IT can be hard yakka making money in the stock market these days. One way has been to buy the shares of a company that has recently installed a feisty chief executive.
IT can be hard yakka making money in the stock market these days. One way has been to buy the shares of a company that has recently installed a feisty chief executive. It is important that the new man is appointed from outside, not shunted up in the corporation and still festooned with the old culture.
Malcolm Broomhead, who headed the North mining house before it was gobbled up by Rio Tinto, hit the ground running when he took over as CEO of the Orica paints-to-explosives group last September. He has chopped off dead wood, saved $25 million in costs, flogged off the corporate art collection to Kerry Stokes, and hung a for-sale sign on the Melbourne head office. The company recently announced half-year profits up from $30 million to $88 million, and a boosted dividend. The Orica share price has more than doubled to $9.20, adding $1.4 billion to the market value of the group since Mr Broomhead came on board. He has set management the goal of earning a Wesfarmers-style return of 18 per cent on net assets.
Closer to home, Trevor Coates, who arrived from the UK in late 2000 to take over the till at the Foodland group, has transformed the company into what many analysts believe is the best run food retailer in the country. Foodland shares have zoomed from $11.50 to $19.20 this year. The move by the New Zealand authorities to ban Foodland from buying the Woolworths NZ chain got Coates’ goat. He fought the case to the Privy Councill in London and won hands down. Now the task is to persuade Dairy Farm in Hong Kong to sell him the New Zealand concern for, perhaps, $625 million. If the transaction goes through, it would mean trans-Tasman turnover of $5.5 billion for the Perth company, and significantly enhanced profits.
Dairy Farm is folding up its tent in this part of the world. Foodland has already acquired 40 of its ex-Franklins stores in Queensland and NSW. There has been speculation that the Woolworths giant in Australia might spoil the party by making a higher offer to Dairy Farm. That is unlikely. But here is a thought. Woolworths is valued on the stock market at $14.2 billion, versus $9 billion for the slimmed down Coles Myer. Third placed supermarket player Foodland checks out at only $1.8 billion capitalisation, and is trading at a juicy multiple of 14 times expected earnings. It might occur to Roger Corbett of Woolworths to whack in a takeover bid for Foodland before it gets more expensive.
There are several other companies with new-broom management credentials. John Ellice-Flint has not been running oil and gas group Santos for very long, but he has moved quickly to re-state the reserves at realistic levels and sell off non-core assets. Ellice-Flint seems to be lucky – always a plus for an oilman. Santos has made a number of oil strikes since he arrived, the most recent at Exeter 150km off the coast of Dampier. All this has helped Santos shares climb from a low of $5.34 this year to $6.40.
Newest entrant on the resources block is 47-year-old Mike Folwell, who stepped in as managing director of the Iluka mineral sands miner last month. He boasts an impressive CV, including top positions with Royal Dutch/Shell, Pioneer International and the Pivot fertilisers group.
Iluka has embarked on a new disclosure policy as transparent as the gown Halle Berry wore at the Oscars. Folwell has been schmoozing institutional investors over east, giving them details of sales volumes and promising a fresh strategy program when the half-year results come out in August. Profits are expected to be flat at around $108 million this year, but 2003 could be big if the global recovery kicks in. Iluka shares have put on a yo-yo performance for months. Currently they are on an upward yo at $4.75. Broker UBS Warburg has a 12-month price tag of $5.74 on the stock.
Investors are not always quickly rewarded by new bottoms on the CEO chair. Peter Smedley succeeded in enraging his medical customers at Mayne Group, and John Fletcher is finding turning Coles Myer around a tough trot. Still, it works more often than not.
Malcolm Broomhead, who headed the North mining house before it was gobbled up by Rio Tinto, hit the ground running when he took over as CEO of the Orica paints-to-explosives group last September. He has chopped off dead wood, saved $25 million in costs, flogged off the corporate art collection to Kerry Stokes, and hung a for-sale sign on the Melbourne head office. The company recently announced half-year profits up from $30 million to $88 million, and a boosted dividend. The Orica share price has more than doubled to $9.20, adding $1.4 billion to the market value of the group since Mr Broomhead came on board. He has set management the goal of earning a Wesfarmers-style return of 18 per cent on net assets.
Closer to home, Trevor Coates, who arrived from the UK in late 2000 to take over the till at the Foodland group, has transformed the company into what many analysts believe is the best run food retailer in the country. Foodland shares have zoomed from $11.50 to $19.20 this year. The move by the New Zealand authorities to ban Foodland from buying the Woolworths NZ chain got Coates’ goat. He fought the case to the Privy Councill in London and won hands down. Now the task is to persuade Dairy Farm in Hong Kong to sell him the New Zealand concern for, perhaps, $625 million. If the transaction goes through, it would mean trans-Tasman turnover of $5.5 billion for the Perth company, and significantly enhanced profits.
Dairy Farm is folding up its tent in this part of the world. Foodland has already acquired 40 of its ex-Franklins stores in Queensland and NSW. There has been speculation that the Woolworths giant in Australia might spoil the party by making a higher offer to Dairy Farm. That is unlikely. But here is a thought. Woolworths is valued on the stock market at $14.2 billion, versus $9 billion for the slimmed down Coles Myer. Third placed supermarket player Foodland checks out at only $1.8 billion capitalisation, and is trading at a juicy multiple of 14 times expected earnings. It might occur to Roger Corbett of Woolworths to whack in a takeover bid for Foodland before it gets more expensive.
There are several other companies with new-broom management credentials. John Ellice-Flint has not been running oil and gas group Santos for very long, but he has moved quickly to re-state the reserves at realistic levels and sell off non-core assets. Ellice-Flint seems to be lucky – always a plus for an oilman. Santos has made a number of oil strikes since he arrived, the most recent at Exeter 150km off the coast of Dampier. All this has helped Santos shares climb from a low of $5.34 this year to $6.40.
Newest entrant on the resources block is 47-year-old Mike Folwell, who stepped in as managing director of the Iluka mineral sands miner last month. He boasts an impressive CV, including top positions with Royal Dutch/Shell, Pioneer International and the Pivot fertilisers group.
Iluka has embarked on a new disclosure policy as transparent as the gown Halle Berry wore at the Oscars. Folwell has been schmoozing institutional investors over east, giving them details of sales volumes and promising a fresh strategy program when the half-year results come out in August. Profits are expected to be flat at around $108 million this year, but 2003 could be big if the global recovery kicks in. Iluka shares have put on a yo-yo performance for months. Currently they are on an upward yo at $4.75. Broker UBS Warburg has a 12-month price tag of $5.74 on the stock.
Investors are not always quickly rewarded by new bottoms on the CEO chair. Peter Smedley succeeded in enraging his medical customers at Mayne Group, and John Fletcher is finding turning Coles Myer around a tough trot. Still, it works more often than not.
