Red flag warning: beware excessive Directors remuneration and the ‘Old Boys Board’
We like smaller companies where senior managers have a significant equity stake in the business. This hopefully ensures the interests of management is well-aligned with passive outside shareholders. Generally speaking, committed managers with decent sized equity stakes are fairly rewarded for their efforts, however, occasionally we come across some real horror stories where remuneration looks excessive relative to the returns of the business and long standing managers are hard to replace. We struggle to understand why passive investors would feel comfortable holding shares in a business like this, or more importantly why the company bothers to remain on the stock market at all. MS International looks a bit of a shocker to us!
AIM listed MS International PLC has 3 operating divisions encompassing ‘Defence’; ‘Forgings’ and ‘Petrol Station Superstructures’. These aren’t the most exciting activities but in our experience straightforward businesses often tend to outperform the jazzier of offerings over the long term. Unfortunately, this hasn’t been the case with MSI where headline returns over the past few years have been lacklustre, to say the least. Over the past 5 years revenue has declined from £56m to £49m and net income from a very attractive £6.31m in 2012 to £1.58m in 2016. The share price has, not surprisingly, also declined from 300p five…