Rakon non-aligned shareholders oust Darren Robinson   16 Sep 2016

Rakon non-aligned shareholders oust Darren Robinson from board, loosen family's grip

By Fiona Rotherham

Sept. 16 (BusinessDesk) - Rakon shareholders not aligned to founder Warren Robinson have voted his son Darren off the board as part of efforts to loosen his family's grip on the electronic components maker.

Proxy votes went against re-electing Darren Robinson although chairman Bryan Mogridge survived the vote. Shareholders are upset at the company’s lacklustre performance, flagging share price, and lack of dividends since it listed 10 years ago. Mogridge was re-elected

It is the first time the NZ Shareholders’ Association has ousted a director through a vote. Association chairman John Hawkins told the meeting the Robinson family had listed the company and then continued to run it like a family-owned business. Mogridge was re-elected on 84 percent of votes cast while Robinson was ousted with 54 percent of votes.

In August the association wrote to about 6,000 Rakon shareholders seeking proxy support to reduce the Robinson family’s level of control on the board. They represent half the directors on the board but hold only 24 percent of the company’s shares.

Darren Robinson told shareholders that it was important to customers that he continue to be able to directly represent their interests at board level but several shareholders at the meeting said there needed to be a clear distinction between management and governance, as was the normal practice in New Zealand and Australian listed companies.

Ahead of the vote, Mogridge said founder Warren Robinson, who wasn’t up for re-election today, was prepared to stand down before the next AGM but wanted to do so with “dignity”. Mogridge also said he will only serve one more term.

Rakon, which makes frequency control and timing components for the telecommunications, defence and space industries, reported a $1.7 million full-year net loss in May.

Its share price has dropped from $1.60 when it listed on the NZX in 2006 to just 20 cents today on the back of failed investments and missed financial targets. In its heyday in 2007 the share price hit $6 per share.

Chief executive Brent Robinson said the company was on track to deliver a 20 percent cut in operating costs by the end of the fiscal year ending March 2017, but the full benefit of that wouldn’t be realised until the final year. He said redundancies were involved, without saying how many.

He recounted the history of the company in a seeming effort to get shareholders onside, saying its latest sales drop in the last financial year and this year related to a downturn among its key telecommunications customers. Revenue from the telco business dropped 41 percent in the 2016 financial year.

Brent Robinson said they were getting some traction in the defence and space industries and were developing new products as part of its investment in a new Internet of Things network being rolled out in Australia and New Zealand.

Hawkins said the CEO had a “lot of excuses” but it was his job to sort out problems that arose in the business. The credibility of the board and management was now in question, he said.

“Year after year there have been upbeat forecasts and reassurances”, he said, but year after year the outcome was less than what had been promised," he said. "Everyone knows Rakon’s performance has been dismal and the management and board have a litany of excuses over what went wrong – it’s always external factors.”

Hawkins pointed to an old saying that the people that get you into trouble are rarely the ones that get you out of it.

Shareholders also questioned Mogridge why the company hadn’t delivered on promises made at the last AGM to diversify the board, with Hawkins saying the nominations and remuneration committee had not held even one meeting all year. Mogridge said the issue had been discussed at board level and there was an acknowledgment of the need for change.

In the letter to shareholders sent in August, the association said the final straw for many shareholders was the decision last year to increase Brent and Darren Robinson’s pay by about 23 percent – to $907,892 for the chief executive and to $734,605 for the marketing director, respectively.

In 2012 the company promised to freeze director and executive director pay until underlying earnings hit $25 million, which has not happened.

Mogridge said today the increase related to bonus entitlements from the 2015 fiscal year which the board approved for payment in 2016, while the base salaries remained frozen.

Following shareholder disquiet, the executive directors have agreed to a 12.5 percent cut in their base salary and no bonus entitlements this year.

Mogridge was paid $120,000 last year while Warren Robinson got the standard director fee of $60,000 per annum.

In April Rakon said its cornerstone investment in Australian start-up Thinxtra, which is rolling out a new “internet of things” network in partnership with French company Sigfox, is expected to start having a positive impact on the company’s earnings by 2018.

Thinxtra last week completed its first significant round of venture capital financing, raising A$11 million. Rakon’s 64 percent stake has been diluted to 36 percent as it made no further investment in the latest round. It has paid out A$5.8 million to date.

Thinxtra said it was on track to provide coverage through its LPWAN ( low-power wide area network) for 85 percent of Kiwis and Australians by June next year and is looking to expand into Asia. It has currently achieved 33 percent coverage in New Zealand.

(BusinessDesk)

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