Friday, August 31, 2007

Share Investor's Friday Free for all

Airport Merger with DAE finally crashes

The merger of Auckland International Airport(AIA) with Dubai Aeronautical Enterprise (DAE) has hit crosswinds with DAE finally realising that their deal to control around 60% of the company looking like it is about to crash and burn.

DAE said legal action filed by Air New Zealand seeking a judicial review of AIA's landing charges constituted a "prescribed occurrence" under the terms of the merger agreement.

DAE have stated if the parties were unable to come to an agreement by the end of five working days of mutual talks, either party could terminate the merger agreement.

As many, including myself have commented DAE look likely to fly the coop.

There are other prospective buyers of AIA in the wings and there is a possibility that a Canadian Pension Plan maybe ready to launch a bid.

Shares ended down to NZ$3.02 on the news today.

Don't leave town or sell your shares yet.

Finance Companies Folding

Finance companies continued to collapse with gay abandon this week. Five Star Consumer Finance disappeared with $80 Million and today a subsidiary of Dorchester Finance was wound up by Dorchester directors.

Dorchester claim the parent company isn't in trouble but we have heard that before haven't we.

The Securities Commission has asked all finance companies to respond to them with a state of their affairs. 18 stragglers were the last to report at 6.30pm today but we have yet to hear the health or otherwise of these companies. It looks likely that we will hear of others going south next week.

Micheal Cullen, the Labour Minister of Finance, has come out to reassure the public that the Finance company mess hasn't spread to the banking sector. His comments are far from reassuring. They scare me.

Two Titans bow out

Sir James Fletcher , the driver behind the incredible growth of Fletcher Challenge from the 1940s-1980s bowed out this week.

Born into privilege and wealth James Fletcher took the reins of his fathers building company in the mid 1940s and turned it into what was to become one of New Zealands largest companies.

His management style , capacity for hard work and ability to communicate with and respect people are aspects of upper management that are sadly lacking, with a few notable exceptions, in this country today.

Nick Nobilo, the founder and head of Nobilo Wines will be remembered for introducing New Zealanders to wine and also for transforming large areas of West Auckland into quality Vineyards where exports of his product have now become commonplace.

Another hard grafter, this immigrant had a vision, had a backbone and got down and let his hands get dirty. Sadly these traits seem to be missing from many of us today.

Burger Fuel share price rises

Josef Roberts explained to me this week that his companies share price was dropping because of poor liquidity and negative world markets. The price was trading at .65c at the time. Burger Fuel shares were up to 70c yesterday and closed today at the same price. Go figure.

Wasted Opportunities

Transpacific Industries, the Australian parent of Waste Management, reported a 117 per cent rise in net profit on the back of a year of aggressive expansion.

Transpacific, an Australian company, bought Waste Management a few years back at what alot of market commentators and directors of Waste Management said was a good price for shareholders. I was one shareholder who thought the price paid was poor and clearly I didn't want to sell.

My stance was vindicated with today's Transpacific announcement.

A shame my detractors seem silent now and so are the former directors of Waste Management.

Short term thinkers can only see just that. Short term.

NZX finishes up

The benchmark NZSX-50 index closed up 0.3 per cent, or 11.37 points, at 4118.97.

Contact Energy(CEN) was down 12c at 915 after swinging very wildly this week and reporting a good profit. Fisher & Paykel Healthcare(FPH) was down 2c at 338, F&P(FPA)Sky Television TV(SKT) shed 3c to 558.

Port of Tauranga (POT) lost some of yesterday's gains to close down 10c at 700 after reporting a stellar profit increase yesterday, Air New Zealand(AIR) rose 5c to 206, Freightways(FRE)was up 5c at 395, and Mainfreight(MFT) lost 2c to 707.

Sanford (SAN) was up 15c at 455, Tower(TWR) rose 7c to 231, Rakon(RAK) was up 7c at 489, and The Warehouse(WHS) rose 3c to 564.

ANZ shed 60c to 3350, Westpac was up 45c at 3145, AMP gained 14c to 1215, Lion Nathan(LNN) rose 5c to 1055, and Goodman Fielder(GFF) was up 10c at 300 after earlier this week reporting a solid profit result. It is at near historical highs.

Till next week.

*Disclosure: I own AIA, FRE, FPH,GFF, MFT, SKC, Shares

c Share Investor 2007

Thursday, August 30, 2007

IPO Quality indicative of poor economy

The poor number of IPO's listed on the New Zealand Stock Exchange in 2007 reflect the lack of confidence that the business sector and therefore market investors have in the NZ economy.

This is a good indicator of where our economy might be going, considering share markets usually anticipate real economic factors months before they happen.

Michael Cullen's tax, spend and welfare splurge has finally come home to roost. His huge taxpayer funded surplus has meant Kiwis have used credit to buy consumer goods instead of the cash that is theirs and the Labour Government's contribution to the current finance company mess must be stated clearly.

The quality of some IPO's listed this year have left investors a little bit cold. Xero [XRO.NZ] the software company listed at over NZ$1 and now languish at around 70c, Burger Fuel International [BFW.NZ] listed at $1 and are currently getting grilled at .70c (up 5c today!!!) Pike River Coal [PRC.NZ] , the biggest IPO this year started trading at $1 and is now selling at just above 80c.

We have had several prospective IPOs canceled this year because of investor nervousness. One of them, AMP's listing of their Summerset Retirement Village unit has been canned but ING's Retirement unit will still be listed later this year, even though some of its directors have been involved in major business failures and losses for investors in the past.

The New Zealand share market is lacking a big IPO that would possibly kick off a new wave of investing. One remote possibility would be this countries biggest company, the Dairy giant Fonterra. There has been talk around the traps from time to time about this happening but nothing concrete or with any substance as yet.

It would make perfect sense to list Fonterra, especially now as the Dairy business is doing historically well, more investment is needed to increase capacity and listing would allow farmers to free up capital more easily than currently and using the proceeds to reinvest in their business, pay back debt or buy that new Holden or Ford.

IPO's can be a good indicator of how well the business community sees the economy going. The dearth of good ones in 2007 indicate that the brakes have already been applied to the economy.

Lets hope the impact isn't too hard.

The resumption of some good IPO's will be one indicator of a turnaround.

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c Share Investor 2007

Wednesday, August 29, 2007

Business Gobbledygook puts up Barriers to Communication


At the end of the day, when all is said and done, with all things considered, in the fullness of time and taking the long-term view-urrrggghh-all we want is a straight answer in the simplest way possible.

Nowhere is this more appropriate than in the business world. While speaking to customers, talking to employees, and communicating a message to shareholders. Your message should be clear, precise, unambiguous and be free of unnecessary verbosity and complicated language and "corporate-speak".

My piece today was inspired by two news items of late and they rekindled this subject which has been in the back of my mind for years. The first situation was some of the language used by Telecom New Zealand(TEL) to explain to customers why they had mismanaged a software upgrade to their Xtra Internet unit and the other news story was about Sky City Entertainment's(SKC) explanation of areas of last weeks complicated 2007 FY profit announcement and the confusion that it caused amongst analysts.

In the first instance with Xtra, a spokesman explained that customers were not let down or disappointed with the break in "service" but were instead suffering from "negative surprise". Callers to the Xtra helpline were told in clipped tones when they got testy with Telecom employees over the wait for resumed service that they were experiencing "service disconnection anxiety".

What this kind of language does of course, is to first of all fudge the real issue and spin the heat off the main protagonist, Telecom, and make the customer feel guilty, secondly it has the added bonus of frustrating the customer so much that he gives up on the reason for his call in the first place. This is exactly why this process is used of course because the offending company really doesn't care that much at all about your problem but cant really come out and say that straight.

Telecom are well known for using this kind of spin to run their business, within and outside the company when communicating with customers. For a communications company Telecom NZ don't communicate well at all and indeed there always seems to be a "negative surprise" waiting at the end of the line when one calls the 123 Help line.

Elmar Toime had to spin for his life today to explain issues surrounding last weeks Sky City Entertainment profit announcement:

"The information that was available when I stepped in as manager wasn't enough to assign budgets to individual responsibility areas of the business."

Translation: I didnt do my homework properly.

The SKC profit announcement contained such gems as this one:

"A strategic development plan has been completed for SKYCITY Adelaide which has verified the value of this business and established the path for delivering incremental shareholder value from this property."Huh? we really mean we will try and increase profit but it is going to take a long time and may never happen under my watch.

Don't laugh:

"...a peer review of the Auckland gaming performance and strategy has been undertaken and plans put in place to actively address opportunities..."Does Management usually inactively "address opportunities" ?The word incremental seems to have been carefully chosen because here it is again:

“Most importantly, we are now positioned to ensure that this delivers incremental value to our shareholders and a sustainable future for our people."

Websters dictionary meaning: A slight, often barely perceptible augmentation. In conjunction with the management speak word of the year , the meaningless "sustainable," this sentence really means that profit growth will be small and management don't really know what outcome that will have for the business.

I could trudge through this announcement and pick up more unnecessary management bullshit but even I have a life to lead. You get my point though don't you. Why jazz up communications to shareholders with hackneyed management spin and written clutter?

To be fair to Toime and his company though, this sort of language and company announcement is not rare in New Zealand or overseas. Some companies are much worse and some are better. Mainfreight(MFT), a listed New Zealand trucking company is one enterprise that doesn't indulge in this stuff and I am a well informed and happy shareholder as a result.

When a business, profession or individual chooses to communicate to others in an unnecessary way, as I have explained above, one has to suspect the motives of the communicator. Their verbosity and over complication is probably hiding something. When communicating to shareholders it could be glossing over profits or company prospects, in the case of Telecom ,spin and complication is used to frustrate or fob off customers because of shortcomings in the business structure and with professions such as lawyers, doctors and real estate agents complicated communication is often used to exclude others for economic reasons. If one cannot understand what others are saying someone usually gets paid to decipher this information and it is usually you that pays!!

Politicians are masters at it and we all know they have to be because the skeletons they are hiding require a fair degree of verbal and written dexterity.

In business though, it is most important to "cut the crap" and get to the point quickly and in the most efficient way one can.

In my opinion one can tell the quality of a business by the way they communicate to shareholders, customers and employees. If the communication is fast and efficient the company is likely to be run in the same way.

Of course the opposite is also true.

Related Share Investor Reading

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Disclosure: I am a shareholder in SKC and MFT

c Share Investor 2007

Mike Moore: Return to Muldoonism?

Poor Mike Moore still has most of his lefty ideals intact but at Political Animal we agree that his sentiments below regarding the Prime Minister Helen Clark and her girlfriends in the Labour cabinet slagging off John Key without any substance or truth are spot on.

I made the comment about Clark and comparing her tenure at the helm of New Zealand with Muldoons reign of terror in the 70s-80s.

Seems the similarities of both Governments are apparent to more than just moi.

Clark usually has responses to such outbursts in the media but has refused to comment on this matter.

In combination with her rorting in the polls 2 days ago the Prime Ministers silence has been deafening.

Mike Moore Wednesday 29 2007

In the 1980s, a cruelly funny cartoon appeared of David Lange. It had four panels - the first displayed a smiling picture of David, then slowly, over the next two panels, David's face morphed into a picture of Roger Douglas.

I'm expecting a cartoon of Helen Clark to appear, morphing into an angry Robert Muldoon. He used SIS files on opponents, perfected the nasty technique of personally destroying opponents, intimidating the media (not that you have to muzzle sheep), and used the levers of Government to create stunts, diversions, and buy votes in marginal seats.

Now there's menacing changes to the electoral law to outlaw legitimate funding that could be considered political in an election year. I will publish a book next year, will that be covered? Absent is a necessary rule to disclose who's donating to political parties. Why?

The attacks on possible, probable enemies of the state has even gone overseas to attacks on Australian Foreign Minister Downer for speaking at a National Party conference, when Labour regularly has overseas politicians speak to the troops. The media breathlessly talked of a "secret" meeting.

Downer said he thought it more appropriate to have a private family Tory meeting. He said he advised the New Zealand Government, no big deal, but this was denied. Who do you believe?

Now Labour, as predicted, has tried to put a blowtorch down National leader John Key's 'Y' fronts. Calling him a "rich guy" coming from people, many of whom went to exclusive schools, enjoyed a comfortable upbringing, and didn't even have to work during university holidays is a bit much.

Even the normally sensible Phil Goff has joined the chorus, hoping to ingratiate himself with left-wing MPs for later. Aspirational politics, an inclusive economy and social mobility was once Labour's strongest economic and social policy credential.

This politics of personal destruction is fearful. Why is Labour so good at it? Because we practise on each other.

Helen Clark is superb at it, she's destroyed more National leaders than any other Labour leader. Come to think about it, she's dispatched more Labour leaders than anyone else too. Now Labour is planning a major re-shuffle. It's needed.

We have the largest Cabinet in the Western world per head of population. Killing the wounded is the hardest job in politics, particularly if they have been loyal subjects.

They are bled slowly, swirling rumours appear, planted from Beehive sources, then, when the victim is anaemic, too exhausted to fight back, someone is dispatched to put the pillow over their head. If Helen can replace half of her Cabinet and keep the show together, it will mark her out as one of the greatest political managers ever.

It's very hard. Muldoon's circle of close mates got smaller and weaker as he got older too. Exactly what does the "consort" Judith Tizard and the legion of Ministers outside Cabinet actually do?

Perhaps it's good they don't do much. They manage the remarkable feat of being self-important, expensive, trivial and irrelevant at the same time.

John Key just has to keep his head down, and is happy to campaign as "Labour with tax cuts", sort of like playing a vacuous political air guitar. As for Winston Peters, our Foreign Minister still seems to hate foreigners.

He can't speak about hospitals without talking of Third World diseases and Third World people, the Central Bank policies are about, he claims, promoting speculation and money-lenders (code word), Dubai investment in New Zealand is naturally bad, but at least the anti-Asian and Muslim stuff has been shelved for a while.

Rodney Hide seems to have rejected capitalism for narcissism and is destined to be a talk-back celebrity. The Greens and the Maori Party have locked up their small market niche and go unquestioned by the media.

The major political parties don't scrutinise them or test them in Parliament because they will decide who forms the Government. Labour could still form the next Government, even if we get fewer votes than National. Under MMP, a silver and a bronze trumps a gold medal.

Meanwhile, New Zealand continues to slip down the OECD ladder of successful economies. World growth is robust at 5 per cent, Australia will grow at 4 per cent. New Zealand half that. Labour productivity was close to zero in the last year, down from 2.7 per cent, 1992-2000. New Zealand's tax ratio is 43 per cent of gross domestic product, Australia's 35 per cent. Australia's spending on a ratio of GDP is 34 per cent, New Zealand's 41 per cent (close to France).

These are huge differences, and getting bigger. That's why an Australian will earn 30 per cent more than a Kiwi, and 500 Kiwis leave each week for better opportunities.

The Government's response? Run a media campaign in Australia telling people to come home!

* Mike Moore is a former Labour Prime Minister

c NZ Herald & Darren Rickard 2007

Tuesday, August 28, 2007

Burger Fuel Director explains Share Price drop

Image result for burger fuel

Josef Roberts, a Director of Burger Fuel (BFW) has kindly answered a question that many of you out there would like to ask him.

I put this to him in an email today:

Do you have any comments with regards to the dropping share price and your initial valuation of the IPO?

Josef replied

Not really – as you know at present there is nervousness in world markets and general tightening of the economy, but in our case it’s mainly due to a situation of low stock liquidity; so just a few small trades can cause the stock to drop if someone needs cash or wants to accept a lower offer. The actual trades are very low.

I don't share Josef's opinion as to the share price drop. I would agree with him that liquidity would affect the share price somewhat but if the market had an overwhelming positive feeling over Burger Fuel's IPO valuation then the low stock liquidity would have presumably shot the share price well above the NZ$1 IPO price as the reality of the market negativity over Burger Fuel's market cap has seen the share price dip to 65c as of today.

Burger Fuel Worldwide @ Share Investor

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Discuss BFW @ Share Investor Forum - Register free

Share Investor 2007

2007 Full Year Profit: Goodman Fielder Pie Gets Bigger

Goodman Fielder Ltd [GFF.NZX] the Australasian food company, has announced a solid profit for Full Year 2007. Net profit on a pro-forma basis, to include a full 12 months performance, was $243.2 million, up 23 per cent on 2006.

Revenue was up 2% to slightly over AU$ 2.4 Billion with strong contributions from Australia but flat input from New Zealand.

During the year Goodman added multiple brands to its stable of everyday home staples that include: Vogel's Bread, Kiwi Bacon, Irvine's Baked Goods and Tararua Dairy products. GFF note that they have integrated the companies that they have bought well and are poised to get good growth from these acquisitions.

Goodman Fielder's Brands set the company apart in this part of the world. They dominate many aspects of the food staples families use everyday, especially breakfast. It is comparable to Kraft, the US food conglomerate, in this respect.

The share price has appreciated markedly over the past few weeks as investors seem to be rushing towards so-called "safe havens" in this time of market turmoil. GFF was dual listed on New Zealand's NZX and Australia's ASX at the end of 2005 at AU$2 a share and has traded consistently on the NZ exchange at a range of NZ$2.10 to just over $3.

A slow but unspectacular growth story with solid revenues wont see much of an increase in share price but there has been recent talk of Australia's Coca Cola Amital being interested in buying the company for its broad range of brands that would compliment some of the strong brands that Coke manages.

The interest of Asian business in Australian food groups is another good reason to hold onto those GFF shares. Apparently those in the food business in Asia see this region as some sort of food holy grail:

What's going on? "A lot of Asian tycoons are seeking to take strategic positions in an area they think will be the next money spinner," says Richard Beaurepaire, head of research at consultancy Bain & Co. in Sydney. "They understand that food will become a scarce resource in Asia over the next few years as the land and water to support the region's 3 billion or so increasingly prosperous, urbanized people are not there." Australia, which likes to style itself as the Supermarket of Asia, produces abundant food that can be shipped fast to its neighbors.(

I like Goodman Fielder for the loyalty of customers for the brands that it sells. More often than not this loyalty can last a lifetime and can get passed on through generations making owning a such a company a good lifetime bet.

Goodman Fielder shares were up 3c today at NZ$2.95.

Disclosure: I own GFF shares.

Goodman Fielder @ Share Investor

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c Share Investor 2007

Monday, August 27, 2007

NZX Share Trades with Strings Attached

Image result for burger fuel

While trying to put a market order in today on the NZAX for Burger Fuel (BFW) it appears an individual cannot make his own mind up just what the market price for a particular share is on a given day.

I wasn't fully aware of this, only just in passing but for shares trading between 10c - $1 you have to bid a minimum of .7 multiplied by the closing price of the share on the previous day. Shares above $1 are multiplied by .8 , shares between 5-10c .6 and below 5c .5.

This little market manipulator came into force early July 2007 and really pumps my blood warmer than a ten year old relieving himself in a public pool on a cold Winters day!

I mean where do Mark Weldon and co get off, it is a Market Limit , what that means to this capitalist pig is that the market is supposed to decide what a share or company is worth on a given day, prospective shareholders are the market and it should be up to us to decide what value we place on a company.

I can understand why this little handbrake may have been applied-to stop a market from sliding too quickly on a bad trading day-but surely this kind of market manipulation must be open to all sorts of jiggery-pokery?

I'm quite sure the upper offer market limits are not enforced similarly so why the hell do weak companies need their hands held as their share prices get hammered on any given day?

Quite frankly they don't and Mark Weldon and the NZX board would be wise to take another look at this recent hamstringing of a so-called free share market and let the market decide what New Zealand listed companies are worth.

Incidentally, I wanted to bid $NZ .20c for 5000 BFW shares as the share price as of today has fallen almost 15% to .65c today. I have lowered my value of the company as I see further costs related to increased borrowing for the company and possible franchisees having an affect on medium term growth, expansion and obviously profit.

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Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary

Discuss Burger Fuel @ Share Investor Forum

Share Investor 2007

Sunday, August 26, 2007

Desperation by Labour Backfires

Image result for useless labour party 2007 nz

The New Zealand Labour Party is desperate.

2o points down in the polls, an all-time low against this National Opposition, Labour Ministers mired in scandal and political stuff-ups and the Prime Minister Helen Clark and her underlings are in full filth mode trying to dig dirt on John Key. If serious accusations are to be found true then any politician must be harangued , it just so happens that none of the accusations placed at the feet of Key are serious or truthful

While New Zealands financial and political security and economy is on the brink of collapse and looking like it will consume this government and the country with it, all Labour are interested in is hanging onto power any way they can.

Scurrilous accusations have been made against John Key which haven't stuck and in fact they have indeed backfired on the detritus that have pointed the wagging fingers. What is that phrase again about glass houses and stones?

The energy being put in by Labour to discredit the National Opposition would be better used to govern the nation out of its present sliding fortunes. On second thoughts it might be better for NZ inc if Labour didn't try to "help" us, things always get worse when they intervene!

To simply ignore the mayhem surrounding them though is a crime that should be punished by an early election and a solid beating of the government reminiscent of what David Benson Pope used to dish out to his pupils while he was a teacher at a Tauranga High School.

Labours thrust at another term in office has them ignoring the basic issues a government is elected to do. We have the highest interest rates in the developed world, hospitals unable to cope with patients, finance companies losing almost $2 Billion dollars so far, government Ministers and bureaucrats involved in corruption and cover-ups, crime at at an all-time high, education standards slipping, record numbers of Kiwis leaving the country while questionable immigrants flood in unabated and a continuing lust to curb our freedoms by Labours lap dogs in parliament, Winston Peters, Sue Bradford and the usual hangers on.

Perhaps the biggest lunge at power lust by Labour is the introduction of a a contentious bill to parliament that will make it almost impossible for detractors of the Government to criticise them or use money in an election year to advocate against them or for an individual or party that one supports. That includes blogs such as this one. (I will not remain silent though dear readers)

The Electoral Finance Bill would curb advertising by political parties from January 1 of an election year that would cap their electoral spending, while government advertising on programmes like KiwiSaver would be uncapped and able to continue unrestrained. This advantage would also apply to Labour supported interest groups such as left backed organisations like the PPTA and other unions.

This kind of introduced legislation-it hasn't been passed yet-is the kind of law that would be passed by jurisdictions such as Mugabe's Zimbabwe , Stalin's Russia, Mao's China and Hitler's Germany.

The successful passing of this bill and its repercussions on democracy cannot be understated. The main purpose of the bill is to shut down free debate and the ability of the silent majority to elect an alternative government, whatever colour that government might be. It cannot be allowed to pass and any individual in parliament who votes for it must surely hang their heads in shame and perhaps think of packing their bags for a seat in Zimbabwe's Governing dictatorship. Clearly those who vote for such individuals must also question their motives for doing so.

A government whose sole focus seems to be power at any cost and the neglect of the country and those that voted for them in the first place is indeed a sad state of affairs. Regardless of how badly Labour have governed New Zealand over the last 8 years and history will look back and judge this period as one of the blackest since the great depression and more recently Rob Muldoon's tenure in the late 1970s and early 80s, a Governments focus must be on governing the country. It is from the outfall, positive or negative, from a governments running a country that a voters ballot must be judged and cast not the corruption of the democracy by fascist law and filth flinging at opposition.

Either way Helen Clark's Labour Government must be judged and whatever angle one looks at it from , whether it be from Governmental success/failure or unbridled muck raking and various legal/ illegal attempts at remaining in power they have been a dismal failure at both.

c Darren Rickard 2007

Friday, August 24, 2007

Auckland Airport's incentive scheme should fly out the window

It seems to this humble soul that the good folks who manage Auckland International Airport (AIA) live in a world where up is down, on is off, black is white and well... you get the picture.

One of the biggest contributors to the drop in Full Year 2007 profit at AIA announced a few days ago was the employee incentive scheme. Such a scheme rewarded employees if the company share price did well, with share options.

As most know the share price has indeed risen over this last year and that has been due to first rumours of a takeover and now a firm offer by Dubai Aeronautical Enterprise and other suitors kicking the tyres.

Now usually when a companies share price rises it is due to the company doing well financially and most of that can be put down to good management. In this case though the share price has risen because of a takeover offer and indeed the share price would have gone down in the absence of this offer as AIA was headed for a flat profit this year anyway.

To be rewarded when a company share price goes up in the first place is a little dodgy because there can be many reasons why this is the case. You can bet company management don't get docked payments for share price falls! In AIA's case the share price rise has nothing to do at all with management doing well.

In the real world, incentives are given for financial results and that is just the way it should be in this case. The fact that profit dropped substantially-by more than 10%- because of undeserved employee share options being handed out is simply an outrage that shareholders shouldn't have to put up with.

The passionless way that this option free-for-all was reported in the media just leaves me guessing as to why this options rort isn't being questioned.

I know this sort of thing seems acceptable by those who are board members of public companies and is a widely carried out practice in New Zealand and abroad but it is something that really rankles my hackles-a wonderful turn of phrase if I do say so!

It is up to shareholders to make their displeasure of this practice known to company management. I am not one to say incentives should not be paid, they should, but only for increased financial results. The bigger the profit increase the bigger the incentive payout I say.

Seems management at Auckland International Airport don't know what the word incentive means. If an individual or company gets paid for a decreasing profit then what is the motivation to do better?

Simply nothing.

Auckland International Airport @ Share Investor

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Share Investor 2007

Thursday, August 23, 2007

Restaurant Brands: Delivering increased profit in October 2007

The profit season in New Zealand rolls on, and by and large things look good company wise considering the sad state of the economy. One company set to announce their profit in October, Restaurant Brands Ltd [RBD.NZ] the operator of the KFC, Pizza Hut and Starbucks brands in New Zealand looks set to show an increase in its earnings.

Of course this wouldn't be difficult considering the bad results they have been posting these last 24 months.

RBD's KFC unit has shown another re-growth because of vast sums of shareholder money being thrown at it but it is still off its all-time sales figures way back in the 20th century, still, having said that KFC is still the main and only profit driver for the restaurant group and it is the greasy stuff that will give RBD another shot at breaking its $1 share price barrier again-it listed in 1997 at $2.20 and briefly once touched that price in 2002.

The main problem for RBD though, apart from bad management and poor service, is the competition from its smarter and more motivated rivals.

KFC's position as the number one purveyor of chicken product is being plucked at by several rival chains. Red Rooster and Nandos are picking off KFCs customers piece by piece.

Starbucks has always struggled here and is basically a tax right-off for the company and it has never turned a profit since arriving on these shores in 1999. Operating costs are way too high and revenue hasn't yet matched these expenses.

The biggest threat to RBD though and its Pizza Hut brand, are the inroads that Dominos has made on its sales and profit. In a profit announcement by Dominos today its CEO Don Meij stated:

However, New Zealand EBITDA improved, growing from $1.5 million to $2.7 million. "In New Zealand, Domino's Pizza continues to go from strength to strength, with its EBITDA contribution up 80 per cent during the year."

October's announcement will probably see another big dip in sales for Pizza Hut and everything management have done so far to compete with Dominos has been a dismal failure.

Hopefully shareholders will also find out whether the board have managed to find a new head for the company. Vicki Salmon was pushed out at the beginning of the year and the company dearly need a new direction, any direction really so they can move forward and make some drastically needed changes in operations at head office down all the way down to store level.

In a related matter, Burger Fuel Worldwide [BFW.NZ] the recently listed "gourmet" burger maker, has failed to have its shares traded at all for the last 5 days. We wait in anticipation for a movement soon.

RBD shares closed down 1c to NZ 84c today.

Restaurant Brands @ Share Investor

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c Share Investor 2007