A company director’s job is to protect the interests of shareholders. As is usually the case, theory is easier than practice, but it’s not particularly difficult to assess their performance. All you need to do is add up what shareholders had a few years ago and compare it with what they’ve got now.
Not so, it seems. The Australian Financial Review’s marketing commentator Neil Shoebridge is upset at the send-off given to Photon Group Chairmain Tim Hughes. In an article titled ‘Hughes Deserved More’ Shoebridge accepted that Photon had fallen on tough times as a result of an ‘acquisition spree that saddled it with too much debt’. But he went on to defend Hughes, saying the company’s recent woes ‘should not be allowed to obscure what he and sidekicks such as former Photon Chief Matt Bailey achieved.’
‘Over the past decade’ Shoebridge wrote, ‘Photon grew from a small handful of companies in Australia, to the 15th largest marketing services group in the world, with 50 businesses here and overseas … he deserved a more auspicious send-off than a perfunctory two-line statement’.
No he didn’t, Neil. His job was not to build a global empire (something even I could achieve if you give me a big enough cheque book). His job was to create shareholder value, and in this regard his record was atrocious. Photon listed in 2004 at $1.80 per share, attributing it a value of $88m. It then raised $16m in 2005, $49m in 2006, $77m in 2008, $115m in 2009 and is in the process of raising an additional $102m. That’s a total of $447m shareholders kicked in to fund Hughes’s buying spree.
At today’s $0.115 closing price, the company has an effective market capitalisation of less than $200m (once all the additional shares related to this latest capital raising are issued). I think it’s worth a bit more but there’s zero doubt hundreds of millions of dollars of shareholder wealth have been destroyed. Two lines are more than enough.
Disclosure: The Intelligent Investor Value Fund owns shares in Photon Group and participated in the recent institutional placement.
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