Former Victorian Labor Premiers like Joan Kirner and John Cain are such lefties they would never sit on a corporate board, but the NSW Right is all about making cash so Neal Woolrich went along to check out Barry Unsworth and Neville Wran at the Tempo and Cabcharge AGMs.

On the upside, you got to watch a whole lot of footy and cricket and get paid for the privilege. On the downside, when MCC Secretary Dr John Lill saw far too many pie wrappers floating around on the ground, you had to hop over the fence at half time in white overalls with “MCG Clean Team” emblazoned on the back to pick up the mess and cop a barrage of abuse from smart-arses in the outer. This humble correspondent is still scarred by catcalls from moronic teenagers.

On the upside, you got to work outdoors and enjoy the fresh air. On the downside, most of the time you were breathing in fumes from spilt beer and rotting O’Brien’s catering in the terraces and working in the rain and / or freezing cold of a Melbourne winter. But the biggest upside was that the cleaning gig was run by the MCC, who were generous to a fault with their hours and completely at the behest of the unions. $21 an hour to watch the footy on a Sunday suited yours truly just fine. The catcalls of smart-arses in the outer and drunken corporate hospitality guests were forgotten momentarily when the pay-cheque turned up.

But not any more. Now, cleaning at the MCG has been outsourced to private contractors such as Tempo Services and you can bet they’re squeezing the working stiffs for as little pay as they can.

Crikey has given Tempo a serve earlier this year for its Labor Party connections (former NSW Premier and all-round excitement machine Barry Unsworth is a Director) and the Government contracts they have been awarded.

Tempo proudly boasts about their client retention record and that “when the NSW Government renewed their cleaning contract with us, it was for five years”. Bazza wouldn’t have had anything to do with that, per chance?

Whether or not they have been leveraging off Government contacts, it appears Tempo has had another pretty good year. Their revenue is up 13% to $467 million, net profit increased 36% to $9.5 million and they have recorded their fifth consecutive year of dividend growth.

Importantly, they are upbeat about their prospects, especially given that there is increasing demand for their security services in the current environment.

With those financials indicators all in the positive, this was an insipid AGM, lasting a whole of 40 minutes and with a grand total of zero questions being asked by shareholders.

This was disappointing, because there were a few oddities in the AGM. Unfortunately, this observer had to once again bite his tongue as he didn’t have a proxy handy and therefore was denied access to the microphone.

The most worrying aspect of the Tempo Services AGM was the ease with which the company passed the fifth resolution of the meeting, which approved the issue of 7 million shares to Taylorplan Services Pty Ltd in part consideration for the acquisition of the Prestige Property Services group from Taylorplan.

The Explanatory Notes to the meeting indicate that the “shares were allotted to Taylorplan at the issue price of $1.85 per share”. No shareholder saw fit to question this when the current market price of Tempo Services is around $2.60.

The issue here is the diminution of Tempo Services’ shareholder value. On these numbers, presumably the consideration is being given for assets worth $12.95 million (i.e. 7 million shares at $1.85 per share). Yet Tempo Services are issuing $18.2 million worth of shares to acquire these assets (i.e. 7 million shares at current market price $2.60 per share).

Tempo Services went from having almost 88 million shares on issue to almost 95 million shares on issue after issuing the 7 million shares to Taylorplan. Assuming the 88 million shares were worth the current market price of $2.60, the company would have a capitalisation of $228.8 million. Add the $12.95 million in assets that were acquired under the share issue, and the company is worth about $241.75 million, but this is now divided between about 95 million shares, valuing each share at about $2.54 per share.

These numbers are a bit rough and ready, but it seems shareholders didn’t care at all that about 6 cents (or two and a bit per cent) was wiped off the value of their shares and transferred over to Taylorplan in one fell swoop! Now while that’s not terribly much, you would have thought somebody would have questioned the Directors in issuing the shares at such a significant discount (almost 30%) to their current market value. Not in this country!

The second curiosity was that options were granted to the Directors with apparently no performance hurdles. The Explanatory Notes to the AGM state that “The Board may determine that certain conditions precedent must be satisfied before an option can be exercised. One such condition may be that the market value of a share in the Company must be in excess of a specific price before the option may be exercised.”

And do you reckon the Board will enforce a doozy like this against themselves?!

Well, the shareholders didn’t care and voted this one through without any opposition.

The only condition on the options was that their exercise price couldn’t be less than 90% of the share price on the day the option is issued. But this isn’t much of a performance hurdle if the company has a shocker and the share price slumps for a while, the Board can issue itself options with a lower exercise price and pick up a tidy profit if the share price later picks up.

Strangely, there was a fair bit of shareholder opposition to an options package to CEO John Schaeffer which did actually include meaningful performance hurdles. They required that the first tranche of options would have an exercise price fixed at $2.75, the second tranche had an exercise price set at $3.00. 11 million proxy votes came in favour of this options package and 5 million against, but on a show of hands at the AGM the vote was unanimously in favour.

It beats me why shareholders would oppose the CEO’s option package, which included a meaningful performance hurdle, and yet acquiesce to the Directors’ proposed option packages, which had no performance hurdle. Go figure!

All in all though, Tempo are performing solidly and have locked in their NSW Government contract for the long haul, so even if Chika’s Libs get up at the next election, they won’t be able to turf the cleaners out for a while yet.


Crikey at the Cabcharge AGM

By Neal Woolrich

Who has never rorted a Cabcharge voucher in his life

Unfortunately, my former employer didn’t believe in Cabcharge vouchers instead we had to fork out the fare from our own pockets and get reimbursed, so I’ve never been able to do the Macca’s drive-through in the taxi and tell the cabby to “put it on the Cabcharge mate”. Honest Injuns!

Despite its prevalence in everyday (business) life for a lot of people, Cabcharge is only a relatively small operation it listed in 1999, has annual turnover of around half a billion and market capitalisation of around $340 million.

In 2001, it had a relatively good year in spite of the post-Olympic slowdown and GST implementation, which most other businesses cited as reasons for declining profits. Cabcharge’s revenue and profit after tax both increased 14% during the year, while their dividend per share was up 7%.

Against that background, the AGM was a sedate affair, with no questions on the accounts and the general questioning mostly being from shareholders who were also taxi operators. Surely none of these people were actually taxi drivers given that they (i) managed to find the Westin Hotel in Martin Place and (ii) made rational, well enunciated observations.

It was interesting that no mention was made of the following ACCC release from December 2000 in the AGM or the company’s accounts:

ACCC Acts over Potentially Misleading Conduct by Cabcharge

Cabcharge Australia Ltd will offer compensation to customers who may have been misled when paying for taxi travel using a credit card after Australian Competition and Consumer Commission action. “The ACCC has received a large number of complaints relating to discrepancies on credit card statement compared with invoices issues from the Cabcharge electronic terminals in taxi cabs due in part to the calculation of Goods and Services Tax”, ACCC Chairman, Professor Allan Fels, said today. “Consumers have complained that they authorised a lesser amount at the end of their journey than they were charged later on their credit card statement. There is evidence that many more customers have complained to both Cabcharge and their credit card providers. The ACCC was concerned that such conduct may be misleading or deceptive in breach of the Trade Practices Act 1974. In response to ACCC inquiries, Cabcharge said that electronic terminals in cabs were being progressively updated with new software to handle the Goods and Services Tax. In some cases, customers were not charged the correct amount in the cab and the difference was levied on the statement. As a result of the ACCC inquiries, Cabcharge has agreed that it will:

– credit all customers for any difference between the amount authorised by the customer’s signature on the Cabcharge invoice and the amount subsequently charged on the card statement;

– ensure that all electronic terminals in taxis are updated to clearly show the true cost of the taxi travel; and

– retain an independent auditor to conduct an audit to ensure that all invoice discrepancies as outlined above are identified and are correctly refunded.”

Perhaps Cabcharge didn’t get slugged with any penalties or, if it did, the amount was immaterial, but it’s a bit of a concern that the company wasn’t prepared for the biggest change in this country’s tax system in 60 years.

The Chairman’s report to shareholders noted that “Cabcharge suggested and helped bring in an equalisation factor to ensure that we did not breach the spirit of the ACCC’s price exploitation laws. The cost of this has been horrendous. It exceeded $1.5 million in 2001 and will have some minor flowover effect into 2002. We worked closely with the ATO and ACCC to achieve a balanced outcome in the interest of consumers. We wanted to ensure that the overall effect of the New Tax System on Cabcharge and its operations was in line with other businesses. We hope this issue is now stabilised. After a full and costly audit of our system costs following the introduction of the GST, we adjusted the Equalisation Factor downwards from 5.5% to 4.5% on 11 August 2001.”

But no mention of the ACCC ruling!

Unfortunately, Crikey couldn’t obtain a proxy to this meeting, so our questions on this issue couldn’t be put to the Chairman, like how much did their GST stuff up cost them and why the heck weren’t the systems in place on time? Why did it take customer complaints to get the correct systems in place “progressively” almost six months after the GST was introduced?!

With this knowledge in mind, my jaw almost hit the floor when the Chairman told the meeting that the company’s GST experience showed two strengths: (i) their flexibility in implementing wholesale changes in systems and management and (ii) their commitment to working to satisfy regulatory authorities!

Yeah, right only after customers had complained about their GST stuff-up and a good six months late to boot!

The Chairman later told the meeting of the company’s local and overseas expansion plans and that the company was well prepared for any technology changes. Based on the GST experience, I wouldn’t bet on it!

Chairman Reg Kermode is a likeable enough old bloke, but he didn’t impress as an orator and half an hour into the meeting, this observer spied at least 4 of the directors drifting away towards snoozeville.

During the meeting Rick Sharp from JP Morgan addressed shareholders about the company’s proposed takeover of Combined Communications Network, a company with which Cabcharge has had a “long and inter-related history”. (CCN provides automated taxi dispatch services.) Given that Reg Kermode is a Director of both companies, shareholders should tread cautiously, but he did mention that he was standing aside from board deliberations given his conflict.

Sharp gave a positive spin on the proposed takeover but, interestingly, made no mention of how much of a premium Cabcharge’s offer (of 90 cents per share) represented. At their latest price of 83 cents, an 8% takeover premium doesn’t appear too excessive. Hopefully shareholders will become a little more enlightened when the offer documents are put on the table, although their lack of questioning at the AGM showed they probably didn’t care too much!

The election of directors went through with the usual 95%+ for votes and poor old Reg was the only Director to have a couple vote against him on the show of hands. “I must admit I’m the only one who’s not 100% popular”, he bemoaned. Reg and Nifty Neville Wran were up for re-election being 75 years of age “although you wouldn’t know it”, quipped Reg.

There were few illuminating questions during general questioning, most being concerned with the pitfalls of working in the cab driving industry.

One of the few interesting points was that Reg indicated that VISA would at some time be welcomed back into the fold, but he couldn’t say when. As a VISA cardholder, I beg them not to cave into the taxi industry’s rip-off of charging cardholders 10% of the fare just to put their cab fare on plastic.

Somehow, I can’t see that happening.

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