Price is back & riding a turning tide

Posted May 12, 2012                                                           Twitter: @PaperlinXsuX


... not that he ever went away. 


Most importantly, the tide is turning as investors' tolerance of chronic under performance is rapidly waning, and on too many fronts to be ignored. 


I call that a growing trend against incumbents' incompetence.

Last time picador Price was an unknown outsider,
but not so next time.

I’m not in favour of blood sports, but a slow and bloody ritual is in progress at PaperlinX. 


Price is definitely back


During the week Andrew Price issued an invitation to a presentation at a broker's office in Sydney on May 21. I thought it may have been a private invitation until it was published on HotCopper here. 


If you're not a subscriber to HotCoppper here is the invitation. Hardly a scoop, but presented for the purpose of full disclosure. By now it may be fully booked.

From Andrew Price

"I was disappointed to lose at the PaperlinX EGM by 1.81% but I don't give up easily. I still see significant upside on the PPX share price, if my strategic plan is implemented properly.

As a fellow investor I would like to invite you to a presentation to explain where I see the future value.

The details are:

Date: Monday 21 May
Time: 4 pm
Where: SCM Equities, Level 11, 1 Chifley Square, Sydney

As seats are limited please RSVP me by 5:00pm Wednesday 16 May at andrewjprice@me.com I intend on holding similar presentation in Melbourne in the coming weeks.

NOTE: You will be required to sign a confidentiality agreement on the day and a disclaimer as this presentation does not constitute financial advice.

Regards

Andrew Price | andrewjprice@me.com | +61 477 182 604

Eye witness confirmation


Price was in Melbourne on Friday pressing the flesh with the right people. It must be serious as he was wearing a suit and tie. Remember he wore an open collar at the EGM.


His message is a highly focussed acronym - CPR. Sounds medical.


Apart from Andrew Price, who'd want Toby's job now?


IMO Toby was incapable of success when given a relatively free rein so I cannot imagine him functioning in this pressure cooker environment. Here are some of the publicly known pressures:


(A) Tony Clarke


Clarke isn't a problem per se but his extended stay in the UK is; ostensibly searching for a replacement of CFO Tony Kennedy who leaves on June 30. If you believe this requires Clarke's full time presence for three months then you probably believe Toby's forecasts for 2014. Good luck. 


As an aside, I hope Tony Clarke is demonstrating to Toby Marchant what corporate restraint really means - by setting an example of his accommodation expenses while in the UK. Does anyone know where Tony Clarke is staying and is prepared to advise paperlinxsux@gmail.com on a confidential basis? I don't intend to stalk him, just seeking a real example of directors' restraint. Anonymous responses to the blog won't be published.

(B) Harry Boon has 5 problems


As I see it, Toby's problems are exacerbated by Harry's problems many of which Toby contributed to; so Harry Boon's problems have boomeranged back Toby Marchant. Unfortunately for Toby, Harry has lots of problems at present.


(B1) Hastie Group (HST)


Boon's other problem directorship is never out of the headlines. HST requested a trading halt of its shares four weeks ago on Friday 13th, April. Still there's no resumption of trading. Yuk!


This recent article sums up an ugly scenario.

Australian Financial Review  |  May 9, 2012

You may download the original here. Points to note about the sad situation at Hastie.

1. Large workforce spread around the globe;
     
2. A "desperate search for capital" is now on when the real problem, as always, is lack of management long ago;
                 
3. Blaming third parties;
      
4. CFO resigns;
       
5. Schroders have apparently done their dough again backing another Boon enterprise;
       
6. UBS, advisers to PaperlinX, were co leaders of the equity raising by Hastie;
       
7. Harry Boon is a director. Remember he was a founding director back to its listing in 2005.

(B2) Mike McConnell


Another of Harry Boon's self imposed problems is Mike McConnell. More about this soon, but if you need reminding, see Introducing $86Man. This issue could easily be resolved by Harry Boon right now otherwise it will be resolved on his behalf.


(B3) Meddling Chairman or reversion to his norm


Rumour is that Harry Boon has become a de facto executive chairman involving himself in day to day matters. Those affected or in the loop will know what I mean. 


This is the old "can do" Harry at work. Those in attendance at the EGM will recall Harry Boon telling us how capable he is of hard work and thus his six directorship equivalents was well within his capacity. 


Harry will never get the message - the reason for limiting oneself to four directorship equivalents, and no dual chairmanships, is being demonstrated to him now with PaperlinX and Hastie both in crisis.


I wonder if the shareholders at Tatts Group and Toll Holdings worry about his workloads elsewhere? 


Perhaps Harry Boon confuses chairmanship with being a CEO which he quit in 2004.


His odd Ansellisation comments just prior to the EGM are disturbing evidence of a meddling chairman. 

Remember Harry Boon wearing his Ansellised smile

Meddling Chairman isn't a new concept at suX. It was covered extensively here on the EGM eve. Here is a brief extract:

Ansellisation - the new strategy

Harry Boon has suddenly thought up a new idea for PaperlinX – Ansellisation. It’s discussed elsewhere in today’s Financial Review, Link Here. Note Harry's lack of tie "working man image". 

For readers unfamiliar with Australian corporate history Ansell Limited listed on the ASX in 2002. Ansell is a global provider of protection solutions, such as surgical, examination, industrial and household gloves, protective clothing and condoms (condoms comprise about 10% of the business, but it’s what Ansell is famous for). 


Not sure how this “eve of EGM” concept fits in with the Strategic Review, which took six months, but that’s a mere detail when a Chairmanship and $275,000 per annum is at stake. Maybe Harry Boon is now an executive Chairman? 


I wonder what Toby Marchant thinks of Ansellisation, although to be fair he’s Ansellised a lot of fine paper businesses over the past decade – if you get my drift.

I'm willing to wager that PaperlinX employees, anywhere in the world, have never heard of Ansellisation before or since the EGM.

(B4) Tide is turning against Harry Boon

Regular readers will know that I often compare corporate life with politics. Perhaps Harry should read again Passing the baton at PaperlinX.

Australia recently saw a government election in Queensland turn into a landslide where the ruling Labor party won only 7 of 89 seats after winning 51 of  89 seats in 2009. Labor had been in government for all but two years since 1989. 

Anna Bligh was a distinguished Labor leader and probably didn't deserve such a thrashing. For those interested in her career, check Wikipedia here. 

The problem with landslides is that they overshoot as everyone wants to be on the winning team. Perhaps even Maple-Brown Abbott or Schroders will vote against Boon next time. Eventually they must admit they backed the wrong horse.

(B5) Uncertainty

Anxiety is often described as fear of the unknown. Many people suffer it from time to time. It generally affects rational decision making.

When will Price strike again? Although he'd deny it this must occupy Harry Boon's thoughts.

I'd be anxious too if my $275,000 pa was dependent on Toby Marchant delivering on his promises.

I suspect nobody knows when the next move will occur, not even Andrew Price. Rationally, there are two necessary prerequisites:

1. Absolute certainty on the second attempt; and
         
2. A valid reason.

The first rests solely with Price which is why he's doing the hard yards now. You can be assured that eventually PaperlinX will provide a valid reason.

(C) Activist investors are gaining traction on the ASX


Here is Harry's problem with Allan Gray formerly Orbis:

1. Orbis holds 08.45% of Spotless where it enjoyed recent success - see below;
       
2. Orbis holds 18.46% of PaperlinX where it is sitting on a $65-70 million loss, its largest ever, and had a recent near loss when it backed Price at the EGM; and
      
3. Spotless pays decent dividends whereas PaperlinX hasn't paid a dividend since 2008.

You wouldn't be surprised that the share price of PaperlinX has seriously underperformed Spotless. But how serious is amazing.


This chart is a real eye-opener. It looks at the share price performance of PaperlinX vs Spotless from mid July 2008 when Orbis first invested in PPX. Over this time frame Spotless performed about line-ball with the ASX200, however it under performed investors' expectations. You may see suX's compilation of the Orbis accumulation of PPX between July 2008 and March 2011 here. Be sure to scroll down.


SuX has never spoken with Dr Simon Marais, MD of Orbis, however it wouldn't be hard to fathom why he is so determined to solve the problems at PaperlinX. I reckon next time there is an Orbis supported challenge at PaperlinX the wavering fence sitters will be emboldened by its recent success at Spotless.


Activist investors have enjoyed a few wins recently and this is causing concern at the "old boys club". In January 2012,  Spotless and its Chairman Peter Smedley were under attack, see - Orbis takes aim at Smedley and Spotless board.


Just four months later, it was reported in the Australian Financial Review on May 1, 2012:


"Spotless Group yesterday caved into shareholder pressure and decided to back a $720 million takeover bid from Pacific Equity Partners after resisting the private equity group’s advances for five months". 


The complete article is worth a read, Smedley warns of activist investors, as it includes comments by Harry Boon, Andrew Price, Peter Smedley and of course the ever forthright Simon Marais.

(D) Australian Shareholders's Association (ASA) 

Apparently the ultra conservative ASA has had a very recent change of heart about that old bogey that Harry cannot shake off - too many directorship equivalents. 

At the recent Sigma Pharmaceuticals' AGM held in Melbourne on May 9, 2012, it was reported:

"... the AGM was punctuated by criticism from the Australian Shareholders' Association's Graeme Hawkins, who took aim at a board he described as overpaid and overloaded with other directorships.

Some shareholders told BusinessDay that although they believed in Sigma's turnaround prospects - which include a greater push into retail through its Amcal and Guardian chemists - they agreed with the ASA's complaints about board remuneration and workload". Read more here.

Six weeks ago the ASA supported Boon and his lousy performance at PaperlinX, while noting recurring concerns about his workload, yet it now complains about directors' workload at Sigma Pharmaceuticals which is flying. Go figure. 

In summary

Harry Boon and Toby Marchant are on a hiding to nothing. Eventually that old saying of PT Barnham, or was it Abraham Lincoln, bears fruit:


You can fool some of the people all of the time;
   
You can fool all of the people some of the time, but
   
You can never fool all of the people all of the time.