Caffyns – are the dominant shareholders likely to rip-off the private investors?

PUBLISHED: 31 Jul 2018 @ 12:53 | Comments (0) |

The family do not control Caffyns plc (LSE:CFYN) through ownership of more than 50% of the ordinary shares, of which there are 2.69 in issue. They control the firm mostly through their holding of all the 2m 6% Cumulative Second Preference Shares, which each have the same voting rights as the ordinary shares (one vote per share), except in a few special situations related to the Premium Listing provisions, such as voting to leave the LSE (ie. the prefs lose the right to vote).

Control is exercised through a specially constructed company “Caffyn Family Holdings” which owns all 2m preference shares. Simon Caffyn and Sarah Caffyn are directors of Holdings, and the whole of the issued share capital of Holdings is held by close relatives of these two directors. So Holdings has around 42% of the voting rights of Caffyns plc.

The directors and shareholders of Holdings also have ordinary shares in Caffyns plc amounting to another 12.2% of the votes. So the Caffyn family have ensured that their company is impregnable to an outside corporate raider, or to a group of disgruntled non-family shareholders, because they have at least 54.2% of the votes (there are more tied up in the pension scheme and, I suspect, spread about in the wider Caffyn family).

They are impregnable so long as the family is not split and members refuse to sell off voting rights to a high bidder.

An outsider builds a stake

Andrew Perloff, active deal-maker and property developer, (Panther Securities and Beales Department Stores) has, in the last three months bought over 9% of the ordinary shares and there are suggestions on bulletin boards that he might try to take control.

But I’m struggling to see how he can do that without paying such an absurd price that he will lose money. More likely, he is buying a passive investment with a yield of 5% and a very strong property asset portfolio that’ll help see him through the next London downturn.

What the directors take

All in all, we small shareholders are at the mercy of Simon and Sarah Caffyn. The value of my savings put in Caffyns depends on the character of these two and whether they behave with decency regarding the powerless private investor.

Apart from a yield on the preference shares going to the Caffyn family (in fact there are three types of prefs with dividends amounting to £72,000 pa) and the yield on the 12.2% of ordinary shares amounting to £74,000 pa, the two members of the family active in the business earn directors’ remuneration.

From the tables we can see that ordinary shareholders have taken away £0.6m or so in a typical year while directors’ remuneration has ranged up to £1.153m.

£m	Dividends + cost of buying the company’s shares	Staff pay (including directors)	Issue of shares for SAYE	Directors’ emoluments
2018	0.61	14.8	0.03	0.63
2017	0.60 + 0.9	15.0	0.3	0.80
2016	0.60 + 0	15.7	0	0.88
2015	0.56 + 0	14.8	0.005	0.86
2014	0.36 + 0.39	14.5	0.3	1.153
2013	0.33 + 0	14.2	0	0.91
2012	0.34 + 0.1	15.0	0	0.83

Directors’ remuneration

£’000s	2018	2017	2016
Simon Caffyn, CEO	302	383	410
M S Harrison (now retired)	–	90	283
Michael Warren	155	139	0
Sarah Caffyn	49	64	69
Richard Wright	64	63	61
Nicholas Hollingworth	29	28	27
Nigel Gourlay	29	28

In 2018 Simon and Sarah Caffyn’s remuneration fell from a combined total of £447,000 to £351,000. This may still seem as an extraordinarily large amount to ordin………………..

……………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

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.