Questions to Mainfreight's MD Don Braid

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.

One individual I have always wanted to put some questions to is Mainfreight Ltd [MFT.NZ] Managing Director Don Braid.

I have requested his time and he has kindly obliged to answer your questions.

So, now is the chance dear readers to put some questions to Don.

You can submit them at the Share Investor Forum here or email them to me here and I will submit the best ones to Don.

Disclosure: I own MFT shares in the Share Investor Portfolio


Mainfreight @ Share Investor

Mainfreight Annual Report Packs a Punch
Analysis - Mainfreight Ltd: FY Profit to 31/03/09
Mainfreight VS KiwiRail: The Sequel
Long VS Short: Mainfreight Ltd
Why did you buy that stock? [Mainfreight Ltd]
Mainfreight 2008 Annual report worth reading
KiwiRail will cost Mainfreight
Mainfreight keeps on truckin
A rare breed
Share Investor's 2008 stock picks

Discuss this Company @ Share Investor Forum


Related Amazon Reading


Global Logistics Management: A Competitive Advantage for the 21st Century by Kent Gourdin
Buy new: $58.49 / Used from: $40.00
Usually ships in 24 hours


c Share Investor 2009

Not so fast Davy Boy

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 Blog

Still Watching Contact Energy
Beam me up Davy
Stock of the Week: Contact Energy
MarketWatch: Contact Energy - June 2009
MarketWatch: Contact Energy - Jan 2009
Contact Energy looks bright during dark times
Share Investor's 2009 Stock Picks
Follow the Monopoly Board

Discuss this stock at Share Investor Forum

Related Amazon Reading


The Top Ten Bad Habits of Management: An Essential, Insightful Resource for Employees, Managers and Executives by Lambros Klouvidakis
Buy new: $21.95 / Used from: $19.76
Usually ships in 24 hours

c Share Investor 2009

Woolworths supermarket consolidation an indicator of a move on The Warehouse?

Just to get my mind off problems related to our 3 week old baby girl stranded in Bangkok I thought I would have a go at discussing The Warehouse Group [WHS.NZ] and its possible connection to the strong rumour over the weekend that Progressive, owner and operator of Foodtown, Countdown and Woolworths supermarkets is going to consolidate their 3 brands into their "low-cost" brand Countdown.

Apart from the fact that I don't think it is a clever idea to ditch two great brands I think this process could be significant in the ongoing battle between Foodstuffs and Woolworths Ltd [WOW.AU] - owner of progressive - for control over the Warehouse.

I will tell you why I think this.

In trying to make things less confusing for consumers, by consolidating brands and possibly saving money on admin and other business costs, Woolworth's Oz could be ready to make their play for the red sheds.

With one supermarket brand instead of three, that leaves room for another brand, like a general merchant such as the Warehouse to fill the brand void.

It is a little bit of a leap in thought I know but it makes alot of sense from a brand and business point of view.

There have been some interesting moves by Wesfarmers Ltd [WES.ASX] in OZ lately - Woolworths Oz main competitor - they are the owner of Coles supermarkets and other brands and they are consolidating their food offers to the cheaper end of town as well.

This consolidation towards the bargain end of retailing is a global phenomenon currently, as businesses react to the economic downturn. As The Warehouse is the largest non grocery retailer in New Zealand and consistently its cheapest, as such it would be a perfect fit for Woolworth's Oz bargain priced Countdown food brand.

There are also a number of Westfield Holdings Ltd [WSF.ASX] mall sites in the country with both a Foodtown and a Countdown and presumably there would be a space left empty in some towns for a different store to take its place.

Two distinct brands covering a massive product reach under one company.

Makes sense to me.

Please keep in mind I am a WHS shareholder.

The Warehouse Group @ Share Investor

Stock of the Week: The Warehouse Group
Warehouse 2009 interim profit a key economic indicator
When will The Warehouse bidders make their move?
Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision
The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court
Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Share Investor Forum - Discuss this topic

Related Amazon Reading




c Share Investor 2009

Michael Hill International: 2009 full year profit commentary

The 2009 full year profit for Micheal Hill International [MHI.NZ] out yesterday was ugly, real ugly.

Summary of Key Points

- Operating revenue of $411.999m up 9.4%
- Same store sales 0.8% up on same period last year
- EBIT of $26.193m down 38% on last year
- Restructure of group in December 2008 resulting in a deferred tax credit of $52.942m
- Restructure consultancy costs of $1.226m expensed in the period
- US acquisition costs of $1.569m incurred in the period
- US segment loss of $5.292m for the period
- Net profit before tax of $20.149m down 46.3% on last year
- Net profit after tax of $69.533m (includes the deferred tax credit of $52.942m)
- Net debt reduced from $64.234m to $36.958m
- Operating cash flow of $47.643m for the period ($7.763m in 2008)
- 30 new stores opened during the twelve months, including 17 in the US, and 1 closed in Australia
- Total of 239 stores open at 30 June 2009
- Final dividend of 1.5 cents per share (no imputation credits attached)
- Total dividend for the year of 2.5 cents down from 3.2 cents in 2008


First the ugly stuff:

Ordinary profit after tax from operations was down by 46% on revenue up by over 9%.

One of the key reasons for this drop in profit was the purchase last year of a chain of bankrupt US jewelry stores that has so far cost MHI nearly NZ$7 million over the last 9 months. A small part of that cost was a one-off purchasing fee related to the acquisition, the rest an operating loss.

Management have indicated that more shareholder money will be spent refurbishing a handful of these US stores and as the retail environment in the US isn't going to recover any time soon it is likely the company will be in for substantial losses for the nest 12 months on US operations.

Michael Hill has said himself that the timing of the US purchase was a mistake (listen to Michael Hill interview - You need to register first) but as he has also said he has always wanted a foothold there, he has it now and holds a long-term view on its future success, as do I.

Pumpkin Patch Ltd [PPL.NZ] has also had recent difficulties with its US operations, incurring significant losses, so this is a very tough market, especially in the current economic conditions.

Michael Hill's Canadian stores have also dropped back into a small loss after being in the black last year.

New Zealand operations were down significantly, and all indications from the man on the street (my good self scoping foot traffic whenever I go past a MH store) are that things are not looking any better as we enter the new financial year.

The not so ugly:

Australian Michael Hill stores were immune from the retail downturn with both an increase in revenue and before tax profit. It is important to note though that Australia has yet to have an official recession, with economic indicators there still looking positive, so that is one explanation for its 2009 success.

Many NZX listed companies have managed their capital well during the credit squeeze and Micheal Hill has been exceptional in this case. They have nearly halved company debt to just over $35 million over the last year, without the use of any capital raising. A move to be admired by shareholders and other CEOs with less frugal spending habits.

The 2009 year has been one of the worst years in business for MHI over the last generation. Most of the indicators have been bad and things do not look any more promising in the coming 12 months. However, Australia has been an exceptional standout.

MHI management don't make predictions for the future but they do stress things will be tough over the 2010 financial year (well duh!) and its expansion into the USA is a long term play that will bear fruit in the future.

I picked up more MHI a few months ago for just this long term play.

9 .5 for effort, 6.5 for results.

Disclosure I own Michael Hill International shares in the Share Investor Portfolio.


Michael Hill International @ Share Investor

Toughen Up: What I have learned from the hard times
Stock of the Week: Michael Hill International
Michael Hill TV3 60 Minutes Interview
Long VS Short: Michael Hill International
Marketwatch: Michael Hill International
Michael Hill's profit shines
Michael Hill takes on the windy city
Why did you buy that stock? [Michael Hill International]
MHI has defined growth strategy
MHI profit sparkles

Discuss this Topic @ Share Investor Forum


Buy Toughen Up: What I've Learned About Surviving Tough Times



Toughen Up - Fishpond.co.nz


c Share Investor 2009