New chairman oversees exodus from argumentative SeaDragon board

SeaDragon [NZX: SEA] chairman Colin Groves presides over a board of mostly fresh faces in the wake of his appointment to the unprofitable fish oil company three months ago, after an exodus of directors.

At a Wellington roadshow for a rights issue of up to $9 million earlier this month, Groves told investors his board had been "refreshed" because it was "governance gone mad."

He described sitting in on a board meeting in May, before his appointment. "We had the classic lawyer, banker and accountant. I'm looking in the room, listening to them and with eight people around the table we actually ended up with at least a dozen opinions on each subject. Two of the people in the room had never been to Nelson in their lives, yet we're running two fish oil factories in Nelson – that could not carry on."

Mr Groves touched on a difficulty with former​ non-executive director Sean Joyce, telling the Wellington meeting: "Ok, so you'll see in the [capital rights issue] book there that you've got that it mentions the directors that are retiring in a nice organised way at the AGM. Mr Joyce went within two-and-a-half weeks. I didn't tolerate Mr Joyce."

By the time of the annual meeting in Auckland last week, Mr Groves said Mr Joyce had "resigned entirely of his own choice from the board in June, contrary to what has been reported in parts of the media."

Asked to clarify his earlier comments, Mr Groves told BusinessDesk it would be incorrect to infer from comments at the Wellington roadshow that he didn't get on with Mr Joyce as he said Mr Joyce hadn't attended board meetings after Groves became chairman.

"As you can see on the board – five of them have now left, resigned or retired, so I would say it was a difficult few weeks and the fact he wasn't showing up at meetings didn't help matters either.

"You probably don't know Sean Joyce, but ... he is, how should we say, sometimes outspoken and sometimes that's good," Groves said. "But the point where we were, we were in a very difficult situation and we couldn't have all the arguing that was going on and he was part of the catalyst of the arguing along with some of the other directors."

Seadragon's 2015 annual report shows Mr Joyce attended 11 out of 12 board meetings, and all three audit and finance committee meetings in the year through to March 31, before Mr Groves joined the board.

Approached by BusinessDesk on two occasions, Mr Joyce has declined to comment.

Groves joined the Nelson-based company's board as chairman on June 1, after Douglas Wilson resigned, having chaired the company through its backdoor listing on the NZX in 2011. Mr Joyce resigned as a director on June 29, according to the annual report.

The board has shrunk to five directors, with departures at last week's AGM by Jeremy Curnock Cook, who represents 22% shareholder BioScience Managers, Tim Preston and former chief executive Ross Keeley.

Mr Preston told BusinessDesk he had always planned to retire at the AGM and said Mr Grove's comments were "interesting" and boards "should have robust discussions". It had been time for the board to reduce in size and for directors to be appointed who brought new skills to the board.

Former chairman Mr Wilson declined to comment whether the former board had been dysfunctional, saying Mr Groves would make an "admirable" chairman and had the right skills to do the job.

The two new directors are Stuart Macintosh, a director of 42% shareholder Mersea Holdings, and Richard Alderton, who was appointed interim chief executive in June. The other directors include Mr Groves and independent director Patrick Geals. Curnock Cook remains an alternative director to Matthew McNamara, who also represents BioScience Managers.

SeaDragon needs the funds from the renounceable rights issue to help cover the costs of its Omega-3 fish oil refinery in Nelson. The plant is due to be commissioned later this year and has gone $3.2 million over its $9.2 million budget and is stretching the company's balance sheet. The original estimate was $4 million.

New capital from the rights issue would be in addition to a $2.5 million convertible loan from cornerstone shareholder BioScience Managers, which isn't participating in the rights issue.

Mr Groves told BusinessDesk at last week's AGM he was pleased to see the board working together constructively and getting along.

"We got a very positive response from the whole audience and people came up to me and commented and said it's good to see a board that is united and working together," Mr Groves said.

The company forecasts revenue of $10.1 million for the year ending March 31, 2016, up from $6.3 million a year earlier, and expects earnings before interest, tax, depreciation, and amortisation of $144,000, compared to an ebitda-loss of $2.2 million in 2015.

Seadragon's shares last traded at 1c and have dropped 51% in the past 12 months.

(BusinessDesk)