Forum Archive Index - October 2000

["John H T Wilkinson" <jhtw@clear.net.nz>]

Snoopy - I am tempted to forward your comments re staff levels on to
Wrightsons, with your permission of course, and ask Dr Allan Freeth for his
comments.

First, though, you need to compare apples with apples and convert the A$ to
NZ$ and then compare the staff numbers over NZ$100K. You may well get quite
a different number.
With A$74K = NZ$100k you could be adding quite a few to Ridley's figure of
24.


----- Original Message -----
From: <tennyson@caverock.net.nz>
To: <sharechat@sharechat.co.nz>
Sent: Friday, 6 October 2000 8:53 a.m.
Subject: [sharechat] Wrightson 2001 Outlook (was Annual Reports)


> >
> >
> >Wrightson's report was one that also grabbed my attention,
> >but I was quite disappointed to see the emphasis on
> >"providing customer solutions" - which expression was
> >peppered through the Chief Executive's report - but
> >virtually no specifics as to how shareholder value was
> >going to be restored and when the long-suffering owners
> >could expect to receive a decent  return on their
> >investment.
> >
> >
> Veritas!   How dare you criticize WRI for not disclosing how
> they are going to improve their performance.  You know that is
> commercially sensitive information! ;-)
>
> On more detailed reading of WRI's Statement of Cash Flows, and note
> 16, I am wondering if WRIs 'improved result' has involved some
> mirror work.
>
> I note that the cash flows from continuing operations has gone *down*
> by 10% since last year, despite sales being up 20%!
>
> How could this happen?
>
> If you look under note 16 in the Annual Report:
>
> 'Reconcilliation of Surplus (Loss) After taxation with Net cash Flow
> from Operating Activities'
>
> then, you can see that inventories have increased by $8.7million.
> We'll allow them that.  You can't sell goods if you haven't got them
> to sell, although I would have thought that perhaps some more 'just
> in time' computer inventory management improvements might keep stock
> requirements low.
>
> I also note that accounts receivables from customers have gone up by
> $14.3million (previous year down by $10.59million), and WRI have paid
> out $8.4million more to their wholesale suppliers in 2000 vs $3.75
> million more in 1999.
>
> I further note that the provision for doubtful debts has gone down by
> $795,000 (after having increased by $1.419 million in 1999).
>
> So what do all these figures mean, and why have I mentioned them?
>
> Having more stock on the shelves, paying your wholesalers for more
> stock before it is sold and reducing your doubtful debtors are all
> actions to take on the *promise* of better future profits and cash
> flows.   This is not the same as *actual* operational profits and
> cash flows having improved.  In other words I think the
> current results have a certain amount of 'hype' built into them.
>
> Now, as an exercise, let's reverse these key assumptions and see what
> happens.
>
> Bad debts keep being incurred as per last year (cash flow
> decreases by 1.419--0.795=$2.214million) and farmers buy their extra
> stuff from other suppliers, not Wrightsons, (accounts receivable
> decrease by 14.282+10.591=$24.873million), so correspondingly when
> Wrightson's realizes they are not selling as much as planned, the
> amount that must be paid to wholesalers also decreases to
> (8.418-3.752=$4.647million).
>
> The net effect of those three factors is a decrease of cash flow (by
> 24.873+2.214-4.647) which comes to a loss of cash flow of
> $22.44million per year.
>
> In other words, WRIs 7.5million dollar profit from last year is
> actually a 7.5-22.94= a $14.94million dollar *loss* if the WRI
> directors future predictions are 100% wrong.
>
> This is an extreme counter-example.   I don't think Wrightson's
> management is that poor in their predictions.  But it does show that
> Wrightsons has a certain vulnerability if it doesn't get its stock
> and debtor levels right.  I would argue that Wrightson's management
> don't have the runs on the board yet, to make me confident about
> holding WRI shares long term.
> >
> >
> >It is staggering how a company of such relatively
> >small size is employing so many people on salaries of excess of
> >$100,000. I'm afraid that too many N.Z. companies seem to see
> >themselves as existing primarily to fill the pockets of management
> >and directors. I would sooner see less glossy pictures and more
> > emphasis on maximising shareholder wealth.
> >
> >
> You are obviously just jealous Veritas! ;-)
>
> I count 60 people on $NZ100,000+ salary packages on total
> company revenue of $NZ600million in the WRI annual report.
>
> If you compare that with Ridley Corporation an Australian
> agricultural product retailer with sales of $A986.5million they have
> only 28 staff in that $A100,000+ pay band.
>
> If Wrightson's reduced the number of high paid staff to more
> realistic numbers, the net profit of the company, and return to
> shareholders would go up by over 40%!
>
> The rot carries through to Board level where 8 directors are deemed
> necessary for Wrightsons, where Ridley only needs 6.
>
> And it seems that in the case of one of the new directors (Maurice
> Loomes) the small shareholders do not get a vote, or any say, on his
> appointment.  Now I know that, in reality, the voting
> in of new directors becomes a 'fait accompli', as small
> shareholders are always block outvoted by larger ones.   Maybe the
> Wrightson directors have just recognised this and dispensed with the
> voting process entirely?
>
> On a 'turnover' to 'senior management fees' ratio, it looks like
> Wrightson's management only expect to have to work half as hard as at
> least one comparable company overseas.   I can't shake the impression
> that WRI is not a company run for the shareholders and I don't think
> "she'll be Wright-son" is good enough. SNOOPY
>
> disclosure: Wrightson's shareholder, maybe for not much longer :-(
>
>
>
>
>
>
>
> ---------------------------------
> Message sent by Snoopy
> e-mail  tennyson@caverock.net.nz
> on Pegasus Mail version 2.55
> ----------------------------------
> "Q: If you call a dog tail a leg, how many legs does a dog have?"
> "A: Four.  Calling a tail a leg doesn't make it a leg."
>
>
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