Coil (English) - Public letter from former independent Director, Andrew Reicher, to the board of Coil

COIL : General Meeting this Wednesday 6th November 2013 at 11h at 3400 Landen (Belgium)

Group Action

A group of shareholders, represented by Stephane Bertouille of Everest Attorneys, have requisitioned an emergency general assembly of Coil SA/NV, to take place on 6^th November 2013.

They seek the removal of the Chairman, Jim Clarke and fellow Board Member Patrick Chassagne.  They wish to replace them with 3 new Board Members: Lindsay Hill, Paul Hogarth and Clemente Gonzalez Soler.

Photo Lindsay Hill :

Photo Clemente Gonzalez Soler, shareholder and CEO of Alibérico (Spain) :

 

They are unhappy with the Management of the Company over recent years, and require a change in Board Structure which will enable:

1. A full review of the corporate strategy and it’s executive leadership.
2. An investigation into the sale of the UK batch anodising business to a Company controlled by the Chairman Jim Clarke, and;
3. An investigation into and review of the activities and remuneration of C.E.O.

Why is this action being taken?

Here are a few key facts:

1. Chairman’s acquisition and conflict of interest.

Coil originally bought United Anodisers, the UK batch anodising businesses in February 2007 for approximately €5.5 M.

On 19^th December 2011, Coil announced the sale of the same business to “private investors” for a “confidential price”.  It announced that the UK business had, in the year ended December 2010, a turnover of approximately €4.8M and an operating loss of €0.4M.  Resultant Capital Losses on the sale were expected to be €2 – 2.5M.
See press relaese

The sale was actually to a Company controlled by the Chairman of Coil, Jim Clarke.  What is more, in the UK Co’s audited accounts for the year ended 31^st December 2011 (a date being a mere 12 days after the Coil sale announcement), it records turnover as £ sterling 6.558M and net profit of £ sterling 675,000.

It is clear from Coil’s audited accounts for 2011 and 2012, that Coil actually received only approximately £1.9M for the UK business, and overall Capital Losses were in fact €3.51M.

During 2012, United Anodisers (see website), the UK batch business then paid dividends of £ sterling 1.252M for the ultimate benefit of EMC Properties Limited, a Company controlled by the Coil Chairman, Jim Clarke.

The business which was sold has continued to use the United Anodiser’s name, thereby risking confusion in the market and with Coil’s customers.

The circumstances surrounding the sale of the UK batch business and its valuation require investigation.

In 2012 the Coil Chairman Jim Clarke’s UK business then acquired the assets of the Italian business Ital Finish (See website), including batch and continuous anodising facilities. See press release
Since acquisition, the continuous anodising capability has been recommissioned and is now in production.

The United Anodisers group controlled by Coil’s Chairman, Jim Clarke, now operates facilities which can compete with Coil.

This creates a serious conflict of interest and the Coil Chairman’s position is untenable.

2. Remuneration of C.E.O & issue of new shares

We believe that the C.E.O. Finance and Management International (FMI) SA/NV, having its permanent representative Mr Tim Hutton, is vastly overpaid.

Coil has disclosed in its accounts for the year ended 31^st December 2012, that the C.E.O. received remuneration of €816,000 during the year.

This sum is out of proportion to the current size of the Coil business and its current trading performance.

On 23th October 2013, the coil Board, despite the objections of one Director, (Philip Hughes) has granted to the CEO a very substantial shareholding with full economic and voting rights in advance of the forthcoming General Assembly thereby swamping the rights of existing ordinary shareholders. They claim the right to use an existing Board power to increase the share capital in order to issue 143.864 new shares to a value of 1,020,000 Euros. See press release only available in French

To prevent this Philip Hughes made an urgent application to the Belgium Commercial Court on 24^th October 2013. The court has agreed to hear the case on 31^st October 2103 prior to the general assembly.

The whole remuneration & benefit structure needs through investigation and revision.

3. Company Strategy and Financial Performance

Coil is the world leader in continuous anodising, yet its market capital is only approximately €6.5M.  It is not growing its sales or profits.

The company share price is languishing at under €5 per share.

No dividend has ever been paid since its Initial Public Offering 17 years ago.

The overall Company growth strategy and its executive leadership requires a full review.

All the information contained within this note is from publicly available sources.

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Dear former Coil Board colleagues,

This is to explain to you why I have given my proxy for the EGM on 6th November to Phil Hughes and the reason I have asked him to cast my votes for a change to the Board, with Jim Clark and Patrick Chassagne to be replaced by Lindsay Hill and Clemente Soler.

As someone who has been involved with Coil since 1989 and was a member of the Board for four years until August of this year, when my new role in Africa required me to step down, I believe I have a perspective which is relevant to the issues. I wish this message to be in the public domain. Please therefore share it with all attendees at the EGM, preferably by reading it to the meeting, and with anyone else you think will have an interest in it.

Fundamentally I believe there is an urgent need for a change in the management of the company.
Coil has been managed by FMI, represented by Tim Hutton, since 2000. The share price then was approximately €15. It subsequently fell to trade in a range around €10 for the period 2002 - 2006 when, after the opening of the new Bernburg factory, it rose briefly again to the €15 level, before falling in late 2007 with the onset of the global financial crisis, to below €3 by early 2009. After recovering slightly, it has since then traded in the range €3 - €5 and today stands just below €4. After 13 years with Tim as CEO, the company's share price is today approximately 75% below the level it was when he started. In that period, I believe I am correct in saying that FMI has been paid a total of over €10m for Tim's services, while the company's equity value has fallen from over €20m to below €7m.

While the Bernburg initiative has clearly been a success, it was followed by the acquisition of two batch anodising companies in the UK which were without doubt a serious failure costing the company much time, money and management distraction. A lot of effort and money have recently been put into developing sales in Asia. This may in due course bear fruit, but the company's trading results do not yet show any significant improvement and profits have been broadly flat for the past three years. The management record is thus very mixed. Nobody can say that 13 years is too short a period in which to make a balanced judgement of the record.

Through FMI, Tim has been paid at the very top of the market range, which might have been justified had shareholders benefitted from outstandingly good and consistent operating performance and strong increases in share value. The actual outcome has been the opposite as pointed out above. It is possible in the current market for the Board to introduce a new, vigorous and effective management team at much lower cost than that of FMI. 

Management should always remember that its duty is to put shareholders' interests ahead of its own. I have come to the painful personal conclusion that this is not the case at Coil. If it were, Tim should have volunteered for FMI to relinquish its contract. But he has always appeared to me to be very determined to stay.

In virtually every other company where such things happen, management is replaced. Knowing your positions as I do, I think the only way to effect such management change at Coil is to change the Board to one where there is a majority for confronting the issue, which is why I am voting my shares to bring this about.

Sincere regards,

Andrew Reicher, 27th October 2013
http://www.linkedin.com/pub/andrew-reicher/13/650/451