Thu | Sep 21, 2017

C&WJ shareholders give in on rehiring auditor

Published:Wednesday | October 12, 2016 | 10:00 AM
In this September 9, 2015 file photo, Managing Director of Cable & Wireless Jamaica, Garfield Sinclair, addresses the company's annual general meeting in New Kingston.

A revolt by Cable & Wireless Jamaica (C&WJ) shareholders ended last week when they voted via poll to rehire the company's external auditors.

A month ago, at the annual general meeting, shareholders had rejected the resolution for directors to fix the remuneration of the company's auditors, KPMG, in what was really a protest vote to register dissatisfaction with C&WJ's board, which they accused of not being sufficiently accountable to minority owners of the telecoms stock.

"The poll was conducted and the resolution was passed," said Kayon Wallace, head of communication at C&WJ, referencing the vote last Thursday.

The meeting at The Jamaica Pegasus hotel in New Kingston lasted for over an hour, which included roughly 30 minutes of voting and 25 minutes of calculating the votes, said Wallace.

At the annual meeting in September, minority shareholders of C&WJ defied the board of directors and voted against the standard resolution to make a wider point on transparency.

Resolutions at AGM's are usually done by a show of hands, whereas in a poll shares are proportionately represented.

In response to the vote against the motion at the AGM, board member and attorney Rochelle Cameron said C&WJ would invoke Article 66 of the company's articles of incorporation to conduct the poll 30 days later.

The shareholders at the AGM demanded independent verification of the heavily fluctuating multibillion-dollar non-cash charges, which led the company into losses. While all other resolutions at the September meeting were passed without fanfare, the final one for KPMG to continue as auditors of the company and to fix their fee was resisted. It was a rare display of minority shareholders exercising their voting power at an AGM.

 

WIN FOR MINORITY

 

At the time, outspoken minority shareholder Orette Staple declared the 'no-vote' as a win for minority shareholders at that moment. The majority of shares are held by overseas-based Liberty Global which earlier this year acquired Cable & Wireless Communication, the parent company of C&WJ, through its regional subsidiary LiLAC Group,.

The auditors received payment of $53 million for the year ending March 2016, up from $50 million the previous, according to disclosures in the annual report. But their fee was not the matter of contention.

The non-cash charges booked by C&WJ relate to impairment and depreciation at the company, which operates in a heavily capital-intensive telecoms industry. Essentially, the shareholders were demanding that some other independent body verify these non-cash expense charges, which fluctuate significantly on an annual basis.

KPMG stood by its work.

C&WJ, which trades as FLOW Jamaica, posted its first annual profit in a decade at year end March 2016 due in part to non-cash impairment charges bundled as exceptional items effectively shifting from an expense of $6.9 billion in 2014/15 towards income of $1.13 billion in 2015/16.

Then in the June 2016 first-quarter non-cash impairments allowed the company to post a net loss of $695 million, or more than double the net loss a year earlier, despite double-digit growth in revenues and mobile subscribers.

In the financials, C&WJ explained that during 2015/16, in connection with the acquisition of Columbus International by Cable & Wireless Communications, the company re-evaluated the planned timing of network integration. Consequently, it made a decision to accelerate the depreciation on these assets over an average four-year period.

steven.jackson@gleanerjm.com