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Murray River Group is fighting fire with fire, releasing the early findings of an investigation into past management practices to fend off questions led by those same — now-ex — executives.

In an statement made publicly available as an ASX announcement, the current Murray River Group board said that early findings from the investigation into the 2016-2017 harvest, the one that led to a $10 million revenue downgrade in May, point the finger squarely at the now departed founders.

“The Board believes that the decisive steps taken in 2017 to exit the co-founders, Erling Sorensen and Jamie Nemtsas, from the business was appropriate and that action is supported by the initial findings of the external independent investigation,” the company said.

Murray River was in turmoil for most of 2017.

The bad harvest caused writedowns, the removal of Mr Nemstas and Mr Sorenson, and the subsequent fight at the AGM where the two men led a rebel group to vote down all but one resolution.

Bad harvest
The board in its statement said that initial findings of an expert independent investigation were that by January it was clear the Sunraysia grape crop had been badly hit by storms.

According to the board’s statement, the Mildura team told senior management at the time – Mr Nemstas who was COO and Ms Sorenson who was managing director – who decided to convert the fresh table grape harvest into a dried fruit harvest.

“The conversion was poorly executed and failed,” the board told investors.

Furthermore, the rest of the board wasn’t told until April, the board’s statement said.

“Processes relating to waste product and product to be reworked at the Mildura operations were highly questionable, and as soon as these poor practices overseen by senior management were uncovered by the board, a provision for 100 per cent of the incorrectly graded stock was taken up in the accounts and further disclosure made at the 2017 AGM,” it said.

It also highlighted alleged “poor practices relating to weighing of product at the Mildura operations overseen by senior management”, such as not weighing each fruit bin.

“These practices – now fully rectified – were not disclosed to the Board until July 2017, and ultimately triggered a full inventory review by the Board which was explained at the recent AGM,” the board’s statement said.

That review saw an inventory write down of $4.3 million in November.

Under pressure
The group led by Mr Nemstas and Mr Sorenson is now trying to roll the board.

In a requisitioning member’s statement, also publicly released as an ASX announcement as an attachment to the current board’s statement, Bryan John Meredith on behalf of the Meredith Group alleges that the blame for the share price drop lies in fact at the door of chairman Mr Farrow and independent director Ms Hennessy.

The share price has fallen from the $1.30 listing price in December 2016 to 38c this morning, down 70.7 per cent.

Murray River's last six months. Pic: Investing.com
Murray River’s last six months of trading. Pic: Investing.com

Minority shareholders BLBD and Meredith Nominees, both controlled by Bryan Meredith, last year requisitioned a meeting to remove Craig Farrow, Lisa Hennessy and Kenneth Carr as directors.

They want to instead appoint Andrew Monk, Steven Si and Keith Mentiplay, re-appoint Mr Nemtsas as COO and acting CEO, and consider the purchase or merger of Mr Si’s company Kadac.

Mr Si also controls SHWL which owns about 11.6 per cent of Murray River.

Mr Meredith said that a capital raising at 30c a share in September was a “bargain” price and unfair for existing shareholders, and the $7.5 million purchase of a farm was bad capital management.

Mr Farrow has been contacted for comment.