GREG HUTCHINGS
“I am passionate about Lupus”
Working for
Lupus Capital Shareholders
30 October ,2009 | Greg Hutchings gregegm.com
Straight talking ....
Greg’s Statement to Shareholders from the General Meeting of 30 October, 2009 :
30 October | gregegm.com
“ I would like to open by saying what a tragedy this whole situation has become and I would like to particularly appeal to some of our largest shareholders who are here today, but wish to vote against the resolutions. [ Greet institution representatives who are present ]. Firstly, may I apologize to them for any hassle and difficulty that I have caused them but I am passionate about Lupus, its shareholders and staff, and feel compelled to do everything possible for their long term benefit. Secondly, I would request them to be open minded and ask themselves, what they, as strong, determined businessman would have done in similar circumstances, especially if they had an investment of 9 million pounds of personal money to protect.
Let me start by putting things into context:
The company, the board, the shareholders and the banks together bought Laird in April 2007 knowing the US housing market was already down by almost 30% with the expectation it could continue but none of us anticipated such a severe recession. Nevertheless my management teams reacted quickly and Lupus continues to be profitable.
The company and banks, with shareholders approval, hedged the dollar earnings with dollar debt.
A year and a half later we looked like we would break one covenant due to the sudden change in the dollar / pound exchange rate.
The bank syndicate was alerted months in advance.
We broke it – we had to renegotiate financial terms
The bank commissioned a business review from accountants. When compiling their review, KPMG never even spoke to me yet concluded that Lupus was in need of a turnaround plan, almost implying, despite record results, it was a distressed company. Would you have accepted this, if you like my management team and I had spent 15 months fighting the worst recession in memory, enduring the pain and effort of cutting almost 30% of the workforce and reducing ongoing annual costs by around 20million pounds. This had been done professionally and smoothly whilst keeping the company stable, profitable and paying its bank interest bills. Would you be happy to accept, without qualification a bank turnaround appointee without constraints – even to the extent that if he resigned for any reason, this would automatically cause a bank breach and default.
I am sure you would seek and expect compromises such as – maybe that any issues highlighted by KPMG could be addressed with the appointment of specific, experienced bank appointees to help rectify them. Or you might even acquiesce to taking a sabbatical period whilst the bank appointee had unfettered access to ensure the banks were satisfied with their risk and the company’s operations. As I offered.
Also, tell me [ institutions ] if like many shareholders, you had felt Lupus had an adequate capital structure, refinancing from the bank for 3 years, and particularly yourself, did not wish the company to have a rights issue - should Lupus have done one anyway - just to placate any shareholder who saw it as an opportunity and also to give unnecessary early repayment to the banks? Did we not do what you wanted?
This current board seems to give out conflicting information….
One - At the AGM, the board praised how my management team and I ran the business with comments like ‘a cracking job,’ ‘screwed down costs,’ ‘no black holes’ etc. Yet your circular, Mr. Jackson, was full of sweeping language regarding ‘significant issues’ and ‘urgent requirements’ which now tries to convey the very opposite.
Two - Several public statements by you again Mr. Jackson and Mr. Taylor at the AGM regarding remuneration were at odds with written and signed documents. If Mr. Taylor concedes that he did not express his remuneration very well then why did he and the company not ensure that the statements were immediately, publicly corrected. Shareholders, particularly institutions should not tolerate this. Are the contracts even on display today?
Three - David Lis’s concern about the banking relationship must have come from somewhere yet this is not borne out by Mr. Jackson’s statements in the circular. Besides which the people who did almost all the negotiations are still at the company and anyway the banks should be impartial.
Four - Mr. Jackson says Lupus is now in a much better state than it was before. Head office must now be costing probably more than £1 million a year. Michael - How many more door locks, handles, and staff to sell them, do you need to generate £1 million cash after tax to cover this new cost? In addition, you state that you have new committees, which I guess are non-profit-making with lots of paper work. What’s their cost?
I would like to particularly appeal to Aviva, Schroders and Polar, as well as all shareholders. You all liked, as did Lupus management, the Laird acquisition, its prospects and price we paid, as well as how the capital structure was financed. We were all well aware of the risks and market place. You backed me and my management team, its structure, and how we proposed to manage it. Our team has done a superb job in a terrible economic recession by efficiently and effectively cutting costs and integrating the acquisition, in order to retain intrinsic shareholder value. My management has worked together as an inter-dependent team, produced record results and has not let you down, indeed probably done better than you expected.
May I ask you [ the institutions] would you have done anything differently?
May I ask you [the institutions ] if you would have defended shareholders interests in any other way?
I, and some of your directors, diligently defended shareholder interests against the unnecessary bank imposition at huge expense of turnaround directors. I also believe that Lupus requires the proven skills, experience and track record of my management team and I to build and grow Lupus in the future.
Thus, may I ask you all, together with most people in this room, to vote for these resolutions.
Thank you.”
Greg Hutchings
Statement to Shareholders of Lupus Capital plc 30 October,2009
31,January, 2010 | Greg Hutchings gregegm.com
Straight talking ....
Greg’s Statement to Shareholders ahead of the General Meeting convened for 12 February,2010
31st January 2010
Dear Lupus shareholder,
You should now have received the company’s reply to my requisition resolutions. It is very disappointing.
The current strategy and board skills looks like ‘manage what there is’ rather than a clear vision of effective, successful, entrepreneurial growth. For shareholders and operating management alike this is not what was signed up to. Shareholders need to show that we want vision, growth and transparency.
1. Were all members of the board, including the turnaround directors, always certain and convinced, having interviewed Mr. Eperjesi that he was the right man for the CEO job and not just a compromise candidate? This has been ignored in the circular.
2. In response to resolution 4 it was admitted that there was lack of clarity regarding Mr. Pike’s meetings with institutions before the last GM and that statements by board members were entirely unintentional. (a similar excuse to previous AGM statements).
The GM transcript (which you may request) shows six occasions when it was clearly and emphatically stated by Mr. Taylor and Mr. Jackson that institutions had not met Mr. Pike (see below).
Would it be a surprise to institutions? “absolutely”
“There are absolutely no names that have been mentioned”
“I don’t believe that, they were in a position where they had information which wasn’t in the public domain”
“the answer to those: no”
“you know we haven’t mentioned names,…so you have as much information today as before as they have”
“major shareholders were not in a position whereby they had information”
3. In answering resolution 5 they have still not acknowledged that Mr. Taylor and Mr. Felton-Smith had fixed success fees when their side letters specifically stated “will not exceed nor fall below £250,000/£160,000.”
I hate to be repetitive and seem to be a lone voice but all these questions are being glossed over as not well expressed or unintentional. I am sure either Fred Hoad (otford.hoad@btinternet.com) or [ DELETED ] would confirm the banks and KPMG’s part in what has occurred and also the lack of corporate governance and transparency. Maybe also ask how the Chairman and new non-executives were appointed – was the Nominations Committee even involved or able to consider alternatives? Or were they made solely at the behest of either Aviva, Collins Stewart or Mr. Pike?
4. I feel betrayed by the four major fund managers. Having successfully built Lupus, over 5 years and with £9 m of my own money, and then swiftly reacted to the recession by lowering the workforce by 29%, saving £20 m pa and producing record results, then twice fought against a dilutive unnecessary rights issue and tried to prevent over £15m being wasted, they voted for an unknown unnecessary turnaround management. Why? And why again?
5. I sincerely hope that Andy Brough’s investment for Schroders of nearly 7% of Tomkins in June 2000 doesn’t suffer the same corporate performance at Lupus. I had just produced at Tomkins record results for the 17th successive year with earnings per share of 28.3p and dividends of 17.45p. I have been led to believe that Mr. Brough supported my exit. Results have subsequently regularly declined. Earnings are now negative and the dividend has been cut to around 6.25p. Is this the future for Lupus?
6. There is now no continuity of directors since every member of the board is new. As shareholders we need to hold them to account in order to ensure that Lupus is run correctly. I am concerned for my £9m investment of 11.3% in what was a sound, well-run, profit and cash generating business with a vision for a growing future.
Please send in your vote FOR the resolutions as soon as possible – irrespective of the current fund managers. They may not be long-term holders since they might sell or they or their mandates may change.
We need to show we are continuously watching the board's actions.
Yours sincerely
Greg
* “Our decisions on how to vote on a resolution are based on Corporate Transparency” - Schroders Corporate Responsibility Report 2008.