corporate profiles

Recycler Metal Man is making hay out of old car parts.

The Auckland-based company, which compresses and re-sells scrap metal, has 64 staff throughout New Zealand and an annual turnover of about $40 million.

Metal Man picked up several prizes at the recent Westpac Manukau Business Excellence Awards, winning the business of the year supreme award, and awards for excellence in manufacturing and exporting.

General manager Clark Proctor said the company's scrap metal came from a range of suppliers including boat builders, sheet-metal workers and automotive repair garages.

Metal Man exports about 50 per cent of its recycled metal, mainly to countries throughout Asia but also to Europe. The "top-grade furnace-ready" metal is used to make a variety of products, such as pots and pans, engine components and aluminium plates for boats.

Mr Proctor said the boom in scrap metal prices this year - they have risen by about 140 per cent - was "unbelievable", but not the windfall some might think. "I'm actually happy when prices are low. Because it doesn't promote thieving [of scrap metal], and removes those people from the fringes of the industry who are bad practitioners and rear their heads when prices are high."

Metal Man operates out of Auckland, Hamilton and Christchurch.

Twenty-eight years ago, a brother and sister set up a bus service in Perth that ran two coaches to London. Those two coaches expanded into Stagecoach Group, at one time the biggest bus company in the world and a watchword for Thatcherite capitalism. The next step was international expansion, and that was where the wheels fell off.

Six years on from the company's nadir, where its shares hovered around 10p and rumours it was on the verge of going bust, it has fought back to surpass its peak at the turn of the century. One analyst yesterday called the group the "shining light" of the public transport sector after it announced a strong set of results.

Stagecoach's storming rise in the 1980s was described as "a classic rags-to-riches tale from the frontiers of capitalism" by Christian Wolmar in his book Stagecoach, published in 1998. It was masterminded by Brian Souter, a former bus conductor and accountant, who launched the company in 1980 with his sister Ann Gloag using their father's redundancy money.

Through a strong knowledge of the industry and following the wave of privatisation and subsequent fragmentation of the market after the Transport Act 1980 it build a significant presence in the market. By 1992 it had expanded into rail operations with the shortlived Stagecoach Rail. Its use of the system and aggressive tactics weren't always appreciated. Mr Wolmar said: "Through press coverage of Monopolies and Mergers Commission referrals and reports, Stagecoach became notorious, an emblem of the excesses of Thatcherism."

When the time came to list on the London Stock Exchange in April 1993, investors clamoured to get their hands on the stock, with the float coming in seven times oversubscribed. It listed at 23p per share, valuing the group at e134m, and over the next six years stormed to a peak of 284p in 1998. One sector expert said: "In the late 1990s all the public transport groups thought the UK had gone ex-growth. There had been huge consolidation, and everyone began looking abroad."

National Express, Arriva and Stagecoach all looked to North America. Stagecoach bought Coach USA, the country's biggest operator, in June 1999 for $1.2bn, creating the biggest bus operator in the world. Mike Kinski, who had taken over as Stagecoach's chief executive the previous year (Mr Souter had become chairman), said at the time of the deal: "We see this as a $40bn market potential."

The move proved disastrous, as over the next three years it had to issue four profit warnings, primarily relating to the US business, which sent its shares spiralling to 10p. This sparked speculation that it was in danger of breaching its banking covenants, which was hotly denied at the time by the financial director, Martin Griffiths, and subsequently proved inaccurate.

The transport analyst said: "Coach USA was not a good buy. It was a lower-quality business and had serious problems. They bought the wrong business, and added to that it was just coming into a recession in the US." The business was also smashed by the terrorist attacks of 2001. "In late 2000, the market thought were problems at the company, but no one realised how serious and deep-seated they were. They realised extensive surgery was needed."

Several months prior to the fourth profit warning, it launched a full-scale inquiry into its US operation and Mr Kinski's successor, Keith Cochrane, parted ways with the company. "There was the impression that he had tried everything and it justwasn't working," one source said. The company brought Mr Souter back, and the rebuilding process had the share price peaking at record levels late last year at 291.5p. One company insider said it had adopted a "back-to-basics" strategy to rebuild its business. Mr Griffiths, who remains the financial director, said yesterday: "The company made a poor acquisition in the US, it didn't meet our expectations. I was always confident we could come through it, but it was a painful process."

Under Mr Souter, Stagecoach sold down or restructured 70 per cent of the US operation, keeping only the most profitable businesses. But essentially it was refocusing on the UK. The group also sold down a business in New Zealand and its interests in Hong Kong. Then, two years ago, the Australian investment house Macquarie offered e263.6m for Stagecoach's London Bus division, which signalled the end of its interest in operating buses in the capital.

The analyst said: "They focused on core UK operations and set about working out how to stimulate growth and exit the unprofitable US businesses. The market perceptions are of a very good management team, and of course shareholders are happy because of the huge amounts returned to them."

Last year, rather than targeting another expensive foreign acquisition, Stagecoach returned e700m to shareholders (including Mr Souter and his sister, who still own about 25 per cent of the company between them). This followed a e250m return several years earlier, but the size surprised analysts and investors alike. "The share price has continued to rise as the market can see it is a cash-generative business and it is happy to return money to investors," the analyst said. Over the past five years the company has also halved its almost e1bn of debt on the balance sheet.

The group has been helped by the sector, which is not particularly cyclical; people will always need transport to travel to work, as well as the children using buses for school and pensioners who travel regularly to hospital. Mr Griffiths added: "The macro environment for public transport is good. People are more concerned about the environment and congestion on the roads is increasing. There is also a wave of inward migration from countries in Eastern Europe which are very comfortable with public transport."

Stagecoach's shares yesterday jumped over 7 per cent to 240.5p after it reported that its performance since the end of October had hit the top end of management forecasts.

Its UK rail business stood out, with like-for-like revenue growing 14 per cent in the nine months to 3 February. These numbers also did not include East Midlands Trains, the franchise it took over on 11 November. Elsewhere in its rail portfolio, its operation with Virgin rose 12.4 per cent. The group's UK bus operation rose 7.4 per cent, while passenger volumes on its buses grew 2.5 per cent.

The management believes that the outlook remains positive despite caution over the wider economy, particularly with the impact of rising fuel prices, although much of that is hedged.

Mr Griffiths said: "The numbers are good, and we are reassured by the continued rise in revenues. The strategy has been very clear in the past four years. We are focused, but also opportunistic, and looking at bolt-on acquisitions. As for another multibillion-dollar deal; we never say never, but at the moment we are comfortable."

WHEN WE last featured Cambridge Clothing, back in 2001, it planned to keep manufacturing in New Zealand “as long as it makes sense”. Six years on, it makes less sense than it used to. Last year the company had 25% of its output manufactured in China and that figure is expected to rise to 50% this year, due to what Cambridge’s marketing manager Kim Macky calls “the changing shape of the marketplace”.

Outsourcing to China has resulted in its now 250-strong workforce being cut by about a fifth. The good news is the company continues to utilise its Auckland manufacturing plant for its own designs, and also contract manufactures on behalf of others, which now accounts for about a quarter of its output. “All the manufacturing plants in Australia have closed now so our manufacturing plant in Auckland has been very busy although it’s coming down from a high 12 months ago due to the high Kiwi dollar.”

So making some suits in China is a big change but the biggest transformation has come since the clothing company underwent a Better by Design audit in 2005. “That’s fundamentally changed the shape of our business,” Macky says. “Design and branding will play a more significant part in our goals and targets than just being a manufacturer and wholesaler.”

The company has spent the past two years reshaping its management structure, including setting up a head of design, Nicholas Blanchet, a Kiwi who heads the design team based in Australia. Some 65% of Cambridge Clothing’s production is exported to Australia. Although the company has dabbled with exports to other countries it views the Australian market as the most compatible with its Auckland-based business and one in which there is still plenty of room to grow.

Currently Cambridge has ten stores within Australian department stores and as part of its design-led makeover plans to open a number of its own standalone stores across the Tasman in the next year. It has no plans to follow suit in New Zealand, though, because of the smaller size of the market here.

Cambridge is still owned by the Macky and Goodfellow families who founded the Auckland company in 1934. Macky says the company will continue to be based in New Zealand, tailoring its business to premium-priced brands. “We foresee a New Zealand-based manufacturing operation being sustainable for the foreseeable future but what size it needs to be is the question.”

Fletcher Building has been a sharemarket darling for the past five years but investors might have missed out altogether if Fletcher Challenge's board had taken private equity advances more seriously.  In September 2000, when the Fletcher Challenge group was being broken up, a private equity firm came knocking on the door expressing interest in Fletcher's building business.

Though the offer was not made public, BusinessDay understands it came from Credit Suisse First Boston Asian Merchant Partners and was worth about $2.82 a share.  CSFB Asian Merchant Partners is the firm that floated ill-fated carpet maker Feltex in 2004.

Unimpressed with the private equity advances, Fletcher Challenge's board jilted CSFB.  Fletcher Building, with businesses which include PlaceMakers, Fletcher Construction, Golden Bay Cement and Gerard Roofs, listed on the sharemarket as a standalone company in March 2001.

Its shares, which started at $2.23, hit a record high of $13.42 in May after Fletcher Building raised $328 million in a placement of new shares to help fund the $1 billion acquisition of benchtop group Formica. Though the shares have slipped back, they are well above $12.

Roderick Deane, formerly Fletcher Challenge chairman and now chairman of Fletcher Building, recalls that the offer came when the breakup of Fletcher Challenge was well under way.  It would have been a "huge hassle" to address the CSFB offer.  Furthermore, Dr Deane describes the offer as indicative with numerous conditions attached, giving a range of prices rather than a specific one.  "It just seemed to us that it didn't have a large enough premium in it to warrant pursuing and it was too indefinite," Dr Deane says.  "If they'd actually made a firm, unconditional offer then of course the obligation to disclose would have been much more immediate."  The offer was subject to a confidentiality agreement and Dr Deane says the other party did not want it made public.

CSFB spokeswoman Elizabeth Rudall declined to comment.

Fletcher Challenge was broken up in New Zealand's biggest corporate restructure in 2000-01.  Fletcher Paper was sold to Norske Skog for $5 billion.  Shell and Apache Corporation bought Fletcher Energy for about $4.8 billion. Fletcher Forests was listed.  Today, having sold all its forests and its wood processing assets bar a sawmill and mouldings plant in Taupo, it is known as Tenon.

Dr Deane says Fletcher Building was always regarded as the potential crown jewel but it had not been "polished up" for some time.  After analysis the board decided what its strategies should be and pooled the lessons individual directors had learned.  Chief executive Ralph Waters joined in mid-2001.  Since then Fletcher's share price has surged as it has cut costs, made the most of strong construction and infrastructure demand, and expanded in Australia by spending $1.6 billion on acquisitions.  Mr Waters handed the reins to Jonathan Ling last September.

With Formica, Fletcher is now the world's biggest maker of laminate boards for use in kitchens, bathrooms, shops, hospitals and schools.  After starting as a company dependent on the domestic residential building market, it is now on track to make more than half its revenue overseas.  "When we listed Fletcher Building it was No17 on the stock market. Today it's No2 in market cap. I think that's the vindication."

Christchurch clothing maker LWR appears to have the inside running after key Pod shareholders - George Gould and Kevin Arscott - entered pre-bid lock-up deals to sell their shares at 50c each, giving LWR 30.5%.

Australian competitor the Merino Company has offered to buy Pod's core business, Designer Textiles International (DTI), for $8 million.

LWR says if its bid fails to reach 90% acceptance, triggering a compulsory acquisition, it would offer to buy DTI for the same price as the Merino Company's offer. Shoeshine expects Pod's minority shareholders won't be that happy with the way things have panned out. This is because they haven't had any time to weigh up the finer details of LWR's offer. LWR sent its 50c a share offer to all Pod shareholders this week.

But by yesterday they still hadn't received the target company statement or the full independent adviser's report from Ferrier Hodgson. Pod announced yesterday the documents were with the printer and it was intended they would be posted to shareholders by today. In the interim shareholders could review these documents via Pod's website.

Ferrier Hodgson completed its report last week and released its preliminary findings, including a valuation range for Pod of 48-54c per share. Ferrier Hodgson has also concluded that shareholders seeking to exit Pod would be better off rejecting the sale of DTI to the Merino Company and then accepting the LWR takeover offer. "In this scenario, even if the LWR offer does not succeed, Pod will still be able to consider a sale of DTI to LWR, at a price equivalent to that offered by TMC." For it's part, LWR says it will not increase its price.

Pod, previously called Designer Textiles, has three underlying businesses: New Zealand merino garment and fabric manufacturer Designer Textiles International, Mollers Homewares and designer fashion garment manufacturer Michele Ann. It's shares were quoted at 48c at midday yesterday, having traded in the low 30s before the takeover activity.

In its interim results published in February, Pod announced a deficit after tax of $1.173 million for the six months ending December 2006. The firm said the result took into account foreign exchange losses of $1.035 million. The result was well down on its previous net surplus of $1.32 million for the six months ending December 2005, although the company said this had included a net after tax gain of $1.1 million following the sale of its Logan Textiles Brisbane property.

At the time Pod chairman George Gould said that the group was suffering from poor financial performance from merino exporter Designer Textiles International. "Despite our merino business exporting record volumes, the reality is that we are finding it difficult to profitably manufacture and export merino fabric and garments when the New Zealand dollar is at 70USc and the competition comes from lower cost manufacturers overseas." Mr Gould said the company hoped to fast-track offshore manufacturing plans to counter the loss.

How this is factored into LWR's plans for the business should its takeover bid be successful remains to be seen. LWR, owned by Christchurch's Anderson family, is part of the largest textiles business in New Zealand. Its parent is the well-known Kiwi company Lane Walker Rudkin. It makes clothing for a range of clients and has been keen to push its Kiwi history of manufacturing in New Zealand, as opposed to its competitors, many of which have outsourced to overseas countries such as China. Last year the company set up its own merino clothing brand to take on the likes of local success story Icebreaker.

After a century in business, Lane Walker Rudkin remains famous as the home of the Canterbury sportswear brand, despite that being split off and sold. The company has since developed its own rugby brand, Union, and Everest, a brand connected to Sir Edmund Hillary's first ascent of the world's highest mountain. It is also expanding the separately run Stirling Sports franchise, after quick success with its first mega-store at Tower Junction in Christchurch.

But Lane Walker made its name as a manufacturer of international underwear brand Jockey in the days of import substitution. Later it was associated with Liberty and Adidas. Like many South Island manufacturers, the high costs of transport regulation and servicing of its larger markets up north heavily affected it. Over the period, it employed a total of 100,000 staff. It still has a large site in south Christchurch where Sarah and Alfred Rudkin made their first socks. During its darkest years, LWR lost heavily in export markets and was asset stripped first by Brierley Investments and then by a US-based expatriate. Should LWR be successful in acquiring Pod, it will increase its dominance in the textile sector.

While lamenting the possible loss of another homegrown company from the stock exchange, Shoeshine would love to see some of the combined assets of Pod and LWR return to the NZX in the future.

The foyer of Mainfreight's new $30 million head office and warehouse is immaculate. It is several metres high, with floor-to-ceiling windows at one end and company philosophies - such as "the man on top of the mountain didn't fall there" - written in bold silver text around the walls.

One of the company's first vehicles, a restored Bedford truck, sits proudly off to one side.

The foyer is so stylish, well lit, and spacious that it resembles an art gallery, slightly at odds with the trucks roaring in and out of the gates outside.

But managing director Don Braid isn't so sure: "An art gallery? Huh, I don't know about that."

Braid - who isn't keen on having his opinions or personal history in the public domain - has to be gently persuaded to be interviewed. More than once he instructs: "Don't you write this article about me."

He is possibly the most self-effacing leader of a major listed company in New Zealand, but you can tell why he would make a good leader. He is tough, a straight-talker, and incredibly dedicated to Mainfreight.

"I don't see it as a job, to be honest, it's a lifestyle, it's what we passionately believe in. We have Mainfreight in our hearts and we love what we do."

And while he is every bit the smooth corporate player, it is not too much of a stretch to imagine him behind the wheel of one of the company's blue trucks.

Braid has always been in transport, joining Freightways in 1978 and shifting to Mainfreight in 1994. He has been managing director since 2000.

Mainfreight, which listed in 1996, has been the top performer on the NZX-50 in the past two years. It delivered a return of about 140 per cent in 2006 on the back of some pretty impressive global expansion. In 2005 it returned 64 per cent.

Braid does not attribute the company's success to his leadership but to the culture and beliefs fostered by founders Bruce Plested and Neil Graham.

Plested is the chairman of the company's board. He started Mainfreight in 1978, and is one of New Zealand's great entrepreneurs.

Mainfreight's philosophy is simple, and logical: build a strong team culture, promote from within, reward good work. But the difference is that this company appears to adhere to it, and is backed up by the board.

"What we have today is based around the culture and beliefs those founders have. We have been able to build on that and create some success out of that," says Braid. "It's all to do with how the business envelops its people to deliver a good quality service - that is the key."

The company has always hired intelligent, energetic people who understand what its customers need, he says. "We are looking to train our guys from the depot floor through the business, so we promote from within, creating an environment where people can forge meaningful careers."

Braid sits in an open-plan office with the rest of his management team. "So we are still able to smell the diesel."

The company has fostered an egalitarian culture among its staff of 3225, and does not believe in hierarchy, bureaucracy or superiority.

The company now earns half its revenue from its overseas operations. It did make a loss in Australia in 2004 and 2005, but has since recovered. For the nine months to December 31, 2006, its Australian domestic revenues jumped 14 per cent to $97.5 million, with earnings before interest, tax, depreciation and amortisation up 14 per cent to $7.8 million. Braid attributes the turnaround in Australia to the management team buying in to the Mainfreight culture.

Mainfreight is very excited about the prospect of growth in the next five years, he says.

"Unfortunately for New Zealand, a lot of that growth is going to be offshore. We still have plenty to do here in New Zealand, but a big portion of our growth will come from Australia, the US and Europe."

Braid is staunch about keeping Mainfreight New Zealand-owned, and does not see why other Kiwi companies can't make it overseas if they are confident about their product.

"Because New Zealand is so far away, you have to get on your bike and go to those countries. You have to go there and do your research."

Braid admits "a lot of us have skin in the game". One of the company's founders, Neil Graham holds a 6.5 per cent share, Braid holds a 2 per cent share, and Plested an 18 per cent share.

"That is helpful and perhaps flies in the face of some bureaucratic and stupid governance rules that apply in America and are starting to invade here, where shareholding by board members is frowned upon. We want to see the success of this business for our own personal gain as much as we do for our shareholders."

Mainfreight is targeting niche operations overseas, and is not ruling out expanding to other services. "We have a sufficient entrepreneurial spirit in the business that we will explore opportunities as they arise."

Braid believes it has shown a "glimmer" of what is possible in the performance of the business in the past two years.

"We are not constrained by the boundaries of one country, perhaps some other businesses are. I think of fantastic New Zealand companies like Fisher & Paykel and Nuplex who we admire, and if we can follow in their footsteps and grow offshore, it's got to be good for the economy."

It would be helpful if the Government could implement a tax regime that helps companies expanding overseas bring all their profits back, says Braid

"But who the hell are we to try and change the Government, we might as well get on and focus on what we do best - which is developing Mainfreight."

Don Braid

* Age: 47

* School: Timaru Boys' High School

* Career: Boss of Daily Freightways, managing director of Mainfreight

James Pascoe is the great success story most New Zealanders don't know about. David Hargreaves reports.

THE term quiet achiever doesn't seem quite adequate for James Pascoe Ltd. In the past decade or so, this proudly Kiwi company has emerged as a significant force on the trans-Tasman retail scene through shrewd acquisition and expansion of businesses.

It is in the mop-up phase of another substantial takeover in Australia -- and it is not ruling out more acquisitions in future.

Including the latest acquisitions it runs more than 500 jewellery stores as well as a department store chain. Its brand names include Farmers, Pascoes and Stewart Dawsons in New Zealand and Prouds and Angus & Coote in Australia.

The company now lays claim to being the biggest jewellery retailer in Australasia. It has an estimated 20 per cent of the Australian jewellery market.

Revenues on the other side of the Tasman alone are likely to top $500 million this year. The company employs many thousands of people, including more than 4000 in New Zealand. Not bad for a business that started with one store opened by James Pascoe in Auckland's Ponsonby in 1906.

Yet as a privately owned business, Pascoe is not required to divulge much about itself, so its achievements are not broadly known.

It is worth comparing Pascoe briefly with high-profile rival Michael Hill International. It, too, has done very well across the Tasman, but has just 120 stores in Australia and about 190 in total.

Pascoe has been controlled since the 1980s by David Norman and wife Anne, a granddaughter of James Pascoe. The Normans value their privacy and rarely speak to the media but cooperated for this article by answering questions by e-mail and supplying other information.

These are busy times for the company as it looks to digest Angus & Coote, a long-established Australian jewellery chain. The A$70 million- plus A&C takeover was carefully orchestrated and demonstrates the Normans' eye for an opportunity.

A&C, like Pascoe a family- controlled business, started losing money last year, reporting a A$3.8 million loss. Pascoe pounced -- grabbing a 15 per cent shareholding, and just months later Coote family members agreed to a takeover bid.

A&C, which has 300 stores, will require a lot of work to return to profitability.

But the Normans will take confidence with what they and Pascoe achieved with Prouds.

Prouds has been built up from just 67 stores to 160 since being bought in 1996. It now turns over more than A$200 million and generates pre-tax profits of about A$20 million. But it was bought in similarly difficult circumstances, having been placed in administration. At the time A&C, ironically in view of current events, worked with Pascoe to carve up the Prouds assets. Pascoe took the Prouds brand stores and A&C took the Edments and Goldmark chains -- both nowin the Pascoe fold.

For Pascoe as a business there were two main attractions in buying A&C. First there was the challenge in turning an underperforming business around and second, Pascoe will get stronger purchasing power on an international basis. It becomes a significant buyer on a world scale.

Though market observers believe Pascoe's A&C acquisition will prove to be a good one, there has not always been such enthusiasm for Pascoe's takeovers.

Some commentators were perplexed by the $122.3 million purchase of the Farmers department store business in 2003 from Australian company Foodland.

Why was a jewellery business buying a battling department store chain? At the time Farmers' performance was fairly ordinary. But the doubters have been proved wrong. It is believed the 58 Farmers stores are now trading far more profitably.

Mr Norman says the acquisition was not originally planned.

"Believe it or not Farmers approached my wife and I regarding the possibility of operating Pascoe jewellery concessions within the department stores. When we took a closer look and saw the potential of the Farmers business it soon became clear we should return it to New Zealand ownership."

For Mr Norman, the purchase and development has provided "a deep sense of satisfaction that a New Zealand retailing icon is back where it should be, that is at the forefront of the NZ retailing industry".

"When we changed the byline of Farmers to 'Your Store' we did so with the real intent of making Farmers relevant to its market. Our market surveys showed overwhelming support for the Farmers brand, its heritage, and a desire to see it succeed."

Asked how Pascoe has been able to grow and thrive in such competitive markets, Mr Norman says the company "empowers its people and is tolerant of mistakes".

Pascoe as a company tries to bring integrity and value for money to its offerings, he says.

The jewellery trade has had a struggle in recent times, with high gold prices and higher interest rates biting into trade.

Mr Norman says the traditional jewellery market is at the bottom of what is normally a seven-year market cycle.

"Statistical data and our own experience is that we have bottomed out and business levels are returning to normal," he says. "However, we believe it will be at least another year before 'fine jewellery' turnover levels return to the trend line."

Mr Norman believes New Zealand is wide open for the development of a younger, more fashion-oriented jewellery market. One or more of the A&C brands might be introduced.

Goldmark, aimed at 16-29-year- olds, is seen as a likely starter.

"The Goldmark brand holds great potential on both sides of the Tasman. To us it makes sense to harness the economy of scale when it comes to sourcing, and marketing," Mr Norman says.

The growth of the Pascoe business has had the deal-seeking private equity companies sitting up and taking notice.

Market sources suggest that the Normans have been approached by several private equity firms seeking a slice of the Pascoe action -- but have been politely sent on their way.

On whether a float of Pascoe or part of it, such as Farmers, would ever be considered, Mr Norman says they would never say never. But it would be "most unlikely".

For the future, it is aimed to keep the Pascoe name at the forefront of the retailing industry.

And, yes, Mr Norman confirms, that would include looking at more acquisitions.

"Does the sun come up most days?"

NZHerald.co.nz Business Chat talks with Dean Bracewell, managing director of package delivery and information management company Freightways.

Freightways operates a number of brands, including Post Haste, Sub60, New Zealand Couriers and DX Mail, rather than one main Freightways brand. Can you explain this strategy?

The multi-brand strategy is designed simply to position our respective brands in specialist niches, so they can become leaders in those particular niches of the market.

We believe, for example in the express package market, which is the biggest market, where we have New Zealand Couriers as our premium brand. New Zealand Couriers provides quite a distinctly different service than Castle Parcel that operates on the economy brand.

NZC will use planes to connect both islands of the country and provide a nationwide, overnight, 9am delivery.

Whereas Castle, we use a lot more road based systems to provide a two day delivery to the South Island and Post Haste is in the middle of those two.

Dean, you've actually been with Freightways most of your working life. How do you maintain enthusiasm for the company?

Pretty easy when you love what you're doing.

The industry that I've worked in - express packages - provided everything I could have asked for.

It's been challenging, it's dynamic, it's fast paced, it's competitive and it's rewarding in so many ways.

But then I'm only one person of many that have built their careers in Freightways. There's many people here in our business for 10, 20, 30 and 40 plus years.

I think Freightways is big enough so our people can develop their careers within the one company, in lots of different roles, in lots of different parts of the industry without having to leave the company. So it works well for employees.

Is it hard to keep a fresh eye on the company's direction?

No, our companies ensure that we are constantly fresh in our outlook and we are constantly trying to meet customer demand with the strategies we have.

This business started off in the 1960s with just six people delivering across town.

We then developed and overnight inter-city network. We then developed an overnight interisland network. We then added additional planes to the network. We've added technology. We've done so much over the years, so it really is quite an evolving industry. It's great to be in.

At one stage Freightways had three owners in two years and then listed on the stock exchange. As a managing director, what was the most challenging aspect of these changes?

First and foremost the most challenging aspect was that the businesses themselves and our people from the businesses didn't get distracted by the change of ownership.

So our primary focus at that time was on the business and growing business performance and we were able to achieve that. So that was the most challenging aspect - not to get caught up in the change of ownership game, but to keep focussed on what we were doing within the business.

I think history showed we managed that pretty well.

What about for you personally?

It was just another management challenge.

Part of the beauty of being at Freightways is there's different challenges every day. That was another one - you take it on board.

I'm surrounded by some pretty exceptional people on the Freightways team, so it isn't just me personally. It's a team of us involved in these things and we managed to cope fairly well.

There's a global trend for private equity involvement in merger and acquisition deals and New Zealand is no exception. You've experienced life under private equity ownership - how did that affect your running of Freightways?

Really it was absolutely business as usual.

The private equity company that bought into Freightways also bought an existing strategy that the management of Freightways was fairly intent on executing and they supported that strategy.

So really it was a very positive experience for us. It meant we ultimately established ourselves in our own right. We listed on the NZX and we've got 7,000 Kiwi shareholders now - who all made a good decision to come on board at the time - and overall it was a positive time and very much business as usual.

From private equity you went public in 2003 - what was biggest change for you as a managing director?

Really running a listed business for us didn't create a lot of change because we already operated with a fair bit of the reporting and compliance requirements that a listed business has.

Prior to our public listing we had issued preference shares a number of years previously, so we had a taste of the public markets albeit full listing is quite different.

I guess the major change is you're under the scrutiny of a lot more interested parties. But we take that on board as just another thing we need to deal with and we take our responsibilities to our shareholders very seriously. They've invested some hard-earned money into this company and we realise we need to front up and talk about how we're going, what we're doing.

Last year you moved in the Australian market with the purchase of information management company, Databank Technologies. How does this fit with your company's direction?

Our strategy for some time has been to continue to defend and extend what we do within our core business - the express package business.

But also alongside that we've been developing our information management business and we've grown pretty much from a standing start seven or eight years ago now to be the number two player in the New Zealand information management sector.

So it was a fairly natural thing for us to actually look into the Australian market with that particular business.

The Australian move was really just a continuation of a strategy here and we don't put walls around New Zealand saying that 'we will only operate here' if we see a good opportunity elsewhere - and we saw that with this business, Databank.

Can we expect to see more expansion into Australia?

We said at the time of acquiring Databank that we hoped it would be a catalyst for future growth.

But we'll do it on our timeframe, when we're good and ready.

So you can't tell me what that timeframe might be?

The timeframe isn't always determined by us. Sometimes it's determined by the market opportunity that's there at the time.

The information management industry has traditionally been about the storage and destruction of paper files. Where do you see the growth potential?

We see the information management - although we'd label it as three parts: the storage of documents, the storage of computer media or backup tapes and there is the destruction of the documents.

The data, the backup tapes, will continue to grow for the reason there is a growing need for these services, to outsource and professionally manage data. Particularly off a lot of legislation that occurred over in the States when they had issues with some of their businesses over there - the Sarbanes-Oxley legislation - and our growing compliance in this part of the world as well.

So the data will grow and certainly the documents will continue to grow with that as well.

The market is quite under-developed and so there is a lot of businesses yet to outsource the professional management of data and we're exceptionally well positioned to accommodate those customers when they come on board.

In 2004 you undertook a strategic alliance with Mainfreight - would further alliances with someone like Mainfreight benefit in expansion into overseas markets?

The relationship with Mainfreight was designed to bring two complementary services together and our services in New Zealand do complement each other.

Currently the two businesses are at different stages of their development overseas, but one day if we were to have to have complimentary services overseas, sure, we'd love to work with our friends from New Zealand.

You recently announced strong revenues and earnings from your first half, in spite of what you described as a "challenging business environment." Your business outcomes are obviously quite closely linked to the economy - what are the major challenges for 2007?

We see the challenges in 2007 as being really a continuance of what we've had over the last 18 months and during that 18 months we have seen a number of our customers trading at lower levels or some of their trading was slowing.

So really for us it is about continuing to work other strategies to offset the quieter times among our existing customer base, to continue the growth momentum that Freightways has.

It's about working smarter, it's about thinking a bit more laterally out of the box and hopefully pushing on with some of the growth in the other markets that are under-developed such as business mail and information management.

However, we must first and foremost keep sight of our core business - the express package - and make sure that we continue to invest in capacity and innovation, so that we do retain and attract a bit more market share over there as well.

So what strategies can we expect to see this year?

It's not a new strategy. Back in the start of 2006 we then saw the market was slowing down.

So it was at that time we decided not to hunker down and bury our heads in the sand. We decided to actually get out and invest in additional resource - in more people, in more capacity, in some operational efficiencies.

So really it's just a continuance of taking those strategies through to the 2007 year and we hope that will continue to contribute to our growth.

Do you think Allan Bollard will lift the official cash rate next week?

Well, I'm not an economist - far from it - but I think that from what we are seeing amongst our customer base that things have been pretty tough and challenging for a lot of New Zealand businesses over the last year and I don't an increase in the interest rate will assist them.

So my preference naturally, is that interest rates aren't increased, however I'm not an economist and I don't have his job.

If the official cash rate did lift, what would be the impact for Freightways?

It probably impacts us two ways.

Firstly, we have debt at the bank. We have a fair amount of that which is hedged, but the balance of it will attract potentially a higher interest rate. That's the more immediate impact.

The second part of it is that as interest rates go up it flows right through the market place.

It might mean that people spend less at the shops and there is less courier packages to be delivered to those shops to replenish what was on the shelf beforehand.

So it can affect us two ways.

Is the price of oil a concern to Freightways operation? If it is, to what extent does the price of oil affect profitability?

Once again there's two parts to the answer there as well.

Naturally oil, if it races away and increases - we're currently running running at a lot higher levels today than we were a couple of years ago, even though there was some fall at the end of last year, we're still well above.

So when oil races away we get a direct and immediate impact on our cost lines within the business.

So we need to structure our pricing arrangements with our customers so that that impact is minimised. So I guess we share the pain with our customers with what is happening to those cost which are beyond our control such as oil.

The other part of it is once again if the market place is experiencing higher costs, if consumers are spending more at the petrol pump, then they're spending less potentially on consumer items and that means lower volumes of packages to be delivered as well.

Do you look at a petrol supplier for discounted bulk buy fuel prices?

Yes, absolutely. We negotiate on behalf of our bulk-buying power and so we do have a well established discount rate at the pump.

A question from a Herald reader. They are interested to know how technology fits into the future of Freightways.
They say that Freightways seems to have lagged behind their largest competitor - CourierPost - in this area, but they have maintained market share and profitability.
Do you see any major disadvantages in not having had the technology?

Not at all, but that question's probably got three or four parts to it.

Just stepping through them, technology is a part obviously of running a transport business such as Freightways and it always has been a key part of what we're about.

We've actually three quarters of the way through a $10 million upgrade to our IT system, so there's a fair bit of money and investment attached with IT.

It's played a pivotal role in the business for 20 plus years and the information systems that we have are geared around delivering scalability because our business has grown very strongly so you've got to have information systems that can cope with that significant growth.

It's a very robust system but it has also got to be flexible to meet the varying customer needs. So we've got a very powerful, core information management system.

The part about lagging a competitor and still maintaining market share, well I think we've actually done more than that. We've grown our market share and we've grown our profitability over a number of years, so it's not just about maintaining it.

I think we've done this by keeping in touch with our customer needs and developing our services to suit those needs rather than getting caught up in a side-game that technology can distract from what you're really here to do.

We think it's most important not to lag customer demand rather than try and keep up with a competitor whose strategies we might disagree with.

Are we disadvantaged by not having some of the technology? Well, we made a decision to roll out in-van data capture technology this year and that's as a result of our customer demand but a time when we've assessed the network that transmits that data as being ready for us and the scanners that will go into our courier vans as being ready for us.

So, a few things have needed to come together but we believe the time is right.

And whilst we've been lining up to make that decision about the technology in the vans we've been focussing very heavily on ensuring we deliver our core service, which is getting packages to the right place at the right time.

What we believe we now have is a very compelling customer offer - premium service, competitive price and the latest technology to over-lay it all.

You talked about the scanners - how are the trials for those going?

They're going fine. We're rolling them out into the Auckland marketplace which is the most rigorous, high volume market to test the scanners and we'll get any glitches that are involved with new technology out of the way in this market prior to rolling them out around the rest of the country.

What developments - technology or otherwise - can we expect to see from Freightways in 2007?

I think you're going to see more of the same and whilst that might sound a bit ho hum, it's kind of what our customers like.

They want consistency, they want reliability, they want innovation when they're ready to innovate and when there is demand for it.

So what you're going to see from us is really more of the same and hopefully that will continue to deliver the sort of performance to all our stakeholders - our people, our employees, our contractors, our customers and our shareholders.
* * *
Freightways was floated on the NZX in September 2003 by private equity players ABN Amro Capital - its third owner in two years.

Investors at issue paid $1.60 and just over three years later the stock trades around the $4.50 mark.

In the last year Freightways has bought the DataBank records management business, Pete's Post mail delivery and took on freight customers left stranded by the failure of Nelson-based airline Origin Pacific.

Bracewell joined Freightways in 1979 and other than a five-year period, including time overseas, he has spent his entire career with the company.

He attended Rosehill College in Papakura.
* * *
Next week Business chat will be sitting down with Tony Gibbs - the man who grows ezipeel citrus in Matakana and is a director of investment company Guiness Peat Group.

PARA RUBBER remains one of New Zealand's best known retail brands despite its chequered history.

The company was founded in 1910 by Christchurch businessman George Skellerup, mainly to supply a wide range of rubber- based products to farmers. After World War II, Skellerup also founded Skellerup Industries which made many of the products sold in the Para Rubber stores.

In the 1960s and 1970s, the chain grew steadily and its shops, with their eclectic mix of foam mattresses, gumboots, jandals and ubiquitous Para Pools, became a fixture in most big towns and suburban shopping centres.

But the chain started on a slow decline after it was acquired by Brierley Investments in the 1980s, and the individual stores were franchised. Over the next 20 years it went through several changes in its ownership structure and by the time it was acquired by Auckland businessman Ross Van Horn in 2000 there were just eight stores left, none of them in Auckland.

In 2003, Van Horn opened a Para outlet at Mt Roskill in Auckland as the flagship store and kept the franchise for it himself.

But last year he sold the Para Rubber master franchise to the Plastic Box retail chain, a co- operative of 33 owner operated stores. It intends to revitalise the Para brand and expects to eventually have about 35 Para stores throughout the country.

The Mt Roskill store is now well established and Van Horn has decided to sell that also and concentrate on his other business, a bathroom supplies maker.

He said the store was now turning over more than $1 million a year and was very profitable.

He said he had been running it under management and had stayed in the background with "my foot on the chequebook", but said a hands-on husband and wife team assisted by a couple of staff could "pull out $100,000 a year quite comfortably".

The prices of the goods sold range from $15,000 for a large Para Pool package to just a few cents for the rubber feet for table and chair legs.

The biggest product category by turnover is the pools, though sales have been hit by this summer's weather.

The next biggest category is foam and rubber sheeting, sold as ready-made products such as mattresses or by the piece, which is cut to order for people doing their own upholstery work.

Footwear is also a big seller - gumboots and jandals sell equally well all year round, as do cheap canvas topped sneakers, a mainstay since the 1970s.

Van Horn has listed the business for sale as a going concern with Jeff Bracegirdle of Re/Max Central at $410,000 including stock.

FARMERS department stores are under new management, with Rod McDermott taking over as managing director and chief executive as the company moves ahead with its change of image.

Chairman Denham Shale said Farmers had completed the full transformation at about a third of its stores and was hoping to complete work at most by the end of next year.

"We are definitely wanting to get ourselves at a level where we're on our own. We don't really want to be in a space occupied by others."

Farmers was aware of its "social responsibility' in smaller towns where it was often the only department store, he said. In those areas Farmers was working to revamp stores but retain a wider range of products.

In Matamata and Rotorua, Farmers has merged old stores or moved into larger spaces to make a combined department and homeware stores.

The 58-store chain was bought by New Zealand-owned private company James Pascoe three years ago from its Australian owners Foodland Associated.

James Pascoe is owned by husband-and-wife team David and Anne Norman. Mr Norman will become group managing director for James Pascoe and remain on the board.

A spokesman for Farmers said the new arrangement would allow Mr Norman to turn his attention to other parts of the group, mostly the Australian jewellery chain.

In September, Pascoes launched a lightning raid on Australian jeweller Angus & Coote, snapping up about 11 per cent of the business and sparking talk of a full takeover. It later took its shareholding to almost 15 per cent.

Mr Shale said James Pascoe was happy with its holding.

As well as Farmers, James Pascoe owns Pascoe Jewellers, Stewart Dawsons and Australian jewellery chain Prouds. Farmers has 58 department stores across New Zealand.

In a statement, James Pascoe's board said Mr McDermott's appointment would provide the continuity and stability required to achieve Farmers' repositioning.

In recent years, Farmers has been moving away from its history as a general merchandise store and moving upmarket, with an increased focus on jewellery, clothes and makeup.

Mr McDermott has 30 years retailing experience, including management positions in Australia with Myer and Big W, part of retailing giant Woolworths.

He has been with Farmers for 15 years, and has been chief operating officer for the past three years.