Connecteast AGM, Gunns, Toll and praise for Jeff Kennett
February 2, 2010
Dear Mayne Reporters,
A funny thing happened on the way into the RACV business centre at 3.30pm this afternoon.
The wife and I had just finished a meeting with Crikey proprietor Eric Beecher about the way ahead and sitting right next to the door of the business centre were a couple of familiar Computershare AGM registration people.
"Hello, hello, hello," we thought. "What's going on here?"
It was the AGM of Equity Trustees. Ahh yes, this is one of the 750 stocks in the world's biggest small share portfolio and details of the AGM must be one of the 200-plus notices of meeting that are stacked up at home uninspected thus far. There goes the weekend!
And what's on the agenda at Equity Trustees?
Item 3. (c): To consider the election of directors: The Hon Jeffrey G Kennett having been appointed in accordance with Rule 60...retires...and, being eligible, offers himself for election.
A quick fumble in the bag and the recording device was installed. Unfortunately, the meeting started at 2.30pm and Jeffrey had already been elected with more than 99% in favour - a far bigger majority than he ever achieved during his political career.
However, the meeting was now discussing a proposed increase in board fees.
As a former spindoctor in the Kennett media unit, we have a big history after I published this 18,766 word treatise against him on jeffed.com during the 1999 state election.
The great thing about AGMs is that people who won't take your calls or say g'day in the street, have to deal with your questions in a public forum. Indeed, we had these two entertaining AGM encounters with Jeffrey in the past:
2001 Sofcom EGM
The day Jeff Kennett quit DCL and 3AK
However, after all the fire and brimstone from Toll Holdings yesterday - this interrogation of the chairman is as a combative as it has ever got and has already had more than 200 downloads - I just didn't have the energy to get on the high horse about a conservative and solid company like Equity Trustees. Especially inside the RACV Club where the wife is a director.
So, the blue card went up and I said words to the effect of:
I support this increase in board fees from $450,000 to $750,000. Australian non-executive directors as a whole are not paid enough and there are too few doing too much. And congratulations for attracting the legendary Jeffrey Gibb Kennett to the board. He'll be a great addition.
Jeff smiled, I gave him a wink and then we even shook hands and had a polite chat afterwards. Have a listen to the audio here.
ConnectEast AGM
The ConnectEast AGM at The Novotel on Collins this morning was quite an interesting affair. This is a single-asset tollroad play with $1.9 billion in debt and lower than projected tollroad revenue on Eastlink over the first three months of operation.
The annual interest bill is running at $150 million and chairman Tony Shepherd revealed that the major banking covenant occurs when the interest cover falls below 1.1 times. That means the business needs to start throwing off about $160 million in free cash, but so far it is still suffering negative cashflow.
The board wouldn't promise to maintain the projected 10.5c annual distribution and after Brisconnections ditched its promised distribution yesterday, nobody trusts anything much that Macquarie-influence tollroad concerns say these days.
Macquarie is still gouging $1 million a year out of ConnectEast as the responsible entity for the convoluted trust structure. Indeed, the trust doesn't even need to have board elections or an annual meeting.
Before remembering to turn on the recording device, I suggested ConnectEast ditch all the financial engineering and become a conventional company. Why does Macquarie still need two board representatives when it is a major competitor through vehicles such as MIG and Brisconnections?
Given that former RACV President Max Lay is one of those Macquarie representatives, I naturally had to say that it was nothing personal and Max is a great guy who would be welcome to keep serving as an independent.
Chairman Shepherd also has a conflict given his connection to Transfield Services - recipient of the Eastlink maintenance contract which comprises about 15% of total ConnectEast costs.
It was interesting that former BHP executive and GUD chairman Russ Fynmore got up to ask a question and advised the board to can the distributions to conserve capital in this credit constrained world.
This set the scene for my final contribution which counselled the board not to be too proud, ideological or conflicted to sell the asset for a discount to the float price if necessary.
Why not flog it back to government or swap it for more secure Transurban paper if it means getting something for equity holders rather than zero that would flow from a covenant default, penalty interest and everything else that follows down that slippery slope.
A stitch in time can often save nine in this market. ConnectEast units fell 1c to 72.5c today and in speaking against Centro director Jim Hall serving on the board, I reminded everyone that Centro knocked back expensive financing late last year but eventually collapsed after waiting far too long.
Eastlink is a beautiful road but it's carrying a huge debt and hasn't met traffic forecasts. It should pursue an early equity raising to stabilise the balance sheet and also ditch the old service providers from the construction and financing period and instead move to a more conventional board and capital structure. In other words, let's ditch Macquarie and all it represents in the tollroad space.
Missed at the Gunns AGM
After all the drama of last year's Gunns AGM, the only contribution I was able to make to yesterday's Launceston gathering was this scene setting pre-meeting interview on ABC Tasmania with Louise Saunders.
Nick Clarke's story in The Mercury noted the absence and a more polite tone all round.
We're beefing up the favourite AGM audios section of the website but this one from Gunns last year remains one of the all time favourites:
You Gunns directors have no one to blame but yourselves
Toll wash-up - bouquets and brickbats
We've updated the subscriber edition on yesterday's Toll Holdings bunfight to take in some of today's media coverage and do check out last night's story on Lateline Business.
The feedback from shareholders after the meeting was overwhelmingly positive, although one old fella walked past and growled: "I'm sick of you wasting everybody's time. You're a pain in the backside."
There was also this email that came in a couple of hours after the meeting, plus a couple of more positive ones that follow:
Extremely disappointed
Dear Stephen,
I would like to register my extreme disappointment at your line of questioning at this morning's Toll AGM. Generally speaking, I am supportive of the type of work you do in business reporting. However, I take exception to your attack of Paul Little, who I note that even you (somewhat belatedly) admitted is very good at what he does. As I have no doubt you are very well aware, Paul is a man who acts with the utmost integrity – he is a profoundly ethical and honest man and businessman, and does not deserve the kind of treatment you sought to give him in that meeting. I would absolutely defend your right to go after unscrupulous executives, without question, but Paul is most certainly not one of them – and what's more, I think you know that, which makes your behaviour a great deal worse. There are oceans of others who are far more deserving of your time. Oceans.
Best, Sarah.
Thank you for Toll showdown
Hello Stephen,
I thought I would send you an email to congratulate you on your efforts at yesterdays Toll Holdings AGM. You certainly created a storm with your comments regarding the allocation of monies from the Asciano split and it was a pity that the remuneration report was not knocked down but the CEO was going to be the biggest problem. You made chairman Horsborough look like a fool and he had enormous problems answering your claims.
One question will you be present at the Tatts AGM in November?
Well done again.
Robert
Autographing proxy forms
An even stranger event happened after Tuesday's Crown AGM when a bright-eyed student wanted his proxy card autographed. He followed up today with this email:
Dear Mr Mayne
I wanted to thank you for stopping and signing an autograph after the Crown AGM. I apologise if you found it somewhat intrusive but I just could not pass up the opportunity. Seeing you 'in action' is truly inspiring and I encourage you (not that you need encouragement) to continue what I regard as essential to keep the 'high-flyers' on their toes, and expressing insightful facts and opinions on critical issues. It should not be taken for granted the thorough and vast amount of research you undertake for so many companies and the courage and confidence to stand-up and continually share your expertise. Keep up the exquisite work.
Shaun
We mightn't have many paying subscribers, but those emails are nice after all these 12 hour days.
That's all for now.
Have a good weekend and keep doing ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.
A funny thing happened on the way into the RACV business centre at 3.30pm this afternoon.
The wife and I had just finished a meeting with Crikey proprietor Eric Beecher about the way ahead and sitting right next to the door of the business centre were a couple of familiar Computershare AGM registration people.
"Hello, hello, hello," we thought. "What's going on here?"
It was the AGM of Equity Trustees. Ahh yes, this is one of the 750 stocks in the world's biggest small share portfolio and details of the AGM must be one of the 200-plus notices of meeting that are stacked up at home uninspected thus far. There goes the weekend!
And what's on the agenda at Equity Trustees?
Item 3. (c): To consider the election of directors: The Hon Jeffrey G Kennett having been appointed in accordance with Rule 60...retires...and, being eligible, offers himself for election.
A quick fumble in the bag and the recording device was installed. Unfortunately, the meeting started at 2.30pm and Jeffrey had already been elected with more than 99% in favour - a far bigger majority than he ever achieved during his political career.
However, the meeting was now discussing a proposed increase in board fees.
As a former spindoctor in the Kennett media unit, we have a big history after I published this 18,766 word treatise against him on jeffed.com during the 1999 state election.
The great thing about AGMs is that people who won't take your calls or say g'day in the street, have to deal with your questions in a public forum. Indeed, we had these two entertaining AGM encounters with Jeffrey in the past:
2001 Sofcom EGM
The day Jeff Kennett quit DCL and 3AK
However, after all the fire and brimstone from Toll Holdings yesterday - this interrogation of the chairman is as a combative as it has ever got and has already had more than 200 downloads - I just didn't have the energy to get on the high horse about a conservative and solid company like Equity Trustees. Especially inside the RACV Club where the wife is a director.
So, the blue card went up and I said words to the effect of:
I support this increase in board fees from $450,000 to $750,000. Australian non-executive directors as a whole are not paid enough and there are too few doing too much. And congratulations for attracting the legendary Jeffrey Gibb Kennett to the board. He'll be a great addition.
Jeff smiled, I gave him a wink and then we even shook hands and had a polite chat afterwards. Have a listen to the audio here.
ConnectEast AGM
The ConnectEast AGM at The Novotel on Collins this morning was quite an interesting affair. This is a single-asset tollroad play with $1.9 billion in debt and lower than projected tollroad revenue on Eastlink over the first three months of operation.
The annual interest bill is running at $150 million and chairman Tony Shepherd revealed that the major banking covenant occurs when the interest cover falls below 1.1 times. That means the business needs to start throwing off about $160 million in free cash, but so far it is still suffering negative cashflow.
The board wouldn't promise to maintain the projected 10.5c annual distribution and after Brisconnections ditched its promised distribution yesterday, nobody trusts anything much that Macquarie-influence tollroad concerns say these days.
Macquarie is still gouging $1 million a year out of ConnectEast as the responsible entity for the convoluted trust structure. Indeed, the trust doesn't even need to have board elections or an annual meeting.
Before remembering to turn on the recording device, I suggested ConnectEast ditch all the financial engineering and become a conventional company. Why does Macquarie still need two board representatives when it is a major competitor through vehicles such as MIG and Brisconnections?
Given that former RACV President Max Lay is one of those Macquarie representatives, I naturally had to say that it was nothing personal and Max is a great guy who would be welcome to keep serving as an independent.
Chairman Shepherd also has a conflict given his connection to Transfield Services - recipient of the Eastlink maintenance contract which comprises about 15% of total ConnectEast costs.
It was interesting that former BHP executive and GUD chairman Russ Fynmore got up to ask a question and advised the board to can the distributions to conserve capital in this credit constrained world.
This set the scene for my final contribution which counselled the board not to be too proud, ideological or conflicted to sell the asset for a discount to the float price if necessary.
Why not flog it back to government or swap it for more secure Transurban paper if it means getting something for equity holders rather than zero that would flow from a covenant default, penalty interest and everything else that follows down that slippery slope.
A stitch in time can often save nine in this market. ConnectEast units fell 1c to 72.5c today and in speaking against Centro director Jim Hall serving on the board, I reminded everyone that Centro knocked back expensive financing late last year but eventually collapsed after waiting far too long.
Eastlink is a beautiful road but it's carrying a huge debt and hasn't met traffic forecasts. It should pursue an early equity raising to stabilise the balance sheet and also ditch the old service providers from the construction and financing period and instead move to a more conventional board and capital structure. In other words, let's ditch Macquarie and all it represents in the tollroad space.
Missed at the Gunns AGM
After all the drama of last year's Gunns AGM, the only contribution I was able to make to yesterday's Launceston gathering was this scene setting pre-meeting interview on ABC Tasmania with Louise Saunders.
Nick Clarke's story in The Mercury noted the absence and a more polite tone all round.
We're beefing up the favourite AGM audios section of the website but this one from Gunns last year remains one of the all time favourites:
You Gunns directors have no one to blame but yourselves
Toll wash-up - bouquets and brickbats
We've updated the subscriber edition on yesterday's Toll Holdings bunfight to take in some of today's media coverage and do check out last night's story on Lateline Business.
The feedback from shareholders after the meeting was overwhelmingly positive, although one old fella walked past and growled: "I'm sick of you wasting everybody's time. You're a pain in the backside."
There was also this email that came in a couple of hours after the meeting, plus a couple of more positive ones that follow:
Extremely disappointed
Dear Stephen,
I would like to register my extreme disappointment at your line of questioning at this morning's Toll AGM. Generally speaking, I am supportive of the type of work you do in business reporting. However, I take exception to your attack of Paul Little, who I note that even you (somewhat belatedly) admitted is very good at what he does. As I have no doubt you are very well aware, Paul is a man who acts with the utmost integrity – he is a profoundly ethical and honest man and businessman, and does not deserve the kind of treatment you sought to give him in that meeting. I would absolutely defend your right to go after unscrupulous executives, without question, but Paul is most certainly not one of them – and what's more, I think you know that, which makes your behaviour a great deal worse. There are oceans of others who are far more deserving of your time. Oceans.
Best, Sarah.
Thank you for Toll showdown
Hello Stephen,
I thought I would send you an email to congratulate you on your efforts at yesterdays Toll Holdings AGM. You certainly created a storm with your comments regarding the allocation of monies from the Asciano split and it was a pity that the remuneration report was not knocked down but the CEO was going to be the biggest problem. You made chairman Horsborough look like a fool and he had enormous problems answering your claims.
One question will you be present at the Tatts AGM in November?
Well done again.
Robert
Autographing proxy forms
An even stranger event happened after Tuesday's Crown AGM when a bright-eyed student wanted his proxy card autographed. He followed up today with this email:
Dear Mr Mayne
I wanted to thank you for stopping and signing an autograph after the Crown AGM. I apologise if you found it somewhat intrusive but I just could not pass up the opportunity. Seeing you 'in action' is truly inspiring and I encourage you (not that you need encouragement) to continue what I regard as essential to keep the 'high-flyers' on their toes, and expressing insightful facts and opinions on critical issues. It should not be taken for granted the thorough and vast amount of research you undertake for so many companies and the courage and confidence to stand-up and continually share your expertise. Keep up the exquisite work.
Shaun
We mightn't have many paying subscribers, but those emails are nice after all these 12 hour days.
That's all for now.
Have a good weekend and keep doing ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.