Brian Gaynor: Taking stock of one fantastic journey

Brian Gaynor says the media has a vital role in ensuring businesses behave ethically and create wealth for all stakeholders. Photo / File

COMMENT:

After 22 years and eight months, this is my last column for the Business Herald.

It has been a fantastic journey and I want to thank the Business Herald editors for giving me the opportunity to express my views every week.

It all began in January 1995 when Fran O'Sullivan, who was then editor of the National Business Review, asked me to write a weekly column for her publication. I jumped at the opportunity because I was angry that we had sold the Bank of New Zealand for a proverbial song with almost no opposition from the investment community.

I was also enraged that the then National Government wasn't being held to account for its reluctance to endorse a Takeovers Code, which would protect minority shareholders when changes in company control occurred.

I decided to adhere to two core principals. The first was never to miss a commitment, because I might lose my position to another writer, and the other was to never use the words I and me. I am breaking the second rule for this column although I recognise times have changed and personal pronouns are much more acceptable these days.

The first weekly NBR column, on January 20, 1995, was about Power Beat International, which was listed on the NZX between August 1993 and April 1996.

I made the following comment about the controversial battery developer: "The stock exchange has been almost totally ineffective in ensuring the market has been fully informed about Power Beat's activities".

This stock exchange comment has been repeated many times by me over the past two and a half decades.

In early 1997, Rod Oram joined the Herald from London's Financial Times and established the daily Business Herald section. Until then the Herald's business section, particularly the Saturday edition, was submerged in a sea of classified ads for situations vacant, cars, boats, and just about everything else for sale in Auckland at the time.

The Saturday edition must have consumed a small forest each week as this was well before Trade Me, and other internet platforms, stole classified advertising from traditional media organisations.

The Business Herald was launched on Monday April 21, 1997 and one of its main stories that day was under the heading "The Relaunch of Mr Trump". It opened with the comment; "Having soared in the 1980s and crashed in the early 1990s, Donald Trump says he is back at the top".

Some things change, while others remain the same.

The Business Herald has evolved dramatically since April 1997 with only Fran O'Sullivan, who had moved from NBR, and Mark Fryer, who will probably sub-edit this column, remaining.

The largest NZX companies at the time were Telecom, by a wide margin, followed by Carter Holt Harvey, Brierley Investments, Lion Nathan, Fletcher Challenge Paper and Fletcher Challenge Energy.

Wilson & Horton, which owned the Herald, was one of the top 10 NZX companies with a market value in excess of $1 billion while NZME, its present owner, has a current market value of under $80 million. This decline is almost totally due to the dramatic changes in the classified advertising market.

Oram enticed me to move to the Business Herald and my first column appeared on Saturday, April 26, 1997 under the heading; "Stock Exchange pussycat not tiger". I criticised the NZX for granting a waiver to Sir Robert Jones' Trans Tasman Properties from obtaining shareholder's approval when it sold its Australian assets to Australian Growth Properties.

The stock exchange was a strong opponent of the proposed Takeovers Code as it claimed it had rules to protect minority shareholders. However, when it came to enforcing these rules, it often granted waivers under pressure from large listed companies.

Sir Robert immediately threatened legal action, but the Herald has been a wonderful supporter of its writers, particularly when these challenges occur. It deals with these threats quietly and professionally with a clear determination to protect the integrity of its content and writers.

Sir Robert dropped his case and I subsequently received only one major legal challenge, from Mark Hotchin in the aftermath of the finance company debacles.

The years have rolled by quickly and I have never had a shortage of topics to write about. These include our winning and losing companies, as well as our top-performing businesspeople, rogues and con men.

My most admired companies have been Ryman Healthcare, Mainfreight, Fisher & Paykel Healthcare, Port of Tauranga and a2 Milk, mainly because they have clear objectives and have established fantastic operational rhythms that have enabled them to achieve their goals.

The Fletcher group of companies, Fonterra, Brierley Investments and GPG have been the most disappointing large cap companies.

Surely Fletcher Building must have the following large sign on its boardroom wall; "We must never appoint a director with industry experience". Yes, the odd individual with industry experience has slipped through but Fletcher Building has a much stronger preference for directors with accounting, legal and finance backgrounds.

A2 Milk, Mainfreight and Fisher & Paykel Healthcare have been among my most admired companies over the last 20 years. Photos / Supplied, File

Fonterra has been a massive disappointment while Brierley Investments and GPG started well but subsequently destroyed massive shareholder value.

The 2010s have been a great decade for the NZX but Fletcher Building's market value has fallen from $4.8b on December 31, 2009 to $4.3b at present while Fonterra's value has dropped sharply since its Shareholders' Fund listed in November 2012.

Meanwhile, a2 Milk's market value has soared from just $32m at the end of 2009 to $11.3b at present while Ryman Healthcare's value has escalated from $1.0b to $8.0b over the same 10-year period.

The big difference between my best and worst performing companies is that the former group have focused on organic growth while Fonterra and Fletcher Building should have bought a2 Milk and Ryman Healthcare respectively instead of making crazy high-risk offshore acquisitions.

My most widely-read column was published on September 21, 2007 under the heading "How Muldoon threw away NZ's wealth". The column argued that New Zealand would be a very wealthy country, the Switzerland of the Southern Hemisphere, if Prime Minster Robert Muldoon hadn't abolished Labour's compulsory Superannuation Scheme immediately following the 1975 election.

New Zealand would have a massive savings pool, a buoyant economy and a thriving stock exchange, if the 1970s scheme was still in place and most retirees would be facing their golden years with few financial concerns.

This has been New Zealand's worst economic decision by a wide margin.

Statistics can deliver clear insights and the accompanying table is an attempt to highlight some of the main business and investment trends since 1997.

In 1997 Telecom (now called Spark) and Carter Holt Harvey, reported higher combined earnings than the four Aussie owned banks, including National Bank of NZ which was later acquired by ANZ.

Former Prime Minister Sir Robert Muldoon. Photo / File

These four Australian-owned banks now completely dominate the domestic economy in terms of profitability and dividend payments.

The number of NZX listed companies slumped from a 1980s high of 318 to only 130 in 1997. These listing figures remain depressed as the NZX has struggled to attract IPOs whereas ASX listings have soared from 1190 in 1997 to 2237 at present.

There has been a major switch from individually owned shares to PIE funds with KiwiSaver being a long overdue initiative. Unfortunately, we had to wait 32 years before KiwiSaver replaced the original schemed nuked by Muldoon.

Finally, total net household wealth has increased dramatically from $407b in December 1998 (the earliest available figure) to $1590b at present. However, residential property has contributed 57 per cent of this wealth growth, private and other domestic businesses 29 per cent with NZX listed companies accounting for only 4 per cent of the household wealth increase.

Although the past 20 plus years has been a positive period for New Zealand, the media must continue to play an important role in ensuring that our businesses are ethical and create wealth for all stakeholders.

This is my last Business Herald column, but I will continue to write about business and investment issues on a different platform in the future.

• Disclosure of interests; Brian Gaynor is a director of Milford Asset Management and of Content Limited, which publishes BusinessDesk.