THE RUMOUR MILL – Seeking clarity on the CMJ’s financials

After the Company of Master Jewellers’ self-styled ‘Marmite’ chief executive announced his resignation, and a copy of the the buying group’s annual financial report was leaked to the press, rumours abounded about the circumstances of Hamilton’s departure. We spoke to chairman Michael Aldridge, to put some of the trickier questions directly to him. By MICHAEL NORTHCOTT

CORPORATE GOVERNANCE

Hamilton was always described as CEO and Hughes as chairman, but neither of them has ever been listed as a director of the CMJ on Companies House. Where did the real executive responsibility lie?

CMJ is a members’ organisation, created for its members and run by the elected Board of Directors. The CEO of CMJ reports to the CMJ board of directors. Stephen Hughes was indeed listed as one of the Directors in the records held at Companies House until his resignation earlier this year.

Why was Hamilton made director of the subsidiaries, and why does he remain so now he has departed the CMJ, Somers Distribution in particular?

Somers Distribution was registered as a company but remains a subsidiary of CMJ. Willie Hamilton resigned his role as Director of Somers Distribution when he stepped down as CEO.

Did Willie Hamilton resign, or was he asked to leave?

Willie Hamilton decided to pursue a career opportunity closer to his new home in the South of England.

Who was responsible for oversight of Willie Hamilton given that he was not a legally designated company director and as such did not have any of the attendant obligations and responsibilities?

The CMJ CEO reports directly to the CMJ Board of Directors.

Regarding the distribution agreements, does the CMJ still own Dollie Jewellery and Diamonfire? If so who did it acquire them from, at what price, and who sanctioned the acquisitions?

Full ownership and distribution rights for Dollie Jewellery has been handed back to its founder, CMJ member Karen Webb-Meek, which has been sanctioned by the CMJ Board of Directors. CMJ does not own Diamonfire. Diamonfire is owned by Burkhard Müller Schmuck, a jewellery manufacturing business in Germany, with distribution points throughout the world. Somers Distribution has a licence to distribute Diamonfire within the UK.

When you say it was ‘handed back’, what do you mean? Was it sold, and at what price?

We acquired Dollie Jewellery as part of our distribution business and then we realised that the distribution part of our business, to be successful we believed, four parts for that business. We only had two, which was Dollie and we’d also acquired Diamonfire. So the decision was taken fairly recently to see whether we could sell Dollie back to its original owner which has now been done. Its then left us with Diamonfire, which is slightly different on the basis that we didn’t own it, we were acting as a distributor on the basis that they had distributors around Europe. We had the license to distribute Diamonfire within the UK, and we still have that.

So Dollie has now been sold back to its original owner?

Yes.

Can you reveal the sum it was sold back for?

I can’t no, that is confidential.

Will Somers Distribution be closing?

Not necessarily, no. We are doing our business review, and when we come to receive that in its final draft form, we will then use a board meeting which comes up in September to do a full review of the distribution part of the business.

THE BONUS

Can you confirm officially who the bonus of £195,000 was paid to?

I can only report that the bonus was given to a member of the leadership team.

Which director authorised the bonus? If it was not a legally designated director, then who, and why was an extraordinary item authorised by someone outside the official directorship?

Stephen Hughes, while CMJ Chairman of the Board, authorised this bonus.

So you can give no indication of who it was paid to?

I’m not able to disclose for legal reasons, but it was paid to a member of the management team. It was not authorised by the Board of Directors either current or previous. It was authorised solely by the chairman at the time.

If the board did not authorise the bonus, will the CMJ be attempting to recover the money, and will they investigate any possible abrogation of fiduciary duty and pursue the parties concerned for compensation?

Moving forward, I have promised CMJ members full transparency and honesty in all financial matters.

In light of that fact that it wasn’t approved by the board, is there going to be any attempt to recover it? If the CMJ as a body did not consent to that payment?

Yes, at the annual general meeting I promised our members that I would investigate any opportunities that may exist for us to look at recovering part or all of the monies that had been paid.

When were members first informed of the £195k bonus and how were they informed?

The bonus was listed as a payment within the CMJ accounts, which are circulated to all members ahead of the AGM.

THE LEAKED FINANCIAL REPORT

The financial report was leaked to the trade press ahead of the AGM but Jewellery Focus declined to publish any information it contained on account of the legalities surrounding misuse of confidential information. Will the CMJ be taking legal action against other members of the trade press for revealing figures that appeared in a document that was not in the public domain?

As director, I am deeply disappointed that one or two members felt it necessary to leak the accounts to the trade press. Any action that is taken around this leak of confidential documents will be in the best interests of the CMJ membership.

Specifically with regards to the trade press leaking the documents though, are you considering action against the titles concerned?

With regard to the trade press which published that leaked information, we are considering options as we speak.

Were concerns raised by members of the board as the CMJ’s overheads and expenditure rose by double digit percentages during the financial year, and how were these concerns addressed? Was board approval given to rising costs at any stage during the financial year?

We are now addressing those concerns and I have assured our membership that we have identified the issues and are dealing with them in a positive way with good corporate governance, transparency and integrity.

Did the board itself raise concerns at the time though, and if they did were those concerns addressed at the time, or is that what you’re referring to as now being addressed after the fact?

Bearing in mind we’re looking at a year ending period when I wasn’t actually privy to that information because I wasn’t on the Board of Directors. I’ve only been on the board for a year – I can’t comment as to what questions were raised or not because I wasn’t sitting in that privileged position on the board of directors.

Does that not make up part of your investigations though?

Yes, it does, that’s what I’m coming on to now. What I would say, is since I’ve been involved certainly questions I’ve been asked and one of the decisions that we took was to put in place a top down business review by an external auditor and accountancy company so we could clearly see what has gone on within the business but in the very short space of time. What I can say is that we have addressed concerns that the membership has actually put to us and we’re dealing with them – in particular now – with great corporate governance, transparency and integrity. So I honestly believe that we are now putting in place more transparency so that everyone who’s part of our organisation can see the actions and the decisions that we are taking.

Does that mean that in essence, the questions that are difficult to answer right now will be answered publicly in due course?

If we believe that there is a need to put any of our decisions and discussions into our members’ domain we will do that because I’ve given my assurance as the new chairman that we will be more open more transparent and we will communicate with our members what we are doing on a more regular basis. That’s what I’ve agreed to do and that what I’m going to do.

In terms of tackling what has been said in the rumour mill, do you think that providing clearer answer on for instance – who the bonus went to – is not important? Is it not difficult to move on from [the rumour mill] by saying we will be more transparent in the future where that might mean leaving a lot of questions about what’s gone on unanswered?

Well I don’t believe that we have left very many questions unanswered as I was very clear at the annual general meeting, I addressed all of the members that were present and explained to them what I could openly tell them which I believe was considerable in both my address and also the finance director’s address. We were extremely open with our figures, 100% transparent, but there will always be certain things that will remain confidential.

Whose rights are being protected by keeping that information confidential?

I think as with any organisation we have been put in a place as the directors of the CMJ, we have been elected by the membership and it comes down to trust. And I believe now that we have that trust, otherwise I believe that I wouldn’t have been elected as the new chairman of the CMJ. I believe passionately that I will have and have got the trust of the membership and we’ve been elected as a board to run the CMJ in their best interest. and that’s what we’ll continue to do.

OTHER MATTERS

What is the ownership status of the CMJ’s offices in Rugby, why is the property being remortgaged, and as an asset of the shareholders, has the mortgage status of the property been explained to the membership?

This is inaccurate information. Somers House, the CMJ Office in Rugby is not being remortgaged. The mortgage status of the CMJ offices remains unchanged.

Yet on Companies House there’s a charge on the freehold for Lloyds Bank dated 9th of June. Something has changed.

I have not at this moment in time got up to date information on that. When I saw that I’ve actually no access to that information just so I can be 100% clear as to what’s actually changed.

We note that a company called Facets PR Limited was incorporated on Companies House in May this year, but is currently non-trading? Is this the Facets PR brand currently run by CMJ, and if so, do these Companies House records indicate a sale of the brand to a private individual?

This is not the PR agency being run as a division within CMJ. Facets PR is incorporated as a subsidiary within CMJ.

So the Facets PR Limited that was incorporated on Companies House on 19th May 2017, by a David Gerwyn Arch-Jones, is unaffiliated with the CMJ, and Arch-Jones is unknown to the CMJ?  

There an internal investigation being carried out at the moment by me.

THE FUTURE

Will the “refocusing” efforts of the CMJ, mentioned at the AGM, include selling off any of the subsidiaries?

We will be focusing on core CMJ activities and we are currently looking at the future status of the subsidiaries.

What, if any, material changes to the corporate structure are planned and in this process what specific priorities have been established?

As Chairman of the CMJ Board of Directors my role is to support the members. Trust has always been a key pillar in my working life and I understand that this needs rebuilding with our members, part of this process will be ensuring transparency, openness, honesty and working towards clear goals with defined financial controls. We are currently carrying out a top down business review and have asked for feedback from all CMJ members and suppliers in a questionnaire distributed to everyone who attended the AGM.  After due consideration by the Board, we will then look at refocusing CMJ strategy to move forwards and ensure that CMJ remains the best jewellery buying group for independent retailers in the UK and Europe.

When you say trust needs rebuilding – in what way do you feel it has been eroded?

Because we’re probably slightly ahead of answers that I would want to give you, on the basis that our next board meeting is in September, we will have our full top-down business review completed by then which will give us information, some we know, some we don’t know. But the ethos, being the chairman, is this really important area of transparency openness and honesty.

We must share that with our members and in the question that you put to me – in what way do you feel trust has been eroded – our communication has not been good enough. We need to improve that immediately and I said that previously and that’s something that will be discussed at our next board meeting as a complete agenda item. Communication with our members/suppliers. Because our business at the CMJ is all about relationships and we need to ensure that our relationships are strong and sound and moving forward.

People won’t have any doubts about what we’re doing and what we’re saying and what decisions that were taking on their behalf. And I feel that that’s why our trust has been eroded with some of the members not all of them because our communication has been poor.

Are there any indications so far as to potential candidates for chief executive?

We are yet to advertise any position, however I can say that in the meantime CMJ is in very safe hands with the interim CEO Terry Boot who brings a great deal of retail and financial experience to CMJ.

Terry Boot has ostensibly no jewellery sector experience and hasn’t managed a buying group before so who is he, why was he brought in and on what basis is he deemed qualified to work on the transition?

At this very moment in time, he doesn’t need to have jewellery experience. What he needs is financial experience to ensure that our day-to-day operational side of the CMJ is being looked after the way the board of directors wishes it to be. And that’s why because he’s in an interim position and he has got a lot of retail and more importantly financial experience.

Who decided to bring him on board?

We advertised the position.

How are sales through the group performing year-on-year?

Sales through the group continue to perform well. The net loss published in this year’s accounts were due to the poor performance of Somers Distribution and Facets Creative.

Does “perform well” mean sales through the group have increased?

I think if you are putting all of the business together, clearly we’ve had a poor year on the basis of our subsidiary businesses. We are going to be looking – as I’ve already mentioned – at our subsidiary businesses once we received our top down business review. and we’ll be doing that in September.

If you are to return to ‘core business’ and bring costs under control, how many redundancies would envisage making?

We’re not at that point. We are currently doing our business review where we will review all parts of the business and we will consider what we need to do to ensure that we run a profitable CMJ.

With regards to being restricted legally on some questions, if you’ve taken legal advice, then on what basis are the lawyers telling you that some of the information I’ve asked for can’t be revealed? Why in a co-operative is anything regarded as ‘classified’ information?

With regard to not being able to answer some of the questions I believe that I’ve answered all the questions that I’ve asked to the best of my ability and as frank as I possibly can. There are a couple of points that I can’t answer and that’s because I on behalf of the CMJ have signed a confidentiality agreement which prohibits me from discussing and disclosing any further documentation or answers to your questions.

What else would you like to add?

The CMJ remains a strong buying group and under the direction of the elected board of directors and the work of its executive team, it will continue to serve its members and suppliers. My goal now is to look forward and rebuild trust, stability and good corporate governance within CMJ to ensure it is profitable and serves the best interests of the membership. I want to stress that CMJ’s core business remains profitable and this gives us a solid foundation to move the business forward with our members and suppliers.