Samuel Heath – the people

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Samuel Heath (LSE:HSM) is a Birmingham metalworker turning lumps of brass into bathroom fittings and door handles – and charging high prices for top quality. For two hundred years has been dominated by the Heath family. Even today 79% of the shares are “not in public hands”, with most of those owned by various family members.

Large shareholders

Shares owned, in ooo’s   Percentage of equity
Samuel B Heath (Chairman) 494 19.5%
C A Heath 379 14.9%
G S Heath 379 14.9%
S A Perkins (nee Heath) 273 10.8%

It has to be said, minority shareholders are at the mercy of the Heath family. My experience of holding shares in family-dominated companies is that they generally behave in a fair manner – after all, many of the minority holders are current employees, ex-colleagues or friends.

Regarding this firm, I have not come across any indication of prejudice towards minorities. Board pay is very high for £5m market capitalisation company at around £0.9m, but the bulk of that goes to professional managers rather than family.

Directors have been reasonable in paying out around one-third of earnings as dividends at 12.375p per share (current share price £2m). I imagine both family and non-family shareholders are keen on a regular dividend flow and so pressure directors to pay up. But, while the current crisis is still with us, shareholders will accept a suspension of payments.

A general point about investing in family firms is the tendency to focus on the medium and long term. Thus, there tends to be greater attention paid to reputation and preservation of a brand to be proud of. There is also a propensity toward conservative financing, so the firm can survive downturns.

In addition, family companies lean toward making greater effort to hold onto good people at all levels in the organisation – they often form strong bonds and sense of mutual dependence. There are valuable implicit personal contracts in abundance in the form of looking out for each other, being flexible, helping in a common endeavour. This camaraderie and solidarity could be a source of strength in the Covid-19 emergency.

2020   2019   2018   2017   2016   2015
Number of staff 141 141 145 141 139 130
Employment costs (including directors), £m 6.03 5.72 5.78 5.37 5.07 4.68
Average cost per head £42,766 £40,560 £39,855 £38,063 £36,475 £36,000

This is not a company that changes very much from year to year or even decade to decade – just a steady rise of turnover, sending good from the same 150,000 sqft factory producing much the same products it was decades ago. While turnover grew 25% from £11.1m in 2015 to £13.9m in 2020 employee numbers rose 8% and employee costs 21%.

The directors

Samuel B Heath, 82, Chairman,

Fifth generation to oversee the firm. Joined the company in 1956, appointed to the board in 1962. Managing Director from 1963 to 1998. “He was involved in all aspects of the business and especially sales, in both home and international markets giving him a deep knowledge of the company its markets and customers. He brings a depth of financial understanding to the business, he has also led the development of a successful brand awareness campaign through advertising campaigns in the UK and other major markets.” (website).  Owns 19.5% of company’s shares.

David  J Pick, 62, MD until 31 December 2020

Joined the company in 1978 as an assistant production manager. Later moved into sales posts initially in the UK and then overseas. Became Sales Manager then Deputy MD with responsibility in new product development and marketing. Appointed to the board in 1995 and MD since 1998. Owns a mere 5,783 shares.

Martyn P Whieldon, 48, Deputy MD, but taking Managing Director role December 2020

Joined the company in 1995 as a sales representative in Europe. Fluent in German and French. Managed sales in both the export and home territories and has travelled widely, promoting the company’s products to customers and at numerous trade shows to dealers and specifiers alike. Appointed to the board in 2010 as Sales Director, he was appointed Deputy Managing Director in F

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