JC Clark Ltd. Calls for Stewart Enterprises Inc. to Review Strategic Alternatives
Feb 06, 2012, 09:00 ET
TORONTO, Feb. 6, 2012 /CNW/ - JC Clark Ltd. ("JC Clark") is a Toronto-based investment manager that beneficially owns 2.1 million Class A shares of Stewart Enterprises Inc. ("Stewart"), representing approximately 2.6% of the issued and outstanding Class A shares. JC Clark has been a long term shareholder of Stewart, owning shares in the Company for over 10 years. However, during this time it has become increasingly apparent that Stewart's senior management and board of directors have failed to create meaningful shareholder value. As a result, JC Clark is hereby urging Stewart's board to form an independent committee of directors to explore strategic alternatives to enhance shareholder value.
In JC Clark's view, Stewart is a mismanaged company operating in an attractive industry as summarized by the following facts:
- Poor Revenue Growth: Stewart's revenue growth over the last 7 years has significantly underperformed its North American, publicly-traded peers (2004 was selected as the base year as the Company changed its accounting treatment for pre-need obtaining costs in 2005, and subsequently restated 2004 numbers).
- Declining EBITDA: Stewart's EBITDA has declined over the last 7 years, while each of its North American, publicly-traded peers enjoyed positive EBITDA growth over that same time period.
- High Management Turnover: Stewart has had 4 different CEOs and 1 acting CEO in the last 7 years alone.
- Unproductive Capital Investment: Stewart has spent $178 million in capital expenditures over the last 7 years, yet the Company failed to generate positive EBITDA growth over that period. This prolonged misuse of capital has destroyed shareholder value, and clearly demonstrates the ineffectiveness of Stewart's current and previous management teams.
- Dismal Share Price Performance: Stewart's share price has declined by 12% over the last 7 years. This poor performance is not a recent phenomenon - Stewart's share price has underperformed the S&P 500 in each of the last 10, 15 and 20 year periods.
Over the last several months, JC Clark has expressed the aforementioned concerns to Stewart's board of directors while also offering credible suggestions for shareholder value enhancement which include:
1) A significant increase in the annual dividend
2) A large-scale share buyback (issuer tender offer)
3) Initiation of a sale process for the entire business
Unfortunately, the response received from Stewart in regards to our concerns and recommendations was wholly inadequate, and in our view demonstrates a continued lack of commitment with respect to shareholder value creation on the part of both management and the board.
JC Clark has been a supportive long-term shareholder of Stewart Enterprises; however, after nearly a decade of underperformance it is clear to us that its board of directors must take more urgent action to enhance shareholder value. In our view, the formation of an independent committee of directors and the engagement of outside financial advisors to explore strategic alternatives would be beneficial to all Stewart shareholders.
For further information:
JC Clark Ltd.
130 Adelaide Street West
Veeral Khatri, CFA
(416) 361 - 6144
Email: [email protected]
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