although smaller non-Israeli holders are subject to withholding tax. But what does the company actually do, how does it make money and is it run primarily for the benefit of the directors and founders rather than the shareholders?

As an increasing number of private investors are now inevitably being drawn to AIM companies in which to invest their savings, a team of UKSA’s members has begun to examine selected AIM companies’ annual reports, with the objective of exposing directors’ reporting practices to public scrutiny by publishing our findings.

Full Plus500 review here

All UKSA AIM reviews here

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SQS Quality Systems AG - another AIM review by UKSA

Would that all AIM companies could be persuaded to copy SQS. The presentation of the report makes it much easier to read than its UK counterparts and the high level of disclosure – happily confined to the notes – would satisfy most analysts.

SQS is a professionally run international business with a small share of a growing market. Profit margins are low
but the results being achieved by recent acquisitions suggest that there is useful scope for improvement.

Full SQS review here .

All UKSA AIM reviews here

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Sprue plc: another AIM review by UKSA

Full Sprue review here .

This company sells a range of Chinese made smoke and carbon dioxide alarms in Europe, principally in France and in the UK. Profits would have been significantly higher had it not been for adverse exchange rate movements and a large warranty provision. Should the directors have anticipated these problems and taken more effective avoiding action?

As an increasing number of private investors are now inevitably being drawn to AIM companies in which to invest their savings, a team of UKSA’s members has begun to examine selected AIM companies’ annual reports, with the objective of exposing directors’ reporting practices to public scrutiny by publishing our findings.

All UKSA AIM reviews here

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Persimmon pay revelations: blame the regulations

The public will have been shocked by the revelation that Persimmon management are in line for a payment of £600million. This is no surprise to UKSA, who warned of this outcome when the Persimmon Long Term Incentive Plan (LTIP) was installed in 2012 and have since continually promoted the regulatory changes necessary to prevent this and similar abuses.

UKSA notes the following:
• The ‘single figure’ reported for director’s pay includes precisely zero in respect of this LTIP.
• The Remuneration Report is incomprehensible as a description of the likely and potential outcomes of this LTIP.
• The Remuneration Report does not contain information to allow any estimate of likely outcomes of this LTIP to be made. That requires an examination of the original terms of the Plan.
• The original terms of the Plan are not available on the corporate website. They are on this website here.

The directors of Persimmon cannot be blamed for dipping their hands into an open cookie jar. They have acted properly under the regulations, though perhaps more in the letter than the spirit. The fault lies in the regulations themselves.

UKSA calls for the following
• The ‘single figure’ regulations should be corrected.
• The chain of approval for directors’ pay should include real investors who are beneficial owners instead of being confined to fund managers who are conflicted intermediaries.
• The regulatory consultation process should be revised to give due weight to beneficial owners instead of intermediaries.

UKSA's earlier analysis of the numbers is here.

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Abcam plc and Hargreaves Services plc

Continuing its investigation into the quality of the top 100 AIM companies’ annual reports, the UK Shareholders’ Association finds uncertainties in the Abcam report and an astonishing but unexplained waste of shareholders’ money by Hargreaves Services’ directors.

Looking at the top of the AIM 100, the team has reached Abcam (number 3 in 2015 and 2016) and at the bottom Hargreaves Services (98 in 2015 but now disqualified).
The Abcam annual report and accounts are “far too long and full of convoluted market-speak which often verges on the opaque.” So complex are its pay arrangements that 23 pages are required to explain them; as the team comments, “It can be no accident that the longer a remuneration report is the less likely it is to be read, which is one reason why boardroom pay reaches the heights it does. Abcam should simplify its arrangements.”

Although Hargreaves Services hopes to reposition and broaden its activities, its coal business is inevitably declining, so it is hardly surprising that the share price has been falling. This company’s directors, like many others, thought they knew where the fall would stop, but unsurprisingly they didn’t. Last year’s share buy-back wasted £4.3m of shareholders’ money, since when the interim dividend has had to be cut by more than four-fifths.

The UKSA reviews can be found here.
Abcam plc
Hargreaves Services plc

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