30/05/2012 - 10:45

Sultans of spin put truth in dire straits

30/05/2012 - 10:45


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Listed companies and government ministers keep on dishing up the kind of spin that frustrates investors, journalists and anybody else who wants to know what’s really going on.

Listed companies and government ministers keep on dishing up the kind of spin that frustrates investors, journalists and anybody else who wants to know what’s really going on.

LAST Friday, Regional Development Minister Brendon Grylls was busy pumping out ‘good news’ press releases to coincide with his visit to Karratha.

One that really caught my attention was the announcement of an extra $57 million for the new Karratha Health Campus.

“Karratha will have a new state-of-the-art $207.15 million health campus,” the announcement started, promisingly for the residents of Karratha.

The release referred to the 2010-11 budget but there was no reference to the 2011-12 budget, released nearly a week before Mr Grylls’ announcement.

That, of course, was when Treasurer Christian Porter announced not only the extra $57 million but, more significantly, that the Karratha hospital project would be delayed by two years. 

There was no mention of that in Mr Grylls’ announcement, so who did he think he was kidding?

Wouldn’t a little candour be sensible, especially when the full story was already in the public domain?

Matrix Composites & Engineering seems to have gone to the same school of communication as Mr Grylls.

The Henderson-based company has had a very up-and-down life since listing on the stock market two-and-a-half years ago. Its share price has soared, it has won awards, and been hailed for its focus on R&D, exports and manufacturing. When the company has failed to meet expectations, however, it has been hammered by investors.

This year, its share price has been persistently weak, and its communication with the market will not help its cause.

The company made three announcements last Wednesday. Investors who started with the company’s media release, announcing a $36 million capital raising, got a small part of the story.

If they read the company’s response to an ASX price query, they got a bit more. This document included the revelation that the company was expected to post a loss of between $20 million and $23 million for the 2012 financial year.

Persistent investors who read the company’s Powerpoint presentation, also lodged with the ASX, got some more. This included another revelation – that the company had breached its banking covenants, and needed to pay back $8.5 million in bank debt.

Collectively, these documents presented a full picture of Matrix’s performance and problems. But unless investors read all three documents, they didn’t get the full story. Why make it so hard?

The very next day, Orbital Corporation decided to try multiple announcements, when one would have been much simpler and easier for investors.

The company’s ‘good news’ release announced that Orbital had struck a deal to supply engines for use in unmanned aircraft systems.

Managing director Terry Stinson was suitably pleased, saying the company had broken new ground and provided a good example of Australian innovation. Just like Matrix Composites.

But on the same day, Orbital issued a market update, which contained a few unpleasant details, including falling revenue in its consulting business, lower profit in its Synerject business and a projected loss in the second half of the financial year.

The engine supply order was a welcome piece of good news but it didn’t tell the full story. 

The three examples quoted here are not isolated instances; they are part of a recurring pattern. 

A fourth example used a trick popular with many journalists and sub-editors – the eye-catching headline that, technically, is not incorrect, but neither does it leave it an entirely accurate impression.

This example concerned Premier Colin Barnett and Education Minister Liz Constable’s announcement of a major redevelopment of Willetton Senior High School.

The headline referred to an ‘$80 million redevelopment’, and this was the figure quoted in nearly all media coverage, including on the WA Business News web site.

Yet in the body of the announcement Mr Barnett said the government was preparing a long-term plan that “could see up to $80 million spent”. The release also disclosed that full costs are only indicative at this stage.

But how many voters will remember that kind of detail? Not many I expect.

• mark.beyer@wabn.com.au 


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