More chaos at Blue Sky: Chair to go, CIO out, profit guidance pulled

(Omer Messinger / Getty Images)
  • Troubled asset manager Blue Sky has withdrawn profit guidance and flagged changes to its board.
  • Shares fell by as much as 10% in morning trade.
  • The company said it will provide additional information on its assets at half-year and full-year reporting intervals.

Asset manager Blue Sky Alternative Investments has notified the market that it’s withdrawing profit guidance for the 2018 and 2019 financial years.

The company also announced chief investment officer Alexander McNab will step down immediately. Current Chairman John Kain will also step down once a suitable replacement has been found.

Shares in the company initially slumped by almost 10%. A short time ago, BLA shares were trading down 7.35% at $2.52:

At current prices, Blue Sky shares are now trading at a discount to the $2.66 target price set out by Glaucus Research — the US short-seller which first took aim at Blue Sky in late-March.

Blue Sky highlighted the following developments which were the catalyst for today’s announcement:

  • uncertainty, due to deal timing, as to whether accretive US transactions will occur before or after 30 June 2018;
  • uncertainty as to the timing and structure of three development projects in Australia; and
  • allowance for significant non-recurring expenses associated with restructuring the business, including to reduce fixed operating costs below recurring annual management fees.

On a conference call following the announcement, Blue Sky’s interim Managing Director Kim Morison discussed the specifics of the three Australian development projects.

Two concern the construction of retirement villages, while the third relates to a student accommodation project.

Morison said the current size of the first retirement village is smaller than originally envisaged, and the company is changing plans to try and make it bigger.

For the other retirement village, the capital structure has been changed with an institutional investor now providing 100% of the funding. Morison said that would result in an adjustment to the fees Blue Sky will earn on the project.

He said the student accommodation project was still scheduled to proceed, but it was currently unclear whether it would start before or after the company’s balance date of 30 June.

In its statement to the market, Blue Sky said today’s announcement is part of efforts to rebuild trust with stakeholders.

“It is important that as part of this process we retain key staff and investment professionals, that we concentrate our business on scale, capability, expertise and competitive advantage as we review our business units and that our fixed operating expenses are less than our recurring annual management fee revenues,” the company said.

“As part of this restructure we will appoint a Chief Risk Officer to manage risk across the Blue Sky group and the role of group Chief Investment Officer will become redundant.”

Blue Sky also presented some detailed figures on its historical investment performance, fee-earning assets under management, and fee arrangements.

The company confirmed it would exit its investment in child-care operator Foundation Early Learning, with proceeds from sale likely to represent a discount to book value of between 14-23%.

Morison said that additional information will now be provided at half-year and full-year reporting dates.

“Certain information will need to be aggregated or disclosed in ranges, given commercial sensitivity and confidentiality undertakings to investors,” Morison said.

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