Australian Pharmaceutical Industries Ltd board members copped a barrage of criticism from shareholders at the pharmacy retailer's annual general meeting on Thursday.
It was the first time the board had faced shareholders since it realised in July it had lost track of $17.2 million, leading to a 41 per cent fall in unaudited annual profit to $20.56 million.
But even more salt was rubbed into shareholder's wounds when API said on Wednesday it expected net profit for fiscal 2007, which ends in April next year, to be impacted by increased depreciation and higher interest costs.
Shares in the company, which also makes drugs, slumped 11.6 per cent of 31 cents to $2.36, reducing its market value by $80 million to $607.34 million.
It was a turnaround from Wednesday when the stock gained about 20 per cent on takeover talk after the company confirmed it had been informally approached by a number of parties about its ownership.
A literally red-faced chairman Peter Robinson on Thursday told shareholder the approaches were unexpected.
Yesterday's developments were not expected and as we said in our statement there is nothing that the board has had to consider that could be put to shareholders, he said.
Mr Robinson said the board was focused on restoring the company's operational performance and meeting the needs of its customers.
As part of our duties we will look at firm approaches that are made to us and at the appropriate time put them to shareholders, however I can assure you that the greatest focus of our directors is on the development of our current business, he said.
Still, once the meeting floor was opened to questions from shareholders, their anger became quickly apparent.
Board members, which also include former federal health minister Michael Wooldridge, were subjected to hours of interrogation from irate shareholders.
Australian Shareholders Association chairman Steven Matthews decried the fact that most of the independent directors held multiple directorships.
He also criticised API for terminating an internal auditing relationship with Deloitte in 2003.
I think you've just proven corporate governance was a box ticking exercise rather than a culture within the company, Mr Matthews said.
Earlier in the meeting, Mr Robinson offered shareholders an apology.
We do apologise for the grief we may have caused you, he said.
Mr Robinson said changes to the board would not be considered until the completion of an independent report in November.
Chief executive Stephen Roche, who replaced Jeff Sher when he quit in July, told shareholders there had been a lack of accountability in the business.
Mr Roche reiterated that the company would incur a one-off pre-tax cost of $4.5 million as a result of the investigations into the missing millions.
He added that the investigations are ongoing and may result in other adjustments.
The second half performance is expected to be stronger than the first half, but once again I remind you that it is reliant on the Christmas trading period despite the savings we are targeting, he said.
API's shares were suspended for more than a month over July and August as the release of its fiscal 2006 accounts was delayed while the company dealt with problems with information technology systems.
It later announced that it had lost track of the $17.2 million.