French Connection has apparently bowed to activist shareholder pressure and begun the search for two new non-executive directors.
The beleaguered high street chain has been the subject of several demands to address its declining fortunes by Gatemore Capital Management, one of which was to replace long-standing non-executive directors Dean Murray and Claire Kent.
The pair, who have sat on the board for almost nine years, have overseen a period of “tremendous decline” in the company’s value, Gatemore managing partner and chief investment officer Liad Meidar told The Telegraph. Murray will mark his nine-year anniversary at the retailer next month, while Kent’s will be in November, which would be a contravention of corporate governance guidelines.
Also a sticking point for Gatemore, and another contravention of corporate governance guidelines, is founder Stephen Marks’ joint role as chairman and chief executive. Marks, who controls about 42% of the company’s shares, has so far remained steadfast in his refusal to split his role.
It is understood that Gatemore has requested that Christos Angelides, the respected former product director of Next who joined French Connection as a non-executive director last year, should oversee the appointment of the new directors.
Gatemore’s campaign began last summer when it demanded a boardroom shake-up, the splitting of Marks’ role, the dropping of the FCUK brand and a speeding up of the closure of underperforming stores among other measures.
The business has been in decline for the past decade following its 1990s heyday; last September it posted a pre-tax loss of £7.9m on sales of £69.2m in the six months to 31 July. Its shares currently trade at around the 32.4p mark, whereas 10 years ago they were £2.40.
Having failed to get a response from French Connection’s management to its requests, Gatemore enlisted the support of additional shareholders OTK Holding and Zoar Invest in recent weeks to support its campaign and warned that the company risks running out of cash this summer unless it takes urgent steps to address its problems. Together the group represent around 15% of the company’s shares and they will view Marks’ agreement to concede to one of their demands as a victory.
