Mears’ biggest shareholder, PrimeStone Irish Capital Holdco DAC, is seeking to get two of its nominees elected to Mears board, against the wishes of the current directors.
Primestone has tabled resolutions to be voted on at Mears’ annual general meeting on 31st May 2019 to appoint two additional non-executive directors: Andrew Coppel and Ian Lawson.
Andrew Coppel is a former chief executive of Queens Moat Houses and the Jockey Club and has been chairman of Dolphin Capital Investors since 2016. Ian Lawson was CEO of steelwork firm Severfield from 2013 to 2018, having previously been a main board director of Kier.
Primestone said that the Mears board had too many directors with a background in social housing or charities and it needed more business expertise.
However, Mears’ board is urging other shareholders to vote against Primestone's resolutions, saying: “The board firmly believes that any process to identify potential new non-executive directors should be conducted by the nominations committee of the board after an appropriate external search open to a broad range of candidates followed by a diligent review process. Such a process, led by the company's nominations committee and assisted by executive search firms, is already underway to appoint two additional non-executive directors. It is the board's intention that one appointment be made by the end of June and the other before the summer holidays if possible.”
PrimeStone owns 13.5% of Mears, making it the company’s biggest shareholder.
The battle comes just a year after Shareholder Value Management (SVM), a German investment firm that owns 9.9% of Mears, moved to oust the then chairman Bob Holt. Mr Holt finally resigned at the end of the year, to be succeeded as chairman by Kieran Murphy.
Kieran Murphy, a former civil servant turned banker, now faces a similar challenge to his authority. He said he regretted PrimeStone’s move.
For its part, PrimeStone said that the board needed more commercial savvy. In its pitch to fellow shareholders, it said: “Over the last five years the company’s revenues and profit have remained flat despite its strong market position and growth prospects. Cash conversion over the same period has steadily declined from over 90% to 3% in 2018. As a result, average net debt has doubled.
“Mears’ financial communication has been unsatisfactory. 11 profit warnings in the last five years have resulted in the market losing confidence in the Company’s ability to forecast and no longer giving the company the credit it deserves for good news.
“The result for shareholders has been a share price that has declined significantly over the last two years, with Mears’ shares now left trading well below their intrinsic value at a seven-year low. Total shareholder return over 1 year, 2 years and 5 years has been 24%, 51% and 47% respectively.
“PrimeStone believes that Mears’ underperformance is predominantly due to a lack of strategic, commercial and financial experience on the board. The current board has a strong concentration of directors with a background in social housing, health & safety and charities. These skills are important but as evidenced by the company’s results, they are insufficient to restore Mears’ performance and take full advantage of its significant growth prospects. These skills must be complemented with strong strategic, commercial and financial skills to ensure optimal business decision-making, allocation of capital and cash management.”
It concludes: “Mears has an exciting future but only if significant changes occur; a reinforced board is critical to this. The two experienced individuals whom we are nominating will help Mears prosper again for the benefit of all shareholders, customers and employees.”
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