So Saturday was my annual trip to the Traidcraft AGM. I have been to a few over the years – especially the 8 years when I was a director – there was no escape then. The following is a few reflections, as much for myself as for anyone else who may stumble across it.

Around 2½ years ago, I wrote this piece with some reflections for an incoming CEO. The challenges can be summarised as:

  • Massive growth in fair trade but not for Traidcraft – time to invest big if Traidcraft is not to be left behind
  • Share price ridiculously low, time for some share buy backs and general support for shareholders as a stakeholder group
  • Need to be sustainable, making a profit is a necessity, not an afterthought
  • Invest in online and try and revive the “fair trader” scheme.

So it took longer than expected to get a new CEO. Robin Roth joined in October 2016, so this is the first part year accounts under his leadership.

So what do we learn form the first set of accounts and the AGM itself.

First, Traidcraft is losing money fast. Net asset value in 2015 was around 90p share. That has fallen to 60p a share. Traidcraft isn’t yet in need of emergency surgery, but another couple of years like the last two and the business will be struggling to keep its head above water. The cash position is getting worse as approaching £1million of the £3million net asset value is in property. Another £1.7million is in stock – up from £1.4million last year. Not good considering turnover fell by £800k. Cash at year end fell from £1million to £¼million in just one year.

So financially things are looking tough after another downward year.

The good news is that Traidcraft has the resources to invest in the future. Although the book value of its property is around £1million – the actual value is much higher and the business could easily sustain secured borrowings of £2million+. So there is still plenty of headroom to invest in the right plan.

Second, we got some idea what that plan was. Invest in online and invest in a new brand that will work in the organic health and wholefood sector. On the former, a new Magento-based site is due to be launched this September which will hopefully provide a significant shot in the arm for online sales. On the latter, we were introduced to the new brand “Eat your hat“. The idea is that “I will eat my hat if you can create a fair trade, organic, veggie (sometimes vegan), high quality, great tasting product in fully biodegradable packaging”. If there is no compromise on any of those factors then you, the customer, will need to “Eat your hat” in amazement.

A cute idea at a high price point. £3.50 for a 90g bar of chocolate is top end but wouldn’t look out of place in the likes of Waitrose, Planet Organic or Wholefoods. I expect it will do well.

Thirdly, it was clear that the current management want and know they need to make a profit. During the question time it was suggested that the budget for this coming year was a £100k-ish profit. With now £1.7million of accumulated losses on the balance sheet it will take a decade or more of patient shareholders before another dividend can be paid.

So the annual Traidcraft September “back to school” report was mixed. Could do better and needs to put some of its great ideas in to practice.

I had to leave the meeting early due to family commitments but I was left with a number niggling concerns.

Shareholders are the Cinderella stakeholder

This was a stealth AGM. There were 27 shareholders present. The AGM was not mentioned on the company website, Twitter feed or Facebook news feed. There is even an events section on the website with lots of upcoming events but no mention of AGM. In fact, due  to a typo the legal notice of meeting was missing the date too! I assume that the meeting was legally constituted…..

I wonder if from this year onwards the meeting will be in London and we will be told it was because no one came to Gateshead. Given it was so under publicised that would be sad end to the Gateshead AGM meetings.

On a number occasions Ethex – the market where Traidcraft shares are traded – was mentioned. And yet if you visit Ethex website the “latest” Traidcraft annual report is from 4 years ago. The latest numbers are from 2014. And the list of directors has at least six mistakes that I could see. So Ethex may be the preferred place to trade shares but don’t rely on it for up to date information Cinders.

Eat your hat? I hope I have to

At its peak the Traidcraft Geobar – the most successful mass market product Traidcraft has launched to date – was turning over, if memory serves me correctly, £5 million. That was with multiple listings in Tesco, Sainsburys, Coop and Waitrose. Eat your hat is not intended for that mass market. So what does a successful Eat you Hat brand look like? It’s going to have work very hard pull in the necessary revenue and margin needed to turn the Traidcraft story around. With £80k+ invested already with no sales to date, I really hope this bet pays off.

Best practise

There is a theory of management that top companies achieve “best practice” because that is what makes them top companies. Of course, cynics often suggest the only people who can afford best practice are the top companies. However, Traidcraft in its good years and its bad has been a beacon of light (a city on a hill some would say) trying to push the boundaries of best practice. It is important that Traidcraft plc is seen to be a leader in social best practice when Traidcraft Exchange is busy calling on big companies to account for their lack of transparency.

I was therefore surprised to hear of the final nail in the coffin of formal, independently audited social accounting and the staff director position. These were both pioneering ideas that are just now beginning to gain mainstream traction. When even a Tory prime minister is suggesting Staff Directors are good thing, seems odd Traidcraft is ditching theirs.

Conclusion

I will be at the front of the queue “eating my hat” when the new product launches and I hope this strategy is right for the Millennial age.