Fletcher King – astonishingly good results, but directors get first dibs

PUBLISHED: Dec 28 2015 @ 06:26 | Comments (0) |

Fletcher King (LSE:FLK) have just reported a massive rise in profits for the six months to the end of October – up by 309% from £231,000 to £945,000 after tax.

Since buying into this share at 30p in July 2013 it has more than doubled if you include the 13.25p of dividends received.

The dividend return, so far, has been 44%.

At a share price of 49p the capital gain has been 63%.

The company has cash holdings of £4m with a MCap of £4.5m (no debt or pension deficit).

(Earlier Newsletters on FK: 2nd 3rd 4th 5th 8th and 9th December 2014, 5th January, 3rd 4th 5th 6th Aug., 11th and 17th September 2015)

I can’t complain. But a lot of other shareholders are regularly complaining, with much justification, about the director’s tendency to pay very large bonuses to themselves and the other 13 employees. Their remuneration is usually around 4 times the operating profit for a period.

In the six months to October their grab reached new heights. With turnover up by 62% to £2,963,000 the 18 employees shared £1,754,000 (up 81%) with the bulk of that going to the directors (assumption based on past form).

This is £97,444 per person for half a year. A Merry Christmas to be had by all recipients!

Any hope of change?

The pattern of large bonuses when this company is performing well will not change. David Fletcher and Richard Goode made that very plain to me and other shareholders in our hour-long discussion after the AGM a couple of months ago.

Their argument is that you need to pay large bonuses to retain highly talented staff working in London’s West End. If you don’t they will drift off.

This is, of course, a convenient self-serving argument, with the largest beneficiaries of this policy being those two people.

So there we have it: the main winners from excellent performance and brilliant property deals will continue to be the rainmakers. David Fletcher, who set up this company 40 years ago, and other top staff have been there a long time through thick and thin.

Without them would there be a company?

Without them would opportunities such as the SHIPS14 deal……… To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

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