AIM-listed delivery company DX Group this morning announced it has appointed the managing partner of Gatemore Capital Management to its board, just two weeks after the activist fund demanded a seat in order to address governance issues.
Liad Meidar, Gatemore’s managing partner, has been appointed as a non-executive director “with immediate effect”, the mail and logistics company said in a statement this morning.
“The Company’s management represents one of the leading overnight freight and parcels teams in the country and, since 2017, has successfully executed an outstanding turnaround. DX is now facing tremendous growth opportunities,” Meidar said.
“As a major shareholder, I remain an enthusiastic supporter, and am committed to assisting the Company through the current situation to the benefit of all shareholders,” he added.
It comes after the activist fund sent a letter to DX Group’s board last month that revealed it had accumulated a stake of approximately 20.5 per cent in the company, and counted itself “amongst DX’s most enthusiastic shareholders.”
But the fund manager said it had been “deeply disappointed” by recent failures by the board of the company, which has seen its share price plunge 36 per cent in the year-to-date.
Gatemore said the tip of the iceberg had been DX Group’s announcement on 25 November that it would not publish its annual results in time for its Annual General Meeting (AGM) that day.
Shares in the logistics company slid as much as 25 per cent after it revealed it was forced to delay the results publication until at least 2 January next year, while its risk and audit committee carry out an internal investigation into its corporate governance.
“We question why the content of that announcement was so ambiguous and lacking in any meaningful detail, in particular regarding the nature of the internal investigation,” Gatemore wrote in the letter to the company’s board at the end of November.
“This lack of transparency is entirely unacceptable,” the letter continued.
Gatemore followed by requesting that its managing partner Liad Meidar be appointed immediately to the DX Board, “in order to better understand the underlying issues, promote improved governance standards and investor communications, and seek ways to achieve full value for shareholders, including through exploring strategic alternatives.”
DX Group’s share price performance has been lacklustre this year, repeatedly missing analysts’ targets, despite the company returning to profitability and upgrading its profit forecast five times during this financial year.
Gatemore argued lats month that the board’s “mismanagement across multiple areas, including corporate messaging and transparency, audit process, broker engagement, and the lack of return of capital to shareholders” had contributed to its underwhelming performance.
It also condemned the “clear missteps” by DX Group’s new auditor Grant Thorton that have caused the company’s results to be pushed back twice, “alarming investors” and leaving both parties with a lack of time to resolve issues like the open internal investigation.
“It is our opinion that the nature of this announcement demonstrates a complete failure of the Board to act in accordance with its fiduciary duties and an absence of acceptable governance standards at DX,” the fund said.
Gatemore’s objection to DX’s governance comes hot on the heels of the news earlier this month that it had bought a stake in DFS, and told its fund investors that the sofa chain was undervalued by public markets and thus ripe for a private equity bid.