1998 Telegraph series - preview of week seven

By Stephen Mayne
January 17, 2008

As our 14-part series examining the 1998 annual meeting season draws to a close, The Daily Telegraph business editor Stephen Mayne, who has bought shares in 50 companies, previews the major action coming up in this final week.

The seventh and last week of the 1998 annual meeting season features the last of the retailers and what can reasonably be described as a handful of poor performing stragglers in line for a roasting from shareholders.

The two listed David companies - Davids Holdings and David Jones -are both finding life tough and can expect a fair degree of criticism at their AGMs today. The Adsteam group bankers sold plenty of assets way too cheaply during Australia's biggest liquidation program - but David Jones was not one of them.

In fact, it stands alone as the only mass-market float in recent years still trading below its issue price. Retail investors who paid $2 are now sitting on stock worth $1.83 -thanks to a recent recovery from the low of $1.43 in September. Chief executive Peter Wilkinson fights on gamely in an upmarket retail sector struggling worldwide.

Myer Grace Brothers might have relaunched its $380 million Sydney flagship last week, but its financial performance is just as patchy as DJs, which doesn't have Coles supermarkets to lift its overall performance.

Last year's Davids Holdings annual meeting was the last chaired by company founder John David and he must be thanking his lucky stars the South African Metro Cash and Carry group was silly enough to offer $1.10 a share. John David received a bucketing last year, but shareholders who turn up this year only have themselves to blame for not accepting the South African offer.

Davids today remains over-geared, under siege from Woolworths' new wholesaling venture, beset by union troubles and servicing an increasingly minority independents market. Its shares finished at 46c and I'll be there at Mindies Hotel in Sydney this afternoon as a proxy for a shareholder who is genuinely upset at what has happened.

Shareholders with a penchant for theme parks should head up to Movie World on the Gold Coast tomorrow for the Village Roadshow AGM at the inconvenient time of 9am. Village says it attracts about 300 shareholders each year, apparently because they get free admission to Movie World for the day. The meetings are normally over very quickly, but this year might be different.

Village stunned political watchers over the past two years with a staggering $2 million worth of donations to the Liberal Party. It has also given generously to some state projects in Jeff Kennett's Victoria, where it operates 14 booming cinemas at Crown casino and successfully warded off a move by new entrant Reading to build a 30-screen standalone complex in Mr Kennett's electorate of Burwood.

Village appears to have toned down its tax-driven strategy of buying struggling resorts such as Daydream Island and Laguna Quays. Despite all the cross-promotions through its cinemas and radio network, the resorts are struggling under the weight of the Asian crisis.

Like rival Hoyts, Village's breathtaking overseas expansion program has also been wound back as the sharemarket punishes growth stocks carrying too much debt, with an exposure to Asia or Queensland tourism. Village has all these characteristics, explaining why its shares have fallen from a record high of $6.70 in February 1996 to Friday's close of $3.36.

On Wednesday, I'll be flying to Melbourne for the Crown casino annual meeting and then that of controlling shareholder Hudson Conway at 9am on Friday. HudCon is usually a tame affair as the stock is tightly held by Lloyd Williams, Ron Walker and Kerry Packer. But with the shares plummeting from $18.50 in October 1996 to Friday's close of $2.35, I'll be raising quite a few issues if other shareholders are not game.

Williams received a $50,000 pay rise to about $745,000 in 1997-98 despite the company's $245.2 million pre-tax loss.

The dramatic resignation of Packer representative Geoffrey Cousins from the board during the year after fundamental differences over corporate governance is also worth raising given that no full explanation was ever forthcoming from either side.

Crown has not been HudCon's only problem investment. There is the small matter of $51 million lost on unknown Indonesian investments. Given that Crown has almost 10,000 shareholders, its meeting should be pretty willing despite the likelihood of free gambling tokens and other oodies to pacify angry shareholders. The Australian Shareholders Association will be there asking questions as will I.

Of the 50 stocks in my portfolio, Crown has produced the biggest percentage loss (about 70 per cent), followed by Jo Gutnick's Great Central Mines and then Hoyts.

Crown's problems are fairly well documented although Williams has never admitted or apologised to shareholders for overspending on the $2.1 billion venue. The timing of the Asian crisis was certainly bad luck, but even without that shareholders would have been lucky to get a dividend for years given Crown's $1 billion debt load.

There is likely to be one happy meeting this week. Shareholders in Harvey Norman will hear founder Gerry Harvey paint a very upbeat picture tomorrow and probably roast Coles Myer which is threatening to move into his furniture and electrical appliances segment. The market doesn't seem worried, with Harvey Norman shares more than doubling to $10.90 over 12 months.

* Stephen Mayne has spent $140,000 buying shares in 50 companies for this series based on the experiences of an active small investor.

AGM Diary
TODAY: Davids Holdings, David Jones: Sydney. Argo Investments, Adelaide. Bains Harding, Perth.
TOMORROW: Village Roadshow, Gold Coast. Harvey Norman, Diamond Rose, Becker Entertainment: Sydney. Just Jeans, Melbourne.
WEDNESDAY: Crown, Melbourne. Primac, Sydney.
THURSDAY: Premier Investments, Melbourne. AAPT, Sydney.
FRIDAY: Hudson Conway, Melbourne. Gazal Corp, Angus & Coote, Sydney.