The Warehouse still interested in Australian Expansion

In a Share Investor Q & A out 20 Sept 2010, on Ian Morrice, CEO of The Warehouse Group Ltd [WHS.NZX], Ian gives some very interesting answers to my questions to him. We cover aspects of his business life, retailing in general and the Warehouse Group specifically and some other topics thus far not broached by other interviewers.

One answer that really interested me was the answer to the following question on the Australian retail market and any possible move back there:

"SI - Ryman Healthcare Ltd [RYM.NZX] has recently announced a move into the Australian market while Telecom NZ [TEL.NZX] is selling up their Australian assets. Do you you see the possibility of The Warehouse going back to that market given the right opportunity and a more appropriate execution of an expansion there?

IM - We would consider it but not through taking the Red Sheds model to Australia.

SI - What mistakes were made when the company entered the Australian market in 2000 and how would you do things differently if you entered that market?

IM - Any future move into Australia would fully consider the competitive environment and the availability of the appropriate footprint in the right locations".

Ian's predecessor, Greg Muir, gained a foothold into Australia in August 2000, by acquiring the Clint's Crazy Bargains/Silly Solly's chain of 115 discount variety stores and ended up losing the thick end of $200 million of shareholders money when Ian bailed out in 2005.

Not Ian's fault of course and it looks like any further entry into Australia would be a bit more considered and planned rather than the rush of blood to the head that Greg Muir - former director at Hanover Group and current director at Pumpkin Patch Ltd [PPL.NZX] - had when he decided to plunk down north of $100 million to buy the aforementioned chain.

I was very excited about the move into OZ back in 2000 but upon reflection and 10 years more experience in the stockmarket I now realise I had my head firmly in a place that never sees the sun in terms of the planning of the Australian expansion. I still believe that a more considered and planned approach to expansion of the company in Australia would be a wise move on Ian's part.


Disclosure: I own WHS shares in the Share Investor Portfolio

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The Warehouse Group @ Share Investor

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c Share Investor 2010

John Banks VS Len Brown

If voters learnt anything from the 9 years of the Labour Government that ended in an economic and social heap of dung, they learnt that socialism doesn't work.

It is interfering, demoralizing, it leads to social problems and perhaps more importantly to hardworking ratepayers/taxpayers, it is very expensive.

In respect to the local body elections in the race for Major for the new Auckland "Super City", voters have a choice between the two leading contenders, John Banks and Len Brown.

While John Banks is connected to the National Party and pushes their agenda of personal responsibility, business, efficiency and smaller Government (his actions belie the last part) Len Brown is another kettle of fish altogether.

Len is a socialist. Nothing wrong with that if you follow this extreme political line but it is bad news for the bulk of us who don't.

Len has for the last 3 years as Mayor, and years before that as Councillor, overseen a Manukau City Council that has raked up record debt by spending ratepayer cash on free swimming pools, cash handouts to special interest groups, koha to political friends and racial favouritism, not to mention his own personal spending on the ratepayer credit card.

For the supercity he wants to expand all this and add some really expensive toys that just don't add up financially.

He wants an Auckland wide rail system, free swimming pools for all (who pays for those again?) he wants all council business to be council controlled rather than privately owned, bigger roads, bigger parks and much, much more... in short a much bigger council.

He also want to continue what he calls positive discrimination, that is, he wants to favour Maori and Pacific Islanders by allowing them representation and input on the council without them being voted in.

I call that racist but hey that is what socialism does. It creates imbalances when it tries to make everyone the same.

Auckland voters have to make a wise decision this September.

Vote for John Banks and you will get much the same that you have got from his time as mayor of the smaller Auckland but vote for Len Brown and you will end up with a mess much the same as was left behind by the last Labour Government.

c Darren Rickard 2010

Rod Duke admits 2008 - 2010 Recession the worst

In a Share Investor Q & A out tomorrow morning on Rod Duke, CEO of Briscoe Group Ltd [BGR.NZX], Rod gives some very interesting answers to my questions to him. We cover aspects of his business life, retailing in general and the Briscoe Group specifically and some other topics thus far not broached by other interviewers.

One answer that really interested me was the answer to the following question:

SI - Is this the worst recession you have experienced in terms of retail and/or personally?

RD - Yes, Yes

Dumb that I didn't ask him if he thought it was over but revealing in the sense that here is a man at the cutting edge of retailing in New Zealand, with years of experience in retail and in business and he says that this is the worst ever recession he has experienced. This would include the decade of low growth in the 1990s, the aftermath of the 1987 stockmarket crash and the oil lead recessions of the early and late 1970s.

Pretty big call to say that the period 2008 - 2010 (I think we will experience a longer term of recession) is the worst of economic times since the depression (I know others have said this but Rod has been very direct and succinct while others on the economic coal-face like him have often waivered in their opinions) but that how Rod has called it and he is old enough to know.

Rod even quotes Warren Buffett at one stage!

My favourite Share Investor Q & A thus far and he completed it in a couple of days. Shame his mate Ian has been dragging the chain.

Sorry Ian just kidding!


Disc I own BGR shares in the Share Investor Portfolio


Share Investor Q & As

Briscoe Group CEO Rod Duke
Ryman CFO Gordon Macleod
Ecoya's Geoff Ross
Xero's Rod Drury
Mainfreight MD Don Braid
Burger Fuel Director Josef Roberts
Sky City CEO, Nigel Morrison


Briscoe Group @ Share Investor

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Rod Duke's Pumpkin Patch gets bigger

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c Share Investor 2010

Ecoya Ltd: Trilogy Purchase Dumps on small shareholders

I seem to have developed an even more keen sense of moral outrage than I usually do and have expressed it over the last few months but there is just so much dodgy stuff out there when it comes to business, financial markets and investing in general.

The rushed purchase last week and subsequent capital raising of Trilogy Skincare by Ecoya Ltd [ECO.NZX] raises some questions about shareholder rights and the responsibility of the NZX as the regulator of the New Zealand stockmarket to protect those shareholder rights.

In a statement to the market yesterday Ecoya management gave the reasons why they "had to act swiftly" and applied and received a wavier from the NZX to make the purchase of Trilogy without obtaining shareholder approval:

"The Proposed Acquisition needs to be executed swiftly as ECO is part of a competitive bid process. If ECO is required to obtain a shareholder vote in respect of the Proposed Acquisition, there is very real likelihood that this would compromise ECO’s position in the competitive bid process, by making ECO’s proposed deal a less competitive option for the vendor."

All well and good but smaller shareholders in ECO didn't have the opportunity to say yey or nay to the deal and the NZX, once again, allowed ECO management and big shareholders in ECO to have rights above the small investor.

Ecoya management say the deal will be good for the company and provide a good platform for growth where Trilogy has markets and Ecoya doesn't but shouldn't it be put to a vote so the owners of this business can have their say?

I think so!

Why bother being a shareholder in a company if you don't feel you have some sort of ownership in the company, albeit a small one.

That is part of the rights of being a shareholder and half of the fun of owning a share in a public company.

If Ecoya management want to run the business in this way why the hell did they go public at all. Complete control of this public company would have been more appropriate if they didn't list.

I asked CEO Geoff Ross in a Share Investor Q & A in July 2010 why he listed such a small company instead of raising private capital and he gave the following reasons:

"We chose to list on the NZX because even though a small raise, it provided a good structure for our capital requirements – a fair valuation and the warrants to raise further capital as our business grows. Being a listed company also gives a credibility when operating in international markets. You are taken with a degree of seriousness when dealing with large clients such as department stores and also your key suppliers".

All credible reasons but how about looking after the shareholder by adhering to NZX shareholder rights?


Ecoya Ltd @ Share Investor

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c Share Investor 2010