The Business Herald’s markets and banking reporter.

Rakon revolt: director dumped

Shareholders voted against the re-election of Rakon director Darren Robinson. File Photo.
Shareholders voted against the re-election of Rakon director Darren Robinson. File Photo.

Investors have dumped Rakon executive director Darren Robinson in a rare case of successful New Zealand shareholder activism.

The company's shares jumped 10 per cent to 22c after the vote.

Robinson, who is responsible for sales and marketing, was voted off the technology manufacturer's board at the company's annual meeting in Auckland this afternoon.

Over 70 million votes were made against and 57.5m for his re-election.

Chairman Bryan Mogridge was re-elected to the board.

In the lead-up to the AGM, the New Zealand Shareholders Association criticised the influence of Rakon's founding Robinson family, which owns roughly 23 per cent of the company, as well as its poor financial performance.

Darren Robinson, along with his brother Brent, Rakon's chief executive, and their father Warren occupied three of the firm's six board seats.

The association had called on investors to vote against Darren's re-election, while also questioning whether Brent was the right person to lead the firm.

The group said Warren, who founded the high-tech component maker in 1967, should stand down voluntarily.

Mogridge told the meeting that the company founder intended to retire from the board before next year's AGM.

Mogridge's position was described as "up in the air" by the association ahead of the meeting, but the group said it didn't want to leave the firm "rudderless" by forcing him out of the role.

At today's meeting, Shareholders Association chairman John Hawkins criticised the company for its "dismal" financial performance.

"Year after year shareholders have been given upbeat forecasts or reassurances about corrective actions taken and year after year the reality has been very different," Hawkins said.

"The company has a poor history of being able to work out where it is going and what kind of income it might expect, so why should shareholders believe the latest claims, the latest promises and latest excuses from the same management and board."

Mogridge said he respected the association's views.

"Naturally we won't agree on everything each other says, but we value theirs and your rights to a democratic process, as you voice your opinion either through correspondence or voting as to what should change and what we should take note of," he said.

Mogridge said Rakon had performed well below expectations over the past five years.

"As directors and senior management of Rakon, we accept responsibility for these inadequate results."

It's been a roller coaster ride for Rakon investors since the company listed on the NZX at $1.60 a share in May 2006.

The stock jumped by a third on its first day of trading and soared to a record close of $5.67 within a year, giving the business a market capitalisation north of $700 million.

But the global financial crisis and strategic missteps, such as an ill-fated expansion into Chinese manufacturing, hit the firm hard.

The company has only made one annual profit - $3.2m in 2015 - amid total losses of $118.7m over the past five years, according to the Shareholders Association.

It has never paid a dividend in its 10-year history as a listed business.

Mogridge told the meeting that the company was making progress in reducing operating costs by 20 per cent.

"The consequent reduction in costs will enhance next year's profit, but as the costs of change need to be considered in this year, the overall impact [on the current year] is minimal."

Management salaries have also been a contentious issue.

Brent Robinson received a 24 per cent increase in his total remuneration in the last financial year, to $907,892, while his brother enjoyed a 22 per cent increase to $734,605.

Hawkins has said those increases were "outrageous".

Mogridge told today's meeting that Darren and Brent's salaries had been reduced by 12.5 per cent in the current financial year.

"This will reduce the income they receive by 28 per cent compared to what was detailed in our 2016 annual report."

The Robinson family netted $56m from selling shares to the public through Rakon's IPO, plus another $12m from the sale of shares to Sir Peter Maire and another party.

- NZ Herald

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