Should you sell when the CFO resigns ?

Monday, Apr 01 2019 by
4

I was wondering if anyone with more experience can help.

Should you sell when the CFO resigns especially if this is out of the blue , I understand it may not be black and white and they leaving could be genuine however does anyone have any thoughts on or experiences.
After all the CFO is closer to the coalface than most.

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Elegant Hotels Group plc is a holding company. The principal activity of the Company and its subsidiaries is the ownership and operation of hotels and restaurants on the island of Barbados. It owns and operates six freehold beachfront hotels and a beachfront restaurant in Barbados. Its hotels include Colony Club, Tamarind, The House, Crystal Cove, Turtle Beach and Waves. It operates Daphne's restaurant, which is located on platinum West Coast in Paynes Bay, adjacent to The House and Tamarind in Barbados. Its Colony Club hotel is spread across six acres of tropical gardens with approximately 300 feet of beach frontage on the Caribbean Sea and lagoon style pools. Its Tamarind hotel is on the Platinum Coast. Its Crystal Cove hotel has three freshwater lagoon pools, two restaurants, two bars, two floodlit tennis courts and a fitness center. Its Turtle Beach property is on the south coast of Barbados. Its portfolio consists of over 550 rooms. more »

LSE Price
70p
Change
 
Mkt Cap (£m)
62.2
P/E (fwd)
6.7
Yield (fwd)
5.1



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13 Posts on this Thread show/hide all

tony akram 1st Apr 1 of 13

sorry not sure why vodafone is there was meant to be EHG

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JohnEustace 1st Apr 2 of 13
4

It's certainly a big red flag for me. I guess it depends a bit whether they really resigned or were pushed. But in a company like Elegant Hotels (LON:EHG) with Luke Johnson as a 12.5% shareholder and NED, given his recent travails ... well it was not one for me anyway.

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Gromley 1st Apr 3 of 13
2

In reply to post #464393

Hi Tony,

As yours is the original post then I think you should be able to edit it - including I think which stock is referenced.

Anyway as to your question - generically I do not think there is a single answer.

Certainly one can point to instances where the CFO departing has been a sell signal, but I'm sure there are countless others where the reason for leaving was genuine and an adequate replacement came along. Imho - it is all in the context as you imply.

I haven't looked at Elegant Hotels (LON:EHG) much at all, but just from a quick skim I can a couple of useful flags fromthe RNS to consider.

1. He has been with the company since 2016 and is cited as having :

played a key role both in returning the Company to financial stability and in helping to execute the recent acquisitions and management contracts.

That sounds a little bit like he was brought in as a trouble-shooter, in which case the tenure and departing with "job done" may well make sense. I also note that the share price took a substantial tumble in June 2016 and presumably this was caused by the problem he came in to fix?

That all seems fine, except that I note , the company was only founded in April 2015. So whatever the problems were in 2016 they were probably there at launch - the phrase "returning the Company to financial stability" in the RNS sounds a bit dubious to me therefore.  This also potentially means that he was the first "proper" CFO and that the companies accounting is somewhat built around him - this could be a red flag, so personally I would want to understand what happened in 2016 before considering this properly.

2.  He is said to be returning to the UK - that can certainly be a respectable reason for moving on after nearly three years.

Finally he is staying on to manage the transition which at least indicates that there is no serious breakdown in relations.

So nothing obviously wrong here as far as I can see - but of course we don't yet know who will be the successor. There is no mention of the recruitment / appointment process for the successor - for a relatively small company like this this would be important to understand.

AHA  - Thank you JohnEustace - I was not aware of the Luke Johnson connection and that would give me pause for thought (and then some).

Was he involved in the launch/float (of a company that had a problem pretty much within it's first year)?

Did the retiring CFO fix the business or fix the accounts?




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mercury61 2nd Apr 4 of 13
1

Today
High flying £D4t4 Solutions Plc - Carmel Warren, Chief Financial Officer, Has notified board that she plans to leave the company and will remain with the company during her Three-month contractual notice period
Transition Plan Is in place and Company has commenced an external search process

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Carcosa 2nd Apr 5 of 13
1

Re Elegant Hotels (LON:EHG) I held these from 2015 to early 2016. Sold out after they became set on destroying the balance sheet. See https://www.stockopedia.com/content/small-cap-value-report-14-oct-2016-inl-154532/?comment=4#4 Now I see curretn ratio is below one since 2016.

The other item I disliked was their property valuation. There was in my opinion a big disconnect between the valuation and the realisable value with realisable value being significantly lower.

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tony akram 2nd Apr 6 of 13

Many thanks to everyone for your comments

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andrea34l 2nd Apr 7 of 13

I'd say CFO resigning is a red flag, but potentially other key directors. Example stocks are Bilby (LON:BILB) and Domino's Pizza (LON:DOM) but I am also not sure why Vodafone (LON:VOD) is mentioned

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herbie47 2nd Apr 8 of 13

In reply to post #464569

If no share is mentioned in the OP then it could be a Stocko default.

I agree with the others, a red flag for me. The 2 key positions are CEO and CFO.

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tony akram 2nd Apr 9 of 13

In reply to post #464585

sorry VOD came up I have added EHG but cant get rid of VOD

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herbie47 2nd Apr 10 of 13

In reply to post #464691

Has been amended now.

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tony akram 2nd Apr 11 of 13

Thanks Herbie47

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InvestorJohn 2nd Apr 12 of 13

Is see that £D4T4 cfo has jumped ship today too...

Edit: woops this is already posted above

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andrea34l 3rd Apr 13 of 13
1

Dechra Pharmaceuticals (LON:DPH) CFO has gone "with immediate effect" today; trading is in-line... I think they are overvalued

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