Crikey subscribers are getting regular email updates on AGM action and here are three recent examples of sealed section items covering the Toll Holdings, Austrim-Nylex and Southcorp AGMs.

From Sealed Section October 31

The Toll Holdings AGM in Melbourne this morning was suitably upbeat given they continue to report record profits and snap up rival companies seemingly every month.

This morning we had the $73 million deal to buy Brambles Shipping which gives Toll two big ships to ply Bass Strait between Melbourne and Tassie.

Crikey’s biggest beef with this outfit is that they run out of annual reports at each AGM, so I’m flying a little blind on last year’s reports.

However, the $200 million man, CEO and co-founder Paul Little, did accuse me of insulting him by asking whether there was some hidden agenda with the move to force the early conversion of $114 million worth of unsecured convertible notes.

Little paid sod all for his 9.23 million ordinary shares which peaked at almost $39 in April this year but have now settled back around $27. (Crikey paid $25 for 16 shares two weeks ago).

But he and Mark Rowsthorn, the son of co-founder and retired Toll chairman Peter Rowsthorn, together shelled out $25 million to pick up 1.5 million convertible notes at $17 in May 2001.

Now the board has decided to force the early conversion, which in Crikey’s book says that they believe the share price is overcooked and will be lower when they are due to convert.

It only means that the two largest holders of ordinary shares will become even bigger shareholders but the move might give them a chance to dump some more shares as it will increase liquidity overall. The notes are hard to shift in large volumes.

Toll was tipped in the media to unveil a deal to buy part of Mayne’s logistics business today but there was no mention in the formal addresses and when I asked about it Little refused to comment.

The Mayne deal would be the ultimate triumph for Little and Rowsthorn’s dad Peter who both came out of Mayne 15 years ago when they shelled out $2 million on a management buyout of a small transport operator in WA which lost $500,000 in the first year.

But Little was talking up other recent contracts, especially the $1 billion deal with the Peter Reith-assisted Tenix to take over all the logistics and warehousing for Australia’s defence forces.

This required 3 painful years of tendering but all the problems seemed to go away once Reithy got on board with Tenix.

Have taxpayers got a good deal? Maybe, although you always worry when someone does a deal with a bunch of public servants and then describes it as an “absolutely magnificent contract” for Toll-Tenix.

The deal gives Toll-Tenix responsibility for 27,000 customer dependents housed in 228 buildings with 1.6 million lines of product worth $6.6 billion.

Little reckons the government will save 50 per cent and warehouse space will fall by 25 per cent which suggests the current supply management practices of Australia’s defence forces are an absolute shambles.

Corporate governance issues at Toll are in reasonable shape although we only have promises that independent non-executive directors will regain the balance of power in the near future. The finance director Neil Chatfield should be booted off the audit committee and chairman John Moule said he’d be bowing out as chairman of the audit committee shortly, at which point they would review Chatfield’s position as well.

None of the NEDS have heaps of industry experience so we really need a couple of retired transport gurus to join the board. How about former TNT MD David Mortimer and former Mayne MD Bill Bytheway (don’t mention those price fixing fines.)

Moule is an old mate of discredited Austrim-Nylex founder Alan Jackson through the Deloitte connection and even agreed to chair Austrim for about 9 months before resigning in January this year shortly after he stepped up as chairman of Toll. Moule was the Victorian managing partner of Deloitte which has hung on to the Austrim-Nylex audit gig, although at least they have just rotated the audit partner.

Austrim and Toll are both Melbourne-based companies which went on huge acquisition sprees over the past 7 years. That is where the comparisons end and Moule was smart to hitch his star to the successful one.


Second sealed section October 29

Kerry Stokes is battling valiantly to salvage something from the wreckage that is the Alan Jackson built Austrim Nylex, but today’s AGM was pretty gloomy and he’s got it all ahead of him.

Stokes holds 48.22 million shares and has never sold one share, a stark contrast to a range of institutions, Dick Pratt and Alan Jackson who all bailed out at prices substantially above the current miserable level of 23c.

Directors copped plenty of grief but it was a lot more civil than last year’s bloodbath which featured all sorts of malcontents, including former Jackson disciple Jack Tilburn.

The board predicted that investors who put up $100 million for unsecured convertible notes will not get the $9.5 million they are due in interest this year.

The notes convert in October 2004 and at present prices the noteholders will finish up with 40 per cent of the ordinary shares. There are shades of the debate leading to the demise of HIH. The $100 notes are trading at $20.20 which tells you what the market thinks the chances of getting any interest payments over the next two years are like.

I pointed out that Stokes has a conflict with three associates on the board because it is in his interest to recommend that noteholders do not get paid interest.

Tony Lewis from Lewis Securities stood for the board on a platform of gving the noteholders a voice but was swamped by the Stokes proxies.

Knuckles Jackson bought 36 businesses in a whirlwind 5 years at the top of Austrim before he was turfed after punching the CEO at a Christmas party two years ago. This is Alan Jackson, AO, former BTR Nylex CEO, former Austrade chairman and former Reserve Bank director we are talking about here.

New CEO Peter Crowley has done a reasonable job stabilising things but he’s signalled his plan to quit and the company is still grappling with a $361 million debt. Austrim is formally in work out mode with its bankers who are charging penalty interest rates of about 9 per cent and severely limiting its financial options.

Thankfully for Stokes, his personal banker Westpac is also one of Austrim’s three major lenders along with ANZ and NAB so in March this year they gave the board two years to get their house in order.

It will be a long road to hoe so don’t expect Austrim shares to surge higher any time soon.

Stokes had one of his PR guys Tim Allerton watching proceedings at the South Melbourne soccer club near the Crikey bunker this morning and it was not a rosy message he would have taken back to his boss.


Sealed section Nov 1

Journalism has a grand tradition of hard drinking hacks. Our Terry Tippler, Southcorp shareholder and long-time customer, gives Private Eye’s legendary media writer Lunchtime O’Booze a run for his money. Here’s his report from yesterday’s Southcorp AGM:

Yesterday morning there was a mass exodus from retirement villages, senior citizens clubs and farms to The Adelaide Convention Centre. Comb-overs, twin sets, Fletcher Jones slacks, the occasional walking stick, hearing aids – they were there aplenty.

The occasion? The best free lunch in town at the Southcorp AGM.

While its registered office is now in Sydney, we have been told repeatedly by Chairman Rick Allert that Southcorp’s heart is still in Adelaide. He also stated that the AGM (and the free lunch) would be in Adelaide again next year.

With a hint of a tear in his eye, Rick began his last meeting as chairman before he commits fully to taking on the poisoned chalice that is chairing Coles Myer.

Rick introduced the execs from around the world, including guru winemaker John Duval who would remain in an advisory capacity.

He spoke for nearly 30 minutes on the company’s successes in wine shows around the world, market penetration in the US, UK and Europe. The traditional corporate video was gone, just Rick and a pretty basic Powerpoint slide show. The top brands accounted for 80% of profits but alas the vin ordinaire was not too flash.

The next bit of bad news was that return on capital was only 8.2%, down from 10% last year and 13.5% the previous year.

The sale of the water heater business, which didn’t raise a wimper from the Freds and Friedas, raised a $130 million profit. Rick reckons that the share price wasn’t too flash and I’m sure that he would have choked on his lobster thermidore at the Magill Estate after the meeting to hear that it had dropped another 15c in early trade.

He had a go at the US dock strike, which was preventing supplies getting to markets. While he blamed the strike for downward share price, I doubt whether many really believed him.

He reckons they’ve got corporate governance licked. Executive remuneration would now be linked to the share price and the overall performance of the company.

He finished with an explanation of his reasons for resigning from the company. He believed that there was “a perception” of a conflict of interest between Southcorp and Coles Myer.

Next, Keith Lambert stepped up to the mike, trying hard to justify his salary. In the US, Lindemans was 14th, Rosemount 22nd and Penfolds 57th in sales.

In Australia, consolidation in the retail area was creating problems, along with new players nibbling away at their ankles. 500 lines were in for the chop, but he wasn’t into letting on which ones. He repeated that the bottom end of the market wasn’t turning a dollar.

Questions came from Bert Prowse from the ASA with a shopping list of questions, which Rick answered with ease. I don’t think Bert was satisfied with the answers on corporate governance, but wished Rick all the best with Coles Myer.

Tom Park’s payout for 5 months as CEO got another run. Rick confirmed with CFO that Tom’s final pay packet had been sent on July1st this year. $10 million for 5 months work which culminated in paying too much for Rosemount was a fine old effort from Parky.

An elderly chap asked Rick about the re-introduction of the Coles Myer discount card to which Rick stated that this meeting was not a Coles Myer meeting and so would not discuss the matter.

Helen Lynch, Stephen Gerlach and Bob Oatley were up for re-election as directors. Rick introduced each of them and asked them to say their bit before a vote was taken. Ms Lynch was asked about a possible conflict of interest with Coles Myer and Southcorp, to which she stated that directors don’t get involved with day-to-day ops unlike chairmen who usually have a regular chat with the CEO’s. She was unanimously re-elected.

Stephen Gerlach, professional director, then took the stage. No questions from the floor — Steve is back in the team.

74-year-old Bob Oatley then ambled to the mike and stated that he was not happy with the share price, possibly because he owns 18% of the stock! He was asked by a shareholder about the John Laws cash for comment deal which Southcorp persists with. It went like this:

* The SMH stated that Laws’ ratings have dropped to their lowest point in 32 years.

* You stated last year that you were one of Lawsy’s greatest mates.

* The ABA is again investigating cash for comment.

* The 2UE website doesn’t list the personal contracts that any of their jocks have in place, contrary to the ABA guidelines

* Why don’t you ring Lawsy and rip up the contract?

Rick handballed the question to Keith Lambert, who stated that the Laws deal was still current and was worth the money. Bob was silent. Just a handful of Freds voted against poor old Bob, so he’s back. Because of his age, he has to face the music every year until John Howard finally gets around to changing the laws for geriatric directors as he promised at the last election..

After nearly two hours we adjourned to the foyer of the magnificent convention centre for the platters of gourmet sandwiches, cakes, nibbles and copious amounts of Lindemans reds and whites.

All the directors including DJ’s Dick Warburton mingled with the adoring throng, exchanging pleasantries while scoffing more tucker. Dick seemed to coping with the stress of the past few months and being the busiest director in Australia. Helen Lynch gratefully received numerous kisses on the cheek and was all smiles.

Celebrity photographer, Bryan Charlton was seen snapping Rick and in-coming Chairman Brian Finn sharing a glass of red which will feature prominently in the Fairfax business sections today.

The medicinal qualities of wine were never more evident!

Next year can’t come around too soon!

Shame the share price plunged 30c to $4.95 yesterday and has now almost halved over the past year. Oh well, Rick’s 19th year on the Southcorp board was undoubtedly his worst.

Terry Tippler