Look at the result from Mighty River Power out this week, profit up by over 40% and retail customers up by over 30000 for the last year.
Contrast that with Contact Energy Ltd [CEN.NZ] FY 2009 profit release out in August. Profit down by more than 50% and retail customers lost, more than 40000.
Reason?
Well according to David Baldwin, CEO , it was "overconfidence" (see arrogance in the dictionary for possible explanation) that led to the spectacular drop in profit and associated loss of customers and reputation:
"There's a fair amount of reflection over what we've done in Contact and it has to be said hubris had been building up over several years."
The 45-year-old is urging his staff to re-adjust their thinking.
"If we assume that everything good that happens to us is all good luck then we won't carry that confidence [forward] and we'll start afresh." NZ Herald Sept 5 2009
Of course if you accept that arrogance is the reason for the slump in profit you would have to sheet the responsibility for that arrogant attitude down to the company leader/s, after all we know that company culture is fostered by its leadership right?
Well, apparently not. David was nice enough to share the responsibility for his muck up with his staff.
Weather plays an important part in company fortunes and boy oh boy meteorologically speaking David has had a bitch of a year with that.
Of course that is understandable, weather is crucial to running an electricity utility company and that is plain to the average Joe but I have rarely seen David blame the weather when it is in his company's favour, it seems to be down to his good management. Boy David has some great connections there - as opposed to the 40000 connection lost over the last 12 months.
Many of you reading this will be thinking, what is your problem Mr Rickard, any company can have a bad year?
Very true and there can be many reasons for a bad year, some of them out of leaderships hands but these reasons are universally known and should be accounted for when running a business.
The big problem that I have though with Origin Energy Ltd [ORG.ASX] appointed David Baldwin is that he and his board of directors were almost single-handedly responsible for Contact's bad year.
They raised electricity prices (probably validly) at a time when they doubled directors fees while in the same week having an expensive lunch at a posh restaurant on the shareholder tit. The shite then hit the fan and they waved bye bye to more than 40000 customers and what they had left of their reputation.
Very few individuals will put their hands up and criticise such a monumental stuff up and put the blame on where it lies, with David.
The piece that I quoted from in the NZ Herald was so soft soap I have to rub myself down (control your excitement) again with dettol just to feel clean again.
The fact that David and his board are still employed after their stuff up is hard enough to stomach but his PR exercise of apportioning blame to everyone else rather than solely on himself is a business slight of hand often used in New Zealand to bury ones mistakes as time passes and it should not be accepted by Contact Energy shareholders.
David, the board, his executives and the puppet masters at Origin Energy should be ashamed, but it is clear that they are not and that is the cutting part.
Contact @ Share Investor BlogStill Watching Contact EnergyBeam me up DavyStock of the Week: Contact EnergyMarketWatch: Contact Energy - June 2009MarketWatch: Contact Energy - Jan 2009Contact Energy looks bright during dark timesShare Investor's 2009 Stock PicksFollow the Monopoly BoardDiscuss this stock at
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c Share Investor 2009
Due to the popularity of the Q & A this week with Nigel Morrison, CEO of Sky City Entertainment Group [SKC.NZ] I have decided to make these things a semi regular thing at the Share Investor Blog.
