Share Investor: Murray & Co: Overachieving Kiwi-style

I had to hunt high and low but I found something.

This piece really has everything a little Fisher & Paykel holder really wants to know.

What he neglects to tell us is, has Mike Daniells passed all his business acumen on.

I would have to answer that by saying yes by looking at the figures, 29-800 million, in 26 years.

What is more important is, has he passed that "we are a company that is going to spend northwards of 70 million next year on R & D" and you would have to say yes again.

Lewis Gradon is still there as head of R & D and as long as he is I don't have one worry.

The biggest value creator in the history of the NZ sharemarket, Mike Daniell (CEO of Fisher & Paykel Healthcare) quietly handed in his resignation slip recently without any fanfare or great media interest.

Mike Daniell’s board at Fisher & Paykel blew his trumpet on the announcement of his forthcoming retirement but they really should have played a full reveille. This is the untold story of NZ finance, a company that grew from a prototype made with an Agee preserving jar after a physician at Auckland Hospital in the 1960s became concerned about the adverse effects of ventilating patients with dry air.

Consider the numbers. When Daniell took charge of the Healthcare division in March 1990 his predecessor was ruling off the accounts showing about $29m of sales and $4m of EBIT. When Daniell steps down in March next year

Photo: Dave O'Hare and 3280 Humidifier (1970)

Healthcare will report sales of over $800m and EBIT of >$200m.

Annual compound sales and EBIT growth of 14% and 16% respectively over 26 years; approximately $500m of shareholders funds turned into marketcap of $4 billion - that’s $3.5b of value creation, 99% of it on Daniell’s watch, the biggest such “market value added” on the NZ market.

If Healthcare had been a listed company the whole time it would have been a 100-bagger. As it was it saved its previous parent company, Fisher & Paykel Appliances, and has done well since listing despite currency headwinds.

How has the company achieved this? Five key aspects, all pointing to good strategy from the top:

A consistent team, in particular Lewis Gradon and Paul Shearer, who have respectively led the R&D and international sales teams over the same 26 year period.

The company persistently plugged away (through sponsoring numerous studies and direct marketing) at the seemingly boring hospital humidification market, gradually leaving less committed competitors in the dust.

It then segued into humidifying air used in “blowers” for sleep apnea in the home. The company quickly worked out that people would get sick of having separate blowing and humidification devices hogging their bedside table and introduced a combined unit before anyone else. This action led to a much bigger fast-growing market.

The company determined that value is in consumables and introduced (and importantly concentrated on) proprietary chambers and tubes to go with its hospital gear and masks to accompany sleep apnea devices.

It has invested in R&D to open up new sales areas, the latest of many is humidifying air pushed over body parts during surgery.

Daniell is an old-style NZ CEO, little ego, no twitter account, his one company generates export sales the equivalent of 60% of the vaunted NZ wine industry with about 1% of the fanfare. Thanks Mike.

	Project Management Essentials For Dummies, Australian and New Zealand Edition by Nick Graham Buy new: $9.74 / Used from: $8.96 Usually ships in 24 hours

Project Management Essentials For Dummies, Australian and New Zealand Edition by Nick Graham
Buy new: $9.74 / Used from: $8.96
Usually ships in 24 hours

c Murray & Co Share Investor 2016

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Sunday, January 17, 2016

Murray & Co: Overachieving Kiwi-style

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