Crazy Jack Tilburn was at his worst and shareholders had plenty to moan about at the Lend Lease AGM after all the key financial indicators halved over the year.
Before throwing to the Chairman to commence the AGM proper, a Lend Lease employee moonlighting as MC for the night estimated that the AGM (which commenced at 7pm) would wind up around 9pm. Wishful thinking!
She obviously hadn’t done her homework. A quick look at the company’s profit, share price and dividend payout would have revealed that all three halved in the space of 12 months. A glance at the shareholder register would have revealed the name “Tilburn, J”. Jack Tilburn and a parlous financial state of affairs are a sure-fire recipe for a long, painful AGM.
Chairman Jill Ker Conway expressed her “deep disappointment” for the drop in share price, saying that the company had made significant progress in building the underlying business and, along with the Board, took full responsibility for the “poor decisions whose cumulative impact was certainly significant”.
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But in what was to become a recurring theme for the night, Conway had a moan about Australia’s accounting rules for the amortisation of investments. She pointed to the company’s US Bovis Lend Lease investment and noted that while in their opinion the US operations were worth more than when they were acquired, accounting rules require the goodwill on the investment to be amortised.
While it is true that most observers look at EBITDA (Earnings Before Interest, Tax, Amortisation and Depreciation) as a more meaningful measurement tool than after tax profits, it is a lame explanation to try to paper over the company’s poor result by blaming an accounting rule that has been around since Adam was playing full back for Jerusalem. Every other company in the country must follow it and most other countries’ accounting rules are similar and Lend Lease itself has been subject to it for years.
Conway then went on to fudge some figures on a slide titled “Transition” and juxtaposed the 1999 results with the 2002 projected results. Conway explained that if you took such-and-such out of 1999, dropped something into 2002, forgot about this and that and then did a one and a half summersault in pike position, we’re right on track in 2002 to get back to 1999 profitability.
This correspondent humbly confesses to not being the sharpest knife in the drawer, but defies anyone in the meeting to comprehend what Conway attempted to illustrate. It was more confusing than Kim’s Knowledge Nation Won Ton Noodle Soup.
To this observer, it looked like a desperate attempt to again paper over a bad result with a feeble explanation that required us to suspend belief for a minute, ignore a few things that actually happened and trust in the Board that everything will be alright.
And this rubbish about being in “transition” was jumped on by an irate shareholder later in the meeting. My thoughts were that, if you’d asked the AGM last year whether Lend Lease was about to go into a “transition” period, there would have been a resounding “hell no”. They were cashed up after the sale of their MLC business, they were out of financial services and solely into property which seemed at the time and still appears to be the right choice given the strength of worldwide property markets, yet they have halved their profit.
It’s a lot like football clubs who ask for their supporters’ patience in a “re-building” year. The fact that Lend Lease had a terrible year in 2001 isn’t the disease; it’s the symptom. The disease was management incompetence in years gone by and hopefully it won’t manifest itself again nearly as badly as it did in 2001.
Other points that Conway raised were the fact that the company had wisely adopted a policy of only paying out fully franked dividends as this would offer the best return to all stakeholders, the company was focused on growing the business, and following last year’s shareholder approval for NEDs to take shares in lieu of salaries, the execs had elected to take a whopping 20,000 shares during the year. They really showed their faith in their strategy for the company.
Managing Director David Higgins gave a dry address that spelled out how strong the group’s underlying business was all shareholders would no doubt be pleased with that and once again made lame excuses for performance and did a numerical juggling act to come to a contrived conclusion that the company isn’t travelling that badly.
Some free advice to any Chairmen or MDs reading and we know you’re reading because you love your regular Crikey fix shareholders care diddly squat about this sort of stuff. All they care about is share price performance and dividend payouts. Save the financial gymnastics for the investor relations roadshows.
After an hour of very sombre but optimistic addresses by Chairman Conway and MD Higgins, time for some questions.
Enter, stage left, Jack Tilburn, even.
Conway: “Oh, Jack glad to see you.”
Tilburn: “Thank you Chairman. Yes, I’ve got through the disasters of the last year very well thank you.” Did she ask, Jack?
Jack took to the microphone with the usual background murmurs, sniggering and expectation of a classic Jack Tilburn rant on the way. I caught up with Jack after the meeting and he had a hand-written name-tag sticking out of his breast pocket saying “Jack Tilburn Corporate Terminator”.
Hasta la vista, baby.
Jack didn’t disappoint, although for a minute I thought he’d done a cut and paste job from one of his many Boral speeches. The words “disappointed, disgusted and dismayed” cropped up again, and he explained in his opening remarks to the jury that he “came from the background of having analysed the Annual Report, the Bible if I may. It’s my job to investigate what’s been done in the past 12 months,” Jack continued. Who hired you, pal?
“It’s been a very, very poor year the worst in my 15 years as a shareholder. It’s been dismal, dismaying and distressing. 2000 was like scaling Mt Kosciusko, which has an altitude of some 7,000 feet, 2001 is like being at Sydney Harbour, altitude nil, zero, 05I have five cards in my hand tonight 2 Jacks, 2 Queens, a King and a Joker.” Doesn’t that make six? Or does the Joker not count?
After four minutes of classic Jack, he turned to his first question “what are those odd, way out, bizarre, names for your US Home Mortgage businesses Freddie Mae and Fannie Mae?”
MD David Higgins explained that they were the names of the existing businesses Lend Lease acquired.
Jack then asked why only a majority and not all Directors had chosen to take shares in lieu of salary and then pulled “a queen card” out of the deck, a question about “Fox studios, that good old dead dog”. After answering his questions politely and with the usual Director-babble that doesn’t warrant repetition here, Chairman Conway requested that Jack ask only one more question as there were many shareholders with paws in the air.
Jack then played “the Joker card”. To watch Jack Tilburn in action is like watching a wily predator stalk a helpless victim. First he sets them up with a baffling reference to an obscure point in the accounts, then he dazzles them further with an equally confusing turn of phrase and when he has them immobilised, he pulls out his lethal weapon and goes for the jugular. Watch and observe, 05
“Madam Chairman I refer to the code of conduct in page 43 of the accounts and in particular the Lend Lease Code of Conduct subheading, “Excellence”. Now the Lend Lease mutual admiration society, from which I announced my resignation last year, and from which I resign again this year, 05″ How can you resign from the something that you have already resigned from? Ah, but beware the stealth of the Corporate Terminator. “, 05Now the Lend Lease mutual admiration society tells us nothing in the accounts of the retirement of Ms Pressler from the United States. Lend Lease paid her $15 million for one year’s service. Where is this revealed in the Bible?”
There is such majestic artistry to his savagery.
Jack earned himself a loud round of applause and this correspondent braced himself for something earth shattering. Instead, Chairman Conway proved that she had passed Director’s School 101: Explaining Ludicrous Payouts with flying colours.
This author runs a mile from a cliche51 and avoids them like the plague, but not Conway. All the chestnuts were there, including a few twists. Shareholders were asked to “understand the context”, it’s a “much larger market in the US and compensation is much higher”, if you want to recruit a “top flight professional you need to pay top dollar”, the salary was arrived at against “external benchmarks”, and if you want to persuade a high profile, top notch employee to leave their existing post “you must offer more than a one year contract”. Oh, and before I forget “Ms Pressler’s compensation was in line with the market”.
Sadly, Jack’s 15 minute cameo was over for the time being.
Paying $15 million for one year’s service out of a 5 year contract stinks and thankfully other shareholders raised this issue later. One shareholder asked how the company could possibly let her go after only 11 months and pay out the full contract “couldn’t she park the cars or make the tea?,” he asked. I would have thought a more ironic punishment would have been to respond to all correspondence addressed to the company from Mr J Tilburn of Sydney, Australia.
On second thoughts, $15 million is not nearly adequate recompense.
The same shareholder also asked how could she be employed and a mere 11 months she is found to not be the person that the company wanted. After Higgins responded lamely, the shareholder said “you haven’t convinced me and I don’t think you’ve convinced many people here”. The rousing reception he received would suggest he was on the money.
Later in the meeting, another shareholder asked who it was that made the decision to hire her, and when advised it was a recruitment firm, he suggested that they would probably have earned a commission of 10% of Ms Pressler’s salary for snaffling the catch of the day.
Another shareholder queried the company’s policy of only paying dividends to the extent that they could fully frank them and whether there were alternative strategies to return wealth to shareholders. Director Robert Tsenin continued the Lend Lease best practice procedure of blaming anyone and anything other than the company and its Directors.
This time the tax system was in the firing line, Tsenin claiming the dividend imputation was biased against companies like Lend Lease who earn a substantial portion of their profits (80%) overseas as opposed to Australia (20%). Tsenin said that analysts had praised the company’s policy of only paying dividends to the extent that they could fully frank them as it was “inefficient to pay unfranked dividends”.
Bollocks. For starters, dividend imputation has been with us since 1987. If they couldn’t work around this comparatively archaic regime, how are they going to respond to the nearly weekly changes in tax laws? And if they don’t like the system, they had the perfect opportunity to push for change with John Ralph’s much-vaunted Review of Business Taxation most of which has been left to gather dust. Surely this issue was of such importance that companies allegedly heavily affected by it would have clobbered the Government around the ears until they effected change? Apparently not we just hear a whimper from Lend Lease when it suits them to explain away their pathetic dividend policy. And Tsenin’s point about unfranked dividends being “inefficient” applies to some but not all shareholders. Unfortunately for the grey-power shareholders with bugger all income and bugger all clout at Board level, it doesn’t apply to them. It’d be no surprise to find out that the Instos have been in Lend Lease’s ear to call the shots on dividend policy.
There were a wide variety of questions, including a joust between Conway and a shareholder concerned about the environmental impact of the development of a former ADI site in Sydney’s outer west, but after an hour of questioning, Conway decided that was enough and it was time to move on.
That was outrageous, and a shareholder rightly condemned this when he had the chance to speak during one of the resolutions. His point was that the company calls the AGM for 7pm and yet at 9pm cites “the late hour” as reason for stifling shareholder debate, most of which was relevant, didn’t continually drudge over old ground and was a reasonable expression of shareholder anger at a dismal result. One hour of shareholder grilling is just not good enough for such a poor performance.
And the Chairman and MD spent an hour all up on their presentations!
The Chairman claimed that the meeting was held at 7pm so that employees their largest shareholder group – could attend. Couldn’t they put it on in the morning and let employees take the morning off work to attend? Not everyone would want to get out of the office to sit through an AGM.
Executive remuneration got a run again, with salaries up but the company claiming no bonuses were paid. And nor should they have been!
The re-election of directors passed with the usual majorities of 99% until the final director vote, that of Diane Grady. A shareholder wished to speak to the motion and the Chairman said “ah, thank you Mr Tilburn”.
Jack floated like a butterfly and stung like a bee, first referring to the company’s “leadership” policy in the AGM, then skipping to the page on Directors’ shareholdings and then in a delightful Olympics analogy said he wouldn’t award Ms Grady a Gold, Silver or Bronze medal, because she is “currently running fourth” on leadership. While some Directors had marginally increased their shareholdings during the year, others stayed the same, and others decreased marginally, Ms Grady had the biggest drop in shareholding in the company among all Directors.
Jack noted that this represented the sale of some $50,000 worth of shares and “if you can’t make half a million like I have this year then you’re crackers”. Jack then bounded off to page 76 of the accounts and highlighted that Ms Grady received over $284,000 in salary over the past two years yet still sold some shares. Jack pronounced that he “wouldn’t sell his shares even if I dropped dead. I thought that Directors never, ever, in Mr Howard’s words, sell their shares. This is a failure of leadership. Where is the loyalty?”
When the Chairman tried to interrupt, Jack bit back with “don’t try to gag Mr Tilburn, I won’t stand for it. I don’t like being gagged.”
The Chairman explained that Ms Grady’s personal share dealings were not relevant to the resolution, went to the vote and it was comfortably passed.
So, three hours later, it was over a good hour longer than Lend Lease’s flak predicted.
I raced out to sample the catering which the Mayne man had talked up prior to the meeting and it didn’t disappoint. In between throwing a beer, a couple of sangers, two little quails, two cold spring rolls, a party pie and some fried chicken down the gullet without it touching the sides, I ran into Crazy Jack, who described himself as a “brother in arms” with Stephen Mayne.
Jack promised to his legion of Crikey fans to be on song tomorrow to stick it up the NRMA. And this Crikey operative promises to be on hand to watch it play out.