Share Investor's 2010 Stock Picks: Looking Back

Back on December 13 2009 I picked 17 stocks in my Share Investor's 2010 Stock Picks .

At that time the market had been trending up for most of 2009 and stocks were well off their late 2008, early 2009 lows.

Since December the New Zealand Stockmarket and other global indexes have headed north with the NZX 50 Gross closing at an 18 month high today. (see chart below)

With this in mind lets see how my December picks have fared 4 months latter.

Main NZX picks


Fisher & Paykel Healthcare
[FPH:NZ]



Picked at $3.24 the stock is now $3.32, an approximate 2.5% increase.


Fletcher Building Ltd
[FBU.NZ]



Picked at $7.65 the stock is now at $8.50, an approximate 12% increase.


The Warehouse Group
[WHS.NZ]



Picked at $4.03 the stock is now at $3.80, an approximate 5% decrease.


Sky City Entertainment Group
[SKC.NZ]



Picked at $3.27, the stock is now at $3.29, a less than 1% increase.


Xero Ltd
[XRO.NZ]

Picked at $1.55 the stock is now at $1.63, an approximate 5% increase.


Contact Energy Ltd
[CEN.NZ]



Picked at $5.70, the stock is now at $6.50, an approximate 14% increase.


Mainfreight Ltd
[MFT.NZ]



Picked at $5.60, the stock is now at $6.50, an approximate 16% increase.


Main ASX Picks

Caltex Australia Ltd
[CTX.AX]



Picked at AU $8.00 the stock is now at $12.00, a 50% increase.

Coca Cola Amatil
[CCL.AX]

Picked at AU $11 the stock is now at $11.25, an approximate 2% increase.

Domino's Pizza Enterprizes Ltd
[DMP.AX]



Picked at AU$ 5.10 the stock is now at $5.70, an approximate 12% increase.


Minor Picks

Auckland International Airport Ltd [AIA.NZ] Up approx 5%.

Kathmandu Holdings Ltd [KMD.NZ] Up approx 20% but chosen for a dive that it took earlier in 2010

Port of Tauranga Ltd [POT.NZ] Even.

Michael Hill International Ltd [MHI.NZ] Up by approx 10%.

New Zealand Refining [NZR.NZ] Even.

Telecom NZ [TEL.NZ] Down approx 7 %.


Yum ! Brands Inc [YUM.NASDAQ] Up by approx 15%


In an overall rising market you are saying to yourself anyone can pick stocks (even a monkey with a dart can Darren) that are going to head north and you may be right. I picked some that have clearly done better than others and some that have fared very poorly indeed. Over 4 months you will get that but as time goes on stock prices will rise.

Stocks like Telecom have done particularly badly and I picked this stock because I thought it would plumb the depths, it did and bargain hunters would have done well out of this stock in the last 4 months and hopelessly over the long-term of course.

Some interesting moves down by the likes of the WHS and some very good rises by bell-weather stocks like MFT & FBU.

My best pick, a 50% rise in Caltex, just goes to show one can get lucky. It was trading at a comparative low when picked but oil prices were set to pick up on any economic recovery or at least the perception of one.

Overall a motley collection of results that will sort themselves out, given time, if I was right in the first place.


Disclosure : I own FPH, FBU, WHS, SKC, MFT, AIA shares in the Share Investor Portfolio.


Share Investor's Annual Stock Picks

Share Investor's 2010 Stock Picks
Share Investor's 2009 Stock Picks
Share Investor's 2008 stock picks

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Telecom NZ: TV3 60 Minutes Segment more like Corporate PR

As an exercise in spin, the piece on 60 Minutes last night about Telecom NZ [TEL.NZ] XT Mobile Network failure was barely able to fool the foolish let alone those intelligent enough to leave the network over their recent failures.

Telecom corporate video was used to show the viewer that yes Telecom and its employees were human too and that we all make mistakes. We were supposed to feel sympathy for the hapless tel-co but most watching, especially XT customers, would have instead been close to physically sick.

Blame was apportioned to Acaltel, little to the man ultimately responsible, CEO Paul Reynolds, and it was suggested throughout that it was time for disgruntled Telecom customers to "move on".

Once again PR cannot take the place of actual service and making the product a good one, especially when it fails to live up to company promised expectations.

Arrogant, empty and inward looking, just like the culture at head office, a culture that will ultimately kill the company.

Telecom shareholders would have cringed just as much as they would have over the falling share price.



Telecom NZ @ Share Investor

Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free


Discuss this stock at Share Investor Forum - Register free

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c Share Investor 2010

Telecom Share Price Limbos but has it jumped the Shark?

How low Telecom NZ [TEL.NZ] shares could go has been the subject of talk not only in the business media today but in the mainstream non biz as well.

At close of market today TEL shares reached a new all time low of NZ$2.15 on very high volume after touching $2.13 earlier post regulation from Government raising its ugly head again yesterday and the continued woes of the XT Mobile Network failure.

The question for investors remains. Should you be getting in or getting out and if you want to buy in should you buy now?

It is no secret to my readers that I have been bagging this company as a long-term investment for over 10 years but in the short term you stand to make some easy money.

Having said that if you had participated in the 1992 TEL IPO then you would have had an annual return of around 25% net for the last 18 years if you include dividends and are eligible for the full tax credits - 35% better than the average of all NZX indicies.

Those days are over though as the dividends will be under pressure in the medium to long-term and the prospects for profit growth look bleak.

Bad news is good news though!

As least for the short term.



The previous share price floor seemed to be around the $2.25 mark (see 6 month chart above) where buyers came in, volume was up and the share price stabilised and then rose from that point.

The chart does look like one hell of an ugly sister (it keeps going down) but there could be good opportunities here for those patient investors.

More bad news could lead to a serious drop to below the 2 buck mark and at that point all is on for young and old because the bargain hunters will be out at some stage - as they were today.

I wouldn't touch it yet though. I would be a patient wallflower, wait for the drunken suitor to throw up in the garden and then pounce to wipe his chin off.

Somewhere near two bucks would be a good time to enter the party.

When to leave is another story entirely.

If you get a hangover please don't blame me.




Telecom NZ @ Share Investor

Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free


Discuss this stock at Share Investor Forum - Register free

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The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham
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c Share Investor 2010

Watching Sky Television

A continued drop in share price for SKT, in the face of an historically high Kiwi dollar,
doesn't bode well for the company when the NZ dollar loses value.


Sports, The Sopranos, Coronation Street and Late Night with Letterman, my personal Fav-we all watch too much TV but is it a good investment?

On first glance Sky Television Network [SKT.NZX] looks like a great blue chip, with excellent prospects and good cashflow. They announced an excellent profit of just over $NZ 51 million for the half year to Dec 31 2007 which was up roughly 40% on the same period last year.

I would argue though that Sky could face an uncertain future, for a number of reasons.

The technology needed to keep the company updated and competitive is very expensive and will require much shareholder cash to do so. Sky need to continually update technology, because they will face intense competition in the future, from cheaper and better services from foreign lands sending their content to customers in New Zealand, through broadband pipes that look set to get bigger from this year.

Another large problem Sky face is the cost of programming.

Currently the Kiwi exchange rate vs the US dollar, where the bulk of Sky programming is purchased, is at near post float highs and has been unusually high for a couple of years.

This is unlikely to continue, as historically the NZ dollar averages below 60c to the US dollar.

Like other shares listed on the NZX, the price of SKT has been hit badly, down to $4.90 currently but off from an all time high of above $6.50 just over 2 years ago.

The share price really should be doing alot better considering the historically high NZ/US dollar cross.

Further weakness in share price will clearly be the order of the day when the NZ dollar falls.

The company is in a dominant position at present in the pay TV market, it is the only player, but its customer satisfaction isn't good, as they use their monopoly position to excuse weak customer care.

Something that monopolies like Telecom NZ Ltd [TEL.NZX], and Auckland International Airport Ltd[AIA.NZX] also suffer from.

Sky Television management need to be a bit more savvy in their outlook to the competition that is out there.

With the internet and mobile technology playing an ever increasing influence in the war for consumers eyeballs, their attitude to that technology and a better attention to customer service and satisfaction will help them counter their competition.

The jury however, is still out over whether they can achieve that.

Disc: I own AIA shares in the Share Investor Portfolio


Sky Network Television @ Share Investor

Long Term View: Sky Network Television Ltd
Watching Sky Television
Market Quickie: Sky TV Worth Watching

Discuss SKT @ Share Investor Forum
Download SKT Company Reports


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c Share Investor 2008

Telecom New Zealand facing a watershed period

Long term, the future of Telecom maybe uncertain but the share price has been
on a downwards trend for some time. The slight upticks in share price and reasonable
volumes make this share one for short term traders.


Long suffering shareholders of Telecom New Zealand [TEL.NZ] for a reversal of fortune for the company may have a long wait on their hands.

Friday's announcement that 2nd quarter profit was down 33% sent the share price down NZ 15c in trading, to close at $3.95 and also sent commentators into a flap about the future of the company.

Profit would have been higher if not for the sale of the lucrative Yellow Pages unit towards the end of 2007, and the continued poor showing of their Australian arm, with a drag on earnings in that competitive market.

I have been down on Telecom for many years for many different reasons and it is easy to knock one of the countries largest companies, if only for its extremely poor customer service, something it shares with the likes of alot of monopolies/duopoly's, like Vodafone NZ and the majority of the countries banks.

Telecom's problems though are multiple, deep set and are entrenched in company culture. From the top management, right down to the help desk in the Philippines or whatever the latest third world country has been used to cut costs.



Telecom must refocus their efforts on their
customers and spending more to update aging
technology to have good long-term prospects.

CEO Dr Paul Reynolds, said there had not been enough focus on customers.

"Telecom had made decisions about leadership, structure and focus that would help secure future momentum, based on a focus on customers".

This has been said before, Reynolds has been at the helm for 6 months but there is not yet evidence that the above has been acted upon.

Management, especially middle to lower supervisory level, still have an attitude that Telecom is a virtual monopoly, you know it, they know it and you can go elsewhere if you are looking to get decent customer service.

One specific which I encountered the other week, piling on illegal service charges(they call it a "convenience charge") for customers who pay by credit card and advising customers it is the credit card company charging it is certainly not a new and innovative way to win friends and influence customers. In a positive way anyway.

Other providers are taking customers off them though, as technology has allowed and Government imposed regulation bites, with the forced split of the group into 3 parts at the end of March.

The continuation of the "monopoly attitude" in the face of increasing competition is Telecom's biggest challenge. In the past that was great for shareholders and bad for customers, increasingly things have become bad for both parties.

The past has been filled with exceptional dividends paid out to shareholders, that was good for the first 8 or nine years, as costs were cut, from its initial inception as a government department, overloaded with excess staff, but as the last of the fat was trimmed from the company in the early 2000s the need for reinvestment of profits became even more apparent than it was years before.

Telecom's investment in their infrastructure is at least 10 years behind some of the international telcos. A plethora of 19 century copper wire is Telecom's answer to the road that 21st century technology and content must travel on and that road long ago gridlocked, to a point where we now have internet speeds at the lowest end of the world scale for a very high cost.

Like allot of investors in the stockmarket, management at Telecom have been shortsighted in their business outlook.

Short term profits have been at the expense of the long term future of the company and billions of dollars must now be invested to turn that shortsightedness around.

Hard decisions have to be made and the company now finds itself in a bit of a watershed period.

It must focus on their customers first and provide them with the best in service and the "new" technology that must come with that service and eradicate the culture that seems to still have them in a battle with those that wish to do business with them.

There must be no shades of gray towards a new long term thinking Telecom, the change must be bold, brash and black and white. Reynolds words "...based on a focus on customers..." must be the core principle on which the company is based and it must be more than words, those words must be acted upon at every opportunity.

If they bite the bullet and do those things, the short term will clearly be difficult but longer term things will get better.

If management decide that the status quo is the way to go or fail to drive a new focused Telecom hard enough, then the long-term future for Telecom New Zealand looks bleak at best.


Telecom NZ @ Share Investor

Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free


Discuss this stock at Share Investor Forum - Register free

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c Share Investor 2008, 2010

A Rare Breed

The bullshit that passes for accountability amongst our leaders; politicians and business leaders alike, makes a farce of the meaning of the word "leader".

What does a leader do Darren?

Well, it is quite simple really, even though some individuals in the positions that they find themselves in and in rarer and rarer cases those than actually achieve those positions, would like others to think that being a leader is a complex issue only understood by the likes of those with over sized craniums.

Being a leader as such is as straightforward as setting examples for those that you lead, for it is clear, even to a two year old, for those that observe a good leader doing good things are likely to model themselves on good behavior. Psych 101 really.

Conversely, bad behaviour by a leader will almost guarantee a negative culture: at the workplace or anywhere else for that matter.

Bad leadership flows down to individuals in a company. It can cause resentment among workers, gossip and it saps productivity, morale and effects the long term viability of the organisation or business.

The worst and most public example of leadership failure in New Zealand would have to be Teresa Gattung, the recent retiring CEO of Telecom New Zealand [TEL.NZ]

Her culture of blame, resentment, lies and underhanded competition at leadership level managed to pervade the company culture to such a core extent that any customer getting in touch with a customer services representative at Telecom would have been well aware that there was something going horribly wrong at head office.

Gattung was the head at that head office and she was fully responsible for the disastrous mess that she managed her way into while in tenure behind the big desk.

After leaving of course she was rewarded for her mismanagement with a bundle of cash and plaudits from other mediocre managers of other businesses and arse kissing mainstream "business media" who patted her on the back for "a job well done".

Excuse me!!

On the other hand, the quiet achievers like Don Braid, the CEO and Bruce Plested from Mainfreight Ltd [MFT.NZ]:


"As we grow to become a world player we must maintain our culture and style of business by keeping a strong grip on our policy of being anti-bureaucratic; continuing to allow branch managers to make bold decisions; being energetic and entrepreneurial; and so continue to grow our business.

Don Braid, GM 2007.


Braid and Plested lead from the front and as a result an excellent company culture has evolved. The workers love working there and most of all customers enjoy their contact with Mainfreight.

Without this strong, leader led, focused running of this business Mainfreight would no doubt be floundering in the extremely competitive business environment that they operate in.

Plested and Braid would be sorely missed if they ever left the company so hopefully they can pick a good replacement when that happens.

Given that company culture is so good, the likelihood is that other good leaders will emerge, thanks to the example set by Mainfreight's leaders.

The lack of accountability by leaders when things go wrong in an organisation or business is probably the biggest barrier to business excellence for the medium and long term in this country.

Corporate history in NZ is littered with the corpses of businesses mismanaged to the point of surrender and over the last 8 years the level of managerial incompetence has continued.

The difference over the last 8 or so years though is that management and specifically leaders of that management haven't been accountable or been made accountable by fellow board members, shareholders and customers.

We have had a litany of cases of unaccountable leaders recently. Tim Saunders, former director at failed Feltex Carpets has recently been voted back in as a director of Contact Energy Ltd [CEN.NZ] after being found by an independent body as being partly culpable for Feltex's demise.

Is it any wonder why those working at the coal face at Contact are suffering from low morale. Its CEO or its board should have summarily dumped Saunders. Totally the wrong message sent to the troops and not good for the long term health of the company, global warming fuzzies or not.

Countless heads at the restaurant operator, Restaurant Brands Ltd [RBD.NZ] have failed miserably at the helm, none of them were held responsible in any way, other than they were forced to leave, long after the rot of their management had set in. RBD continue to suffer this vacuum of leadership all the way down to store level and it is obvious in almost every aspect of the business, from the non responsive middle managers all the way down to the surly staff serving customers.

There is a more successful culture in low fat yogurt than at RBD head office.

Sky City Entertainment Group Ltd [SKC.NZ] CEO Evan Davies made a series of mistakes that ended in his being pushed out the door earlier this year but not before he resided over dramatically falling fortunes in gaming profits, a couple of bad asset purchases and a conflict of interest case when his wife was promoted to a position of significant importance in the company.

Davies was allowed to stay at the helm despite his failures because his fellow board members and Sky City shareholders failed to make him responsible and he himself failed to realize that he wasn't managing the company the way it should have been and to fall on his own gilt edged sword.

Management under him at the time are still there at head office and continue to run around like headless chooks wondering what to do, while bargain hunters are hanging around, presumably with better management skills, waiting to pounce on the mismanaged beast that is Sky City.

When is it that leaders will take responsibility for company success and its failures?

It will happen when others make them responsible for those failures. In the case of company leaders; shareholders, employees and customers fail to make them accountable and need desperately to do so.

It shouldn't be up to others to make individual leaders responsible though. Being taught to be a leader from an early age is the antidote to the sickness that we as a society are suffering in terms of leadership.

The New Zealand Prime Minister, Helen Clark, should be a leader to look up to but her copybook is unfortunately blotted with so much irresponsibility and lack of accountability the ink is turning into a sickly red and spilling over the whole corpse.

With good role models in New Zealand being as rare as 15 year old virgins it looks like the problem is going to get worse before it gets better.

Our socialist education system where it is taught that it is OK to lose and that the word"failure" has been erased from the school vocab to be replaced by the phrase "did not achieve" is certainly only going to make the problem of future good leadership a goal that is "not achieved".


Disclosure: I own SKC & MFT shares in the Share Investor Portfolio

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c Share Investor 2007

Telecom NZ rewards ex Chief for Mediocrity

The smack in the face to investors that is the Teresa Gattung payout brings more questions than answers. Gattung was paid $5.4 million during her final year with the company, which has just been released in the 2007 Annual report.

Gattung ran Telecom New Zealand [TEL.NZ] for almost ten years and in that time was responsible for more destruction of wealth for New Zealand public shareholders in any one single listed company in this countries history.

When she took the helm in the late 90s the TEL share price had reached almost $10 and profit peaked at NZ$820 Million dollars in 1998 . Since then profit has struggled to grow and has remained basically flat until 2007 profit of just north of $900 million. Next year the company will struggle to make $650 million because of the sale of one of the companies core assets, the Yellow Pages, a decision arrived at while Gattung was at the helm.

When Gattung left the share price was barely over $4 and the company has been left with problems surrounding decaying infrastructure and obsolete technology like their 027 mobile network ,which was redundant technology even before it was introduced not so long ago.

I cant work out whether Gattung didn't get much criticism for her truly awful reign at the top of Telecom because she is a woman or because brokers and large institutions had so much money invested in the company that there wasn't that much critical opinion to be written about by our mainstream business media writers. It was probably a little of both.

Teresa Gattung was a short term thinker in business and wasn't able to grasp where the company would be in 10 years. Under-investing in the business, reactive rather than proactive, marketing spin and poor service were the hallmarks of her time at the top and the position she had the company in when she left has the company directionless, treading water and fearful of competition.

Clearly she left the company in a worse state than when she started and the $5.4 million she was paid out before she left, including over $2 million in "incentives," was a kick in the collective teeth of Telecom shareholders who had to suffer through what was one of the biggest losses in New Zealand corporate history last year.

The news that Ms Gattung has had "several job offers" from companies should leave those that have offered shaking in their boots were they to read the last 9 years of Telecom balance sheets.


Telecom NZ @ Share Investor

Telecom NZ: TV3 60 Minutes Segment more like Corporporate spin
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free


Discuss this stock at Share Investor Forum - Register free

Recommended Amazon Reading


The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham
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c Share Investor 2007 & 2010

Telecom New Zealand Hangs Up.

Telecom New Zealand's [TEL.NZ] profit announcement last week reveals a company in gradual decline.

There are many reasons for this, not the least of them being the fact that management have always had a siege mentality to competition, that is, they tended to respond to rivals in a reactive rather than a proactive way. Their customers suffered on monetary and service levels simply because Telecom's monopoly position allowed them to do so.

When Government moved to untangle their monopoly their shortcomings were revealed to a greater extent than we already knew. Overwhelming arrogance seemed to be the order of the day.

Underspending in infrastructure over the last 18 years has left the company in a position where it now would have to spend multi billions just to get their networks and infrastructure up to speed to present day technology so they could offer their customers anything close to high speed broadband or mobile technologies that allow modern fast content.

The shortsightedness of the past seems to pervade Telecom's culture to the core. I say this because the companies answer to falling profits and revenue in the fixed line business was to sell the Yellow Pages unit to a Canadian Pension Fund for NZ$ 2.2B earlier this year. Roughly half of the proceeds will be dispersed to shareholders.

The Yellow Pages unit was one of Telecoms most profitable divisions, contributing over $200M in before tax profit and set to increase revenue and profit in years to come. The new owners have increased their own advertising for their product and are concentrating on growing their online presence.

As a business owner myself I would be ditching declining businesses rather than flogging off the most profitable.

To be sure $2.2 B is a nice little wedge of moola but it is a short sighted of management not to look towards its future in a more considered manner.

Most of Telecoms other businesses are either mature or near maturity. Fixed line is in decline, Mobile is reaching saturation and "Broadband" or what Telecom call broadband is constrained by their 19th century copper wire outlook in a 21st century world.

Lessons that should have been learned in the 1990s: lack of investing back in the business, slow to respond to competition etc, still haven't reached managements brain stems and look unlikely to do so unless coerced by Government intervention.

Management even suggested last week that Taxpayers should fund the badly needed infrastructure needed if New Zealanders "...wanted broadband quicker...".

For a communications company, Telecom New Zealand are not communicating the right message. Its customers continue to get an engaged signal and its clear message to the public at large is that they just don't care.


Telecom NZ @ Share Investor

Telecom NZ: TV3 60 Minutes Segment more like Corporporate spin
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free


Discuss this stock at Share Investor Forum - Register free

Recommended Amazon Reading


The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham
Buy new: $14.95 / Used from: $7.50
Usually ships in 24 hours

Buy Bird on a Wire & more @ Fishpond.co.nz




c Share Investor 2007 & 2010

Business Mis-Management

The recent and distant past of company management and its track record in New Zealand leave a lot to be desired.

While the calibre of management in selected companies listed on the NZX is clearly very good: Mainfreight Ltd [MFT.NZ], Pumpkin Patch, Michael Hill, Fletcher Building, Rakon among a shortlist, the great bulk of management is littered with far too many candidates for the top prize of mis-manager of the year.

On the negative side the list includes Feltex at the top followed by Restaurant Brands ,with Telecom, The Warehouse(previous Management)Tourism Holdings and Sky City all worth a mention.

The bottom rung seem to share some common traits. Basic bad decision making, at times it is part of the culture- Telecom, in Feltex Carpets case bad decision making was endemic and used to cover up problems, Restaurant Brands suffers from a culture of denial when it comes to decision making-witness the complete ignorance of store level service, Tourism Holdings simply couldn't make a decision as to what their problems were caused by and Sky City Ltd [SKC.NZX] has made a hastie decision to buy a cinema unit that drags down profit and is capital hungry for no return but they refuse to make the decision to let go and cut lose a bad business.

The Warehouse's woes were widely canvassed but they suffered from a man,Tindall, that rushed into a new business with too much confidence, ignoring basic differences in the shopping culture of 2 different countries.

Managers are paid to manage and that means, as much as possible, decisions being made at the right time and in the right direction as consistently as possible. When managers begin to garner a track record of bad decision making, it is time to look at the problem, fix it if possible or move that manager on if an easy fix isn't possible.

Shareholders need to have a means of making their opinions known to those who manage their investment in the company they have bought and apart from the likes of Bruce Sheppard from the Shareholders Association, the rest of us appear to be sheep when it comes to standing up for our vote on the board.

The buck stops with the person at the top rung of management but a clear stumbling block with our listed and private companies is the bottleneck of middle managers ,who often serve the purpose of mere relay people, of information from productive workers on the shop floor to those executives at the top. We could do with less of these people in our companies, in my humble opinion they can confuse the clear messages that must get through from upper management to shop floor and back in order for a company to function efficiently and competently.

Restaurant Brands suffers from this syndrome in spades. Store workers don't get to communicate clearly as to what is going on at store level directly to upper management, problems are filtered through a multifaceted layer of store, area and regional management before getting operating concerns to the top.

Of course RBD store managers often don't have the motivation to let upper management know if there are problems at store level anyway, lest they be in the gun themselves. This happens to a lesser extent in other New Zealand companies but is still clearly a problem. Telecom suffers badly from the same syndrome.

The solutions to our problems may lay in what Toyota calls the "Toyota Way" that is, where there is a free flow of reciprocal critical information between upper management and productive workers. In essence this means that a shop floor worker has access directly to upper management and vice versa.

Like a pyramid of cheerleaders whispering advice from the bottom of the pile to the top, by the time it gets there the message is often completely different from its original form. Remove the middle of the pyramid and it will collapse but remove middle management from the management pyramid and it will serve to make the company stronger.



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