Lasmo holders can hit back (CORRECTED)

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The Independent Online

One plus one can equal one, despite what the mathematicians say. Which company proved it? It was the same one that paid off its chief executive with a record pounds 2.2m.

The answer, if you have not guessed, is Lasmo, the oil company that was worth pounds 1bn when it bought Ultramar for pounds 1bn at the end of 1991 only to find it was still worth pounds 1bn afterwards.

Lasmo will face the music today, at its first annual meeting since the horror of the Ultramar deal became clear and Chris Greentree received his reward for failure.

Though feelings in the City run high, it would be wrong to assume that large investors will make a noise. They have already been able to express their views in private.

The meeting, then, is not just a trial of Lasmo, which was busy preparing its defence over the weekend, but of annual meetings in general. If investors do not complain today when will they?

Private shareholders have every reason to feel aggrieved. Like large investors they have seen a fall in their income following a dividend cut and suffered a capital loss with their shares lagging behind the market by 50 per cent. But unlike them, individuals have not had the chance to ask Joe Darby, the new chief executive, any questions until now.

Fund managers speaking for more than half the shares have attended private meetings in recent weeks as Mr Darby attempted to reassure them that change was in hand. For their part, they left Mr Darby fearful about today's meeting.

The unlucky minority of shareholders must hope he will fill in the gaps in their knowledge today. But with the company hoping to raise money in the US any minute, he may hide behind American disclosure rules and keep them in the dark. Such are shareholder rights.

Mr Greentree's payoff rubbed salt into open wounds. He received more than Bob Horton from BP or Ralph Halpern from Burton. But most fund managers, investing billions for pension funds, insurance companies and unit trusts, say they cannot do anything about it.

Lasmo did not need their approval. And some fund managers were glad to see the back of Mr Greentree, whatever the cost.

More than that, they argue that their job is to make money for their clients. This means they are keen to boost shares rather than knock them. Thus their reluctance to make a fuss.

It is not just the Ultramar deal that has caused concern - not helped by a confusing presentation in the accounts - but doubts about existing businesses. Earnings have declined almost every year for five years. Borrowings exceed shareholders' funds, despite the fact that Lasmo issued shares for Ultramar and raised cash by selling a business (at a pounds 300m loss).

Shareholders should grab the opportunity while they have it and ask Mr Darby the following questions today.

Lasmo lost pounds 50m in the money markets last year. This news - tucked away in the accounts - has horrified investors, scarred by losses at Shell and Allied-Lyons. What was Lasmo doing dealing in short-term Treasury instruments?

The oil company boosted its 1992 results by taking account of budget changes to petroleum revenue tax. Was this wise given that the Finance Bill has yet to be passed into law and the change had not even been announced by the year end?

The costs of developing the Piper field in the North Sea are twice as high as expected. Has anyone lost their job as a result?

All the directors except one were on the board at the time of the Ultramar bid. How can they justify claims of new management?

If the answers are unconvincing shareholders should not lose heart. They have one rarely used weapon - the power to vote against the re- election of some of the directors. The three standing today are John Hogan, the chief operating officer who joined the board earlier this year, John Cordingley and Grant Cochrane. The last two are members of the remuneration committee and so should take some responsibility for Mr Greentree's payoff.

Shareholders should use this weapon, however blunt. The trouble is that unless enough of them put up their hands to oppose their reappointment, there will be no poll, and if there no poll we will never know how the institutions voted. This is because they tend to vote by proxy - registering their votes in advance.

Voting against, albeit in a secret ballot, would be better than doing nothing at all.


In an article on 25 May, we stated incorrectly that Lasmo had lost pounds 50m on the money markets last year. The figure quoted in fact represents the net difference between cash flowing into and out of money market instruments during 1992 rather than actual trading losses.