Caffyns – the directors

PUBLISHED: Aug 16 2017 @ 04:20 | Comments (0) |

Caffyns (LSE:CFYN) has been a family-dominated firm for over 150 years, despite it now being a Premium Listed company on the LSE. The family have been accused by a bulletin board writer of running a corporate board of directors which “is grossly self-indulgent”.

I need to start the process of assessing whether this is true to the point of being seriously detrimental to minority shareholder interests.

The family do not control through ownership of more than 50% of the ordinary shares, of which there are 2.75 in issue. They control the firm through their holding of all the 2m 6% Cumulative Second Preference Shares, which each have the same voting rights as the ordinary shares (one vote per share), except in a few special situations related to the Premium Listing provisions, such as voting to leave the LSE (the prefs lose the right to vote).

In addition, Caffyn family members not sitting on the board own around 16% of the ordinary shares. Sarah Caffyns, who is a board member, has 39,232 (1.4%) ordinaries and Simon Caffyn, CEO, has 51,988 (1.9%). Also the Caffyns Pension Fund holds 4.66% of the ordinaries.

(There are some other preference shares held by the family but they do not have votes and are not relevant to the power dynamics of the firm).

Evidence for the self-indulgence charge

We’ll start with the money paid to shareholders, staff and directors over several years.

£m	Dividends + cost of buying the company’s shares	Staff pay (including directors)	Issue of shares for SAYE	Directors’ emoluments
2017	0.61 + 0.9	15.0	0.3	0.81
2016	0.60 + 0	15.7	0	0.88
2015	0.56 + 0	14.8	0.005	0.86
2014	0.36 + 0.39	14.5	0.3	1.153
2013	0.33 + 0	14.2	0	0.91
2012	0.34 + 0.1	15.0	0	0.83

Clearly, the directors have taken more cash than the shareholders have received, and £0.81m seems a lot for a £13.8m company. But, I suppose, at least director remuneration has fallen from the heights of 2014.

The question we need to ask is whether shareholders derive good value from paying over £0.8m per year to the directors. They are experienced and have proven capable over a long period. Also, there are six people splitting this money, even though only three are full time.

Directors’ remuneration

£’000s	2017	2016
Simon Caffyn, CEO	383	410
M S Harrison (now retired)	90	283
Michael Warren (FD for 10 months)	139	0
Sarah Caffyn	64

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