iSelect CEO exits after board dispute
The sudden resignation of iSelect's chief executive less than four months after the company floated on the sharemarket was due to disagreements with the board and "completely unrelated" to a probe by the corporate regulator, the company said.
Matthew McCann resigned as chief executive on Friday evening, shortly before the company was forced to revise down its revenue targets by $6 million for the year to December following demands by the Australian Securities and Investments Commission to clarify a "potentially misleading" announcement on August 29.
In a trading update on Monday, iSelect confirmed its revenue would be softer than expected, due to weaker returns in health and car insurance.
However, it stood by its forecast for earnings before interest, tax, depreciation and amortisation of $30 million, excluding costs relating to the float.
iSelect chairman Damien Waller said Mr McCann had resigned over "differences of opinion" with the board over the company's business strategy.
"It was around operating priorities in the business," he said. "Matt had a view around how to grow the business via acquisition, whereas the board was much more focused in organic growth."
He said Mr McCann's departure followed several weeks of discussions. "The timing of the ASIC trading update, which is driven by ASIC, and the timing of Matt's resignation, [are] completely unrelated. They're not linked together in any way," he said.
"We've been having conversations with Matt over some period. The ASIC issue is relatively new."
Last week the corporate watchdog demanded the company withdraw or modify its earnings forecast. In a letter, obtained by BusinessDay, it said iSelect directors had cut internal revenue targets for its health and car businesses without telling the market.
On Monday, iSelect said it expected first-half revenue for the current financial year to be $2.4 million lower than the prospectus stated. This took its total revenue forecast for the year to December to $126.6 million.
Chief financial officer David Chalmers, who has been appointed acting chief executive, said he was comfortable the company had satisfied ASIC's requests but could not rule out future enforcement action.
"I don't think anyone can ever rule it out," he said.
"There's certainly no lurking issue that the company is aware of that would cause it to frankly have any concern."
Australian Shareholders Association chairman Ian Curry said he would push iSelect for any more revised figures, including statutory net profit. "There are quite a few numbers there that we're still trying to work out," he said.
He said he questioned whether the company had enough independent directors to properly scrutinise the business.
"There's obviously more work to be done before people can understand what went wrong," he said.
Professor Peter Wells, at the University of Technology Sydney business school, said some of the company's accounting procedures, such as the inclusion of trailing commission estimates, remained problematic.
"They would argue it simply reflects the economics of the transaction," he said.
"But I would suggest it's a number which is very, very difficult to determine and is subject to change. It's a rubbery number."
"For a business that is growing rapidly, forecasting is always going to be more of an art than a science."
Mr Wells also questioned the exclusion of certain one-off costs, such as float and CEO expenses.
iSelect shares rose 10¢, or 8.3 per cent, to close at $1.37.