Tuesday, November 13, 2012

Inland Homes (INL) - Directors salaries/bonuses

There is a potentially ugly situation developing at AIM-Listed brownfield site developer, Inland Homes (INL).

It's a fundamentally good company, which buys and re-develops brownfield sites, and then typically sells them on to developers for a profit, once planning permission has been secured. It also develops some sites itself.

Their website is here;

The Directors presented at several investor meetings which I attended, and impressed by them, a number of us bought shares in the company (I only have a small number myself, but have friends with considerably more).

However, a problem has developed over Directors remuneration. This is a small, AIM Listed company, which trades at a big discount to NAV, and where by any measure shareholder return has been very poor. The company Floated in April 2007 (admittedly happier times) at 50p a share, and yet today the shares are languishing at just 18p.

They have paid nothing in dividends, until a negligible dividend of 0.067p a share was recently declared. With 183m shares in issue, I calculate the total cost of paying the maiden divi is just £122,610.

However, the Annual Report for 2012 shows that the 3 Directors helped themselves to £246k in bonuses, more than double the total dividends paid to all shareholders!

There is absolutely no information given in the Annual Report that I can see which explains what performance targets were met to trigger these bonuses, so the only conclusion I can come to is that the Directors just fancied helping themselves to some of our (shareholders) money!

It is impossible to justify any bonuses to Directors when the shareholder return has been so poor, indeed heavily negative.

The advfn bulletin board for this company contains many negative comments from shareholders who are unhappy with the Directors remuneration and corporate governance at Inland Homes.

If Directors want to run it as a private slush fund, then buy us out! But as it's a Listed company then Directors are subject to scrutiny & challenge from shareholders who are unhappy with the situation here.

The 2 main Directors, Stephen Wicks and Nishith Malde, seem competent. But their total remuneration, including benefits, bonuses & pensions, are £458k and £453k respectively, the latter for a Finance Director!! (that is before employers NIC, which adds a further £114k cost to the company).

Remember that this is a small (£34m mkt cap) AIM Listed company which has only ever paid one derisory dividend, and where the share price has lost over 60% of its value since the company Floated over 5 years ago.

One has to ask the question, what planet are they on?!

One also has to ask the question, for whose benefit is this company actually run? It's clearly not shareholders, is it? We are paying these fat salaries to Directors who seem to have no link between shareholder value and their remuneration.

That needs to change. Myself and other shareholders will be attending the Inland Homes AGM and putting these issues to the Directors. A previously supportive shareholder base is turning against management, because of their greed over pay.

At the very least there needs to be a proper bonus scheme put in place with sensible targets, linked to shareholder value, explained to and agreed by shareholders.

Of course this is only the stuff we see. What about expense accounts? I hear that many Listed company Directors use their expense accounts to travel and entertain in lavish style, which of course is never reported to shareholders. So the total cost of Directors is often a lot higher than even the disclosed remuneration. I don't have any specific information on the expenses of Inland's Directors, so this is more a general point.

AIM, and the London market generally, has become a cesspit of greedy, self-serving Directors who brazenly milk the companies they run for personal benefit. The zeitgeist has changed, and shareholders have had enough, and are now prepared to challenge errant Directors and remove them if necessary using an EGM or AGM. It's not just private shareholders who feel like this, but Institutions too. There should be no rewards for poor performance.

In my opinion Inland Homes is fundamentally a sound company, but the Directors are now the wrong side of the line in terms of remuneration, and this issue needs urgent attention.

The undeserved bonuses for 2012 should be repaid to the company, and if they want bonuses in the future, then a proper scheme should be drawn up which links reward to achievement, and in particular, long term growth in the share price. So share options are the best route for this, with a challenging uplift in the share price necessary before any benefit accrues.

If the Directors want to carry on using Inland Homes as a personal slush fund to dip into when they fancy paying themselves a bonus, then they should buy out external shareholders and de-List.

I loath the property sector normally, as it is full of people with inflated egos and a sense of entitlement, who have become used to excessive pay during the boom years, and are now refusing to moderate their greed.

Action is needed here at Inland Homes to get things the right side of the line, with Director pay reduced to more appropriate levels for a small company, undeserved bonuses repaid, and a better structure put in place for the future so that shareholders can regain confidence in the management.

If things are not sorted out, then I'm considering launching a Shareholder Action Group website to bring together unhappy shareholders, and to demand/force change. Hopefully that won't be necessary once we discuss these issues with Directors at the AGM;

Annual General Meeting of the Company will be held at 10.00 a.m. on 27 November 2012 at theoffices of the Company, 2 Anglo Office Park, 67 White Lion Road, Amersham, Buckinghamshire HP7 9FB

Please feel free to comment below, and/or on the advfn bulletin board linked to above.

I also urge all shareholders to come along to the AGM and join the discussion with the Directors over this issue. Contact your broker for details on how to attend the meeting if your shares are held in Nominee, they might need to give you a letter to enable you to attend.


  1. Paul, An excellent article, and as a small holder (25,000 shares) in my SIPP with Barclays Stockbrokers, I have this evening written to Inland referring to your piece and asking for an explanation re the extremely high salaries and bonuses paid to our Directors. Unfortunately I cannot be at the upcoming AGM but at least my name has been added to the growing number of disenchanted holders.
    Geoff Luckett

    1. Thanks Geoff.
      I feel that the Directors here don't seem to understand that small AIM companies should pay their Directors relatively modest salaries, but give upside through shares and share options.
      These guys seem to want big companies salaries & bonuses PLUS upside from the shares (in the long term).
      That's the problem in a nutshell.

      I'm sick of this relentless ratchet of executive salaries just going up & up every year, with no link to performance or shareholder value. It's got to stop.

  2. They should all use tni scheme for Simon Fox...
    sp above 75p and you get a bonus.
    (look what it's done for the sp, currently at 73,
    with phone hacking uncertainty) to be fair though
    I feel confident in Simon fox's actions..removing
    happli etc.


  3. good piece Paul I agree wholeheartedly

  4. I too agree - and would also add that taking a bonus given the financial performance to date rather than acting as a sign of confidence in the future really acts as the exact opposite.

    After all they both have material interests in the company in the form of both shares and options

    Time for this merry-go-round to stop

  5. Good Morning Paul
    Good article, but is it possible to change the NIC from £114m to £114k


    Rob Ward

    1. Well spotted Rob, and thanks for flagging this typo.
      I have now corrected the figure to £114k.

      Regards, Paul.

  6. Paul - thank you for bringing this matter to shareholders attention. I am delighted that you will raise the matter at the AGM and shareholders should be urged to attend. I hope to be there to give you my support. I also agree that the dividend was derisory and we should push for a greater payout next time.


  7. Robert Sutton (Skegbyhouse)November 14, 2012 at 5:26 PM

    Robert Sutton.

    I have accumulated a fair number of shares in Inland. The main directors have a good track record of building value in property companies, having built one up previously, (Country and Metropolitan was the name, I believe), increasing NAV, then selling it to a major builder as an exit for all investors.

    Until now the plan was to repeat the trick with Inland. I have been to a number of meetings and never got the impression that the directors would do something as brazen as this. My worry has now shifted from the company's strategy to that of the directors.

    Neither of these two are likely to have any immediate need for this much cash since I believe they were both major holders in C&M. So why would they wish to take so much of it out now; particularly in such a desperately tax-inefficient way? They would pay little or no tax on the profits from a sale of the company.

    One answer, of course, is a mixture of greed and impatience. After all, their drawings are tax-inefficient but at least (from their point of view) they get all of the money taken out of the company. At liquidation it is shared pro-rata by all the shareholders. This level of selfishness does not gel with the impression I have gained of the two men at several meetings.

    More worrying would be that, in fact, they have lost faith in their ability to grow the company's NAV substantially in the current market conditions and are grabbing what they can now. I find that unlikely, however.

    Most likely is that they have simply deluded themselves into believing that they really are worth these vast sums of money, drawing 3% or the company's NAV as salary each year.

    For real conspiracy theorists there is the possibility that they have acquired access to finance sufficient to buy the company out altogether and that they have embarked on a programme to reduce the share price as much as possible before striking. if the intention was to de-list as part of this strategy than we would be playing into their hands by taking an aggressive stance at the AGM. They will certainly have enough support to win any vote and a heated meeting would make it easier for them to distance themselves from private shareholders.

    All in all our best strategy must be to try to persuade them, without allowing the meeting to overheat, to step back and try to see their salary aspirations for being as excessive as they seem to third party observers.

    1. Hi Robert,

      I agree that we should seek to persuade the Directors to moderate their salaries to more appropriate levels for the size of company, and that no further bonuses should be paid - unless through an agreed bonus scheme with stretching performance targets for shareholder value.

      If the meeting gets heated, then so be it. But I've always found that firmly putting opinions to Directors gets the point across.

      I've also met the 2 top Directors here, and was also impressed with them, so let's hope we can steer them back onto the right side of the line re remuneration.

      This is by no means the worst case of corporate greed I have seen, but they are starting to take the piss, and we have to make it clear that we won't stand idly by as they remove large amounts of cash from the company, and as you say in a highly tax inefficient manner.

      Regards, Paul.