Blue Sky turmoil continues with board purge, further share slide
Written on the 8 May 2018 by Ben Hall
Under fire Blue Sky Alternative Investments (ASX: BLA) has abandoned guidance for FY18 as it announces another purge of its board members and management including the exit of chairman John Kain.
BLA shares have been savaged by nearly 80 per cent in the wake of a report by short seller Glaucus Research which claims Blue Sky has wildly exaggerated its assets under management (AUM) and at the market close on Monday, the price was at an all time low of $2.50.
It dropped a further 4 per cent in early trade on Tuesday to $2.41.
In the six weeks since the controversial Glaucus report, Blue Sky shares have fallen rapidly from $11.47, prompting the resignation of managing director Robert Shand along with revised downward guidance for AUM. More than $800 million has been wiped from the company's value.
In announcing it was withdrawing underlying net profit after tax (NPAT) guidance for FY18 and its fee earning AUM guidance for FY18 and FY19, Blue Sky also revealed chairman John Kain will step down as part of a major overhaul of its executive team.
"The Board is examining proposed changes to the Blue Sky business model and management structure, to prioritise Blue Sky's areas of competitive strength and to better align Blue Sky's fixed cost base with recurring management fee revenue," says Blue Sky interim managing director Kim Morison.
"There will also be changes to board composition and disclosure framework to promote greater independence and further improve communication."
Executive director and Chief Investment Officer (CIO) Alexander McNab will also retire while Tim Wilson will step down as independent non-executive director but will continue in his executive role as managing director of Blue Sky's Private Equity business.
The role of CIO will also be cut and be replaced by the position of Chief Risk Officer.
Morison says the Blue Sky board has agreed that an immediate priority is to rebuild trust with stakeholders by making significant changes to the business and management model.
"It is important that as part of this process we retain key staff and investment professionals, that we concentrate our business on scale, capability, expertise and competitive advantage as we review our business units and that our fixed operating expenses are less than our recurring annual management fee revenues.
"These initiatives are expected to deliver a better performing, more transparent and accountable business with recurring annual management fees exceeding fixed operating expenses from FY19."
Blue Sky's new management team will conduct a "roadshow" over the next few days in Sydney, Melbourne and Adelaide to shore up confidence with investors about the company's direction and intention to provide continual updates and guidance.
Morison says similar communication will be provided to shareholders and detail on its historical investment performance, AUM, and fee arrangements will be provided in its future half and full financial year results.
"It is intended that this information will be updated and released half-yearly at financial reporting dates. Certain information will need to be aggregated or disclosed in ranges, given commercial sensitivity and confidentiality undertakings to investors," Morison says.
Blue Sky now expects to complete exits for four of five assets during the financial year ending June 30, 2018. Contracts have recently been exchanged to sell Blue Sky's fund interests in Gundaline and Foundation Early Learning.
Business News Australia
Author: Ben Hall