13 questions asked at 2022 CIMIC AGM

1. Well done again on handing back the initial $20 million claimed in JobKeeper so that CIMIC was not tarnished by the widely rorted scheme. What has been the reaction to this ethical move from staff, government and the community, particularly as more details emerged about the biggest waste of government money in Australian history where $38 billion was paid to claimants which didn't qualify under the rules of the $90 billion scheme.

Answer: Thank you. It was very well received.

2. Three of the CIMIC directors – independents Kathryn Spargo and Russell Chenu and Alternative Robert Seidler - advised the ASX they had fully accepted the Hochtief offer for their personal shareholdings this week. Was that a board decision for directors to accept ahead of the AGM and which of the directors are yet to accept the offer.

3. The 2022 annual report was released in February before the Hochtief takeover offer was launched and disclosed that there were 43,106 shareholders in CIMIC at a time when Hochtief owned 77.7% of the company. Hochtief is now up to 87.8%. Approximately how many retail shareholders have accepted the offer so far and how many are still on the register today? Are there any notable institutional hold-outs?

Answer: don't know.

4. Why did we agree to cut the proposed float price of Ventia Services from more than $2 to $1.70. In the 5 months since listing, the stock has soared by 50% from the float price to $2.56, suggesting it was floated too cheaply. Also, were there specific issues which triggered the recent withdrawal of our rights to appoint 2 directors to represent our residual 32.8% stake? Wasn't this always an obvious conflict of interest given we compete in some segments with Ventia?

5. When disclosing the outcome of voting on all resolutions today, could you please advise the ASX how many shareholders voted for and against each item, similar to what happens with a scheme of arrangement? This will provide a better gauge of retail shareholder sentiment on all resolutions and was a disclosure initiative adopted by the likes of Metcash, Altium and Dexus after their 2021 AGMs.

Answer: No, this request came in too late to adopt.

6. The chairman disclosed in his address that we are expecting to receive $3.8 billion in revenue from the Victorian Government on the main tunnel contract on the North East Link project in Melbourne. At one point it looked like we were pulling out of this project after big blowouts and disputes emerged with other Victorian Government projects such as the Westgate Tunnel and the Metro Rail project. Is our $3.8 billion commitment to this enormous North East Link project constructing Australia's longest tunnel because the government has agreed to take on more risk in a contract with more traditional cost-plus features?

7. CIMIC has a reputation for playing hard ball with sub-contractors and smaller counter-parties. We won the $200 million-plus early works contract for the North East Link and then our main sub-contractor Quinn Civil went broke, delaying the works. Similarly, we signed a rental agreement to bid for the North East Link and then walked away, vacated the building and refused to pay landlord JustCo until a County Court Judge ordered we pay almost $1 million late last year. Please comment on both of these situations. Are we being reasonable in our contractual dealings?

8. Hochtief has a current market capitalisation of $A6.2 billion, which is below the current $6.85 billion market capitalisation of CIMIC based on the $22 offer price. It is unusual for a smaller company to take over a bigger company. How important will the CIMIC assets be in the ongoing performance of Hochtief? Does CIMIC represent a clear majority of value and revenue in the wider Hochtief group?

9. David Robinson has a long history with Hochtief, first joining the old Leighton Holdings board in 1990, making him one of the longest serving directors of an ASX listed company. Could he explain how he first came into the Hochtief orbit. Will David have any ongoing role with the business after the takeover and does he have any regrets over his 32 year stint on the board. For instance, in hindsight, does he regret the purchase of CIMIC shares by Hochtief in January 2014 which led to ASIC action and a Federal Court fine of more than $400,000?

10. The Monash Freeway project in Melbourne has been previously reported as having around $100 million of claims against the Victorian Government and its Major Road Projects Victoria division. What is the progress with this? CIMIC through its CPB division is yet to be awarded a Victorian Government contract through Major Road Projects Victoria under its new contract model. Is this a result of our litigious history with the Victorian Government, particularly over the West Gate Tunnel project? Please summarise where our relationship is at with the Victorian government.

11. CPB is yet to be awarded a Victorian Government new model contract by Major Road Projects Victoria. Is this a result of the litigious nature of CPB with the Victorian Government? How is the relationship going, particularly after the WestGate Tunnel dispute?

12. Are there any concerns with price escalations that are written into our pattern CFMEU agreements across CIMIC's projects in Victoria? Do we have state-wide multi-project agreements with the CFMEU in any other state? Are the CFMEU EBA rates and working calendar factored into all our contracts to protect projected earnings forecast?

13. Final question. Many thanks for reading out most of my written questions without any censorship. In addition to making an archive of the webcast available, could you also publish a full transcript of today's AGM debate on your website.

Copyright © 2022 The Mayne Report. All rights reserved

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