Share Investor Q & A: Questions to The Warehouse' CEO Ian Morrice

I have got a Share Investor Q & A coming out, probably next week sometime, from the CFO of Ryman Healthcare Ltd [RYM.NZ] but have managed to jack up a good one today with The Warehouse Group Ltd [WHS.NZ] CEO Ian Morrice.

The Warehouse is a company with a long established history in New Zealand as the bargain retailer and it has been a great investment for long term shareholders over the past.

Over the last 5 years though the company has stalled in growth and now faces more serious competition from its rivals.

It has been headed by canny Scot, Ian Morrice for the last few years and he has done well. What do we know of his plans for the Red Sheds and how he intends to take the company into the future will be of interest as well as how the man works.

With that in mind I thought I would like my readers to put some questions to Ian and The Warehouse.

Please leave your questions here at the bottom of this post or email me here.


Disclosure: I own WHS shares in the Share Investor Portfolio


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c Share Investor 2010

2010 NBR Rich List

The 24th annual 2010 NBR Rich List (see full list at NBR - Requires Sub)was out this morning and revealed the usual bunch of multimillionaires with a few additions to last year and some notable omissions from the 2009 list.

Graham Hart topped the list with a $5 billion plus fortune and there was an inclusion for the first time by Rod Drury, CEO of Xero Ltd [XRO,NZ] and the exclusion of folk like Terry Seripisos and beleaguered businessman Allan Hubbard.

The usual entry of old money from the likes of the Myers, Todds, Fay, Richwhites and Spencers also continue to eek out places in the top ten.

The top 10:
1 Graeme Hart $5.5 billion
2 Todd Family $2.7 billion
3 Eamon Cleary $2 billion
4 Lynette Erceg $1.5 billion
5= Christopher Chandler $1.4 billion
5= Richard Chandler $1.4 billion
6 Goodman Family $850 million
7= Stephen Jennings $800 million
7= Sir Douglas Myers $800 million
8= Sir Michael Fay $750 million
8= David Richwhite $750 million
9= Michael Friedlander $700 million
9= Spencer family $700 million
10 Peter Cooper $650 million

NBR @ Share Investor

2009 NBR Rich List
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Recent Share Investor Reading

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Ryman Healthcare Ltd: Australian Expansion Needs Care

Ryman Healthcare Ltd [RYM.NZ],the retirement village and aged care provider, is one of the NZXs best performing companies and historically it has increased earnings by at least 10% for each of the last 10 years.

Its full year result to March 31 2010 was up 16% on last years 2009 full year and indications are that these sorts of results are likely to continue for the foreseeable future considering the increasing age demographics for the New Zealand population and the seemingly unparalleled popularity of their offering to their prospective customers.

New Zealand has and will remain an important area of growth in revenue and profit for the long term and this has been stated by Ryman management on many occasions.

The decision announced today at the Ryman Healthcare Ltd [RYM.NZ] annual meeting to start looking at property in Australia to build one of their villages is a two edged sword for the company and its shareholders.

In an interview with Ryman Chief Financial Officer, Gordon Macleod coming up next week at Share Investor I put the question of expansion into Australia before today's announcement and the answer, now somewhat academic, will be adding to today's news.

On the one hand the company has a good business model, is brilliantly managed and Australia is a vast untapped market for them but on the other hand Australia is littered with the corpses of listed companies that have tried to expand there and have headed back with their tails between their legs and millions of dollars less in their pockets.

Ask management at The Warehouse Group Ltd [WHS.NZ], Telecom NZ [TEL.NZ], Restaurant Brands Ltd [RBD.NZ] Burger Fuel Worldwide [BFW.NZ] and a whole host of other companies that thought they could foot it in a much more competitive market. Australia has been the bogeyman of failure for New Zealand businesses looking for more opportunities for growth.

There have also been successes. Michael Hill International [MHI.NZ], Mainfreight Ltd [MFT.NZ] Pumpkin Patch Ltd [PPL.NZ], Sky City Entertainment Group Ltd [SKC.NZ] (after new management and a number of years) and others set out to achieve their goals and promises to shareholders for more growth across the ditch and have done well for shareholders in terms of returns.

One of the major stumbling blocks for Kiwi companies expanding across the Tasman has been their lack of research and the tendency to go full steam ahead without testing the market in a small way first. Significantly the aforementioned failures all bought standalone businesses (apart form BFW) and thought they could run them in a similar fashion to their New Zealand business model. The successful ones all tried their new businesses in Australia in a small way and grew a base from their initial success.

Management at Ryman have indicated that they have done their research for years and they are going to develop one village and see how it goes before committing any further shareholder cash to growth there:

“We have been carefully studying the Australian market for several years,” and we see it as the next logical step in the growth of the company. The Ryman model will be relatively unique in the Australian market.”

“We are in a strong financial position and the management team is ready to take this next step.”

“Shareholders can be reassured that we will be taking one step at a time, and that we will be very focussed on getting the first village successfully established.” Ryman Chairman Dr David Kerr at 2010 Annual Meeting.

Ryman shareholders should indeed be pleased that the company is taking the softly, softly approach to Australian expansion but cautious nonetheless that the outcome of expansion in OZ could be disappointing.

This company has been well managed in the past and I am mostly pleased about the announcement today, apart from the reservations I pointed out.

If the Australian move is executed with as much care and consideration - subject to proper research by RYM management and taking into account the vast differences in business, investment, employment practices and other country specific variables - as has been in New Zealand the company and shareholders are going to be richly rewarded in the long term.

I look forward to positive results from our Aussie branch over the next few years .

Disclosure: I own MHI, MFT, PPL RYM, WHS shares in the Share Investor Portfolio


Ryman Healthcare @ Share Investor

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c Share Investor 2010

Official Cash Rate: Bollard Gets it Wrong, Again

Allan Bollard's decision today to raise the official cash rate by .25% to 3.00% is further evidence that Mr Bollard is out of his depth.

His raising of rates to record levels a few years back did nothing to damage the housing boom - the 2008 financial crisis took care of that.

Most of Mr Bollard's movements have been based by looking in a fogged up rear view economic mirror with little understanding of the current and future outcomes. His movements lack foresight, basic economic understanding and the ability to see the bigger picture.

What is clear is that the world is having economic problems, especially struggling with debt, and what New Zealand relies on to keep afloat, exporting, is going to be hurt again by this latest rise.

Likewise the mortgage holder is going to have problems, at a time when there is no spare cash to spend in a faltering economy.

One only has to look towards the United States near zero cash rate to see what problems this latest rise will cause - our OCR is too high.

The wise thing to do today would have been for Mr B to lower the cash rate to 2.5% and keep doing it to stimulate business lending and therefore the economy.

Any 3rd form economics student would have done the same.


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c Share Investor 2010