Blancco Technology Group and Corporate Governance

I attended the AGM of Blancco Technology Group (BLTG) yesterday (29/11/2016). The Government announced a review of Corporate Governance yesterday but is it not surprising that companies cannot get even the basics right? This AGM was a typical example.

Blancco used to be called Regenersis and was in the electronic hardware repair business in essence. This was not the kind of business I like to invest in because there are few barriers to entry and neither was I impressed otherwise having seen them present to investors more than once. However in the last financial year, it was all change. They disposed of the repair business and have transmogrified via acquisitions into a software business focussed on “data erasure”, they changed their name, and the management was also changed. The disposal of the repair business meant they returned a large amount of cash to shareholders, and these changes mean interpreting the accounts from last year, or understanding their current financial position is not easy. Analysts forecasts suggest revenue of about £30m in the current year and profits of £5m giving a p/e of about 25, but they have yet to publish their half year results to the end of June.

Data erasure is needed because of the high turnover in PCs, phones, TVs, even cars and watches now, where when they are disposed of (sold or scrapped) it is necessary to remove all data from them for security reasons. Deleting files does not do that – even formatting a hard drive does not do it – the data is still recoverable. Personally I take a sledgehammer to the hard drive but it seems only 10% of folks actually use that method with most using insecure methods. Only 8% of companies actually use paid erasure which is what Blancco sells.

Blancco now seem to be the world market leader in this niche software segment. But there is a growing demand for it as paranoia about security grows and new standards are promoted or legislated for that requires it on disposal of equipment.

I arrived 15 minutes late for the meeting due to trains into Cannon Street being disrupted by “signal failures”. Last week it was leaves on the line. Such an unreliable transport system! So I voted on the last resolution (against share buy-backs as usual), and before the Chairman moved on to general questions asked about the proxy counts. Was he going to give them? Answer: No. I suggested it was both normal and best practice to do so (I attend a lot of AGMs and it is usually done apart from being recommended), but he still declined. So I asked him whether there were any votes of significance against any of the resolutions. He tried to avoid answering that also by saying all resolutions were approved, but eventually conceded there were a number of votes against two resolutions including against the Remuneration Report (Comment: not surprising as I voted against that also – total board remuneration last year was £3 million, and new share incentive plans for the new management look quite aggressive). I can’t say I appreciate a Chairman (Matthew Peacock) who is unwilling to answer simple questions, so it is perhaps a good thing that he is stepping down as announced in the AGM statement issued on the day. I will send him a copy of the ShareSoc note on “How to Run a General Meeting” for his future reference and the new Chairman, whoever that might be as we do not yet know. See http://www.sharesoc.org/How_To_Run_General_Meetings.pdf which covers this point.

Apart from the initial hiccup, the other directors answered questions openly and well thereafter. There is a full report on the ShareSoc Members Network. The business seems to be growing and is profitable which for a software company is not always true. Future accounts will certainly be worth examination. It’s always worth attending AGMs, and I just wish more investors would do so.

Roger Lawson

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