A volunteer from the Crikey Army has provided a cracking account of the Miller’s Retail AGM where chairman Bill Cutbush pulled an old excuse out of the top drawer to shut down debate after a year of share price pain.

However, the Board was all smiles as they prepared to announce record sales of $972m (up 49%) and net profit after tax of $31m (up 34%) for the year ending 30 June 2002.

The Chairman’s (Smiling Bill Cutbush) address was a typically upbeat assessment with most emphasis on the stock’s stellar performance over the last 4-5 years, nicely avoiding the previous 12 months of pain. His only reference to this was that MRL “recognizes the impact that recent share price movements may have had on some shareholders.”

From highs of around $3.50 to the current sub-$2 territory, it was hardly surprising that he moved on so quickly.

He then dropped a bit of a bombshell when he announced Robert Clark, an executive director who owns nearly 11,000,000 shares, would be moving across to a non-executive directorship next year. All the people planning to complain about the lack of a clear, non-executive majority on the Board (currently there are 3 exec and non-exec directors), sighed and tore up their questions.

[CRIKEY: In our view, this is another illustration that companies don’t understand the subtle but important distinction between “non-executive” and “independent” directors. The fact that Clark is a former executive probably makes him a “non-independent” director under most accepted corporate governance tests.]

He finished up by comparing MRL’s vastly superior share performance over the last 4 years compared to Harvey Norman, Coles Myer and Woolworths. New shareholders, and anyone part of the $50m share placement at $3.15 last year, declined to give a standing ovation.

The Managing Director, Ian Miller, then got up and showed his passion and talent for retailing by talking in detail about some of the group’s strategies including differentiating their woman’s apparel business, and the strong opportunities for growth in the discount variety business.

He wrapped up his speech with a qualified forecast, that as long as the critical Christmas period was a decent one, the company was looking towards double digit earnings growth for the first half 2002/2003.

Questions were then invited regarding the company’s financial statements, and quick as a flash, a grey-haired crusader from the Australian Shareholder association had the floor! He queried the company about the conservative nature of writing off goodwill with the straight-line method over 20 years for retail brands.

His reasoning appeared fair, the Board looked a bit blank, til the company auditor jumped in and said they were “comfortable” with it.

So what?

The A.S.A agent then uttered the dreaded word “options” and the first hint of real excitement swept through the audience. He asked why the company appears to allow executive options holders to participate in bonus issues? The next 10 minutes of financial jargon eluded your correspondent, as multiple parties inadequately tried to establish whether this was a legitimate concern or not.

However, between the ASA suggesting the company was “seriously out of step” and the Chairman saying (but not sounding like) he appreciated the question, things were getting interesting!

Amongst all that, the sharp, non-executive director David Jones stepped in to answer another question, that the referenced, but not explained (why not?) options performance hurdles in the Annual Report were “10% EPS growth per year.”

The Chairman was obviously anxious about the “o” word as he then astonished many people by embarking on a passionate defence of aligning management and shareholder interests and said that the company was “not stepping back from options.”

A few people looked embarrassed with all this dirty talk and that was the last we heard about them!

The Chairman then moved along to the re-election of Mr Ron Baskin as a non-executive director (who by the way, has nearly 3,000,000 shares). The Chairman was about to rush into the vote when a loquacious young shareholder suggested that Mr Baskin might like to take the opportunity to say a few words regarding his retail experience and future vision for the company, which he subsequently did quite adequately.

However, the first signs of real nerves appeared when the Managing Director leapt up, walked over to the microphone and gave a stirring speech of support for (his old friend) Mr Baskin.

After the Chairman echoed those remarks with more of his own, most of the audience were pleading for a stop to the overkill – Mr Baskin’s own remarks were more than satisfactory! His re-election echoed a recent election in the Persian Gulf region when he was returned with over 99% of the vote.

Onto matters of general business, and finally a more recent shareholder took up the cause. Here was a classic AGM moment to cherish.

A man well into his 70s, in a warbling but intelligent tone, took 5 minutes to explain that he had lost a lot of money on Miller’s and he was having trouble reconciling the fact that the Board was so upbeat and optimistic while he was losing half his dough.

Half expecting the question (and as if reading from a script), the MD explained his lack of control over the market’s behaviour, long term perspective and Miller’s (admirable) focus on their own business etc. He did suggest that the market had gone from over optimistic in the past, to overly pessimistic now. He might just have easily said “sorry, can’t help you”.

Mention was also made of the disappearance of two large insto investors CBA and ING. Again, not too much drama – but then the MD basically said that the “genius” Greg Perry from Colonial First had understood Miller’s and thus taken a large stake, but following the Wizz’s departure, subsequent people (obviously less gifted) felt “differently”.

This insto offload was given as a reason for share price weakness.

The Chairman had already been trying to wind things up, explaining that the meeting room was being used by someone else. Many smirked that this old trick had come out!

[CRIKEY: Cutbush used this exact same excuse at the hostile Coates Hire AGM last year!!!]

That didn’t deter the same young man from earlier jumping up and suggesting that this was a great opportunity to address the market’s “overly pessimistic” view by talking about the biggest challenges facing the company, with particular reference to the apparel business which seems to be struggling, considering revenue rose 27% but profit didn’t budge.

In true style, Mr Miller got straight into retailing strategies and store-level behaviour which while interesting, avoided the bigger question.

The Chairman’s smile was thinning, and obviously noticing the several pages in the young questioner’s hands, hastily wrapped the meeting up.

The shareholder wasn’t particularly happy, and this correspondent (sitting nearby) overheard him express that it was a “joke” that out of the whole year, companies seem unwilling to find a few extra minutes for questions at
the AGM.

All in all, it was a pretty tame meeting. The Board managed to avoid direct questions about corporate governance, and considering it’s stance on options, high number of related party transactions and shortfall of pure independence on the Board, it should be pretty happy with itself.

It was intimated however that they would be reviewing the Board’s structure in the future.

It was nice that the Chairman went to great pains to assure shareholders of complete transparency, of not sweeping concerns under the carpet, and of taking into consideration everyone’s concerns – but the actual feeling conveyed was of a Board which doesn’t enjoy the AGM experience and actively seeks to limit the opportunity of question time.

This was confirmed by the fact that people milled around for at least another 20mins afterwards without the slightest sign of someone else “needing” the room.

Surprise, surprise.

CRIKEY: A cracking report from our volunteer observer. If it is true that Cutbush cut the meeting short on a bogus claim that someone else needed the room, he really should be rapped over the knuckles. We note that at least year’s Coates Hire meeting that shareholders were similarly angry after a one-off bad year. Cutbush implored shareholders to tough it out and things would turn around, and his assurances rang true during the year, so he has credibility at least on that front.

Peter Fray

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