Kiwi companies fall to Australian jinx

By Duncan Bridgeman

Friday 6th June 2003

A string of recent business failures across the Tasman had investment analysts yesterday questioning the merits of local companies expanding into Australia.

Clothing company Hallenstein Glasson this week became the latest Australian casualty, saying it would close four stores in Melbourne. The company's intended departure comes less than a month after fellow retailer The Warehouse suffered a share-price collapse when it revealed its Australian operations were faltering.

Tower's share price has taken a hammering too as its Australian subsidiaries struggle.

While Hallenstein Glasson is content to concentrate on running its successful Glassons stores across the Tasman, The Warehouse is in damage-control mode after the resignation of CEO Greg Muir.

Other local companies are still licking wounds from their embattled forays into Australia, including Telecom with its AAPT subsidiary and Air New Zealand after the collapse of Ansett Australia.

"For a lot of investors the question is that given the track record of New Zealand companies fumbling badly in Australia, why go there in the first place?" Macquarie Equities investment director Arthur Lim said yesterday.

A number of success stories pointed to reasons they should but it appeared past mistakes were not being taken aboard, he said.

The distinction between successful ventures such as Fisher & Paykel Appliances, Michael Hill International and Carter Holt Harvey was that those companies grew from the ground up rather than making acquisitions, he said.

Those three companies had managed to perform well in Australia along with the likes of Lion Nathan and Nuplex. Burns Philp's major shareholder, Graeme Hart, had also benefited from venturing into Australia.

Mr Lim said the recent difficulties in Australia highlighted the importance of companies carrying out due diligence.

"Our companies don't seem to do acquisitions well and the tendency seems to be to pay too much in the rush to expand," he said.

Bancorp New Zealand managing director Craig Brownie said there was no single reason many local companies found the Australian market tough as the environment was different in many areas.

"I don't think you can generalise and say if you are trying to go into Australia it's going to be a disaster ... but I think certainly people are becoming more cautious."

Mr Brownie said a big problem for local companies expanding into Australia was the differences in labour markets and variances between states.

But some companies had adjusted to those conditions well.

Fletcher Building had performed well in Australia since acquiring the Laminex Group last year, he said.

"Maybe that's an example of having an Australian chief executive who understands the market well."

Forysth Barr analyst John Cairns said the Hallenstein Glasson example was positive in that the company had recognised its offering was not working and pulled out after testing the market.

"The companies that really do come unstuck perhaps don't read the signs and react accordingly."

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