Shareholders in Vocus Communications have stepped up their pressure on the board of the company to dump its chief executive Geoff Horth and make changes to the board.
In the past two weeks shareholders owning more than 20 per cent of the issued capital of the voice and data network operator have separately put demands to chairman David Spence.
The implicit threat was that if Spence did not act then shareholders would use their votes at the next annual meeting to force changes.
Spence, who is in Perth for a board meeting, told Chanticleer on Tuesday that he was fully aware of the concerns of shareholders.
"There is no doubt given the recent profit downgrade that there is a lot of pressure on us as a board and management at the moment," Spence said.
"I have had a lot of shareholders talk to me over the last couple of weeks. There is pressure on us to make changes.
"I have a list of a whole lot of things that shareholders want. But we need to do this in an orderly manner."
One Vocus shareholder told Chanticleer he believed that governance of the company was "broken". He said this was shown by the fact that there had been no changes in the board or management despite two profit downgrades this financial year.
"I would argue objectively that the guy who made all these decisions, that led to a profit downgrade of 30 per cent, needs to take responsibility," said the shareholder who did not wish to be named. "How can he still be there?"
But Spence defended Horth's performance.
"Geoff will absolutely have our support until we decide otherwise," he said. "We have brought eight companies into one and he is doing that."
Spence said he would not be rushed into make changes at the company.
"I know everybody wants things done yesterday but there is a helluva a lot of working going on and a lot of moving parts," he said.
"I am in Perth where we are having review with our business leaders and a board meeting.
"We have a strategy day on the 14th and that will be the time for any announcements about changes.
"I am going to do what is best for all shareholders and in the best interests of the company."
Shareholders have claimed the board of Vocus is split in relation to the company's governance.
In response to this Spence said: "I don't believe our governance is broken."
"There is always tension when you are under pressure like this.
"We are in the middle of a particularly good meeting over here slowly working through all the issues."
The Vocus situation appears to have a parallel with the recent board room ructions and management upheaval at milk products exporter Bellamy's.
It was seen as a sound business that had been badly managed. It changed its CEO and revamped its board with the appointment of a new chairman and new non-executive directors.
However, this was all done through a very messy process including a meeting of shareholders and bitter proxy fight.
Spence hinted that changes would occur at Vocus.
"My job is to make change in the best interest of the company and its shareholders. If changes need to be made we will do so.
"We are not going to do anything stupid."
The company last year appointed a new chief financial officer, Mark Wratten, and downgraded its chief technology officer role in favour of appointing a new head of transformation,
There has been speculation that Vocus would be the subject of a takeover by private equity. But there is uncertainty about whether or not management has its arms around the problems including a failed business development system.
There have been no formal approaches made to the company but several informal moves.
Vocus issued its second profit downgrade this year on the night of May 2. It said profits for 2017 would be one third lower than it guided in February.
The downgrade revealed weakness across its three main operating businesses.
In response to the downgrade broking analysts marked down their earnings forecasts for 2018 and slashed their bullish price targets. One analyst warned the company was in danger of breaching is debt covenants.
The stock hit a high of $9.41 in May last year and closed on Tuesday at $2.96.
Vocus is now one of the top five shorted stocks on the Australian market as investors try to profit from a further sharp decline in the share price. About 102 million shares have been sold short or about 16 per cent of the issued capital.
