Picking up Mercury with Chopsticks

I was reminded last week of just how lax New Zealand's laws are on serious fraud and financial skulduggery.

The Serious Fraud Office charged Peter Marshall with 13 counts of false accounting and making false statements in 2005, after his company Access Brokerage collapsed in 2004 owing more than $3 million.

Through his lawyer Marshall's defence is that due to a stroke he has suffered "memory loss" and that crucial evidence is in his mind murky because of this and therefore has asked for an adjournment to his fraud trial.

Forgive me if I might sound a like a tough bastard but surely all the evidence needed is in written form and any charge prosecuted and then defence of such charges would be a simple procedure and could go ahead in the absence of Marshall's absent memory.

Time certainly isn't going to help his recollection of events become crystal clear enough for him to have any trial commence.

Justice certainly isn't going to be served as it has already been over 3 years since the collapse of his firm and further delay seems to me prolonging the inevitable.

I must say this isn't the first example of such a defence being used to delay a fraud trial and it comes on top of poor efforts by the SFO to seek justice on behalf of victims of financial fraudsters and stacked deck accounting practices and the likelihood of these sewer rats being caught and punished seems akin to trying to pick up mercury with chopsticks.

Marshall's prospective fraud trial is especially relevant considering the climate in the finance industry of late.

The recent finance industry collapses in New Zealand share a common thread.

There are many that called themselves "financial advisers" who advised kiwis, many of them elderly, to get into Bridgecorp, knowing it was about to collapse.

I know of one 75 year old who has probably lost NZ $25000.00 that was advised to "invest" in Bridgecorp not long before its fall from grace.

I call that fraud and that needs to be punished by a jail sentence. Sadly the odds are that isn't going to happen.

Trustees of several financial companies have also been culpable in my opinion. Accepting deposits from customers, while at the same time keeping the knowledge that the company is in trouble to themselves.

There is really no need for laws to be changed or the SFO amalgamated into some big new state apparatus . All that is needed is for existing fraud laws to be used, prosecuted and a big enough deterrent handed down.

Until there are deterrents for this kind of despicable behavior that can alter victims lives forever, sometimes with deadly consequence, then underhanded and fraudulent swine are simply going to continue with their criminal behavior.


C Share Investor 2007

Pumpkin Patch profits Flatten

Pumpkin Patch Ltd [PPL.NZ] the small global trendy kids clothing retailer, has announced its full year profit today and reported an annual net profit after tax down 3.2 per cent to NZ$27.6 million.

Sales revenues were up 17.9 per cent to $365.7 million for the year to the end of July.

The high $NZ exchange rate hit net profit as foreign revenue is brought back to head office, which is in New Zealand.

The network of stores increased by 35 over the last year to 200 but the expansion, especially in the US and UK markets hit the bottom line as logistical frameworks were put in place for further future expansion.

It looks likely that company profits will remain flat in the near term because of the increased costs of expansion in combination with what looks to be a kiwi dollar that will remain high.

Currently the company is suffering from high tariffs being placed on Pumpkin Patch product in the UK and the US but there has been some movement by those particular authorities to change tariff quotas. Management are hopeful.

Clearly increasing revenues from expansion will offset the increasing costs of same but the full benefit will only be seen once economies of scale can be brought to the US and UK divisions and that is going to take some considerable time in my opinion.

Micheal Hill International [MHI.NZ]is facing similar business start up problems as it establishes its jewelry chain in Canada.

It seems that once a brand enters into a new market it takes a year or two before it builds enough momentum and gets recognized and loved as it already is in Australia and New Zealand.

Australia already has 102 stores and NZ has the most per capita of the countries that it operates in, at 50.

The main growth area for Pumpkin Patch is going to be the USA. Pumpkin Patch opened its first US store in Los Angeles in 2005. Stores are predominately located on the West Coast but further sites are being sought in the Southwest.

Two stores have been opened in Texas and management have announced today that they will be moving into East Coast locations soon.

My guess is that the US has room for around 1000 stores so the company is clearly going to be a very different one in the 10 years or more that this is going to take, if the company keeps its head above water in this very tough and uncompromising market.

Short term, sales in New Zealand and Australia markets, where most of the Patch profit is earned, are likely to be dampened by a weak economy, with high interest rates, increased taxes and other living expenses having impacts on individuals non-essential spending habits.

Long-term though, if company expansion is successful, then we are likely to see an excellent returns for shareholders.

A final dividend for 2007 of 4.5c per share will be paid 17th October 2007, with a record date of 5th October 2007.

PPL shares closed up 5c today to $3.30, close to its lows for the year.

*Disclosure: I own PPL shares


Pumpkin Patch @ Share Investor

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Related Amazon reading



Attracting the next generation of customers: retailers offer insights into marketing to kids.(Cover story): An article from: Hardware Retailing by Luke Dunscombe
Buy new: $9.95
Available for download now


c Share Investor 2007

At least Robin Hood was Honest: Labour will buy the 2008 Election

There is no doubt that Helen Clark and the sisterhood in the New Zealand Labour Party are feeling the heat at present.

With Clark finally succumbing in the polls completely to National, if there was an election today John Key and his buddies would govern on their own. The majority of the country at present prefers Key as its leader.

Clark and co are facing a continuing slide in the economy, failing pillars of the state apparatus in health, education, policing and every other sector of government involvement in our lives are under pressure.

The only success Labour have had is increasing state dependence through record welfare recipients and bloating state employees to a level where we may see some pen pushing, clipboard carrying, pen protector wearing drones move to use up Auckland office space because Clarke and her mates have exhausted supply down in the unproductive caverns and dark bureaucratic holes in Wellington.

You better believe though that the sisterhood deep within Labour will not relinquish the control that they have had over New Zealand, the Land of the long trousers, short hair and hairy pits, for control is what this lot crave and they will do almost anything in their power, and they have it in spades, to hold on to it.

The recent proposed changes to electoral law to make it easier for the incumbent to stay in Government and stifle democratic debate has been widely canvassed in sensible media of late. The hand-wringing Chris Trotters and Russell Browns of this world largely see nothing wrong with stopping debate if you disagree with a point of view so haven't critically covered this as yet.

The grab main grab for power by Labour isn't going to be seen until mid next year when they go to the public for a forth term in office.

Labour and Micheal Cullen have been stockpiling stolen taxpayer funds to the tune of billions of dollars and have so-far refused to hand it back to those who earnt it in the first place because it will not earn votes so far away from an election.

The cynical grab for power by promising to spend billions of dollars of taxpayer dollars on you if they get in is reminiscent of Muldoon's lavish social driven election promises in the late 1970s/early 80s except it will go further in 2008.

Taxpayers, business and therefore the economy have been bled dry over the last 8 years by high taxes and lavish government spending and instead of cutting taxes for the self-imposed economic disaster that they helped create they are going to target special interest groups next year with welfare inspired tax credits, more handouts to students, elderly groups, low income earners and immigrant sectors and some but not much money, will go back to the middle classes that earnt this money in the first place.

Of course these kinds of handouts are designed to maintain the control that Labour and the left in general require and lust for but the horrible thing is that they may even placate those same middle-classes that will fund the 2008 power grab.

Are the middle classes that stupid?

Can they not see what has happened? To be sure the old give with one hand and take with the other has been reversed but is the process so hidden that the majority of New Zealanders wont see this 2008 power grab for what it is?

At least Robin Hood was honest, with Dear Mr Hood you knew were going to be robbed and the proceeds were going to go to the poor but for Ms Helen Hood the bluntness of her arrow is probably to her advantage because while the recipient is clear where the arrow came from and where it is going to, the translation of one from the other is muddied with bureaucratic and citizens blood.

The taxpayer funded power grab began at the 2005 election and was successful, just.

Billions of the middle classes taxes were used to buy the votes of the very people who supplied the funding and got Labour the seat of power by around 50000 votes.

To be fair $800,000 of taxpayer moola was also stolen by Labour to fund a pledge card and that kind of politicking cannot be understated in the light of electoral reform bills proposed to become law this year and used to cover off spending in the 2008 election.

In 2008 though we are likely to see the biggest push using taxpayer dollars to re elect a government that we have ever seen in our electoral history.

Cynical, dangerous and morally corrupt? Sure, but it is up to those middle classes to take back the power that they have let go that their taxes represent.

To do otherwise would be to ultimately let themselves and their country down.


c Darren Rickard 2007

Share Investor's Friday Free for all: Edition 3

Fast Food Company keeps its Head

Restaurant Brands (RBD) the operator of KFC, Pizza Hut and Starbucks in New Zealand has appointed, Russel Creedy, the man who has been acting chief executive since Vicki Salmon's departure to the permanent position as head.

Creedy has been with the company since 2001 and has run company supply chains and Pizza Hut in that time.

Unfortunately Creedy is part of the lack of service culture that pervades RBD's operations and his appointment comes in the wake of his failure at the Pizza Hut division to stem sales drops in the face of competition and the continuation of that as acting head.

His placement as the top Colonel seems to me to be a default kind of appointment and smacks of nobody else outside the company with enthusiasm and fresh ideas being attracted to the sinking ship that is Restaurant Brands.

As an aside but related story Mac Donald's in the US is making inroads into Starbuck's territory with better product and cheaper prices. This author wonders how the local bean crusher is faring against the big Mac.

Retail Therapy

Two of the countries larger retailers reported profits today, with similar results.

Clothing retailer Hallenstein Glasson (HLG) reported a 1.3% fall in net profit to NZ$21.4 million.

Sales were marginally up to just over $200 million with New Zealand operations struggling and Australian sales up a solid 8.1 %.

Expansion of OZ and Kiwi stores were on the cards for the previous 12 months with a Glassons opening in a new Westfield Mall 2 weeks ago in my local area. The store manager tells me it seems to be doing very well and foot traffic while I was there seemed to reflect the managers statement.

The Warehouse (WHS) New Zealand's largest retailer, has announced an annual net profit after tax of $115.5 million. Sales were up 2.4 per cent to $1.76 billion.

The profit included almost $20 million from asset disposal from which a 35c special dividend will be paid. There is to be a normal 5.5c dividend on top of that.

The Warehouse is in a state of flux at the moment. Expansion plans are on hold and ownership is in limbo as Foodstuffs and Progressive look to fight out ownership bids for the company in the courts early next month.

Both retailers will find the going tough for the medium turn, as high government spending has lead the economy into a tail spin raising interest rates and inflation.

Post 2008 election a new frugal, tax cutting regime will help stimulate this sector again.

Pumpkin Patch (PPL) the trendy global kids fashion retailer, will report Monday 17 September(NZ time) and judging by the spectacular fall in share price of the last several weeks insiders seem to know that the result isn't going to be pleasing.

Fonterra headed to a new Frontier?

As canvassed here a few weeks back the speculation about New Zealand's largest company being listed surfaced again this week.

Fonterra's brands business could be worth more than $4 billion if floated on the share market and analysts say it would be an eagerly awaited float.

Fonterra's brands business - including Anchor, Mainland and Tip Top - had an operating revenue of $4 billion.

This puts it above the scale of companies with similar strong brands, such as Goodman Fielder (GFF) which has approximate $2.5 Billion in sales.

With the NZX bereft of such large listings a partial float of Fonterra would give confidence to a sagging undervalued New Zealand stock market.

Good news and bad news for Fonterra this week.

Rachael Hunter, the girl form Glenfield and the Tip Top Trumpet ice cream girl from 22 years ago this week launched the Jellytip Trumpet, a fusion of two classics.

Pictures of Rach' licking the new cone shaped concoction immediately reminded one that perhaps Rod Stewart might have seen the original picture of the pretty 16 year old doing exactly the same thing all those years ago. He of course latter married her.

The bad news, the milk that they base most of their products on has been implicated (again) for causing health problems.


Stupid is as Stupid does

Alan Bollard, the Reserve Bank Governor, has left the official cash rate at 8.25% this week.

Just when he should be lowering the rate because of a downturn in the New Zealand economy, with international markets likely to cut interest interest rates ,Bollard sits on his hands.

Bollard's possum in the headlights, hand on the tiller approach didn't work when he was raising rates and now he appears to be riddled with confusion as to what to do next.

"...This would be offset by the sharp rise in dairy prices and the decline in the New Zealand dollar in the past month..."

So he was critical of the Dairy industry when using it as an excuse to raise interest rates and now he is expecting the same industry to get the economy going when he did the best he could to destroy it with the highest interest rates in the developed world.

Cant have it both ways Forrest.


The Song Remains the Same

Finance companies are in the news again this week.

Geneva Finance, the latest company to strike problems in the financial sector crisis, yesterday gave its trustee assurances about its financial fitness.

On Tuesday, Standard & Poor's put Geneva on negative "CreditWatch" saying it was having liquidity problems.

This writer cannot believe the amount of money being spent by this Finance company and others on saturation advertising trying to soothe prospective customers that their company's stability can be assured.

One could equate the quantity of any advertising of a particular company with the amount of trouble they might be in.

I certainly wouldn't come to that conclusion though-sound of one hand clapping.

Geneva insist things are hunky dory.

Jumping Ship at Telecom a good Call

Another Telecom (TEL) exec is about to head West. Telecom's CEO of its consumer arm, Kevin Kenrick, is resigning in December.

His departure follows the resignation of another senior Telecom exec, CFO, Marko Bogoievski.

Teresa Gattung was the first to get the heave-ho earlier this year when her dismal results as the CEO finally caught up with her.

Considering the pressure Telecom is now under because of Government regulation and the need to spend large capital sums replacing aging infrastructure it seems that head office has morale at the same levels as Telecoms dropping share price and future prospects.

The departures are well timed.

NZX Market wrap

The NZSX-50 index rose 20.25 points, or 0.5 per cent, to 4162.68 on turnover of $83.5 million.

It was a weak trading day which capped a week of the same slim trading.

Giant retailer The Warehouse(WHS) was flat at $5.95 after posting an annual net profit of $97.9m.

Clothing retailer Hallenstein Glasson(HLG) fell a cent to $4.59 after saying annual profit fell 1.3 per cent, to $21.4m.

Top stock Telecom (TEL)was down 2c at $4.35.

No 2 on the NZX board, Fletcher Building(FBU) increased on yesterday's 22c gain with a 14c rise to $11.99. Contact Energy(CEN) fell 2c to $8.97.

Fisher & Paykel Healthcare(FPH) was up a cent at 360, while F&P Appliances(FPA) rose 10c to 365. Auckland Airport (AIA)rose a cent to 311 with no more news of takeover talk, Sky City Entertainment(SKC) lost 2c to $4.38, and Sky TV(SKT) rose 17c to $5.60.

Air New Zealand(AIR) was up 4c at $2.29 ahead of a large dividend payout, Infratil (IFT)was up 8c at $2.80 and investment company Hellaby(HBY) was also up 8c, at $2.74.

NZX increased 15c to $9.75, PGG Wrightson(PGG) was up 2c at $1.78, Vector(VCT) the Auckland Lines company rose 5c to $2.58, and Tower(TWR) was up 5c at $2.25.

Going down were, Pumpkin Patch(PPL) was down 9c at $3.25 ahead of next weeks profit announcement, Nuplex(NPX) fell 13c to $6.97, Port of Tauranga (POT) lost 7c to $6.90, and Cavalier(CAV) was down 3c at $3.30.

c Share Investor 2007