Monte in strong financial shape

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Setting the Record Straight

Monte in strong financial shape

Following close on the heels of the bizarre campaign by Millie Phillips, AJN journalist Joshua Levi has continued with a highly misleading attack on the Home by publishing an article in last week’s edition of the AJN (Monte’s $13 million slide – 30/11/12) which claims that the Home is incurring unsustainable losses and has experienced a dramatic reduction in operating results since 2004.

Nothing could be further from the truth.

When the Home became aware of the content of the impending article the Home’s CEO, Robert Orie, immediately advised Mr Levi that the figures he was quoting were highly misleading as they didn’t take into account extremely large variations in non-cash based adjustments, such as depreciation, which had occurred between the years being compared in his article.

Respected financial analysts exclude depreciation when they undertake comparisons such as that attempted by Mr Levi, who, as far as we are aware, is not an accountant. This is to ensure that the often large variance between the ways depreciation is calculated from one organisation to the other or from one year to the other is removed so that a fair comparison can be undertaken on a cash basis.

In 2004 the Home was an organisation that held significant cash reserves from years of accumulated bequests and which were held on deposit and earning income at high rates of interest. Today it is a dynamic aged care provider operating major campuses on either side of the harbour and providing substantial outreach and Home Care services.

In the process the Home has converted cash held by the organisation into the vital Randwick campus, the purpose of the original bequests so generously given to the Home.

The conversion of cash into the Randwick campus plus a revaluation of the Home’s other campuses undertaken by the Home’s independent auditors during the period in review resulted in a massive increase in the Home’s provision for depreciation.

Trying to compare 2004 results with that of 2012 is therefore like trying to compare apples with oranges.

The undeniable fact is that apart from the unique period where the Home was in the commissioning phase of the Randwick campus, on a cash basis the Home’s operating results have steadily improved since 2004 to a point where its current recurrent operating income, which this year totals nearly $71 million, covers the vast proportion of its operating expenses.

Contrary to the thrust of Mr Levi’s article, the Home’s reliance on donations is limited to its capital requirements in terms of upgrading and maintaining the quality of its campuses and to provide funding for new building work which is critically needed to meet the demands of an ageing demographic, and not required to fund operating losses.

In 2012, as clearly articulated in the Home’s 2012 Annual Report, the Home achieved an overall cash surplus of $7.4 million and since 2004 it has accumulated a total of $40.6 million, which has provided an average of $4.5 million per year of capital funding, sufficient to enable the Home to maintain its building stock at the highest standard.

This is a significantly different picture to the one painted by Mr Levi and clearly refutes the allegation that the Home is in any form of financial difficulty or heading in that direction.

Despite Mr Levi being made aware that the figures he was quoting were highly misleading and misrepresented the true results of the Home, Mr Levi chose to publish the article regardless.

This type of sensationalist journalism is appalling, especially when it is directed at highly respected communal leaders and an organisation that provides outstanding services to the elderly and which relies heavily on having the confidence of the community and their ongoing support.

It is extremely disappointing that the AJN has permitted this to occur, especially as Mr Levi failed to disclose to the public that he, as the principal journalist, is the son of Ian Levi, former President of the Montefiore Home and a member of the Board of Management that was overturned at a controversial, bitter and hard fought AGM in 2001 by the majority of the current Board and whose vision continues to be successfully implemented.

In relation to Mr Levi’s comments about Mr Alex Abulafia’s nomination for the Montefiore Board, the simple fact is that he was not a financial member of the Home and, therefore, in accordance with the Rules of the Home, not eligible to stand for election.

Finally, with regard to comments about succession planning, the Home operates with a set of Governance principles that comply with the recommendations of the Australian Securities Commission (ASX) and the relevant Australian Standards. All Board positions are vacated every year and it is up to the members of the Home to democratically elect the Board that will represent the members during the following year. At close of nominations for this year’s election the Home had received 5 new nominations for Board positions.

Hardly the picture Mr Levi seeks to portray.