Neal Woolrich filed his report on the Cochlear AGM last week and it has generated a lot of feedback from customers and the company which is at the bottom of his piece before the account of the Coates Hire AGM kicks in.
By Neal Woolrich
Potential Cochlear implant recipient if he doesn’t stop listening to heavy metal music
Crikey often cops a bagging for doing too much bagging, but amongst all the brickbats that get thrown around on this website we do occasionally pass on a bouquet when it is deserved.
Cochlear is one such company.
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Talk about the feelgood AGM of the millennium. There were moist eyes after the company showed a promotional video of all the good work they’d done, the company’s share price and profits have been going through the roof and the outlook is for more to come notwithstanding the current global economic malaise. They picked up innovation awards both here and in the US during the year, so the Government would be enjoying the opportunity to once again chest-beat about Australia’s leadership in the field of medical research.
About the only downside that Professor David Pennington alluded to in his Chairman’s address was that, because the company had hedged its foreign currency exposures, it hadn’t benefited from the slide in the Pacific Peso during the year.
And that’s the way it should be as far as this shareholder is concerned. (Ed – hang on, we bag companies that stuff their hedging.)
Although one shareholder asked the Chairman to outline how much had been foregone through hedging, any sensible investor would be pleased with the Chairman’s response that Cochlear aren’t in the business of speculating on foreign exchange movements. The Chairman explained that it was more important for the company to know with certainty what their export sales position will be so that they can more accurately predict future profits.
The Chairman noted that he was pleased by both major political parties’ commitment to R&D and education and when questioned by yours truly indicated that there was no material difference between the Liberals and Labor as far as their stated policies in these crucial areas. Of course, the Chairman qualified his response by saying that, as Chairman of a listed company, he didn’t plan to engage in any political debate. Based on the noises that both parties had made, Professor Pennington was confident that the company could work with either side following the election.
The Chairman did note that Australia was lagging behind the rest of the world in terms of medical approvals and needed to lift its game so that Australians do not unduly suffer from absence of world-class medical resources and procedures.
The company experienced sales growth of 65% over the past year and the Chairman noted that he was confident of the company meeting targeted growth of 20% in the current year. Cochlear’s share price has increased 10-fold since 1997 and despite having a Price/Earnings ratio of around 80, it didn’t look like retreating.
Cochlear’s position in the US is looking sound, with its main competitor, Advanced Bionics, receiving a “please explain” notice from the FDA for inappropriate labelling on one of its products.
There were a dozen or so questions from the floor, none of which were remotely hostile. The Chairman’s address and questions were over in 40 minutes, all 5 pieces of official business were passed without dissent from the floor (except for one contrary chap who voted against the CEO’s option package) and the meeting was wrapped up after 45 minutes in total.
The Chairman then had everyone grasping for their tissues by showing a video of Cochlear’s work with profoundly deaf people. Having seen the difference that this company has made to so many people’s lives, it’s hard not to like Cochlear.
There aren’t too many companies in Australia in respect of whom one can say that their shareholders love them, their customers love them and the Government and Regulatory Authorities love them. In essence, Cochlear has a complete winner of a product, so they don’t have to do too much to sell it.
This was one of the more harmonious AGMs you’ll see reported on Crikey and rightly so. It is a pity more Australian companies cannot take a leaf out of Cochlear’s book.
Contrary view on Cochlear’s product
Just so we don’t seem too much like a cheer squad, this is a combination of three emails sent through from a subscriber who has heard of serious misgivings with the latest Cochlear offering:
I wouldn’t be so sure about the customers all loving cochlear. Listening to a friend that is the parent of a child with one of these devices, the current model, while much smaller and a dream to wear, is very specific as to where a person has to be to talk to such a child.
The earlier models did not care but had a lot of interference noise.
The new models are considered almost a disaster. School teachers cannot be anywhere but in front to teach the children.
If they don’t fix it their share price will rise and fall like every other share on the market. The reason given to the parents is funds are not available.
Maybe you should do a little more research.
Watching a child that lost all her hearing at 10 months and seeing what the device has done I have nothing but admiration to see this 6 year old girl “singing” and being almost normal in a normal school.
The mothers continuous effort day after day to bring the child to the present state of normality is nothing short of miraculous.
But to see the frustration and anguish when the new device was fitted has filled the mother and her friends in similar circumstances with some anger and annoyance (to put it mildly). Having to stand in front to talk is a definite drawback whereas the original device was omni directional. Even her school teachers are complaining.
If these words can be used to improve the situation then Cochlear will go from strength to strength. The feeling I get from the parents is that when Government funding was lost and it was “privatised” shareholders gained and customers suffered. You probably know the whole situation of the affair. I am only looking in from a very narrow one point of view.
In my circle of friends and aquaintances I have two people with a cochlear implant. The young girl with the complaint and the other who has had an implant only 3 months ago.
Both are successes beyond belief. The 3 month old job is on a lady of 75+ and does not know anything other than she can now hear. BUT you have to stand in front of her to talk.
Just in case some one thinks it’s an isolated case.
Cheers, Crikey subscriber
CRIKEY: Just one point of clarification, Cochlear was spun out of Pacific Dunlop in 1994 at $2 a share and it is now $50 so suggestions that the money is not available for research and improvement is not right. We’ve had emails in suggesting that not ll the implants are as wonderful or successful as on the video. There are a couple of cases where children have had to be re-operated on because the implant failed or broke but this is a tiny minority.
Deaf is worse than blind
Thanks for publishing the above. As I think I’ve told you before, I am a Cochlear implant recipient, and they are indeed the 8th wonder of the world. Cochlear deserves all the praise and support that it can get.
You might like to tell Neal Woolrich from one who’s ‘been there, done that, got the implant’ that he won’t be joking about it if and when his addiction to heavy metal does destroy his hearing. Music is one thing that cochlear implants can’t handle at this stage of their development. Unless things have changed since my last tune up, optimising for music as opposed to speech isn’t likely to be high on the development priority list for a good while yet, either.
Look after your hearing now. Deaf is far worse than blind, IMHO.
It can take years
I’ve had a look at the comments on the site – they seem to be quite reasonable comments about the implant – mostly successful but with some shortcomings.
Those comments about the directionality of sound are interesting. It is likely that the directional microphone in these devices was designed to try and improve a person’s ability to hear sound in front of them when in any amount of background noise. They are also much more useful when someone is talking in front. Very useful for someone in a 1:1 learning environment (which is often required for any profoundly deaf person) but not always useful when dealing in practicalities of everyday life (eg the classroom nowadays is not “teacher in front, kids behind desks”. Having said that, concerned parents of a child with an implant or close relatives of an older person with one are led to expect miracles by believing the publicity which is really frustrating. The implant does not restore normal hearing, and it may take months, even years of rehabilitation before many implantees achieve really good results.
Cheers, Name Withheld
What do they want – surround sound?
Today’s sealed copy had this, in part:
“In my circle of friends and aquaintances I have two people with a cochlear implant. The young girl with the complaint and the other who has had an implant only 3 months ago.
Both are successes beyond belief. The 3 month old job is on a lady of 75+ and does not know anything other than she can now hear. BUT you have to stand in front of her to talk.
Just in case some one thinks it’s an isolated case.”
Methinks your correspondent is talking through his arse, obviously having little or no experience with the profoundly deaf – no matter whom he ‘knows’. I can’t be dogmatic about this, because I have no personal experience with profoundly deaf children who have the Cochlear implant, but at least I do have one myself so I talk from first hand, not second or third hand experience when it comes to actual use of the gadget.
There are as many different situations with deafness and the efficacy of hearing aids as there are deaf people. As with all ‘mechanical’ aids, and as with the sense of normal hearing itself, they vary from individual to individual. It would take me an hour to set out the many reasons why some people, including myself, prefer and even need people to speak directly to them, but to blame this on the cochlear implant is pure crap. The system is a three-part one (the implant with it’s array of electrodes, the external speech processor of which there are two basic types – ear-level and body-worn – and the individual recipients themselves with all the infinite variations likely to be found there in their audio ‘profiles’.
I’ll be raising this issue with the audiologist tomorrow so I’ll report back, but my gut-feeling is that it’s total crap in the sense that what the hell do these people expect a 22 electrode system to provide, surround sound? Bugger me.
A counter-point to your piece on the Cochlear AGM. It’s very easy for hearing people to get “moist eyes” about the “good work” that’s done by this company. However, to many Deaf people, this is a very condescending attitude, as they don’t believe they need to be “fixed”. If you search the web for “Deaf culture” and “cochlear implant”, you’ll get a plethora of hits on this – for example, check out the following article: http://seattlep-i.nwsource.com/lifestyle/cont28.shtml
I’m not trying to rain on Cochlear’s parade, as the work they do is technologically very advanced, and is extremely valuable to certain people, but it’s not universally popular, especially with some of the people they’re trying to “help”. Just another perspective that’s worth thinking about.
Cochlear CEO responds
I am concerned about the comments regarding Cochlear’s new device (an anonymous subscriber). The facts are as follows;
Cochlear’s new device is currently under closely supervised trials and has not been made available for general distribution. Cochlear knows and are monitoring all of the recipients in the trial – all are adults and no children are included.
It should also be noted that if there are complaints about any devices manufactured by Cochlear, as eluded to by the anonymous subscriber, and such a person or persons were to contact me directly or any of our offices, any such issues would be immediately addressed.
In addition, we confirm Cochlear was never Government owned.
Crikey at the Coates Hite AGM
By Neal Woolrich
There were incredible scenes at the Coates Hire AGM at the Wentworth Hotel as the normally staid AGM process degenerated into a volley of insults worthy of the Jerry Springer Show.
It was a baptism of hell, fire and brimstone for Chairman Bill Cutbush, who has only been at the helm for 12 months, as he delivered the unpalatable news of the company’s $1.2 million net profit, down from $17 million in 2000.
Cutbush and Managing Director Jim Brown identified two main factors the general slow-down in construction activity after the Olympics and big losses sustained on their investment in their UK subsidiary. Brown jokingly lamented the efficiency of construction of Olympic infrastructure and seemed to yearn for the days of yore when construction projects dragged out beyond budget and beyond their targeted completion date. Coates’ business, of course, is to put up all those flashing signs, air compressors, fencing, port-a-loos and any other equipment that is needed on a construction project, major event and the like.
MD Brown gave about as detailed a financial overview as you’re ever likely to see at an AGM and Chairman Cutbush noted that this was about the most transparent company he’d ever been involved in but that wasn’t enough for some shareholders! More on that later.
In their 5 years as a listed entity, Coates have delivered reasonable profits each year, but the 2001 financial year was their first shocker since listing. Against that background, there was likely to be a fair bit of shareholder angst, which didn’t seem to be ameliorated by the contrite addresses of the Chairman and MD.
The ASA representative at the meeting won the toss and kicked with a strong breeze in the first quarter and noted that at last year’s AGM the company had assured shareholders that the UK business was on track, yet once again this year shareholders are being told “trust us, we’re fixing it”. The company had their UK head honcho on hand to spill the beans on what was going on there and the company’s spin was promising, but only time will tell. Another bad year for the UK operations and the group can expect a fair bit more shareholder hostility at next year’s AGM.
The UK investment seems a disaster on paper. The group wrote off $5 million in goodwill and wrote off $3.5 million of equipment used in their contract with their biggest client, Corus, having re-negotiated terms with Corus following that company’s downsizing.
Our ASA trouper then queried why executive remuneration had gone up by $1 million when profit had dropped dramatically. Chairman Cutbush then threw to Finance Director Garry Woods to field this one, who informed the meeting that the increase was due to 8 persons coming on to the list who in the prior year had just been below the disclosure threshold and none of the senior executives enjoyed an increase in salary. This explanation didn’t wash with one feisty shareholder later, who all but accused Woods of lying through his teeth!
Cutbush’s hospital handpass to the FD was the first of many and he quickly displayed Steve Larkham-esque skills as the quickest hands in the business. “Sounds like one for the Finance Director. Garry?” “Jim can you field this one?” “I might hand this one over to our auditor, 05”
There I was thinking things were amiss, 2 questions and 10 minutes into question time, and the ASA hadn’t trotted out the old chestnut auditors’ remuneration. But sure enough, they didn’t disappoint, querying what services Ernst & Young provided for their $150 grand in “other services” and whether they could guarantee their independence in providing audit services.
Now before Crikey reaches for the keyboard I’ll save him the trouble of putting in one of those [Ed:, 05..] comments and note that I used to work for an accounting firm, so if you think I’m biased in favour of the brown shoe brigade, you’ve been warned.
But this rubbish about auditors fudging accounts because they’re worried about losing other work from a client really is fairies at the bottom of the garden stuff, especially when you’re looking at a $400,000 a year client such as Coates, which is chicken feed for Ernie & Berts and the other “big 5” bean-counters. Auditors have strict standards and guidelines to adhere to and while they may push the envelope, if they go overboard there is a strict disciplinary code to whack them over the wrists with a wet lettuce leaf. No doubt the Editor will insert a contrary view here! (Ed – wouldn’t dare!)
Your correspondent remained quiet for the next few questions, with a proxy stuff-up (not pointing fingers, Mayne) seeing me enter as a visitor and not wanting to test the Chairman’s patience early.
This proved near fatal, for after only a few questions, the Chairman put the head down and said “right, we’ll move on to the vote now, 05”
Hang on, Bill!
There were a few murmurs from the floor and when the Chairman realised there were more hands waving in the air, he opened the microphones again.
Yours truly then piped up, first with a question to the company’s auditor regarding a change in accounting policy it was decided that leases would be accounted for on the basis that they were finance leases and not operating leases. I conceded that the rationale for the change was reasonably explained in the accounts. But this change happily resulted in a $3.2 million credit to the Statement of Financial Performance so I queried whether this would be reversed out over time, as in later years the company gets a hit from depreciation. Ernie (or was it Bert?) explained that the $3.2 million benefit was permanent and the depreciation and interest costs under the finance lease method would be similar to the annual rental expense under the operating lease method.
I then turned to the UK operations and noted that the subsidiary was only just profitable (after taking out one-off charges) and the company has written off $5 million in goodwill and $3.5 million in relation to equipment used on the Corus contract. I asked for comment on the observation that this clearly says the company paid way too much for the UK business.
MD Brown agreed that it looked bad, but repeated my admission that hindsight is always 20:20. There were a few things which happened in the UK business which he didn’t elaborate on that significantly devalued the business. And yes, if they bought it today knowing what they know now, they wouldn’t pay as much.
A few questions later and the Chairman, with one eye on the clock and the other on his climbing assist tally, was asking potential interrogators “you are a shareholder, aren’t you?” This operative was happy to have slipped in a couple of curlies on the sly and buttoned the lip for the rest of the meeting.
That didn’t matter, for there were plenty of testy customers waiting to have a swing.
The next punter to mount the soap box had terse words for the Finance Director’s earlier claim about executive remuneration, at which point Cutbush leapt to his FD’s defence in the most firm but polite manner.
Business was starting to pick up!
Then another referred to my point about the $3.2 million free kick in the Profit figures which saved the company from being in a loss and asked whether they would need to “pull any rabbits out of the hat” like this next year in order to manufacture a profit. The FD said that this was one of a number of accounting issues that the Board deliberated over long and hard including the UK writedowns, employee provisions and doubtful debt provisions which all had an adverse impact on profit and shouldn’t be seen as accounting trickery to conjure up an artificial profit figure.
The Chairman assumed his role of Jerry Springer with graceful aplomb and kept the dogs at bay from the sitting ducks on the Board. A few more hostile questions and I was ready to jump up and chant “Jerry, Jerry, Jerry, 05” Somehow I don’t think the 80-somethings in attendance would have appreciated that one.
After a prolonged question time the likes of which probably hadn’t been seen at a Coates AGM, the Chairman then asked that any further questions be put to the Directors after the meeting and moved on to the resolution to pass the accounts. This was passed comfortably and the amiable Cutbush quipped “thanks for your support these guys [the Board] do a great job out there”.
Next up was the vote to re-elect Director Bob Critchley. Cutbush ever the people’s Chairman then said he was going to do something which was probably completely out of order and would earn him a stern rebuke from his legal advisers but, bugger it, he went ahead and gave Critchley a glowing recommendation. After the turmoil of a few minutes earlier, there was a lot of love in that room, people.
A very dapper shareholder in smart slacks and reefer jacket then stood to speak ever so elegantly in favour of the motion. He disdainfully referred on several occasions to “the shareholder behind me” who had earlier accused the FD of fudging the executive remuneration figures. Mr Smoothy indicated that he had a long connection with the company, both as a shareholder and a former executive, and surprise, surprise considered that there was nothing extravagant about Coates’ executive salaries.
The vote was carried by 97% of the proxies and unanimously on show of hands. Oh, except for our friend from the ASA, of course.
The final piece of official business was to change the company’s constitution to allow for Notices to be sent by such archaic means as fax or email. An elderly shareholder who had held the floor several times and each time politely identified himself as “AP Thatcher” stooped up to the mike again and objected to this “grossly unfair” proposal. Heavens forbid man, what if you’re away when the email is sent?
The Chairman once again gave this objection the big don’t argue that it deserved but in the nicest possible way, of course. It was passed unanimously except for that Loveable Luddite, AP Thatcher, who after the vote promised to get with the times and come to next year’s AGM in a baseball cap!
After the resolutions had been passed and an hour and a half into a lively meeting, the Chairman threw caution to the wind and opened the floor for general questions. Big mistake.
Our friend from the ASA complained about the lack of disclosure in the accounts. But they’re 60 pages short, already!
Chairman Cutbush then revealed his hidden agenda and the reason for his haste throughout the meeting “we have to be out of this room in 5 or 10 minutes so they can clean up for another function that’s coming after us”!
This was all the encouragement another disgruntled shareholder needed to take the floor and he didn’t need no microphone and engage in the mother of all rants. “Why spend $7 million on a computer system when you can’t get through on the phone? , 05When was the last time any of you tried to ring through to Coates? , 05That poor girl Mel takes 900 calls a day, 05 Why is it that it takes “market conditions” to force you to improve employee conditions, 05 Why is it that we shareholders never get market information… I have to come here and drag it out of you, 05″
Jerry, Jerry, Jerry, 05
This idiot’s last gripe took the cake for stupidity. He had asked the Board why their share price had shot up to $1.10 in the past couple of days. When the Chairman, MD and FD said that all they knew of was a Salomon Smith Barney report which valued the company at $1.60, this loose cannon went right off the beam. He complained of lack of disclosure and whinged that “shareholders are always the last to find out”.
When Chairman Cutbush mockingly suggested the company mail out every investor analyst’s report to every shareholder, the meeting applauded. “And if I did that, you know what would happen? I’d be accused of pumping up the price and we’d have ASIC crawling all over us!”
Jerry, Jerry, Jerry.
Mr Smooth the dapper former executive took the mike and said “Chairman I request that you adjourn the meeting we’ve had a gutful of this, 05”
Jerry, Jerry, Jerry.
I sensed the opportunity to really stir up the oldies and question how much Coates was making out of its Gay and Lesbian Mardi Gras work but unfortunately the Chairman was too quick on the draw and adjourned the meeting with the mother of all hospital handpasses, 05
“Ladies and gentlemen, thank you for your attendance and patience over the last few minutes especially. If you have any questions please call our Company Secretary, Gary Jenkins. He takes calls on issues like this all day…”
That much-maligned Coates switchboard will be in meltdown on Monday!
And to think I spent all morning working out a double entendre about Coates’ involvement in the Mardi Gras which I never got to use in the meeting. Oh well, it’s been recycled in the title of this piece.
Woolly’s Final Thought:
I thank the shareholders and the Board for being part of the AGM and hope they can sort out their differences and move on to more constructive investments.
You know, there are no winners when a company records a drop in profit. The shareholders lose money, the executives don’t get their bonus, and the inevitable belt-tightening will hurt every employee, from the Chief Executive Officer to the office janitor.
But fighting over it doesn’t solve any problems. In times of crisis, we all need to pull together and resolve our differences so that we can move forward to create a more happy and prosperous company. I hope these people all realise this before it’s too late for Coates.
You take care of yourselves, and each other.
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