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Rubicon's proposed pay for new director is pay before performance: NZSA

Thursday 5th September 2019

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At the same time as warning shareholders not to hold their breath waiting for a dividend from Rubicon, the New Zealand Shareholders’ Association is signalling it is reserving judgement on its newly appointed director, George Adams.

But NZSA is definite that it won’t be supporting Adams’ proposed $137,127 a year pay package, saying it is excessive for a company with a market capitalisation of only $89 million, is not profitable, does not pay dividends and “has been a serial destroyer of shareholder value.”

NZSA says Rubicon has been a disappointment to shareholders ever since it was spun out of Fletcher Challenge as a separate company in 2001.

“To the best of our knowledge, the company has never paid a dividend and the share price currently trades around all-time lows,” the retail shareholders’ organisation says.

Rubicon’s sole remaining asset is ArborGen, the world’s largest provider of tree seedlings to the global commercial forestry industry and currently produces more than 350 million seedlings a year.

“Despite Rubicon’s long history of underperformance, the company believes it can now capitalise on ArborGen’s position in the market,” NZSA says in advice to members on how it will vote the proxies it holds.

“Unsurprisingly, given past performance, the chair was reluctant to give any firm guidance in the annual report,” it says.

NZSA notes the balance sheet has total assets of US$194 million and shareholders’ equity of US$147.6 million with intellectual property valued at US$105.6 million and net debt of US$25.8 million.

“The company has so far been unable to generate sustainable profits. Shareholders should not hold their breath waiting for a dividend.”

Adams was appointed to the board last month with chair Dave Knott saying: “we believe he will add considerable value to our decision-making as we move forward.”

The New Zealand-based Adams was previously managing director of Coca-Cola Amatil in New Zealand and finance director of British Telecom Northern Ireland. He is also a director of Tegel Group, deputy chair of Cavalier and on the boards of a number of other companies.

“Mr Adams’ previous roles suggest that he is a highly capable individual,” NZSA says.

“However, we would have liked to have seen a director nominated with forestry and/or timber products experience. There should be no shortage of suitable New Zealand-based candidates with this type of experience,” it says.

“Subject to the company’s responses as to our concerns at the ASM, we will vote in favour of this resolution” to confirm Adams’ appointment.

The notice of meeting says Rubicon wants to pay Adams $150,000 in shares which will be held by a trustee and will only vest in three annual tranches if a number of conditions are met, including that he remain on the board.

Adams will also be paid up to $74,627 a year in cash. “When combined with an independent director’s current base cash remuneration of $62,500 per annum, this equates to a total pre-tax annual remuneration of up to $137,127,” the notice says.

That’s before any changes in the market value of the shares.

NZSA reminds shareholders that it opposed last year’s proposal to increase the directors’ fee pool to $800,000 – the company said “over 97 percent” of the shares voted last year supported that resolution.

“Our view on the fee pool and the share offer has not changed,” NZSA says. Giving Adams such a package “represents pay BEFORE performance.”

Rubicon shares are trading at 18 cents and have fallen more than 33 percent in the last 12 months during which time the benchmark S&P/NZX 50 Index has gained nearly 20 percent.


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