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Rakon criticised for 'disturbing' loss announcement

The Shareholders’ Association has lambasted Rakon for releasing its disappointing financial forecast before last Friday’s shareholders’ meeting – but says there is nothing it can do to force another vote.

An hour before Friday’s annual shareholders meeting, and a special meeting to vote on the partial sale of its China joint venture company, the company announced to the sharemarket its forecast for a $54 million after-tax loss for the financial year.

Shareholders’ Association acting chairman Grant Diggle says it is disappointing shareholders who had cast proxy votes ahead of Friday's meeting did not know about the forecasted losses, however the company appears to have conducted itself legally and within NZX's continuous disclosure rules.

He says the company told the association it only learnt the information immediately before it disclosed to the market, because it was divulged at that morning’s board meeting.

“The shareholders' association would expect companies would arrange their affairs and arrange and schedule their meetings so their shareholders would have all the information they require to make an informed decision before proxy voting closes, not after proxy voting closes, which was the case in this case.”

Mr Diggle says the last minute release of significant information robbed shareholders who had already cast proxy votes the chance to reconsider. He also described the continuation of poor results as “extremely serious.”

Rakon chairman Bryan Mogridge and executive director Darren Robinson were up for re-election at the meeting – elections that the association opposed.

About 17% of shareholders voted against Mr Mogridge’s re-election, while 19% voted against Mr Robinson. New director Herb Hunt had 99% endorsement.

Mr Diggle says Rakon’s shareholders have sent a powerful message to the board that they are displeased with the performance of the company and are looking for either an improvement in performance or a change in the board’s composition.

At Friday’s meeting, Mr Mogridge assured frustrated shareholders there would be changes at board level if the company was not making a profit in two years.

The Robinson family, who have three board representatives, hold about 23% of the company while the entire board holds about 30% of shares.

One angry shareholder at Friday’s meeting, Laurie McEntee, who has held Rakon shares since its 2006 IPO, told directors the company had gone from being a sharemarket darling to a disaster.

dwilliams@nbr.co.nz

More by David Williams

Comments and questions
6

Rakon continues to keep bowling head-first into what would appear (on the surface) classic textbook mistakes for manufacturing firms.

A great lesson in why you don't buy into family run businesses that are taken public without a robust BoD that look after all shareholders equally. The Robertsons have relatively speaking done much better than other shareholders (they got their Directors fees and Salaries) and they continue to lead Rakon from a bright promise at IPO to oblivion.

I was hoodwinked with the weasel words and backed "kiwi made" buying in to the IPO and later. They are funds I could really do with in my retirement. Shame on you dodgy Robinsons and board. Typical chicanery was announcing $54m loss an hour before meeting and after voting had closed. For what is worth I voted against.

Totally agree with Chris. A damning indictment on the Robinson family, and Mogridge, who assures board level changes if in 2 years not profit making! What a laugh. More rhetoric. My guess is within 2 years liquidation will be achieved, with some very wealthy shareholders/board members. Oblivion here we come.

The litany of of mistakes and poor judgment committed by the company has long signalled "a change of perspective " at board level= code for radical change of leadership both on the Board and in management. Be sure that the Robinson family will not see that.

A complex, high tech yet commodity business without market dominance and very large and growing customers (read powerful negotiators) And in addition being without any prospect of new products that will be major differentiators. Sounds like a dog of a business to me. Is this a fair assessment?