David Jones shoppers are typically a very dapper lot, but their shareholders are most unruly after years of poor performance. Crikey’s Sydney correspondent, Crullers, weathered the storm and survived to tell the tale of their EGM.

Chairman Dick Warburton, the recently press-averse company director, got the meeting off to an amusing start by attempting a gag along the lines of how he needed little introduction.

In his anxiety to deliver the gag, he fluffed his lines and inadvertently referred to himself as “Dick Chairman”.

It’s a good thing Dick’s title isn’t “Head” instead of “Chairman” of DJs.

He didn’t realise his gaffe until later in the meeting when a shareholder pointed it out and Dick quipped that he would expect to see it in the CBD column (the business funnies section) of the Sydney Morning Herald tomorrow.

Whoever writes tomorrow’s CBD will have to work triple overtime to keep track of all the oddities who got up and addressed the DJs EGM.

In short, the EGM was called to change the company’s constitution to allow it to issue a new class of “Reset Preference Shares”. The company will issue 65,000 of them at $1,000 a pop, thus raising $65 million in capital.

Crullers attended the DJs AGM last year, a bruising affair if ever there was, and it is remarkable how little has changed in the meantime:

* DJs’ share price is still languishing just above a dollar and Dick Chairman still shares the shareholders’ frustration that the market doesn’t value the company as they would all like;

* Shareholders still reckon Dick Chairman holds too many directorships and the Superchairman still reckons he can leap tall board tables in a single bound;

* Shareholders still think CEO Peter Wilkinson and the rest of the board are overpaid. The company’s execs don’t think they are;

* Dick Chairman still reckons this company is just about to turn the corner and the shareholders just plain don’t believe him;

* DJs’ shareholders love sharing their experiences of shopping in the store.

One debonair chap asked how they expected to clear out dud inventory when the other day he saw a man’s dressing gown for $2,400 and a pair of pyjamas for $845.

What a rort! And Crullers though he was being ripped off when he shelled out $50 for a dressing gown and $30 for a pair of flannel PJs a few years back at K-Mart!

Question time went on and on and on for over an hour. I was expecting this to be pretty quick and dirty given that shareholders were there to vote on a single issue – whether or not the company could change its constitution to allow the issue of the RPSs.

But every conceivable shareholder grievance in the book was trotted out.

In over an hour of questioning, only a handful of shareholders had a decent point to make, the rest were a motley assortment of nincompoops, whingers and the downright insulting.

The ASA’s Stephen Matthews got the ball rolling. He landed a few body blows at last year’s AGM and the ASA had mounted a pretty strong campaign prior to the meeting.

Matthews’ first point was that the board has a fundamental credibility problem. He agreed with Dick Chairman that it was “all about share price”, which has declined 35% since listing, but Matthews added that it was also “all about dividends”, which have just been cut 25% from 4 cents a share to 3 cents.

Matthews said that shareholders and the professional investment community just didn’t believe the board of DJs when they cited a target return on investment of 15%. “And here is why,” Matthews continued, “the 2000 AGM”.

He noted that at the 2000 AGM, Dick Chairman had stated that by entering into a sale and leaseback of its stores, the company would free up capital to invest in high growth businesses. Instead, as Matthews noted, they went into the under-performing DJs Online venture and the Foodchain businesses, the latter Warburton continually referred to as being “paused”.

Matthews concluded by asking who would be made accountable for these dud decisions and whether Warburton would resign?

Dick Chairman’s argument was that they had taken over a troubled business and it took a long time to clear out their major inventory problems. He said the revamp of the flagship CBD stores was now complete and they were back to being the “up-market” department store they had been before being left to decline for some time. He also asked shareholders to take into account the difficult trading conditions which had seen Harris Scarfe and Daimaru bite the dust, and the Myer – Grace Brothers stores get in all manner of strife.

Warburton also mentioned that the professional investors that the company had all spoken to all agreed that the target was do-able.

For the first of many times in the meeting, Warburton said he’d address the question of his resignation “when the time comes”.

Shareholders became ever more cynical the more this was trotted out later in the meeting.

While Matthews is right – the board has a fundamental credibility problem because of their past failures – I can’t see how a new capital raising will hurt the company. They won’t get themselves out of the woods by doing nothing.

After Matthews came a shareholder who didn’t have a clue what he was on about for the most part, prattled on endlessly, rehashed the same points over and over, continually interrupted Dick Chairman as he was trying to answer and in short added little to the meeting except many unnecessary minutes on the clock.

This bloke’s first point was fair enough – that the $4 million cost of the issue was a bit high.

Chairman Dick agreed whole-heartedly.

That should have been the end of that. But the disgruntled shareholder continually pressed the point that this is buried in the prospectus and shareholders should have been told about it in the notice of meeting.

Well, there’s only so much you can put in the notice of meeting, numb-nut. And it’s not as though it’s “hidden” in the prospectus – it’s right there under the heading “Expenses of the offer” in the “Additional information” section.

Warburton displayed the patience of a saint in indulging this twit for far too long. The shareholder’s last comment summed it all up – “I can’t figure out the details of the conversion”. What a surprise!

Another ASA rep asked why the company’s off – balance sheet liabilities had grown more than three fold from around $700k to $2.4 billion. Dick Chairman said this was the result of the sale and leaseback of the company’s store premises. It assumes the improbable scenario that the company had to pay out all of its leases in full tomorrow.

Next up was the most objectionable shareholder this AGM observer had ever seen. And that’s saying a lot.

This person introduced herself by saying she was Scottish, a race known for being direct. True that may be, but downright rudeness is a trait I haven’t encountered in the Scots I’ve known.

Plenty of angry shareholders bristle at AGMs, their one and only chance to vent their spleen at under-performing directors, but at least most of them try to back up their arguments with a few facts.

This “lady” (and I use the term advisedly) said she was “disgusted with the dishonesty” of the board, but failed to back it up.

Was she referring to the fact that the company hadn’t performed as well as the board had projected at previous AGMs? She seemed to be peeved at “all the mumbo jumbo” as the chairman addressed the meeting, so maybe this was the basis for her claim.

We’ll never know after her rambling spray.

But you can hardly call a board “dishonest” when making forward-looking statements which fail to come to pass.

Warburton had been perfectly transparent about the company’s short-comings – Foodchain in particular – and why the company hadn’t been as successful as they had hoped. Naturally he sternly rebuked the accusation.

She also made the point that Warburton was “a little overloaded” (yawn), at which point he took the opportunity to again (as he’d done at the previous AGM) argue his ability to serve on numerous boards. He claimed to regularly work an 80 hour week, refuting the ASA’s suggestion that there weren’t enough days in the year to serve on as many boards as the Superchairman does.

Back in the days when the young Crullers had a proper job, a 70 hour week wasn’t unusual but 80 hours was exceptional, so he dips his lid to Dick Chairman for his power of work. But perhaps a few more hours out of the board room and onto the golf course might clear Dick’s head a bit.

The feisty Scot also called for the resignation of the entire board. While I like to see the odd bit of blood spilt, I can’t quite fathom where a vacant board will lead DJs.

It was interesting to read the initial AAP report of the meeting, which focused on the shareholders’ call for Dick Chairman’s scalp:

“One shareholder asked that the entire board including Mr Warburton resign either in 12 months or three years if the company did not meet targets under its strategic plan.”

What the scribe omits is that this particular shareholder was a fruitloop. And that’s being kind. “Complete bitch” might be more appropriate.

Once again, Warburton demonstrated more patience than was reasonable in tolerating questioning that was completely out of order.

Incredibly, this person received a warm round of applause from the meeting. Amazing stuff.

Vent your anger, for sure, but do it with a bit of grace, dignity, civility and a few cold hard facts, please, madam. (Says Crullers after just describing her as a “bitch”.)

An old lady got up with nothing more to contribute than the startling revelation of “I think you’re all overpaid” – cue the applause track yet again.

And this lady got up later in the meeting to basically say “I still think you’re all overpaid”!

Another shareholder made the fair point, which had already been addressed, that the company had previously assured shareholders that the sale and leaseback of the company’s stores would provide the capital that it needed for expansion, but now shareholders are being asked to dip in again.

A reasonable argument, which Dick Chairman responded to by saying that the company couldn’t sit on its hands and had to keep expanding.

But this bloke also continually interrupted and tested the chairman’s patience. Once again, Dick Chairman was unflappable when he had every right to cut this bloke off.

After question time was over, we finally went to a poll. 86.5% of proxies were in favour (plus 7.4% which were open), and it didn’t take long for the scrutineers to come back and confirm that the motion had been passed by the required majority “overwhelmingly”.

This correspondent doesn’t have too strong an opinion either way about the RPS issue.

Other than diluting ownership marginally and placing ordinary shareholders behind the RPS shareholders in priority for dividends and distributions on winding up, I can’t see how this could be a bad thing for existing shareholders. The potential negatives are trifling.

The company’s performance has been underwhelming for a not inconsiderable time and the continual re-assurances from the people at the top had worn thin with shareholders long ago.

But we’ll stick our neck out and say the company is making a move in the right direction with this. If the shareholders who are rightly angry about the company’s insipid performance in the past don’t have any confidence in the board, well the solution is simple – don’t subscribe for the RPS.

They should at least give the incumbents the licence to do their job without fetter and if other shareholders want to throw more money down the gurgler, then so be it.

Now it’s time to play the waiting game and see if this capital injection can solve DJs’ problems.

Peter Fray

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