Sequoia chief executive, Garry Crole, has hit out against shareholders “with a personal axe to grind” as he fights for his job ahead of an EGM in June.
Earlier this week, multiple shareholders, who together hold 5 per cent of the votes that may be cast at the general meeting, called for Crole and non-executive director Kevin Pattison’s departure. Instead, they would like to appoint head of professional services Brent Jones and former Diverger chair Peter Brook in their place.
The dissenting shareholders believe the new directors will improve corporate governance and create a more focused and profitable business and an EGM will be held on 4 June.
In an open letter to shareholders, posted on the ASX, Crole noted that one of the dissenting shareholders only became a shareholder in February and flagged the long-term progress made since he took over as CEO in 2019.
Shares in Sequoia Financial Group have risen by 160 per cent in the last five years versus returns of 20 per cent by the ASX 200.
“To call for such an early drastic and costly action as the removal of the group’s managing director and a non-executive director is unusual and brings into question the motivation for seeking such a change,” he said.
“I am obviously disappointed to have to defend my position in this manner […] since I took over as CEO of Sequoia we have gone from being a loss maker to one of the most profitable licensee groups within the sector.
“There has been suggestion from some that there are flaws in parts of my leadership style and I am always happy to take feedback onboard. My openness and support of those loyal people around me has been criticised, however I will let the results speak for themselves.
“I believe every shareholder vote makes a difference and that we should not let those with a personal axe to grind continue to distract our great business from continuing to deliver.”
If shareholders vote to retain Crole’s service, Sequoia has said it will put in place a new contract that will see him handover the CEO role with an orderly succession process no later than June 2026. He would also be subject to revise KPIs with a “sharpened focus on underperforming business units, revenue/margin growth across licensee services and professional services divisions”.
He also has the backing of chair Charles Sweeney, who was appointed as chair last week to replace John Larsen.
Sweeney stated he was in favour of the directors’ retention due to the trebling of revenue and net tangible assets since Crole took over in 2019. He also praised the licensee services division which has experienced a large organic increase in adviser numbers at a time of national adviser exits.
“I am extremely confident that if you vote in favour of the current board and MD and against the section 249D that you will continue to be well rewarded as shareholders as the company continues its growth trajectory.
“As stewards of your company, we intend to use its hard-won capital wisely, through a combination of fully franked dividends, earnings accretive acquisitions and share buybacks, assessing the right balance to maximise shareholder returns as the opportunities arise.”
Acquisitions
A direct criticism raised by the shareholders is the acquisition of Sharecafe in April 2022 where the company has since filed for $3.5 million in damages against managing director Tim McGowen.
It was hoped the acquisition of Sharecafe as well as Informed Investor and Corporate Connectwould provide increased delivery of premium information and finance news to Sequoia’s client base, and assist in developing a digital and educational content platform for fund managers, ASX-listed companies and the financial services industry.
In a business update in January 2023, the firm acknowledged the integration of the three companies had taken “longer than anticipated” and that it was “causing short-term pain to its bottom line”. The delays had caused the Direct Division to fall short of the EBITDA budget by $500,000, it said.
However, Sequoia said in its FY2022–23 result that the division has since been “restructured to capture service efficiencies and new customers”.
The shareholders stated: “The new directors will improve corporate governance and ensure that the significant cash balance available to Sequoia does not result in a repeat of acquisitions like Sharecafe.”
As well as Sharecafe, the company has carried out several acquisitions including professional services firm Castle Corp, legal services provider Australian Business Structures and national paraplanning service Clique Paraplanning.
Sounds like a schoolyard childish scrap! take it behind the shelter sheds and sort it out!
Really Publicly listed company??