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Wynyard shareholders told restructure, board revamp, and tight cost control will turnaround performance

Monday 20th June 2016

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The revamped board of listed software company Wynyard say a restructure of the business into two units and tight control on costs should see a turnaround on the disappointing 2015 performance that has seen the share price tank 59 percent in the past year.

At today’s annual general meeting in Auckland, long-time director and newly appointed chairman Guy Haddleton told shareholders the board and management were working hard to apply the many lessons it has learnt in recent months. The share price rose 5 cents to 69 cents.

Shares have been on a downward trend this year since a disappointing annual result in February where revenue of $26.3 million was well below the forecast $40 to $45 million with several expected deals slipping. The company then did a heavily discounted rights issue in March to raise working capital in a hurry.

Haddleton addressed shareholders concerns in his speech, asking what went wrong and why had chief executive Craig Richardson kept his job?

The failure to close expected government contracts in December meant cash didn’t arrive as expected through December and January although the board still thought it could achieve the lower end of its revenue guidance range, he said.  That would have been okay if the capital raising planned for December had occurred but it slipped into the New Year and then global market turbulence derailed the process.

“Although the market disruption was unkind to us, let’s not blame this. Bluntly we didn’t execute a solid game; no doubt influenced by our previous capital raising successes and not placing sufficient weight on the value of having an investment banker as a partner,” he said.

A board-commissioned independent review of chief executive Craig Richardson found he was a leading salesperson and inspirational leader. Haddleton said Richardson has been receptive to guidance and the board agreed he should continue as ceo, although the revamped board which has three new directors with more commercial experience will play a more active operational role in future.

The business has been divided into two units – government which Richardson will head, focused on the criminal intelligence market, and commercial headed by Paul Stokes, which will focus on its new cyber security product ACTA (Advanced Cyber Threat Analytics).

The narrower focus of the business should yield annualised cash savings of around $17 million through a combination of reducing staffing levels through attrition and redundancies and further operating cost and capital expenditure reductions. The company wouldn’t say how many staff have lost their jobs.

Haddleton said no-one was happy with last year’s sales performance and to address that the company was no longer selling “everything, everywhere”. The government side will sell to the law enforcement and corrections market in North America and national security in Europe, the Middle East and New Zealand. Commercial will sell to large corporates and managed security service providers in Australia, New Zealand, and the UK this year before expanding into other regions next year.

“The opportunity pipeline for ACTA, our cyber security product, is the strongest I have personally seen for such an early stage enterprise software company,” he said.

It’s already signed deals for ACTA with Telstra and Deloitte.

Richardson said the market opportunity in front of the company has reduced from an $8 billion market to a $4.7 billion one but that won’t impact the qualified sales opportunities for this financial year.

There is no change to the revenue guidance for this financial year of $54 to $65 million plus an additional contract of $14.3 million that has taken some time to close. The cash position for the first half is expected to be broadly in line with forecast and the board said the company has sufficient working capital to fund its business plan announced in February.

One woman turned up at the annual meeting to drum up shareholder support for a class action to recover share price losses from August 2016 to February 2016. A critical mass of affected shareholders needed to pursue a class suit would be losses of around $17 million.

Two fund managers - Logic Funds principal Greg Marshall, who successfully waged a campaign that led to a $60 million settlement for Credit Sails investors, and Australian-based Millinium Capital managing director Tom Wallace are behind the campaign. Neither men are shareholders in Wynyard and will receive part of a 20 percent of so fixed percentage fee from any successful court order or settlement if the class action proceeds.

Marshall said preliminary investigations indicate Wynyard may have misled investors over statements relating to two key areas: reported 2015 revenue falling short of guidance and comments on the status of the deeply-discounted $30 million capital raising in March.

Richardson said he was aware of the class action campaign but that he had had no contact with those behind it. Directors and management had disclosed all financial information relating to the guidance as soon as it became clear to them, he said.

“I’m a shareholder too and I’m not happy with the 2015 performance,” Richardson said. “But we have a significant market opportunity, the makings of a good business, a great board and strong executive team. I understand shareholders’ disappointment but the board and management are working relentlessly to revive their confidence.”

BusinessDesk.co.nz

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