Character Group (CCT)

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14th Jan '18 by Prof Calculus

12 comments 4255 reads

Need some feedback this the first time I have initiated a discssuion as I feel quite strongly about the following

I have just noticed based on the Annual Report year ended 31 August 2017

http://www.thecharacter.com/Content/Images/uploaded/PDF/2017/TCG%20Annual%20Report%20year%20ended%2031%20August%202017.pdf

that the following directors received 'performance bonus' in 2017 of the following

Mr Diver just over £ 1 million
Mr Shah 723k
Mr Kissane 523k

In 2016 the amount was similar I have no problem if they are performing , clearly the last 2 years they have not been performing so how can they justify the excessive bonuses ,

Would be interested in fellow investors thoughts.

NB AGM is next Friday I am going to try and attend and will ask them this question

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Prof Calculus

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12 comments

Dean brooks

14th Jan '18

Yes I believe that is excessive in terms of performance over the last year, we have had profit warnings and reduced sales.

Prof Calculus

14th Jan '18

Hi Dean

Thanks for your response I have emailed all 3 directors asking them to comment interesting to see how they respond (assuming they do ) I believe Paul Scott was /is invested would be interested if he agrees with us

hammers976

15th Jan '18

Ridiculous figures for a company of this size - especially considering the performance over the last year. Heads they win, tails they win.

TangoDoc

16th Jan '18

The problem with bribes for providing a service above and beyond normal duty is that we are unlikely to be told what the deal was with these three individuals and are no able to judge what might have happened had they not satisfied the bonus requirements. Is it fair to judge any individual's bribe on the overall performance of a company when we are not told the specific agreements?
On the other hand, considering what you might get for a million pound bribe on the open market........................

222

17th Jan '18

Tony,
I suspect you will get a glib reply broadly stating something like this:-

"Each executive director is paid a basic salary and is entitled to benefits, including payments of pension contributions to a suitable scheme of his choice and participation in a private health care scheme. Where a director chooses not to take a pension allowance, an equivalent sum is added to his gross salary.
Each of the executive directors is also entitled under the terms of his service contract to a bonus in
the event that specified performance targets are met or exceeded. These targets are based on certain profit levels being achieved in each financial year of the Group, adjusted to exclude certain exceptional non
- trading items.
MessrsDiver, Shah and Kissane are also entitled to a further bonus of 4%, 2% and 1% respectively of the consolidated, pre -tax profits of the Group in the event that a specified minimum target is met or exceeded. "

...all of which I cut and pasted. (easy huh?)

Frankly from my perspective one only has to divide the bonuses for senior team by the operating profits to understand that this is totally disproportionate in terms of the % of company profits which are being "returned" to their pockets. As you have said performance has hardly been great.

In terms of rmuneration being in line with shareholder interests EPS is a better meaasure than operating profits before exceptionals ...and EPS forecasts are not going up are they!

Albertos

17th Jan '18

Missed this the first time around.

Total directors' remuneration is £3.9m.

That's 3.4% of turnover, £300k more than the dividend paid and last but not least 35% of the total wages bill.

I find all these metrics pretty appalling even without reference to the fact that the company is not growing.

In reality, however, all you can do as a PI is sell your shares in disgust as I did with Persimmon when I found out about their remuneration package. It is only the Institutions that can effect things like this and I'm led to believe they don't turn up to AGMs or vote against this sort of thing in the main - is that because their salaries are similar?

Phil

(I've been looking at Bilby and have their accounts to hand - Directors' remuneration there is £0.5m and they seem to be doing a good job of turning the company around. Could it be that shareholders interests there are more aligned because the guy in charge owns a large slug of the company?)

Nick Jacobs

18th Jan '18

"how can they justify the excessive bonuses ?"
They can't, of course, but they don't have to. With the collusion of their pals on the board, they just take the money. Because they can.

In theory, shareholders can kick out directors. In practice, they can't, because large shareholdings are controlled by other companies, not by individual investors. The directors of those companies don't want to upset the directors they're asked to vote for. Why? Figure it out. "You scratch my back, ...". A lot of company directors sit on several boards.

Maddox

19th Jan '18

Trading Update -

https://www.investegate.co.uk/character-group-plc--cct-/rns/trading-update/201801190755023303C/

I missed this first time around - as issued at 07:55.

Trading over Xmas was in-line despite all the issues.....

gus 1065

18th Mar '18

Not sure it necessarily adds much to the discussion above, but this article from Richard Beddard over on II addresses the same issue.

http://www.iii.co.uk/articles/489425/shares-are-cheap-question-character

Basic strap line is that they're effectively paying the going rate for an AIM CEO to five different directors. Quite appalling really.

Gus.

janebolacha

18th Mar '18

Gus, yes, executive reward here is obscene. I did well out of this company but sold out a couple of years ago. Besides the levels of remuneration and bonuses, there was one other factor which bothered me. This was the repeated buybacks of shares by the company from the directors themselves, rather than from the public, something that always seemed very odd.

I held for several years and the share went up very nicely indeed but somehow I always felt uneasy with the company as a "forever" holding. The business model is essentially a short-term one, dependent on licence renewals and catching or creating fashion fads in a very competitive toys market.

I am still puzzled by the sudden and unexplained departure of Mark Dowding from the CFO job, replaced not by a new appointee from outside but by Mr Shah taking on the job himself, in addition to his other existing responsibilities. Why would any company do that? It may be unavoidable to speculate, rightly or wrongly and in the absence of explanation, on the reasons for his departure which seemed to coincide with the disclosure of the travails of Toys R Us in the US.

TangoDoc

19th Mar '18

The other thing that always crosses my mind is that we have no way of knowing what the final profit outcome would have been had these individuals not been in post and under their specific agreements. Not that I approve of tiny numbers of workers in any company being paid obscene sums for doing jobs that are neither risking their own lives nor saving others'.

Prof Calculus

19th Mar '18

Yes I did have a small holding but would not invest anymore as point of pricicle plenty other companies out there that are not run exclusively for the directors , bonuses are way to excessive for at best lack lustre performance

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Prof Calculus

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