In a letter circulated to shareholders last week, and seen by Money Marketing, Arlington special situations fund and Armadillo Investments say the firm raised £5,500,000 since floating in 2002 yet now has capitalisation of less than £500,000. Over this period, its share price has dropped from 100p to 1.45p.
The shareholders say they have no confidence in the business skills of the Birketts and have called on other shareholders to vote them out at the EGM on August 20.
At the heart of the dispute is a £853,483 debt which was owed by Prestbury Investment Management, a packager formerly part of Prestbury Group Holdings but now wholly owned by Lee Birkett, to Prestbury Holdings. This was written off in the July accounts for Prestbury Holdings.
The shareholders say PIM, having net assets of £27,379, was contractually obliged to pay Prestbury Holdings the £853,483 in December 2007.
The shareholders say it is highly unusual for a company to run up debts of this magnitude with a company in which its chief executive officer is a substantial shareholder.
It says there is a “considerable conflict of interest” between the private interests of the Birkett family and the duties they owe the company. It says of the combined directors’ remuneration of £597,514, a substantial part has ended up with Lee and Lynne Birkett and that, tog- ether with their remuneration package is worth close to the entire current market capitalisation of the company of around £500,000.
In his own letter to shareholders urging them to vote against his removal, Lee Birkett claims there are “many inaccuracies” in the Arlington and Armadillo letter.
He disputes the accusations over directors’ remuneration and claims he earned £60,000 last year and accepted an offer for a substantial pay reduction.
Birkett disputes the figures quoted for the capital raised since the flotation of Prestbury, suggesting £3.8m not £5.5m was raised.
He says: “There are no conflicts of interest. My shares in PIM were completely declared and the transfer of PIM out of Prestbury was approved by City advisers and lawyers. The build-up of the £853,000 of debts by PIM was morally aligned to Prestbury plc as overheads such as rent, services and staff costs were shared.
“If the parties that called for the EGM had felt that the executive directors’ proposals in March to take Prestbury private at a price of 20p per share was in the company’s interest, this would have given the company a transactional value of £6m.”