The Reject Shop (TRS) 2015 AGM Report

Company/ASX Code : The Reject Shop Limited (TRS)
Venue :
Crowne Plaza Hotel Melbourne, Victoria
Monitor : Mr Ian Curry
AGM Details / NoM : Wednesday 14th October, 2015
# of Attendees : 22 shareholders and 27 visitors
# Holdings represented by ASA : 44
Value of Proxies : $1.04 million
# Shares Represented by ASA : 110,000
Market Capitalisation : $272 million

Improved performance carried into FY16 year

The AGM was a low key meeting, poorly attended and only the ASA asked any questions. Following a disappointing 2014 financial result requiring impairment charges, write-offs and the appointment of a new CEO, the Chairman spoke positively about the improved sales performance in the second half of the 2015 year. This improvement has continued in the first quarter of the 2016 year with comparable store sales ahead of the previous first quarter. The rate of expansion will slow during the year with a net eight new stores opening.

Increased marketing and advertising has contributed to results and an emphasis on customer engagement using a data base in excess of 200,000 customers is producing strong brand loyalty. More use of television and catalogues and a review of supply chain structures are aimed at increasing sales and reducing costs. It was noted that the share price had increased from $5.11 to $9.43 in the last 12 months.

A new distribution centre, to replace the existing centre, is to be completed in early 2017 when the lease on the current Melbourne centre expires. This development will be financed from cash flow and existing borrowing and banking arrangements.

ASA asked whether further store impairments or write-offs are likely in 2016 and the answer was none are likely. We also asked about the impact of supply chain reviews on suppliers and were assured that no issues are expected as most product is bought from best available suppliers.

The build-up of franking credits was raised and the Chairman was asked to consider capital management approaches which could utilise these to benefit shareholders. He indicated that directors were aware of this and wanted to ensure that profitability and cash flow made this possible.

The remuneration report received votes in favour of more than 97%. ASA asked that a table showing actual remuneration paid in the year be shown. This will be considered. Once again we asked that the company introduce a policy requiring directors and executives to have a minimum shareholding requirement over a specified term of years. The Chairman does not support any mandating of share ownership.

The issue of performance rights to the CEO received a vote of support of more than 95%. The CEO Mr Sudano has revitalised the executive team and impresses as a leader with a clear strategy.

Both directors standing for re-election received votes in favour of more than 99.5%.

The meeting was asked to approve an increase to the director’s fee pool of $350,000 to $950,000. ASA regarded this as excessive and asked if this increase of more than 50% indicated the appointment of an additional director. The Chairman advised that an appointment is planned and acknowledged that the increase would mean no further increases would be needed for a number of years. It is noted that the company has tight cost controls and director fees are modest. The resolution was approved by 88% of votes in favour.