Sunday, September 27, 2015

Hallenstein Glasson 2015 Profit

Just back from a self imposed exile.


Top of my agenda is Hallenstein Glasson Ltd [HLG.NZ].

It is top of my agenda because it has its full year 2015 profit out on Wednesday and there is much talk of oh its had its best days behind it, it wont be long before its doing its best impression of a Pumpkin Patch (a stock I once owned)or Postie Plus (again a stock I used to own). There is a difference.

The difference here is that it isn't the same. It knows that there is competition out there from the Top Shop (albeit - a bastardised version) and H & M and a whole host of others and they will be going in the shops daily to see what they are up to - trust me,they do.

The shtick is that there is competition and we are going to take it seriously.

Amongst our leading selling bits and bobs we are going to do anything to appeal.

We DO realise that things have changed and that we have to be on our toes to meet those changes as they happen.

We have been here for 135 years and we along with our cash - no debt you understand - are going to be here for another 135 (60 years of that will be with me, 12 years so far)developing in whatever way the public deems necessary.

We will change and change again.

I have had my doubts about this company but it responds in cycles. At the moment it should be going through a recovery cycle but it isn't, people have lost faith in it, that's good that it isn't because it just leaves more room for people like me to buy more - which I'm doing.

I managed to scape enough together for an additional 4000 shares, bringing my total to 14000.

I noticed they got to about- not about, exactly $3.10 before trading up recently at $3.50.

I got mine at about $3.20.

I haven't heard a thing about this Wednesdays announcement.

I haven't even heard if its good because when management usually inform the market they were unusually quiet.

Well see on Wednesday.

Hallenstein Glasson @ Share Investor

Hallenstein Guidance not indicative of wider retail recovery
Stock of the Week: Hallenstein Glasson
Hallenstein Glasson Australian expansion needs expert execution
Why did you buy that stock? [Hallenstein Glasson]

Discuss HLG @ Share Investor Forum

Download HLG Company Reports
Download HLG Company History

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 c Share Investor 2015

Thursday, July 2, 2015

Kathmandu IPO: Prospectus Analysis

I was right about this one, took about 2 years longer to come unstuck but come unstuck it did.

Will it work with a new person? Well out of all the retailers in this part of the world id give Rod Duke 50/50.

Hes getting the company for what its worth by the way.

Right from the get go the Kathmandu IPO Prospectus (Requires free registration at Share Investor Forum to download ) is all about the flash, the sheen, the image and impact of the Kathmandu brand - at first glance the document looks more like a catalogue for their product rather than a prospectus - and to be sure the brand is part of what the present owners are selling and it is a great loyally followed brand but what of the bones, the inside, the guts of the company, how are they selling prospective investors that?

Well in short the present sellers are not telling investors the full story. Pro Forma figures - figures based on an "as if" scenario rather than reality - are used throughout the document.

Pro-forma figures do not show investors the true state of a companies books and this alone should have prospective investors running for the hills (without a Kathmandu backpack).

I will go on however.

For example pro forma sales figures from 2007 and 2009 indicate that in 2007 Kathmandu sales were $A151.4 million and in 2009 A$215 million and respective store numbers were 58 and 82. That works out roughly the same level of sales per store for each of these years. Very hard to get this sort of consistency in any sector of the economy, least the retail industry. These particular figures have clearly been manipulated or "smoothed" to make things look good and we can safely assume this for other comparisons made. This makes the figures misleading to say the very least.

It is pointless to make any further comment about the prospectus' other figures or comparisons used except to say they cannot be trusted.

Some more key points but they rank in far less import for potential investors than do the inclusion of pro forma figures to make comparisons year to year to sell the company.

1. management are more than halving their stake - not alot of faith there in the company and they are insiders!

2. $85 million in debt to be paid off - not a high figure considering indications that debt in July 2008 was more than double that.

3. IPO costs of more than $15 million, far too high.

4. Investors will not know how much their application for shares will cost them until after the IPO has closed. At NZ$2.01 - $2.32 per share a large range in price exists.

5. A major emphasis throughout the prospectus on growth through increases in store numbers - an expensive way to grow and to be fueled by more company debt or perhaps additional capital raising from shareholders.

6. Omitting financing costs and essential financial data like historical NPAT.

I was skeptical of the Kathmandu IPO before perusing the prospectus but after reading it I have come to the conclusion that this IPO is a complete and utter stinker.

Too much emphasis is on the media grabbing sexy Kathmandu brand and not enough on what is important when an investor needs to make a wise decision - full, frank and accurate financial statements and not pro forma monopoly style accounts that are only fit to wipe your bum with.

I am appalled at the gall of the present owners, the accounting firm signing off on pro-forma accounts and the NZX for allowing this kind of bullshit and calling it sufficient disclosure pre-IPO.

I could be wrong and this IPO could be the best listing since Coca Cola but investors cannot tell that from reading disclosures in the prospectus with accuracy what sort of condition Kathmandu the company is in - why are the present owners playing shell games with investors one would have to ask?

If you sink your money into this one you deserve to lose it.

Related Share Investor Reading

What is Jan Cameron up to?

Kathmandu @ Share Investor

Kathmandu IPO: Jan Cameron lands a blow to IPO

Kathmandu IPO: What is it worth?
Kathmandu IPO: Retail Interest HighKathmandu IPO: A tough mountain to climb
Kathmandu No.1 but IPO should get the Bullet
Download the detailed Kathmandu Value Cruncher Report - Requires free registration at Share Investor Forum to download
Download Kathmandu IPO Prospectus

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c Share Investor 2009

Share Investor Q & A: Briscoe Group CEO Rod Duke

Briscoe Group Ltd [BGR.NZX] hasn't been immune from the current recession and its impact on the overall retail sector but it has fared better than most. The group consists of three major brands; Bricoes, Rebel Sport and Living and Giving, with Urban Loft a small chain present in the Auckland market only.

The company listed on the NZX in 2001 but has been a patchy investment in during its 9 year run on the stockmarket.

However with no debt and healthy cash reserves in the bank, the company, while not setting the stockmarket on fire has been around for decades and CEO Rod Duke has managed it well since he joined the company in 1988.

Rod, when he does make public statements, is always forthright with his opinions but he rarely talks about himself or his business preferring company results to speak for themselves.

All the more reason to stick Rod under the spotlight and find out more about him and his company.

The Q & A was conducted by email.

The Q & A

Share Investor - Your 2010 half year result of $6.64 million after adjustments for accounting, depreciation changes and company tax rate was up on the 2009 half year result. What contributed to these profit levels and in comparison to last year how do you feel the company has performed considering the overall economy and the performance of your competitors?

Rod Duke - The major items this year were sales growth and the on-going efficiencies in our cost of doing business. We were very pleased with our profit performance this year and our improvements compared across the retail market.

SI - How much has a focus on cutting day to day business costs contributed to profit and is there more fat to cut in 2011?

RD - The focus on our costs was a significant contributor and in the years to follow we intend to challenge ourselves to deliver an improvement in productivity and profitability.

SI - Do you expect higher sales levels for 2011 and will that be at the expense of margins or not?

RD - Our internal budgets have provided for an improvement in sales but not at the expense of margin.

SI - Looking towards 2011 do you think you will be able to beat the 2010 result and if not why not?

RD - We remain cautiously optimistic but much will depend on issues beyond our control.

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

RD - Yes, Yes

SI - What are some of your business and management principles and what strategic planning method do you adhere to?
RD - Our core management principle is to do the basics really well. In retail you need to ensure you’re on top of cash, GP, wages and inventory. Having clear expectations around how we manage these is essential.
SI - What are your medium to long-term growth plans (5-10 years) in terms of company size and revenue growth?

RD - Five years ago those growth plans were much more aggressive than to-day. Next year we may be looking at some very different economic projections so our mid term estimates are very much a moving target.
SI - How is the Briscoe Group performing against competitors like The Warehouse Group Ltd [WHS.NZX] Kmart and Farmers?

RD - Like you I can only look at the information widely available. That question is perhaps better answered by a share-holder of both companies, and that’s not me.
SI - How are the all important margins tracking and how much emphasis are you placing on them given that retailers like Hallenstein Glasson Holdings Ltd [HLG.NZX] look to be doing better this year after a focus on margins rather than sales at any cost?

RD - Firstly our margins are pretty much in line with where we forecast them to be and we regard margin as the life-blood of a healthy enterprise. Secondly, I don’t know of any retailer that has adopted a strategy of sales at any cost. On the question of HLG, I’m not in any position to comment on their strategy or performance, I’m simply not in possession of the detail required to do so. What I can comment on is my knowledge of that industry and the generation of gross margin. I have an associate that operates within the apparel industry in NZ and I believe his recent experiences are most likely to be identical to many retail and wholesale participants.
Final gross margin is not just a bi-product of how much you discount product it is often an indicator of how cheap you purchase product. The NZ apparel market is dominated by product originating from China or at least the far east. Therefore, the raw material (fabric) is purchased in China, its manufactured in China and its shipped to its final destination from a Chinese port, all these transactions are denominated in US$. When you look at the Kiwi $ - US $cross last year versus this year you would have noticed a vast difference. By my calculations 2009 Jan – Aug average cross was .59, the 2010 Jan – Aug average cross is .70. As you can see, and as my associates demonstrated to me it has been particularly easy for him to generate significantly higher margin this year, even if he were to discount his product at a higher rate than last year, because he has purchased product very much cheaper than last year almost entirely due to the move in currency.

SI - What kind of profit margins are you achieving and can the company do better?

RD - For first half this year our EBIT margin was 6.8%, last year 4.9% and the year prior 2%. We believe we can build on the solid 6.8% of this year and over time move that beyond 8%.
SI - How many more outlets can you add to the group in terms of all 4 of your brands before saturation point?
RD - Overall we think we can add about 10% more stores into the network. The real issue will be the re-location and or re-sizing of many of our stores to maximise the opportunity in each of the catchments.
SI - Any intentions of expanding the Briscoe brand across the Tasman in the near or distant future?

RD - Not at this point but I’m not saying never.
SI - Living and Giving & Urban Loft, they haven't been great success stories thus far, do you see them doing well in the long-term and at what point do you walk away if they don't perform?

RD - In a period of recession the highly discretionary products do suffer the hardest. Both our offerings have found the going tough but in the scheme of Briscoe Group the effect is minimal and our intention is to battle on.
SI - With retail in general in the doldrums and many retailers struggling to survive some might expect you would want to use some of the 60 odd million that BGR has in cash on the balance sheet for some good retailing bargains of your own. Have you seen any attractive propositions?

RD - Not attractive enough to purchase.
SI - I am often disappointed by the levels of service offered to myself, my friends and associates and think sometimes it is so low because New Zealand consumers have low expectations and don't complain. How well do you think your staff represent the company in terms of service levels to customers so customers remain loyal and keep coming back for more over the long term?

RD - We have never pretended that we offer personalised one-on-one service, perhaps assisted self service would best describe our offering. I believe customers appreciate that no promise has been broken and expectations have largely been met.
SI - Does the company have a mystery shopper program and if it does what has it revealed about service levels to the customer?

RD - Yes we do and whilst we will always strive to do better our customers’ expectations have largely been met.
SI -Tammy Wells, otherwise known as the Briscoes Lady, how much do you think she brings to that brand and whose idea was it to identify her with that brand?

RD - Tammy brings a lot to the value of our brand, she identifies with middle NZ and I believe our customers see her as being a lot like themselves. Many of us had a hand in her selection some 20 years ago.

SI - Is the overall retail sector saturated in terms of retail offerings or is the recession the main reason for the large number of retail failures and the slowdown over the last 2 or 3 years?

RD - A recession of this severity and of this length will always sort out those businesses living on the edge of bankruptcy. As Warren Buffet is famous for “You only know who’s swimming naked when the tide goes out”.
SI - In my investing experience I have found the level of business leadership in New Zealand wanting - with a few very notable exceptions - when it comes to making good long-term decisions based on sound business skills, the basic understanding of running a business and accountability when it comes to making mistakes and this is often reflected in businesses hiring from an overseas talent pool. What are your views on how we can get good shareholder representation in the boardroom?

RD - My experience does not extend beyond my own company so perhaps I can talk a little about us. For us its always been about balancing the individual skills within a board and these days there needs to be much more importance placed on Governance and experiences from outside of BGR.
Many of the issues confronting retailers (particularly those listed) require a very detailed knowledge of the Governance requirements which incidentally are ever changing.
Additionally, recent trading difficulties brought about by the effects of recession has meant that both management and board members have needed to look for answers in a wide variety of places. Our board has a wide level of experience and thankfully not exclusively retail, because many of the most complex recent issues we’ve faced have not been solved in typical retail manner.

SI - What company or companies do you admire the most (apart from BGR) that you don't have a financial interest in and why?

RD - Harvey Norman Holdings Ltd [HVN.ASX] Very experienced and long serving management and a strong and wide distribution of stores. Plus a compelling format that has good acceptance and buy-in from customers.

SI - Your 9.41% holding of Pumpkin Patch Ltd [PPL.NZX] is that just an investment in what you see as a good company or do you have any other intentions you would like to share with Share Investor readers?

RD - Personal investment only.

SI - Are there any particular books, periodicals or websites that you have read that you would recommend to Share Investor readers in terms of business and investing?

RD - None.
SI - I have read Benjamin Graham's Security Analysis and find it crucial to long-term investing not just in the stockmarket but for investing in general. Have you read it and if you have what have you taken from it as its main points?

RD - Not read.
SI - Who are some of your business mentors/heroes and why?

RD - No current mentors.
SI - What was your first job ?

RD - Footwear salesman, 16 years old, Adelaide South Australia.
SI - What excites you about retailing in general and the Briscoe Group specifically?

RD - The constant change generates the most excitement and I guess the need for constant change inside Briscoe Group is both a challenge and a “Rush”.
SI - MBA or practical experience, what kind of experience is most suited to retail management in the Warehouse boardroom?

RD - I wouldn’t like to say, you had better put that to my friend Stephen.
SI - What do you see as the strongest and weakest quality of your leadership style?

RD - I put great importance on loyalty and I’d like to think I give it as well, but I do from time to time get a little frustrated at the speed at which things get done, Impatience!

SI - What has been your main achievement or achievements at Briscoe Group over your term as CEO ?

RD - The building of a loss making company 20 years ago to an organisation now supporting 1500 NZ families with interesting employment through the profit generated by 90 stores.
SI - Where do you see yourself and the business you help manage over the next five years?

RD - I’m not expecting the business or myself to be in a very much different place. We will have made stores generate higher sales and larger profit but I expect we will not look vastly different in 5 years.

About Rod - From Briscoe Group Website

Rod Duke has spent all his working life in the retail sector. After leaving school in Adelaide, he commenced work with retailers in South Australia before moving to Waltons Ltd in Sydney in 1980. From 1981 to 1988 he held the positions of New South Wales Manager of Homecraft/Eric Anderson Stores, a Senior Merchandise Executive for Grace Brothers then Managing Director of Norman Ross Ltd. In September 1988, Rod accepted the position of Managing Director of Briscoes (New Zealand) Limited, at that time a subsidiary of Hagemeyer of the Netherlands, with a mandate of returning the company to profitability and preparing it for sale. In January 1990, Rod reached agreement for the RA Duke Trust to purchase 100% of the shares of Briscoes and he has continued to be the Group’s Managing Director. In 1996 Rod established, and in subsequent years expanded, the Rebel Sport chain of sporting goods stores in New Zealand as a business within the Briscoe Group.

About Briscoe Group - From Briscoe Group Website

Rebel Sport employs approximately 615 permanent full time and permanent part time staff, 17 of which are employed at their Head Office in Auckland.

In peak periods the company employ staff on a fixed term basis and this number can increase to around 704.

Rebel Sport stores employ generally between 25 and 35 permanent staff each.

Briscoes Homeware (includes Urban Loft & Living & Giving) employs approximately 1074 permanent full time and permanent part time staff, 25 of which are employed at their Head Office in Auckland.

In peak periods the company employ staff on a fixed term basis and this number can increase to around 1298.

Briscoes Homeware stores employ generally between 15 and 25 at the smaller branches and between 25 and 40 at the larger branches.

Briscoe Group has 72 employees, providing management, finance and administration, information technology and other support functions.

History Timeline


Briscoe Group retailing interests total 57 Homeware Stores and 32 Sporting Goods Stores. Raised $1.35 million dollars for Cure Kids since becoming a key partner in 2000.


Acquired the business, assets, and certain liabilities of Living & Giving (9 stores) and opened Urban Loft. Briscoe Group retailing interests total 48 Homeware Stores and 27 Sporting Goods Stores.


Briscoe Group retailing interests total 33 Homeware Stores and 19 Sporting Goods Stores. Became a key partner of the charity Cure Kids and committed to raising funds to further medical research for children with life-threatening illnesses.


Briscoe Group retailing interests total 30 Homeware Stores and 17 Sporting Goods Stores.


Briscoe Group retailing interests total 28 Homeware Stores and 11 Sporting Goods Stores.


Agreement reached with Rebel Sport Australia for the franchise agreement to be terminated with effect from April 2005, beyond which date the Briscoe Group will continue to have the exclusive right to the Rebel Sport name in New Zealand.


First Rebel Sport store opened outside of Auckland.


First Rebel Sport store opened in Panmure, Auckland.


Briscoes negotiated a limited franchise agreement with Rebel Sport Australia. This franchise agreement gave Briscoe Group the exclusive right to use the Rebel Sport name in New Zealand and access to Rebel Sport Australia's product supply arrangements and intellectual property.


Briscoes purchased by the RA Duke Trust, a trust established by Rod Duke.


Following several years of losses, Hagemeyer recruited Rod Duke, the then Managing Director of Australian retailer Norman Ross Ltd, as Managing Director of Briscoes. Rod Duke's mandate was to prepare Briscoes for sale. Over the next two years Rod Duke returned Briscoes to profitability by rationalising the number of stores and product lines, improving inventory management and re-orienting the business towards branded homewares.


Following extensive rationalisation of the Briscoes store chain by Merbank, Hagemeyer (a Netherlands-based international company) purchased Briscoes New Zealand.

Over the next nine years, during which period import licensing was phased out in New Zealand, Hagemeyer transformed Briscoes from (primarily) a wholesaler of imported goods to a general merchandise retailer.


Australian and New Zealand operations of Briscoes purchased by Merbank Corporation of Australia.


First Briscoes warehouse and store established on the corner of Princes and Jetty streets in Dunedin by William Briscoe and Son.


Original Briscoes business established in Wolverhampton, England and steadily expanded into the British Colonies, including Australia and New Zealand.

Share Investor Q & As

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Briscoe Group @ Share Investor

Share Investor Q & A: Put Questions to Briscoe Group CEO Rod Duke
Long Term View: Briscoe Group Ltd
Briscoe's Cash worth looking at
Whats on Rod Duke's shopping list?
Why did you buy that stock? [Briscoe Group]
Rod Duke's Pumpkin Patch gets bigger

Discuss BGR @ Share Investor Forum - Register free


Bird on a Wire: The Inside Story from a Straight Talking CEO

Buy Bird on a Wire: The Inside Story from a Straight Talking CEO & more @


c Share Investor 2010

Monday, May 25, 2015

Thanks Dennis Barnes

I just want to say a quick hello and thank you to Contact Energy's Dennis Barnes.

I have been critical in the past.

Your background is back up the front and you are to be congratulated.

A 50c dividend is generous.

This Blog Share Investor thanks you.