It's not just sausage rolls that are on the menu at company annual meetings.
Annual general meetings have always been important in terms of allowing shareholders to eyeball the directors and management of a company and ask them tough questions.
In more benign times when profits were growing and dividends were flowing questions were often on the softer side with more interest shown in free sausage rolls and cups of tea.
But in the past year the importance of such meetings has ramped up a notch with many firms taking the opportunity to provide a quarterly financial update.
Harbour Asset Management’s Shane Solly said instead of companies giving guidance at their annual results they were promising updates at the AGM.
“That’s changed the importance of them. It’s not just a chance to ask tough questions. It’s almost become a quarterly update.”
And the updates out of AGMs haven’t been very upbeat this week. On Wednesday Move Logistics warned that activity was slowing more than expected with higher interest rates starting to hit home.
Yesterday Freightways delivered a Q1 trading update that was decidedly downbeat.
“In New Zealand, we have experienced a continuation of same-customer decline in volumes but in Australia we have also seen the start of a similar slowdown in same-customer activity,” CEO Mark Troughear told shareholders.
New business gains were being made in both markets but this was only “partially mitigating the underlying poor economic conditions”.
While its revenue for the quarter was up 25.5 per cent to $298 million its net profit after tax was down on the prior corresponding period due to higher debt and interest rates as well as an increase in amortisation costs.
Craigs Investment Partners institutional analyst Robbie Aitken described the update as a profit warning.
“Group revenue increased +25.5 per cent, but this included a full six-months contribution from Allied Express (AEX) vs just three-months last year. After stripping out our estimate of the Allied contribution we estimate underlying revenue growth for the remainder of the group was close to -1 per cent. EBITDA +11.9 per cent, and we estimate approx. -2 per cent excluding AEX.”
Aitken noted net profit after tax was down 4.7 per cent.
“This is a weaker than expected result with management commenting that the NZ operations continued the same volume decline seen in the 2H 23 result, but with the Australian operations (which had remained fairly buoyant) now demonstrating the start of a similar slow-down in activity.
“In addition, weaker paper prices have affected the IM [information management] result, and a consenting delay affected the recovery in waste volumes in Victoria. Offsetting these negative aspects is an easing of labour pressures but this may not be evident in wage rates until FY25.”
Aitken said in terms of the outlook the company provided very cautious comments around trading.
“In general the economic environment is worse than FRW was expecting and they commented there is a risk that EBITA will be at or below FY23.”
The warning could also serve as an alert for Mainfreight investors with that company due to report its half-year result on November 9.
Today will see a trifecta of AGMs with Fletcher Building, SkyCity Entertainment and Port of Tauranga all holding get-togethers for shareholders.
Each company is facing major challenges which investors are bound to want to know more about.
Fletcher Building will no doubt be questioned on its recent Australian pipe issue. Solly said investors and analysts would also be closely looking for an update on future building demand.
“Everybody can see the medium-term potential for more activity.” But he said the nearer term was less clear. With the number of building consents falling there could be a tough patch coming. Solly said quite often consents also didn’t evolve into housing starts.
Australia was already seeing a slow-down in housing starts. High immigration will no doubt help boost demand for housing but that will take time to flow through to new builds.
Solly said Fletcher was still also dealing with legacy issues; not just its pipe business but also the silicosis issue in Australia and reconstruction cost escalation at NZ International Convention Centre.
On top of that Fletcher is also in discussion with Waka Kotahi with regards to cost over-runs on the Puhoi to Warkworth motorway as well.
SkyCity also has a lot to discuss with the Australian regulator investigating its Adelaide casino, a threat to temporarily suspend its New Zealand casino licenses after a former customer complained about host responsibility, and the search for a new CEO after Michael Ahearne announced he was resigning earlier this month.
Meanwhile dismay is growing in the export, infrastructure and sharemarket sectors over the Environment Court’s continuing silence on its decision over the Port of Tauranga’s container terminal extension bid.
It’s been eight months since a long-awaited hearing on the project, which has been challenged by 11 local iwi and hapu groups.
Former corporate raider and now fallen-from-grace businessman Ron Brierley made an unexpected appearance at an Australian AGM this week, according to the Australian Financial Review.
Brierley was sentenced to 14 months in jail after he was found guilty of possessing child sexual abuse material but had his sentence reduced last year due to his declining health.
The AFR reported that Brierley turned up to a meeting for troubled mortgage lender Yellow Brick Road which was seeking approval from shareholders to de-list the company from the ASX.
Brierley, described as wearing a “scruffy polo and shorts”, questioned why the company hadn’t accepted an offer his Mercantile Investment Company made in 2018 to buy it at A9c a share. It was rebuffed at the time as being “grossly inadequate”.
Now Yellow Brick Road is trying to take the company private at A5c a share. More than 89 per cent of shareholders approved the plan to de-list. But the company declined to comment on the appearance of Brierley at the meeting.
The AFR suggested that a new rule may be required for keeping convicted criminals away from AGMs.
The New Zealand sharemarket dipped again this week, hitting a 12-month low. Solly said around 70 per cent of New Zealand’s top listed companies were interest rate-sensitive stocks and the NZ market was having a delayed reaction to the bond rate rises.
“US government bond yields have gone up again.”
Investors are essentially choosing bonds and term deposits over equities. Solly said that was proving tough on the listed power companies who typically appealed to investors who wanted a steady dividend.
He said one factor which could boost company share prices was talk of restructuring. Genesis last week announced a review of its retail operating model could result in the loss of up to 200 jobs over the 2024 and 2025 financial years. That would be a large chunk of its 1268 full-time workforce.
Rather than boost its share price Genesis shares have fallen from $2.44 to $2.38 (as of yesterday’s opening price) since the announcement. Solly said that was because there was a “bit of wariness” about whether Genesis needs to reset its dividend and whether the dividend was sustainable at the current level.
“That’s a tough decision the new management team will have to make,” he added.
OPINION: You never know when bad luck might strike.