JD Wetherspoon Results and Directors Reappointed at Edge Performance VCT

JD Wetherspoon (JDW) published their results for the year on Friday (13/9/2019). The revenue figures were very positive with like-for-like sales up 6.8%, overall revenue up 7.4% and earnings up 9.2% (after exceptional items).

There was an extensive diatribe from Executive Chairman and founder Tim Martin on two issues: 1) Brexit and 2) Corporate Governance standards.

Mr Martin’s stance on Brexit is well known. He is a Brexit party supporter and sees no problem with a “hard” Brexit. He says “Elite remainers are ignoring the big picture regarding lower input costs and more democracy, and are mistakenly concentrating on assumed short-term problems, such as delays at Channel ports”.

On corporate governance he dislikes the requirement for non-executive directors to step down after nine years. He says his company’s stance “is that experience is extremely important and the so-called nine-year rule is perverse and counterproductive”. He has a number of other complaints about the UK Corporate Governance standards. It looks like there may be a battle on some of these issues at the forthcoming AGM.

I agree with Tim Martin on Brexit but not altogether on corporate governance. I don’t like directors serving for more than 9 years simply from past experience of directors becoming stale and sycophantic over time. But he is right to criticise the “excessive focus on achieving financial or other targets”.

It’s well worth reading the announcement, but this is clearly one of those companies where shareholders have to have faith in the leadership of Tim Martin.

I do not hold the shares, but not for any prejudice against Mr Martin.

At the Edge Performance VCT (EDGH and EDGI) the sole remaining director Terry Back has reappointed two of the directors removed by votes at the recent AGM. This I consider most atrocious behaviour. The last time I saw this happen was at the bun fight over the future of Victoria (VCP) and that was soon overturned and a new board put in place.

It is of course essential to have more than one director in a public company because of the listing rules and for other reasons. It can of course be difficult to recruit new directors at short notice, particularly when a company is in difficulties. Potential directors fear they are at reputational risk. But reappointing directors removed by a vote of shareholders is simply not acceptable. Shareholders have a strong interest in improving matters so it should not be impossible to find some volunteers. I have suggested that ShareSoc line up some nominees to put the board on the spot. Investors need some new independent directors, not the same old guard.

As I said in this previous blog post: https://roliscon.blog/2019/09/02/edge-performance-vct-sorted/, I have long considered this VCT to be a basket case of the first order. The situation should not be allowed to continue.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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