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Arden (LSE:ARDN) had been in bad way for years when Luke Johnson, a famed entrepreneur and investor in start-ups and young companies, bought over 10% of its shares in 2014 for about £1m. He too has lost money on this investment so far.
As the company continued to decline he joined the board two years ago. As things got even worse, shareholders backed his elevation to Chairman, in hope that he could bring to bear his renowned down-to-earth brand of rational hard-hitting managerial style.
He takes no salary for his role, relying on a rise in value of his shares as a reward for his effort.
At last year’s AGM I quizzed the board about the need to conduct zero-based budgeting, i.e. to examine every cost to see if it contributed to shareholder value. I was particularly concerned about remuneration levels. It was impressive to hear that Luke Johnson had already taken the initiative and presented Steve Wassall, COO, with a book on the subject.
I anticipated cost reduction to get the expense levels more into line with the lowered revenue levels. Already total administration expenses are down 17.3% year on year to £6.3m.
Before discussing possible futures for this company I’ll briefly describe the other key players.
James Reed-Daunter, CEO.
He was a founder member of Arden, but was not a director until 2012. He held 1.67m shares in the company prior to the flotation in 2006, and 1.17m after it, taking some £800,000 cash out. His shareholding thus fell to only 4.63% of Arden’s shares and stayed that low even as late as 2010.
Since becoming CEO his financial commitment to the firm has grown; by 2014 yearend he had greatly increased his holding to 2.84m shares (12.43%) with another 500,000 available under options with the company’s incentive scheme.
Following the recent company repurchase of its own shares his holding fell by over 500,000 to 11.41% – he sold them to the firm.
It is amusing to think that after seven years of accumulated losses for shareholders he still thinks it OK to take remuneration of £170,000. Smiles would soon disappear if he was working on one of my building sites and failed to deliver to that degree.
Jonathan B. Keeling, Executive Deputy Chair
Mr Keeling was also a founder member of Arden Partners. After being appointed Executive Deputy Chair in 2012, now earning £170,000 (what a laugh!), he took special responsibility for developing international relationships – some Indian companies are clients, for example.
At the time of the float he was an executive director holding 1.67m shares. He sold 0.5m in the placing to take him to under 5%.
Similar to James Reed-Daunter he has built up his holding over the last 2-3 years; in 2014 he had 10.08% of the equity capital, or 2.08m shares. Following the share buy-back he now holds 2m shares (10.19%).
Steve Wassall, COO
Steve Wassall joined the company in 2009 and was elevated to the Board in 2010. He holds 3.7% of the shares. Total remuneration in 2016 was £125,000
So…what is the plan?
Not all is entirely clear yet, but there are some hints as to what might happen.
Shift to fees from corporates
Luke Johnson observed in the latest report that “We continue to face challenges: commissions are under pressure, and the regulatory burden grows remorselessly. All brokers like Arden will have to increasingly rely on their corporate client list to generate fees in order to succeed.”
With that in mind………………To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
