Letter to shareholders

Back to all news/events

Letter to shareholders

Dear Shareholder,

You may have received a letter from Andrew Perloff, in which he recommends you to vote against the re-election of the Chairman Michael Rusch and the election of Per Staehr, our newly appointed non-executive director. The Board has asked me to respond.


In his letter, Mr. Perloff makes a number of inaccurate and potentially misleading interpretations of the Company’s Annual Report and Accounts, which have been prepared in accordance with UK Generally Accepted Accounting Practice and audited by Grant Thornton UK LLP, a leading firm of Chartered Accountants. Mr. Perloff’s implication that your Board has incorrectly presented financial information is as dangerous a one for him to make as it is a false one.


A potentially misleading claim made by Mr. Perloff is that the profit includes a £200,000 benefit from the pension scheme. In fact, in accordance with accounting rules, the full service cost of the pension scheme of £204,000 is taken against operating profit and the pension return, also of £204,000, is credited against interest costs. Mr. Perloff has conveniently identified the credit to make his point while ignoring the corresponding debit.


Our results for the year show a significant improvement in the Company’s financial position with an increase in operating profit of £483,000. But for Mr. Perloff’s so-called shareholder activism, profits would have been higher: the Company has incurred expenses employing independent professionals to advise on ensuring all shareholders best interests are served. These expenses will continue and future profits will be reduced, while Mr. Perloff continues to claim to be acting in shareholders interests, rather than his own, and the Board is compelled to ensure shareholders are not misled.

Mr. Perloff complains that executive remuneration increased £74,000 in the year. Executive directors received performance related bonuses totaling £46,000. On reaching the age of sixty in September 2006, as required under the rules, I left the Company’s pension scheme and a contribution of £18,000 was made to a money purchase scheme and separately identified in directors’ remuneration. The balance of the increase is accounted for by inflation increases in expenses and salaries.

The £1.2m profit made ten years ago, to which Mr. Perloff refers, included a £0.6m exceptional profit on disposal of property in London.

Shareholders should note that the Board is proposing a 20% increase in dividends for the past year. Furthermore, as an indication of their commitment to the Company, the executive directors have exercised options and bought a total of 405,000 shares in the Company during the past year, of which I exercised and continue to hold 330,000 shares. My option over a further 420,000 shares time lapsed in the year and I was granted options over 575,000 shares. Non-executive directors, including Per Staehr, have bought 55,000 shares.


Mr. Perloff says that the future is not bright and makes much of the cautious statements in the Chairman and Chief Executive’s reviews. His view is strangely at odds with his recent approach to a major shareholder offering to buy their shares.

Mr Perloff claims that the directors “hid” the value of the Group’s property. Under existing accounting rules property may be carried at cost or revaluation. If the directors wished to adopt a policy of revaluation, to reflect the site’s potential for redevelopment, the Company would incur the considerable expense of having regular external valuations. In addition realisation of the full value would require the Company to vacate the site totally, at considerable cost.

Mr. Perloff’s offer to acquire the Saffron Walden property included a lease back option but was some 30% lower than the offer received from a national house builder. Mr. Perloff claims that his offer was “unconditional”. It was not: like the other offer it was subject to contract and had it been progressed, presumably to negotiation. Mr. Perloff’s offer also came with the suggestion that if the Company sold the property to him, he would be amenable to the Company buying his shares. In view of the inadequacy of the offer it has not been pursued.


Your Board is focusing on the future development of the business. The volume of outstanding tenders, projects for which we have been selected and the order book for 2009 and beyond is probably stronger than it has ever been. Your Board is determined to consolidate the business, develop our exciting LED technology and maximise shareholder value. Since the Board and their families speak for 26.6% of the Company, their interests are clearly aligned with those of all shareholders.


The Board do not find Mr Perloff’s involvement with the Group constructive. His approach is inconsistent and disruptive. On the one hand, he has suggested that we have discussions with another company in which he is a major investor about the sale of all or parts of the Group, while at the same time suggesting we might look for acquisitions. He has suggested that the Company might buy back his shares whilst offering to buy more shares in the Group. Overall his approach is bizarre and unhelpful.

Michael Rusch has shown exceptional courage and leadership through several years of extremely difficult trading conditions. He and his family are major shareholders and have the most to gain from the Board’s determination to maximise shareholder value. Per Staehr has a wealth of relevant experience to benefit the Company, which, for reasons that are not clear, Mr Perloff would seek to deny the Company.

We strongly recommend that shareholders vote in favour of all resolutions at the AGM, including those relating to the re-election of Michael Rusch and Per Staehr. I enclose a new proxy form for you to use, which will over-ride any earlier proxy form you may have sent in.

Your Board will maintain its commitment to deliver you value for your shares as its overriding priority.

For and on behalf of the Board,

Chief Executive

LPA Group plc – Form of Proxy

For use at the annual general meeting to be held at 12.00 noon on Tuesday 11 March 2008 at the offices of College Hill Associates Limited, The Registry, Royal Mint Court, London EC3N 4QN.


I/We ………………………….…………………………………
of …..………………………….…………………………………
being a member/members of LPA Group plc hereby appoint (note 1)

or failing him the Chairman of the meeting as my/our proxy to vote for me/us and on my/our behalf at the above mentioned meeting and at any adjournment thereof. I/We wish this proxy to be used as shown below:




Please indicate with an “X” in the spaces below how you wish your votes to be cast. This proxy will be used only in the event of a poll being directed or demanded. If the form is returned without any indication as to how the proxy shall vote on any particular matter, the proxy will vote or abstain as he thinks fit.


Resolution For Against
1. To receive the accounts for the year ended 30      September 2007.
2.   To declare a final dividend of 0.40p per ordinary share for the year ended 30 September 2007.
3.   To re-appoint Michael Rusch as a director of the   Company.
4.    To appoint Per Staehr as a director of the Company.
5.   To re-appoint the auditors and to authorise the directors to fix the auditor’s remuneration.
6.    To authorise the directors to allot shares (as defined in section 80 of the Companies Act 1985) in the Company.
7.    To authorise the directors (pursuant to section 95 of the Companies Act 1985) to allot shares in the Company for cash.
8.    To authorise the Company to make market purchases (as defined in section 163(3) of the Companies Act 1985) of its own shares.
  1. If you wish to appoint as your proxy any person(s) other than the Chairman of the meeting, please insert the full name(s) of the proxy or proxies (in block capitals) in the space above. A proxy need not be a member of the Company and may attend the meeting in person but may not vote except on a poll. Please note that a proxy may not speak at the meeting except with the permission of the Chairman of the meeting.
  2.  To be effective a form of proxy must be in writing and signed by the member or his duly authorised attorney or, if the member is a corporation under its common seal or signed by a duly authorised officer or attorney. A corporation may appoint a representative to attend and vote at the meeting.
  3. To be valid this proxy, together with any power of attorney under which it is signed, must be received at Capita Registrars, Registrars for LPA Group PLC, Proxy Department, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU not less than 48 hours before the time fixed for the meeting
  4.   In the case of joint holdings the vote of the first-named holder in the register will be accepted to the exclusion of the other joint holders