Peter Daly needs to be replaced as chief executive and the Salisbury Group offloaded if AFS Group has any chance of turning around its financial woes, a co-founding shareholder has said.
In a letter to AFS shareholders this month, obtained by InvestorDaily, founding shareholder and ex-company board director Peter Conacher called for Daly to be removed as leader of the dealer group due to his poor success record.
"Peter Daly has worked very hard and diligently, however, his track record of success is abysmal," Conacher said.
"He, to my recollection, has not implemented one strategy that has made money for the business. Most CEOs last five years or so. Those who have been around to remember Robyn Jemmot and the referral network - this was a complete failure with my estimated cost of $400k plus expenses."
When contacted, Daly referred all questions to AFS chairman Barry Stephen. He was unavailable for comment by InvestorDaily's deadline.
As well as the removal of Daly, Conacher said AFS had wasted money through the automatic commission and information system update as well as the recruitment of practices through the firm's business development managers.
"There is an inordinate amount of other wastage that can't be curtailed and consequently reduce debt and increase return to shareholders, thus increasing the capital return," he said.
He said it was time for shareholders to act, push for the reduction of the current board to four practitioner directors and ask pointed questions as to where the company's profits had gone.
As part of his proposed action plan, Conacher has put forward Phil Kleinig as a director and said he believed practices that did not turnover a minimum of $500,000 should either be transferred to the Salisbury Group or be asked to leave the dealer group.
He said following the consolidation of practices, the Salisbury Group should be sold.
"I believe we should then sell the Salisbury Group as it really is a lost cause. As I recall, we paid $1 million approximately for our shareholding and we bill them for compliance etc $150,000 per annum," he said.
"We, I believe, made a mistake by spending the money on low-level practices. Again from my recollection they can't pay us what they owe us."
Another reason for shareholders to push for change was the company's "significant compliance issues" following a compliance review, he said.
"Potentially the cost could run into such an amount that the company could be destroyed as each claim AFS has to stump up $25K," he said.
"The directors' responsibilities and liabilities are onerous. This is another major cause for grave concern. This total mismanagement falls squarely on the head of the MD and head of compliance."
Conacher retired from the AFS board last November due to ill health and conflicts of interest in that he was selling a shareholding in his business, Vivid Financial.
For the financial year ending 30 June 2011, AFS's bottom line result was a reduction in consolidated after-tax profit of 40 per cent from $2.8 million to $1.7 million.
Total expenses for the period were $1.43 million, which included $370,000 in provision for claims, bad debt of $580,000 and write-downs for the Salisbury Group of $200,000.
