From the National Post....
Friday, May 19, 2000
Magellan faces wrath of shareholders
Profit up, stock dipping: Company's CEO badgered over poor investor relations
Peter Fitzpatrick
Financial Post
Executives of Magellan Aerospace Corp. vowed to stay the course yesterday in the face of a grilling from shareholders disappointed by the company's dipping stock.
Murray Edwards, the chairman and chief executive, told the firm's annual meeting that he doesn't believe in quick fixes to reverse a 40% share price decline over the past year, but instead wants to build value. "We take a longer term view. We don't look day-to-day or month-to-month, we look at the next five years," said the Calgary-based businessman who has raised Magellan from the ashes of bankrupt Fleet Aerospace in the early 1990s. "Over time, the market will recognize that."
Magellan's financial performance has been strong, with profits growing 150% over the past two years, he said.
It is moving rapidly into e-commerce to deal with both customers and suppliers and has positioned itself to be a preferred supplier to major manufacturers who are cutting back on the number of suppliers they deal with. For example, the U.S. giant Honeywell is cutting its current supplier list for some products down to seven from 100 and Magellan is one of the seven, Mr. Edwards said.
Charts presented during the meeting suggested revenue will continue to grow to $1.5-billion in 2003, up from an estimated $700-million this year.
Mr. Edwards suggested Magellan is being penalized because it is a nice house in a bad neighbourhood, pointing out that the aerospace manufacturing and servicing company is in the index with the lowest multiple among the S&P sub-indexes.
However, shareholders, who were more concerned about the stock price than the company's financial performance, refused to accept the explanations. "You fall into the category of a great company but a lousy stock," said one.
"You have to be a hell of a lot more positive," said another, suggesting the company improve investor relations.
Two others called for a special dividend or share buyback, but Mr. Edwards, who himself has 18 million shares or 30% of the stock, said he wouldn't consider such a move until year-end and prefers to keep a strong balance sheet in case a good acquisition comes along.
Still, in the face of continual questions from shareholders Mr. Edwards finally admitted Magellan has to take action.
"There's a message here today that we'll take and we'll go back and look at doing some shareholder relations, but we'll do it in a positive, not promotional way," he said.
The company released first quarter results at the meeting. Net income rose to $7.4-million (12½ a share), up from $5.7-million (10½) and revenue was up to $150.3-million from $114.3-million. Magellan shares closed unchanged at $5.70 yesterday.
What can I say except "I wish I was there?" By the way, what good would a dividend do?
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