|
| Personal finance articles |
|
|
|
Meldex shareholders are revolting
By Edmond Jackson
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
That, in every sense, appeared to be the initial and defensive approach of Dr Jim Murray, the new chairman of this AIM-listed pharmaceuticals group at its highly charged annual general meeting yesterday.
Shortly before, it was alleged in a Regulatory News Service announcement that Barry Muncaster (a co-founder of the group) was "trying to wage a concerted campaign with a view to changing the direction and strategy of the company". This followed another RNS saying Peter Ibbetson had resigned as senior independent non-executive director "to highlight the unacceptable behaviour from a minority of shareholders" although the board would by then have known how votes were being cast and if Ibbetson had support then this was a petty resigning issue for someone so capable as Murray claimed in the announcement.
Whatever his ultimate goal, Muncaster is spot-on with his concerns (as expressed to Meldex (MDX) ahead of the AGM and published on internet bulletin boards). Long-term shareholders have recently feared a flow of equity issues, hence dilution, because the AGM special resolutions linked a share issue for the final payment for Melbrosin (a key acquisition made in 2007) to approving scope to issue another 100 million shares. Shareholders were also angry that directors' remuneration was nearly £1.5 million last year when the end-2007 financial results left Meldex looking challenged for cash after busy acquisitions. Hence Muncaster's opposition to the relevant resolutions ahead of the AGM was overwhelmingly endorsed by shareholders; both the authority to issue another 100 million shares and approval for the directors' remuneration were defeated.
The upshot for directors' pay, however, was Murray saying simply that the remuneration committee would respect shareholders' wishes for the rest of 2008 onwards. Various times during the meeting, frustration boiled over that directors were not buying shares in the market despite their halving in price this year.
This central so called 'strategic' conflict over acquisitions versus running the group organically (until the shares have reasonably recovered) looks unlikely to go away. Murray emphasised to shareholders that building a high value pharmaceuticals group is a long haul process and in Meldex's case (he believes) requires ongoing acquisitions. Shareholders were reassured to some extent by Richard Trevillion, chief executive, asserting that share issues would not be dilutive.
Putting the shareholders' revolt in perspective, it is easy to overlook Meldex's achievements which include many passionately committed investors who want to see it and the shares a thriving success. It normally takes many years to build a profitable pharmaceuticals business with a global infrastructure and pipeline of products; but Meldex has achieved this in two years to position itself in a variety of fast-growing product markets. When Steve Martin, chief development officer, managed to speak he came across well - the product pipeline is clearly vigorous.
Murray's virtues are harder to weigh up. His extensive experience, for example as a co-founder of Shire Pharmaceuticals (listed in the FTSE 100) should be an asset to Meldex. Ideally, the company should be allowed now to get on without distraction from its business. As the AGM progressed, Murray proved that he can and does listen to shareholders, changing his approach somewhat. But even for me, as someone who respects the 'wise grey hairs' of men like Murray, he can be worrying. Initially he refused to take any questions before voting on AGM resolutions, which angered shareholders before he was eventually persuaded to relent. Various times, he did not comprehend the resolutions or even what shareholders were trying to say in relation to them. (Bear in mind, the likely stress of the occasion though.) A professionally run board should be above issuing petty announcements against Muncaster and bulletin board posters as Meldex is doing.
A shareholder queried whether the group's key performance indicator was adjusted operating profit as an absolute or per share measure (the latter obviously being investors' prime concern) and it was initially perturbing to hear Murray refer to the former measure but he accepted a 'per share' approach would be more appropriate.
Communications have been a sore point for investors this year with Meldex supposedly constrained by potential bid approaches to clarify its progress. Shareholders were further frustrated at the AGM that Murray used the excuse of an ongoing investigation into Muncaster and a possible concert party of shareholders, as reason not to update the meeting on trading and the cash position. This seemed like a foil. Murray promised, however, that all will soon be revealed and the company will embark on a thorough communications programme.
Frustration boiled over at questions after formal business. Gary Cressman, a hedge fund manager, said he had been contacted by Meldex's finance director with regard to £1 million debt funding and he also alleged a 30p per share placing had been mooted. This coincides with rumours about Meldex's cash position and a low-priced placing. Cressman also challenged Murray's record of delivering value, citing the recent low-priced sale of Hunter-Fleming in relation to capital raised; another company where Murray has been involved. Cressman, who said he personally owned five million Meldex shares and has been a long-term investor, tried to make his own points to shareholders after the meeting closed but bouncers moved in to empty the room and the discussion continued in the street. From the look of his face, Cressman is plainly frustrated by a substantial paper loss, to take action as he sees fit to restore value. An initiative towards an EGM and change of chairman looks likely.
Without taking sides against Murray, as a smaller shareholder I will lose patience if Meldex starts a series of public spats against Cressman in a similar way it is doing against Muncaster. These are investors like any other, simply anxious to see value.
More positively, the Meldex 2008 AGM was a unique triumph despite the obstacles presented nowadays by nominee accounts, to vote. It proved that investors can still exercise collective will as company owners, towards exacting shareholder value. This pharma group is on the cusp of exciting financial progress, with the May results presentation containing a projection for at least £13 million operating profit on at least £60 million revenue. The situation is worth watching for what is revealed in the new communications programme.
Useful links:
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View