The Sweett Group’s board has claimed to have secured more than 50 per cent of the shareholder vote against a coup by Francis Ives, whose actions it today insisted were “motivated by emotion”.
The group this morning published its response to requisitions from minority shareholders and announced a general meeting of shareholders for 9 May.
It is sending a circular later today calling for shareholders to vote against all the resolutions by Mr Ives and said that the second resolution that Mr Ives has put to shareholders (which would see him elected and appointed as executive director) will require a 75 per cent majority in order to be successful.
Former chairman Mr Ives, who owns 4 per cent of the company, is part of a group shareholders that owns 14 per cent of the consultancy and that wants to reinstate Mr Ives to the board as chairman and remove non-executive chairman Michael Henderson.
But the group claimed today Mr Ives has not come up with a “cohesive strategy”, and has rejected claims including that the company is excessively indebted to its bankers and vendors and is only avoiding administration because those parties waived their entitlements.
The Sweet board said today that it unanimously backs the current chairman and has so far secured a 50.1 per cent majority shareholder support in its recommendation to vote against all resolutions proposed by Mr Ives.
It said despite this, the requisitionists have refused to withdraw their requisition, “resulting in further unwelcome distractions and significant costs to the group, its board and shareholders”.
Circular sent to shareholders
“There was never any question of the Group being placed into administration, any suggestion of which is damaging to shareholder value. The Group is trading comfortably within its banking covenants and agreed facility limits.
“The board does not believe that Francis Ives is the right man to lead the group. Since his departure three years ago, the business has changed dramatically, both in terms of sector and geographic diversification. The skillset now required to lead the business is very different from that of the old UK-centric business.”
Nicholas Woollacott, senior independent director speaking on behalf of the board, said: “The recent announcements of new commissions spread across the group’s regions and sectors, as well as the record order book and robust interim results, give the board confidence in its current team, strategy and in the outlook for the group.
Mr Woollacott told shareholders that Mr Ives had failed to articulate a cohesive strategy.
He added: “Michael Henderson has the board’s unequivocal support in his role as non-executive chairman and has been instrumental in the group’s development into the diverse and global business that it has become in recent years.
“The board, which commands 12.4 per cent of the vote, will be voting against all the resolutions and strongly recommends shareholders do the same.
“The group has received letters of intent to vote against all the resolutions from 41.4 per cent of the share register. In addition, certain other shareholders representing 8.7 per cent of the share register have indicated their support to vote against all the resolutions.
“Sweett Group has a clearly stated strategy to become a globally diverse business and, in doing so, create value for its shareholders.
“In the last three years, since the departure of Francis Ives, the group has made significant progress in delivering on these goals.
“The responsible and considered approach adopted by the board and operational management teams in moving into new geographies and sectors has enabled Sweett Group to withstand the highly challenging conditions in its core markets while continuing to deliver growth.”
Frances Ives’ circular
In Mr Ives’ original circular, seen by Construction News, the former chairman highlighted a “series of profit warnings, poor trading performance and significant under-performance against competitors”, along with the first ever accounting loss and breach of banking covenants.
It claimed there was excessive debt and no strategy to strengthen the balance sheet communicated, along with a lack of an integrated global strategy and concern that the firm was losing talented employees.
The circular added that Mr Henderson has declared his intention to retire at this year’s AGM in August; yet he has rejected Mr Ives’s proposals both to succeed him and to conduct a review of CSG’s financial and strategic options.
It stated: “With a clear focus on recovering shareholder value, the appointment of Francis Ives as executive chairman would provide vital leadership to the company. We have major concerns regarding the company’s current strategy; in particular, its inability to present a credible turnaround plan.”
The circular also claimed:
- CSG is excessively indebted to its bankers and to vendors of acquired businesses and avoided administration in 2012 only because these parties waived their entitlements.
- CSG has had to sell its PFI investments to pay down debt. With these investments now nearly all sold, CSG is dependent upon generating free cashflow from normal trading activity. Yet working capital management has deteriorated since FY12.
- At the time of the IPO in 2007, the combination of easy access to cheap bank debt and the use of quoted shares as an acquisition currency offered the prospect of a ‘buy & build’ strategy through M&A.
- CSG’s shares no longer provide an acquisition currency and the company is over-leveraged, and with CSG’s predominantly held by former and current employees rather than institutions, “trading volumes are low, pricing spreads wide, and trades of even small sizes can move the price by +/-5 per cent”.
“Despite all the costs and overhead of being quoted on AIM, CSG has remained to all intents and purposes a private company,” the circular added.
“Francis Ives’s appointment as executive chairman will restore leadership and confidence in the future. He will instigate a comprehensive financial and strategic review so that recommendations can be put to shareholders within three months of his appointment.
“We are confident that Mr Ives’s appointment will deliver much-needed change and better value for shareholders. We ask you to vote in favour of the resolutions.”
The Sweett board reject claims that Mr Henderson refused to consider a fundamental financial and strategic review, and that the group is not acting like an integrated business overseas.
The Sweett group share price is at 24 p per share.
The General Meeting of Shareholders will take place at Holborn Gate, 26 Southampton Buildings, London WC2A 1PB on May 9 2013 at 10am.