Wellington & Wairarapa

Infratil says it has no plans to sell its minority stake in Wellington bus operator Mana Coach, even though the High Court has ruled out a planned merger with its Wellington bus business.

Infratil subsidiary New Zealand Bus runs the scheduled bus services in Wellington and the Hutt Valley. Mana Coach operates mainly north of Johnsonville and has limited runs into Wellington. Infratil acquired its 26 per cent holding in Mana Coach through the purchase of Stagecoach New Zealand in 2000.

New Zealand Bus was fined $500,000 and costs of about $600,000 by the High Court in 2006 after it tried to buy the rest of Mana Coach without Commerce Commission approval. The Mana Coach vendors at the time, Kerry and Ian Waddell, were found guilty of being accessories to the transaction, but not fined. Their conviction was subsequently overturned on appeal.

The Waddell family sold its 74 per cent stake in Mana Coach to merchant bank Bancorp, which in turn sold it to British transport entrepreneur Brian Souter last December.

Infratil executive Paul Ridley-Smith said yesterday that he expected the ownership structure of Mana Coach to continue in its current form.

Mr Souter was an experienced bus operator as a founder and major shareholder of Stagecoach, he said.

Last week the Court of Appeal turned down an appeal by the Commerce Commission against the High Court's decision not to convict Infratil for its role in the transaction. But the judgment upheld the $1.1 million fines and costs for New Zealand Bus, which were paid in 2006.

A restraint-of-trade clause in the contracts of shop assistants at Masterton Pak 'N Save has employment lawyers baffled and union delegates outraged.  The three-month clause, which is most often used by employers to protect trade secrets, stops employees working for rival stores after they leave the supermarket.

The Dominion Post was provided with a copy of a contract for a Masterton Pak 'N Save shop assistant which says the person cannot work for a rival or similar store within a 50-kilometre radius for three months after resigning.

Employment lawyer Peter Cullen said the clause was far-reaching and it would be hard to prove it was justified in the case of shop assistants.  "I've never heard of a check-out operator being subject to a restraint of trade."  It potentially stopped former staff working at vegetable stores, bottle shops and similar outlets.

But Masterton Pak 'N Save franchise owner Paul de Lara-Bell stood by the contract. "You can put whatever you want in a contract. Whether you can uphold it in a court of law, and whether people agree to it, are two different things."  He said the clause was mainly aimed at senior staff, but the supermarket would not rule out using it on others.

National Distribution Union secretary Laila Harre said the clause was completely unreasonable and illegal.  "People don't know what their rights are. They are fearful of breaching the contract and the clause keeps them in a job they're not happy with."  She said supermarket workers aged 15 and under usually earned about $6 an hour. Youth workers, aged 16 and 17, were paid $9 an hour, while those over 18 years earned the minimum wage of $11.25 an hour.

Susan Hornsby-Geluk, a partner with law firm Kensington Swan, said the courts scrutinised such clauses heavily, with the onus on employers to prove former staff had specialist knowledge.  "You'd be stretching it to say a packer of groceries has either client relationships or special knowledge that create a risk for the employer."

News of the clause has prompted Foodstuffs, which owns Pak 'N Save, to step in. Wellington region group manager Robert Kent said the clause was specific to the Masterton site only. The company did not believe it was enforceable.  "We need to take the steps to remove it from that particular site's employment agreement."

In March last year Wellington barista Victor Hsieh was stopped by the Court of Appeal from competing near any of Fuel Espresso's coffee outlets after he took the lease of a coffee cart, Beangrinder, a week after leaving Fuel Espresso.  He had a restraint-of-trade clause that stopped him making coffee within 100 metres of any Wellington Fuel outlet for three months after leaving.  But Ms Hornsby-Geluk said a barista was skilled and had stronger client relationships.

British transport entrepreneur Brian Souter has re-entered the Wellington bus business, with Souter Holdings buying Mana Coach Services from merchant bank Bancorp.

The price has not been revealed. Mr Souter founded multinational transport firm Stagecoach and is still a major shareholder.

Mana Coach runs 120 buses in the Wellington region, including Newlands Coach Services.

Stagecoach New Zealand was sold to Wellington investment firm Infratil two years ago for $250 million. Stagecoach New Zealand runs scheduled bus services in Wellington and the Hutt Valley as well as Auckland.

Bancorp bought its stake in Mana Coach from the Waddell family in July last year for an estimated $24 million - a day after Infratil said it would appeal against a High Court decision preventing it from buying all of the company. Infratil already owns the remaining 26 per cent of Mana Coach through the purchase of Stagecoach. Bancorp described its purchase of Mana Coach at the time as a "long-term strategic investment in infrastructure". Infratil finally lost its appeal against the High Court decision last month.

Bancorp managing director Craig Brownie said Mr Souter made an approach to buy Mana Coach "three or four weeks" ago. Mr Brownie denied that Bancorp had been warehousing the shares on behalf of Infratil while it awaited the outcome of its appeal.

Infratil has consistently refused to say whether it had done a deal with Bancorp to buy the shares if the High Court appeal had succeeded.

Mr Brownie said Bancorp always had Infratil in mind as a potential buyer of the Mana Coach shares if it had been allowed to bid for them. "But it would be fair to say that New Zealand Bus would see Souter Holdings as a good co-investor long-term. "As a 26 per cent shareholder they had to be happy with the Souter company coming in. Even though they lost the court case, they are very happy about the outcome."

Returning the company to the control of a highly experienced operator was the best outcome for the business, he said.

Former Stagecoach New Zealand managing director Bill Rae has been appointed chairman of Mana Coach, replacing Mr Brownie, and Geoff Norman will continue as chief executive. Kerry Waddell has left the board, as a Bancorp appointment.

Norsewear confirmed at the weekend the brand has been sold, but the company said its socks will still be made in New Zealand.  Apparel Brands is the buyer. It is owned by Aucklander Ben Nathan, former owner of Barkers Men's Clothing. Management bought the six Norsewear stores, including the one at Norsewood.

Redundancies at the Norsewood and Wanganui factories are likely.  The company employs 22 people in the Wanganui factory and 27 at Norsewood.  The Norsewear factory is the dominant employer in Norsewood.

The company indicated it will communicate with staff early this week.  Workers first learned of the proposed sale through media reports on Tuesday. Norsewear released a statement yesterday, but refused to make further comment.  An unnamed "company spokesperson" said "intensive work" would continue on the future of the manufacturing plant in Wanganui and the factory in Norsewood.  "These are complex negotiations and it is likely to be some time before final decisions are made," the spokesman said.  "We appreciate our staff have concerns about the future of their employment. It is still likely there will be some redundancies and Norsewear wishes to assure all staff that they will receive all their entitlements in full."

Wanganui Mayor Michael Laws said his office had been in contact with Norsewear, seeking clarification on the future of the Wanganui plant and those employed there.  "This is a small but important business with skilled workers and of real value to the Wanganui economy."

Norsewear has promoted itself as a Kiwi icon. There was speculation this week that some production will be moved to China.  Mr Nathan registered a company called Norsewear Brands in July.

Infratil and the Commerce Commission go to the Court of Appeal today over the investment firm's frustrated attempt to buy Mana Coach Services.  Infratil was fined $500,000 with costs of about $600,000 last year, after its subsidiary New Zealand Bus tried to buy Mana Coach without the commission's approval.

New Zealand Bus trades as Stagecoach, operating most of the Wellington region's public bus network. It already owns 26 per cent of Mana Coach. Infratil is appealing against the decision stopping New Zealand Bus buying the 74 per cent of Mana Coach it does not own, and the High Court penalty it calls "grossly excessive".  The commission's cross-appeal says the fine is too low. It had sought $2.5 million in fines and costs.

Problems started for New Zealand Bus in January last year when it sought commission clearance to buy Mana Coach. It later withdrew the application before it was approved, planning to go ahead with the purchase without clearance.  That prompted a commission inquiry, a court injunction to stop the sale proceeding, and a High Court hearing in August last year.

Justice Forrie Miller found the bid by New Zealand Bus to buy the Mana Coach shares breached the Commerce Act when the offer went unconditional, because the deal was likely to substantially lessen competition in Wellington's bus market.  Though found guilty of being transaction accessories, vendors Ian Waddell and Kerry Waddell were not fined.

Infratil spokesman Paul Ridley-Smith said yesterday the fine was excessive given that Infratil had agreed with the commission to have the High Court decide if it was in breach of the Commerce Act, before the acquisition of Mana Coach occurred.  In late July last year, merchant bank Bancorp made a lightning raid, buying up 74 per cent of Mana Coach.  Mr Ridley-Smith would not say if Infratil had a deal with Bancorp to buy its shares if the appeal succeeded.

The appeal hearing is set down for three days.

Independent Wellington retailer Unity Books has helped to trial a proposed new chapter in creating a more flexible workplace, with initiatives including job sharing and working from home.  Two Labour Department workplace toolkits were launched yesterday, which provide advice on issues such as job sharing, holidays, leave and roster management.

Unity bookstore co-owner and manager Tilly Lloyd hit upon a staffing solution to a business downturn.  Ms Lloyd said that, when the Willis St store's rent was increased about the same time that global book chain Borders opened up in competition in Wellington, she was forced to reduce one staff member's hours.

The only difficulty the staff member had, was that the revised hours clashed with band practice.  "So I said, `Why don't you have your practice here?"'  She offered a storeroom for the band rehearsals each week.  Another staff member was able to bring her preschool-aged daughter into work at weekends and arrive a little later if she was leaving her at a creche during the week.  "It seems important to me that the harmony and happiness of staff is really vital," Ms Lloyd said.

Labour Minister Ruth Dyson and Small Business Minister Lianne Dalziel launched the Labour Department initiative at the bookstore yesterday.  Ms Dyson said that in a tight labour market with low unemployment, employers were faced with staff recruitment and retention problems.  She doubted any "purely hypothetical" change of government would be able to overturn a business approach that research had shown was now expected in the workplace.  The Labour Department surveyed a range of New Zealand businesses and organisations for 18 months to determine how they made job flexibility work for them.  "It's clear that employees support flexible work," Ms Dyson said.

A Wellington study has found that more people get blood clots from sitting down for long periods at work than on long-haul flights.

Professor Richard Beasley, of the Medical Research Institute of New Zealand, said researchers studied the risk factors of 62 people under the age of 65 admitted to Wellington Hospital with deep vein thrombosis or pulmonary embolism.

One-third of them had been seated for long periods at work in the previous four weeks, and only one in five had been on a long-haul flight.

Professor Beasley was surprised by the length of time workers had spent sitting down. Some had worked in a desk job for up to 14 hours.

"Some of them were seated for up to four or five hours for a time without getting up to move around." Managers, call-centre workers and taxi drivers were among them.

But the results did not mean that sitting still at work was more dangerous than taking a long-haul flight. Other factors such as cabin pressure had been implicated as contributing to the risk on flights.

Researchers did not know the proportion of people who had desk jobs compared with those who travelled.

Professor Beasley said the public recognised long-haul flights as a risk factor, but there was less awareness of the dangers of sitting still at work.

Office workers should stand and move around every half hour to an hour, he said.

ACC had committed funding to further research on how the work environment contributed to the risk.

Professor Beasley is to present the research findings at the Thoracic Society of Australia and New Zealand's conference this month.

John Milford, managing director of Kirkcaldie & Stains Limited, made the following speech to this morning's annaul meeting.

As this is the first time I have addressed the shareholders it is appropriate I should give you some background on my retail career to date.

I started in retail as a management trainee over 30 years ago. I worked for the Allders department store and Duty Free group. My last assignment for Allders was running their flagship store in Croydon in the UK. During my time with them I covered all aspects of running department stores.

I was invited to come to New Zealand as an executive manager for Farmers Trading Company. I then joined Pacific Retail Group where I held the position of Chief Executive Pacific Retail Limited. When the business was sold I spent a little under 2 years with the Repco group, prior to joining Kirkcaldies I was general manager Repco Australia.

I joined the company 10 months ago, at the time we had a number of challenges facing us which had been identified. I could tell from the start that the business was fundamentally sound and did not need major changes in direction to bring it back on track.

The first issue we faced was excess apparel stocks, a fashion clearance was organised and implemented at Shed 11 very successfully which cleared the majority of our aged stock. The other outcome was the positive cash flow from the exercise.

Prior to making any changes to the business it was important that we obtained feedback from our customers. A comprehensive market research exercise was undertaken, with qualitative and quantitative feedback. The majority of the information the management was aware of. This project focused and documented the information in such a way that it could be used as a blue print for decisions made. We also asked our cardholders and our fashion customers on our database to give us feedback on our apparel offering. We received over 1000 responses. This feedback has been utilised by our buyers for their buying strategies.

I was taught a long time ago that successful department stores have four key ingredients. They are Service, Selection, Value, and Style.

If we look at each of these Kirkcaldies has a good basis for going forward.

Service - An independent Roy Morgan poll of 12,000 customers ranked K&S as number one for customer service. - We have changed the rosters to ensure that experienced and knowledgeable staff are available seven days a week. - We have reviewed and changed the recruitment requirements. To ensure that all new team members have the right qualities and attitude that Kirkcaldies customers expect. - We have a comprehensive training program focusing on service and selling skills. - We are supporting our wedding gift and personal shopper team, making them available seven days a week. - Even though we have been reviewing costs we have been increasing selling staff on to the floor.

Selection - Kirkcaldies had already over 150 exclusive brands when I joined. This has been expanded with the brief to the buying team that each season we must secure new and exclusive brands. - It is important that we source the very best global brands as customers expect us to have them in the better/best areas of merchandise. - One other area of strength is our New Zealand brands. They are normally a little more expensive but are of a higher quality. This is a policy we will continue. - Two of our latest brands which are now available are Laura Ashley Home and Fashion and a new bed linen concept Lexington. Both exclusive to us in Wellington.

Value We have to ensure that Kirkcaldies gives its customers value for money. We do this by rigorously checking the prices on like merchandise sold by our competitors and will refund any customer who finds a product sold elsewhere at a lower price. - We have recognised the value of our cardholders who support us by introducing exclusive shopping evenings and allowing them the first pick of our sale buys. - I am delighted to tell you that we have opened over 1000 new accounts in the last 10 months and our sales have increased on our existing account holders. - We have not changed our policy on the sales. We still only have two per year, however we have extended them from one week to two weeks. - One issue that the market research did give us was the inferior quality of some of the sale buys. Our new policy is quite simple; we will not buy in for the sale any merchandise that we would not sell on the shelf at full price.

Style Kirkcaldies has its own unique style that has been built over 140 years, our doorman, our pianist, our outstanding service and of course our support of the local community. - All of those easily recognisable Kirkcaldies icons will stay.

- Many of you will have seen this Christmas the Kirkcaldies teddy bear. This was sold to help support a very worthy Wellington institution - The Wellington Free Ambulance. I am delighted to tell you that we have raised $30,000 for them. - We will continue to reinvest in the community that supports us so well. Our focus will continue to be Wellington based.

You will have seen a number of changes in the store. All retail businesses need to reinvest and reinvigorate their brands. This is not something that can happen every five years; it is something that we will do on an ongoing basis. You will experience this in all areas of the store as we upgrade our cosmetic offer to reclaim our number one status in New Zealand. Many of you will have dined in the enlarged and refurbished K&S Cafe the second floor, and seen a number of new retail concept areas in the store. This investment in many cases is jointly funded with our suppliers.

This year will also see us make a major investment in IT with a new POS system and merchandise inventory system.

Whilst we have achieved a lot in a short space of time there is still much to do. Retailing is a business requiring that we recognise our customer's preferences. We source quality products, as many as we can exclusively. We pay the right price for them and we sell the majority at the appropriate margin. We endeavour to ensure that we continue to exceed our customers' service expectations and make the shopping experience unique and memorable.

This is only possible when we employ and retain the right people and in this respect particularly I would like to acknowledge Mr David Knight who is with us today. David has retired after 28 years as the company's merchandise manager. David's contribution was huge and the team will miss him as will a number of his customers. We have been very fortunate to secure the services of Gary Nicholson who is an experienced retailer and senior manager who has extensive buying and merchandising skills.

Given all the changes we have managed to increase our sales for the first five months of the new financial year which were 10% ahead of the same period last year. We have maintained our margins and cost control measures are starting to impact.

My vision for Kirkcaldies & Stains is that we will create a centre of retail excellence which will be unsurpassed in Australasia. I am committed to leading the team with energy, passion, honesty and compassion. We will look to ourselves and our business before we blame others and will always put our customers first.

Rival bus companies were not given the chance to bid for prized Wellington bus operator Mana Coach Services, which merchant bank Bancorp bought this week.

Christchurch-based Ritchies Transport, which also runs urban bus services in Auckland, said yesterday that it would have bid for Mana if it had been given the opportunity. "We would definitely be interested in that business and we always have been," director Andrew Ritchie said. "Certainly it is something we would look at in the future."

Buying Mana would have been the easiest way for Ritchies to enter the market, he said. "It is a good business and it has been well run in the past."

Bancorp bought 74 per cent of Mana from the Waddell family for an estimated $24 million. The other 26 per cent is held by Wellington investment firm Infratil, which also owns the Stagecoach buses. Infratil's attempt to buy all of Mana was rejected by the High Court this month after the Commerce Commission opposed the deal as being anti-competitive. Infratil is appealing against the decision and if successful said it would try to buy Mana again, using its first right of refusal.

Family member Ian Waddell said Bancorp managing director Craig Brownie had made a direct approach to buy the company.

Mr Ritchie said Mana's value would diminish if Bancorp tried to sell its stake to any company other than Infratil. He questioned the price Bancorp paid given that $24 million would buy a fleet of 90 new buses.

Ritchies had considered setting up in Wellington, as it had done successfully in other cities. "Something like this possibly makes us feel like we should be considering it in a little bit more detail."

The Commerce Commission is comfortable with the sale as it "preserves the potential for competition".

Mana Coach Services is being eyed by at least four transport operators, including three from Australia, keen to enter the Wellington bus market.

The High Court at Wellington stopped New Zealand Bus, which owns Stagecoach in New Zealand, from buying Mana last month because the deal would substantially lessen competition. Mana and New Zealand Bus had not competed for contracts in each other's patch.

Mana's owners, mainly associated with the Waddell family, told the court they would sell the company to another operator if the acquisition by New Zealand Bus was barred.

Mana operates a fleet of about 110 buses, including urban, and touring and charter buses. Stagecoach Wellington has about 370 buses under several brands.

Three Australian companies gave evidence during a two-week trial --Transdev-TSL, Veolia Transport and Swan Transit. All said they would look to enter the market by acquiring an existing operator. Bidding for individual contracts was too risky because of the small size of the contracts, and the lack of information about passenger numbers, revenue, costs, depot locations, and staff availability.

The director of Christchurch-based Ritchies Transport, Andrew Ritchie, told the court that the company had been in the Wellington market for a long time. However, the contracts for subsidised bus services, typically for between 10 and 15 buses, were too small to come in as a new operator.

Ritchies is New Zealand's largest privately owned bus operator, with a fleet of more than 600 buses. It operates urban bus services in Auckland, Timaru and Marlborough. It also has charter, tour and long distance services, including the Intercity brand. Mr Ritchie said Ritchies would not necessarily compete with New Zealand Bus if it bought Mana.

Transdev-TSL executive general manager, Ross Mackiggan said that, if it bought Mana, its strategy would be to compete with New Zealand Bus and take market share. French-owned Transdev operates trams in Melbourne, buses in Sydney and ferries in Brisbane. It unsuccessfully tendered to form a joint venture with the regional council to buy Wellington's urban rail service from Tranz Rail in 2002.

Veolia Transport director Peter Lodge told the court that it would look to buy an existing operation with about 150 buses to enter the New Zealand market. Mr Lodge said the New Zealand market was characterised by high entry barriers, but those became an advantage once the company was established. Veolia was Australia's largest private transport operator, including buses and trains in Australia's main centres.

It also operates the Auckland rail services in partnership with the Auckland Regional Transport Authority.

Swan Transit director Neil Smith said his company was interested in the New Zealand market, but it would require a contract substantially larger than the maximum existing contract size of 22 buses in Wellington. Swan Transit operates 283 buses in Perth, 560 buses in South Australia and ferries in Brisbane.