The Works wins proxy adviser support in activist investor board dispute
Key Takeaways
- •ISS said Kelso failed to make a compelling case for changing The Works’ board and raised no material concerns about performance or strategy.
- •Glass Lewis said Kelso’s concerns about the share price had some merit, but still found the case for electing Graeme Coulthard insufficient.
- •The Works said adding Coulthard to the board could disrupt its growth strategy and create governance imbalance.
- •Kelso, The Works’ third-largest shareholder, owns a 10% stake, while Coulthard holds 8% of the company.
- •The Works reported 3.3% sales growth, £260 million in revenue to May, and a 44% rise in adjusted profit to £7.2 million.
The Works has secured the backing of two major shareholder advisers in its boardroom dispute with activist investor Kelso.
The stationery and crafts retailer has been locked in a row with Kelso, a London-listed investment firm, after the investor attempted to force a director onto the company’s board.
Institutional Shareholder Services (ISS) and Glass Lewis have both urged investors in The Works to reject Kelso’s proposal, handing the retailer a significant boost ahead of next week’s Annual General Meeting (AGM).
Kelso has argued that Graeme Coulthard, a former Card Factor director and a major shareholder in The Works, should join the board. The company’s executives, however, have said Coulthard’s presence would “risk derailing” its growth strategy and have refused to meet with him.
Ahead of the vote, ISS told shareholders that Kelso had “failed to articulate a compelling case for board change”. The advisory also said Kelso had “not raised any material concerns regarding the company’s performance or strategy”.
Glass Lewis said Kelso’s concerns about The Works’ low share price “appears to have some merit”. However, it added: “[But] the case for electing [Coulthard] remains insufficient, particularly given the company’s improving operating performance and substantial recent shareholder returns.”
Kelso questions board attendance
Last month, the dispute escalated after Kelso criticised The Works chairman Stephen Bellamy for dialling into board meetings from his home in New Zealand.
The activist investor said it “believes shareholders would benefit from greater clarity regarding [Bellamy’s] physical attendance and in-person engagement with the business.”
Glass Lewis pointed to evidence that Bellamy attended all seven of the company’s board meetings last year.
“In the absence of evidence that any presumed virtual participation has prevented Mr. Bellamy from effectively performing his duties as a director, this concern does not provide a sufficient basis for supporting the election of Mr. Coulthard,” the proxy said.
The Works has urged shareholders to vote against Kelso’s proposal, warning that it would “create an imbalance in governance and potentially result in particular shareholder interests being prioritised over those of the broader shareholder base, with a consequent risk of value destruction.”
Kelso said on Wednesday that it was “perplexed and disappointed that the current board have chosen to advise shareholders to reject [Coulthard’s] appointment.”
Kelso is The Works’ third-largest shareholder, with a 10 per cent stake, while Coulthard owns 8 per cent of the company.
The AGM vote will be watched closely because it comes as The Works continues to reposition itself away from its older “pile it high, sell it cheap” image and towards screen-free entertainment for children, a shift the board has tied to its wider growth strategy.
The retailer reported 3.3 per cent sales growth and £260m in revenue to May, while adjusted profit rose 44 per cent to £7.2m.
