Private Investor: Why shareholders should sit pretty on their DFS shares

Looks like I got
DFS rather wrong. A few weeks ago, I wrote about how sorry I was to see the firm being bought back by its founder, Graham (now Lord) Kirkham.

Looks like I got DFS rather wrong. A few weeks ago, I wrote about how sorry I was to see the firm being bought back by its founder, Graham (now Lord) Kirkham. Given that he himself owned 10 per cent of the shares and the board had recommended his bid, I thought it was a done deal. I also considered it not a very good deal. There was not much in the way of a premium and I don't think it offered a full and fair price for the company.

Much more than that, I was very impressed by the way DFS has performed since I bought a couple of hundred shares when it was floated in 1993. They were priced at 260p, they have returned about the same in dividends and special dividends since, and now Lord Kirkham is offering 445p per share for them.

Thus, DFS has shown excellent capital growth and a very respectable income, dividends and special dividend, and I saw no reason why I should be deprived of the future flows of these. After all, the whole point of investing in equities is for the return on capital they offer and when you find one that has provided such magnificent returns as DFS you tend to treasure it.

Now I find that, despite a threat by the independent directors to resign if Lord Kirkham's bid fails, there is much more resistance among institutional shareholders to his lordship taking DFS private than I would have thought possible.

M&G and Morley own 14 per cent of the company and have said they plan to vote against the offer. Because this is a scheme of arrangement, it is a serious matter as the "bid" can be blocked if more than 25 per cent of the shareholders vote against, as I now shall. (I was also ignorant of the fact that Lord Kirkham can't use his own 10 per cent shareholding to "vote for himself", so that too is a complicating factor.)

Yet, if Lord Kirkham is thwarted where will that leave the business? Without wishing to be too rude, the resignation of the independent director is probably neither here nor there as far as selling soft furnishings is concerned. The real question is what Lord Kirkham's attitude would be. It is an all-round unsatisfactory position. As far as my shares go, I shall be sitting tight on my DFS sofa.

I also have a sinking feeling about British Airways. Not that I have any less faith in the company's long-term ability to pull through the turbulence and become a winner in this appallingly difficult climate for the airlines. No, my unease reflects the fact that I didn't follow my own advice and buy more BA shares on the recent weaknesses in the share price - essentially very short-term market reactions to some grand standing by the management of the unions of the company. Still, some more bad publicity about flight cancellations might be enough to get them closer to the 200p level, at which I would like to buy some more - just as long as they don't cancel my flight.

Everyone loves a bad news story about BA and the company's PR effort has to make sure that British Airways don't go the way of British Leyland, British Steel, British Rail and pretty much everything else with the word British in it, and become a laughing stock. As it happens, the service I received on a recent BA flight back from Berlin was probably the best I've ever had on an airline, so I for one know they can do it. It's a great company, but its reputation, unjustifiably, seems to be getting a little dented lately.

Finally, a word on accident and sickness plans, which I slated last week. I have had a little bit of reader feedback on this, which confirmed that they are indeed a worse option than self insurance. As I recounted last week, to me the AA/Eagle Star/Zurich accident and sickness plan has brought me great disappointment, roughly on a par with my friendly society savings plans.

This all goes to prove what we know already; when it comes to winning the trust of the public with regards to financial services, from something as big as your pension to something as small as a modest sickness plan, the financial services companies - with few exceptions - are their own worst enemy.

s.o'grady@independent.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Sport
David Moyes and Louis van Gaal
football
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
News
i100
PROMOTED VIDEO
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
Sport
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
rugby
Arts and Entertainment
Worldwide ticket sales for The Lion King musical surpassed $6.2bn ($3.8bn) this summer
tvMusical is biggest grossing show or film in history
Voices
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Arts and Entertainment
Salmond told a Scottish television chat show in 2001that he would also sit in front of a mirror and say things like,
tvCelebrity Trekkies from Alex Salmond to Barack Obama
Life and Style
food + drink
News
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
News
A cabin crew member photographed the devastation after one flight
news
Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
Life and Style
The Google Doodle celebrating the start of the first day of autumn, 2014.
tech
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trainee / Experienced Recruitment Consultants

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

    Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Quantitative Risk Manager

    Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

    Day In a Page

    Secret politics of the weekly shop

    The politics of the weekly shop

    New app reveals political leanings of food companies
    Beam me up, Scottie!

    Beam me up, Scottie!

    Celebrity Trekkies from Alex Salmond to Barack Obama
    Beware Wet Paint: The ICA's latest ambitious exhibition

    Beware Wet Paint

    The ICA's latest ambitious exhibition
    Pink Floyd have produced some of rock's greatest ever album covers

    Pink Floyd have produced some of rock's greatest ever album covers

    Can 'The Endless River' carry on the tradition?
    Sanctuary for the suicidal

    Sanctuary for the suicidal

    One mother's story of how London charity Maytree helped her son with his depression
    A roller-coaster tale from the 'voice of a generation'

    Not That Kind of Girl:

    A roller-coaster tale from 'voice of a generation' Lena Dunham
    London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

    London is not bedlam or a cradle of vice

    In fact it, as much as anywhere, deserves independence
    Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

    Vivienne Westwood 'didn’t want' relationship with McLaren

    Designer 'felt pressured' into going out with Sex Pistols manager
    Jourdan Dunn: Model mother

    Model mother

    Jordan Dunn became one of the best-paid models in the world
    Apple still coolest brand – despite U2 PR disaster

    Apple still the coolest brand

    Despite PR disaster of free U2 album
    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits