Marchant's waste is starving everyone

Posted Feb 28, 2012                                                             Twitter: @PaperlinXsuX 

This is about flagrant irrefutable waste. It must be feeding Toby Marchant’s ego as it serves no other purpose.

It also demonstrates how weak the PaperlinX Board is to condone his actions.

In three weeks I expect it will cost Harry Boon his chairmanship. If left unchallenged, it will cost a lot more than that – it’ll probably cost PaperlinX the Company.

Take the time to understand why the words “cost control” and “Toby Marchant” are incompatible. He is a spendthrift.

I don’t care how Toby Marchant spends his own money, although I’ve repeatedly expressed concern about him never buying one PaperlinX share.

This flagrante waste is costing dearly; in terms of money, the morale of employees; and the possibility of returns to shareholders and hybrid holders.

If Andrew Price is successful can anyone imagine that extravagances like Milton Keynes detailed here, and many others, will continue to exist? I’ll give you a clue - he likes to tell the story of working out of demountable offices.

________________________________________________

Why does PaperlinX have three head offices?

PaperlinX now has Head Offices in Melbourne, Amsterdam and Milton Keynes; but first some info about the existing PaperlinX offices in the UK and Europe and their uses.

Robert Horne Paper Group 

Huntsman House, Mansion Close, Moulton Park, Northampton.

Howard Smith Paper Group

Sovereign House, Rhosili Road, Brackmills, Northampton.

Howard Smith Paper at Northampton is a superb automated warehouse complex with excellent head office facilities and around 80 parking spaces for the office complex alone.

The few remaining HSPG head office staff have been transferred, I am led to believe, to Robert Horne’s Moulton Park Head Office which is just two miles away. The HSPG head office is now, to all intents and purposes, empty.

This could have housed the PaperlinX ‘Global Centre’ operation and saved the expense of Milton Keynes - rent and fit out.

Milton Keynes is only 25 miles south of Northampton, see map below. It shares the same rail line into London, being just 25 minutes on a fast train between them. Both cities are within two miles of the M1 motorway, see map below.

What a waste of money!

Howard Smith Paper head office and central warehouse shown above. I was unable to find a photograph of the office complex, which apparently just to the left and out of shot.

The Paper Company (prior to 2002, Bunzl Fine Paper) 

London. This is probably immaterial as the corporate profile dated, June 2009, shows operations in 26 cities with a plethora of trading names such as Donald Murray Paper, Mason’s Paper etc. 2009 does seem out of date!

The Paper Company trades as PaperCo. Its head office was situated at Unit 1, Bricklayers Arms, Mandela Way London, SE1 5SP. These offices are situated south of the river about one mile from Tower Bridge. It now houses the PaperCo Government Contracts Team and National & Corporate Services Team. 


More than enough room there to house Toby and his team I would have thought. Not practical geographically though.

Europe Region 1 (Continental Europe)

M Gillioen, Executive Vice-President Europe Region 1

Appears to be same address as the Netherlands Office 

Proost en Brandt b.v.

Stammerkamp 1

1112 VE Diemen The Netherlands

However there is another business in the Netherlands, which appears to be an envelope business.

Europe Region 2 (UK, Ireland & Sth Africa)

D S Allen, Executive Vice-President Europe Region 2

Same address as Robert Horne, which is what we like to see. 

Former European HO – still vacant 

Herikerbergweg 25- 27, 1101 CN Amsterdam Zuidoost, Netherlands

New Global Centre – Can anyone tell me the date of occupation?  -  a helpful person advises September 2011 celebrated with an opening party, see Comment #1 below.

The Pinnacle, 160 Midsummer Boulevard, Milton Keynes

Why a new Global Centre, and why Milton Keynes?

I suspect it is another Marchant indulgence. There is no rational argument or evidence to support Milton Keynes.

From July 2008, Toby Marchant was CEO PaperlinX Europe. I’m reliably advised his “office” was Amsterdam. Prior to that he held UK based roles, CEO PaperlinX Europe Region 2 and MD Robert Horne Paper Group; so one assumes he worked out of Northampton, probably from his favourite Robert Horne.

In 2011 two efficiency measures were announced:

·        Feb 2011: Closure of the European HO in Amsterdam and establishing what was described in the ASX release as an “Operational HO” in the UK but now referred to as the “Global Centre” on the PaperlinX website, see here. This allegedly had on-going savings of $15M pa and was to be cost neutral in 2010/11. Balderdash!

·        Aug/Sep 2011: Transfer of the HO from Mt Waverley to Dalmore Drive, Scoresby, place of operations of the trading companies Spicers and Dalton. This is a modern factory/office complex ideally located near the Eastlink Toll Road with easy access for containers and a mere 30-35 minutes to the Melbourne CBD by car. See here and here.

What really happened?

In Australia, the transfer occurred as planned.

The Amsterdam office was closed but is still vacant and still leased by PaperlinX after approximately 12 months.

The Global Centre is located at The Pinnacle, 160 Midsummer Boulevard, Milton Keynes. This property and address is the “Collins Street” of the region. The term “pinnacle” is no understatement.

For those readers unfamiliar with Melbourne, here is some info about “Collins Street” for later comparison with Milton Keynes; see here Google Map of Collins Street and Collins Street. Seriously, would you run a paper wholesaling business out of Collins Street?

At The Pinnacle, PaperlinX doesn’t appear as a “name” tenant. The major tenants can be confirmed here here (be sure to choose Other Local Occupiers) which lists prestigious tenants:

·        Network Rail’s new headquarters

·        The Shaw Group Inc. (Stone & Webster)¹

·        Bank of Santander (Abbey)

·        BP

·        Deloitte

·        Denton Wilde Sapte²

·        Baker Tilly³

·        Coutts Bank

·        KPMG

·        Coca-Cola Enterprises Ltd

For the benefit of non-UK readers who may be unfamiliar with three of the above names:

1.    The Shaw Group Inc. (Stone & Webster) is a Fortune 500 company with 27,000 employees around the world;

2.    Denton Wilde Sapte or SNR Denton - during 2010 Denton Wilde Sapte merged with US firm Sonnenschein Nath & Rosenthal, creating a 1,250 lawyer firm with offices on four continents, known as SNR Denton; and

3.    Baker Tilly is a global accounting alliance, represented in OZ by Pitcher Partners (a tier 2 firm).

Here is the corporate brochure for The Pinnacle. 

And the floor plan showing PaperlinX on the fifth floor.

Seriously, this is a ‘Collins St’ address for a paper wholesaler with the arse out of its pants. Just imagine the fit out costs befitting this address.

You’ll have to imagine the fit out at Global Centre as unfortunately I cannot procure any photographs available on the public record and there are no moles in HQ. Not yet.


Late Press: Within two hours of original publication we are advised the fit out is as expected - barbeque on the patio, wifi on the patio for using an iPad out there, music systems etc. Stunning views across Milton Keynes and guess what - often there are only the secretarial staff there. Toby's form is as consistent as Black Caviar's - readers outside Australia may like to read about a wonder horse here.

Housed at The Pinnacle are the CEO, CFO & Group Finance, Group HR and Group Marketing. All overheads – wait till you see our exposé on the Group Marketing department which is another massive waste.

It seems to me that these people could easily have been accommodated at one of two existing locations business locations in Northampton, as occurred in Australia. But I suppose the industrial locations of the real businesses of Robert Horne Paper and Howard Smith Paper don’t have the style befitting a global centre, or do they?

1.    Howard Smith Papers’ next door neighbour is Barclaycard UK - see here!  They are also in a purpose built facility.  Barclaycard employs 3,000 people on two sites adjacent to Howard Smith Paper.

HSP’s Northampton offices are virtually unused and do not lack style. They would be an ideal home for PaperlinX Global Centre!

2.    Robert Horne’s offices would be more than suitable too. However I’m advised there probably isn’t room at Robert Horne’s offices to be fair.

Late Press: Within two hours of original publication a kind reader sent these photos to confirm that the HSP Northampton location is in fact stylish. Here are two photos of Barclaycard Northampton - a mere 250 metres from HSPG and across the road. Thank you.

Apparently this isn't good enough for Toby Marchant. He must have laughed himself silly when he first saw Scoresby, Victoria, which is the real HO.

Do logistical reasons favour Milton Keynes - Yes?

The ones that readily come to mind are that Milton Keynes is closer to Toby Marchant’s home than Northampton (see map below), high class neighbours such as Coutts (bankers to the Queen), a shiny new office with fifth floor views and good local restaurants for strategic planning sessions, team bonding etc. And probably one of the top 10 shopping malls in the UK is within walking distance - Central Milton Keynes Shopping Centre

There is only one reason for Milton Keynes - Toby's ego; and everyone knows this to be true, including Harry Boon.

MAP

For those unfamiliar with the region, there is a map below or you can play with a  Google map here. 

• “A” is Toby Marchant’s home in Granborough;
• “B” is Northampton where two of PaperlinX’s UK operations, Robert Horne Paper and Howard Smith Paper, are based; and
• Milton Keynes is highlighted.

Competition Winner - NTA of PPX

Posted Feb 27, 2012                       Twitter: @ PaperlinXsuX

Apologies for the delay in releasing results. Being editor of suX takes more time than I ever contemplated.

Readers may recall the quiz launched on Dec 29, 2011. See here.

Despite what I thought would be an interesting distraction for despondent PaperlinX investors, I was underwhelmed by the response. 

Here are all the entries, all from Australia.

Entry	Date	Entrant		Explanation
0.040	08-Jan-12	CB	Surrey Hills	Guess
0.041	30-Dec-12	DW	Melbourne	Goodwill is currently $257.3m – so assume half of this is impaired and taken through the profit and loss to reduce retained losses. The operating loss will be worse than guidance.
0.050	08-Jan-12	DH	Lithgow
0.094	31-Jan-12	CD	Sydney
0.211	15-Jan-12	PR	Gold Coast	An optimistic $0.211. Assessed using my normal accounting method.

The published NTA was $0.180 – see here page 3/5.

That makes PR of the Gold Coast the winner. Before publication I spoke with PR (Peter Robinson) and gained his consent to publish the following:

He is a retired Microfinance Specialist now living on the sunny Gold Coast, Queensland. He spent most of his working life in developing countries. A possible clue to success there.

When questioned about his explanation of “Assessed using my normal accounting method”, Peter advised:

I did not keep my calculation notes. However it would be appropriate to say the calculation was basically achieved by taking the previous reported NTA and guessing at the loss per share for the half year ended 31/12/11, disregarding any goodwill write down which doesn't feature when calculating net tangible asset value.

Peter has been an early and active supporter of suX and PIGS.

He was also an early protagonist writing to the AFR in November 2011, which closely followed my first letter about PXUPA on November 10, 2011. The rest is history.

PaperlinX’s cheap funding

PUBLISHED: 14 NOV 2011  

“The non-payment of interest of about $11 million to note holders does indeed require some clarification (“PaperlinX prices cause concern”, Letters, November 11) as I note from its annual report on June 30 that the company had in excess of $125 million cash equivalent on hand and total current assets of $1.54 billion covering total current liabilities of $845 million.

Companies like PaperlinX should not issue prospectuses to raise funds and then decide without proper justification not to pay interest on these borrowed funds.

I note chief executive Toby Marchant’s recent presentation giving thanks to shareholders for their patience and support. Surely shareholders have demonstrated their complete non-support by selling the shares down from a high of around 66¢ to the current 8.5¢, a drop of 87 per cent, during the past year. This is another company where the management and directors do very well, to the disregard of owners and supporters”.

Peter Robinson Managing director, LSJ Investments Pty Ltd, Carrara Qld

Peter is a registered PIGS supporter and as I maintain the register of PIGS supporters, I can also reveal that Peter added to his holding of PXUPA at sub $20 levels.

A worthy winner.

Who Can't Count?

Posted Sunday Feb 26, 2012                                    Twitter: @PaperlinXsuX

Week #15 – four weeks to the EGM

1.    Rumour mill

2.    Who can’t count?

3.    Profile of Senior Executives Part 2 - Meet Toby Marchant & Chris Creighton

4.    Executive brickbats and bouquets

5.    What did Mr Market say last week?

1 Rumour mill

I’m advised that PaperlinX is in lock down worldwide.

Whistleblowers in Melbourne are now using public phones.

Apparently Toby Marchant is livid. Toby, put up or shut up. If you deny my allegations, make a public statement as executive director of PaperlinX. It’s a test of your credibility, not mine.

Get used to it. Your dirt file grows by the day. I believe the reason there were no questions at the Webinar is that there no dial-in participants were allowed so as to avoid difficult questions.

It’s not that people dislike you, most say you're an affable bloke, they simply detest your incompetence and arrogance and the resultant consequences to their livelihoods.

Elsewhere I review Chris Creighton. The bulk of my research on him was done in December. I note that some Creighton related social networking pages formerly ‘open’ are now ‘closed’. Everyone is being cautious. Fortunately I took screen shots in December. Anyway, relax because it’s a favourable review.

YoYo revisited: Readers will recall a blog comment re YoYo – see here “Toby’s YoYo deal” published Feb 8. 2012. That was in response to a comment lodged on suX on Feb 7, 2012.
Attention all whistle-blowers - I listen.

Strangely, the print media has recently been running articles on the success of YoYo. Try this test,

Google search “YoYo PaperlinX”

The top 5 results are from five different paper/print industry blog sites and all were posted 10-20 February inclusive. And four of the five carried the same picture. At least we know that PaperlinX is reading suX. Thanks guys.

As predicted, PaperlinX hasn’t breached its banking covenants; but it’s done a refinancing ‘deal’ at an apparent cost of $3 million.

Re subsequent lender’s control of hybrid distributions, one wag suggested:

“I really thought Boon might have an ace up his sleave, and that was why he wasn't jumping. It now looks like it was a pair of sevens. He is toast, that is the worst 12 month review I have ever seen.

It sounds like they practically asked for the banks to insert the PXUPA clause so that they didn't have to argue with Graham any more about whether they could pay the distributions”.

Source Hot Copper: click here

2 Who can’t count?

The analysis following is based on percentages of the issued capital of PaperlinX however the EGM results are based on the votes cast on the day.

Most retail shareholders would be so disengaged with their failed PPX investment not to bother voting; Why encourage the bastards?

Those motivated to vote would be anti-Boon. There is nothing in Boon’s policy pitch, see here that makes one jump with joy.

Voting Outcome - Alternative  A

Price Supporters
#	Group	Min%	Max%
1	Price inner circle	5.07	10.00
2	Orbis	17.30	19.30
3	MBA	9.15	9.15
4	Schroeder	11.02	11.02
5	Dual PPX/PXUPA holders	0.00	2.00
6	Disaffected PPX holders only	0.00	2.00
7	Disaffected PPX holders with shares in TOL, TTS or HST	0.00	2.00
		42.54	55.47

Notes:

1.    Price declared 5.07% in the requisition lodged Feb 3, 2012. It is highly likely he controls a lot more; if not then, certainly three weeks later.

2.    Orbis is usually reported in the press as holding 18.2%, but could be +/- 1.0% before needing to lodge a change of substantial holding. Orbis has declared its support for Price.

3.    MBA recently sold down. I assume they’ve stopped selling. Hard to imagine they support the status quo, just being polite.

4.    Schroeder has been solid at 11.02%. Hard to imagine they support the status quo, also being polite.

5.    Pure guess, but plenty exist and are likely to be sufficiently involved and motivated by PaperlinX-suX and PIGS to vote their protest.

6.    Low turnout of otherwise disgruntled PPX retail investors.

7.    I’m certain shareholders in Toll Holdings (TOL), Tatts (TTS) and Hastie (HST) would prefer Harry Boon to focus on their problems.

After all, he was a director of these three companies long before joining PaperlinX in May 2008 and sadly all of Boon’s directorships underperform the general market – see here and our critiques of Harry Boon here and  here.

This is an unascertainable group, but would exist. 

The Board’s holding is

Boon Supporters
Group	Shares	Holding %
Board	622,412	0.10
Proxies to chair of meeting		3.00
		3.10

Voting Outcome Alternative B

Let’s assume (ie to make an ass of u & me) MBA and Schroeder decide that notwithstanding their eye watering losses, they don’t believe in public humiliation of an incompetent greedy and over stretched chairman who is a  member of the old boys club. Then the Price support looks like this:

Price Supporters
Group	Min%	Max%
Price inner circle	5.07	10.00
Orbis	17.30	19.30
Dual PPX/PXUPA holders	0.00	2.00
Disaffected PPX holders only	0.00	2.00
Disaffected PPX holders with shares in TOL, TTS or HST	0.00	2.00
	22.37	35.30

The Board’s holding plus support then is:

Boon Supporters
Group	Shares	Holding %
Board	622,412	0.10
MBA		9.15
Schroeder		11.02
Proxies to chair of meeting		3.00
		23.27

Disclaimer: I’m not Anthony Green or Mungo McCallum.

Conclusions:

1.    Either way Price wins, or Boon has another trick up his sleeve.

2.    Possible Boon surprises between now and the EGM:

(a) A technicality not yet detected by the Price team – think dirty tricks like the Nil Participant Webinar.

(b) Boon sacks Marchant and offers Price the CEO’s role, with an ‘understanding’ of chairmanship in the future. A graceful exit for Harry and Toby pays his price. Australians will recall the Kirribilli agreement between Bob Hawke and Paul Keating.

(c) A company saving deal is announced before the EGM, such as the emergence of a cornerstone investor. This recently occurred at Gunns (GNS & GNSPA) and happened at Transpacific Industries (TPI & TPAPA) during the GFC. The deal may specifically exclude Price for reasons unrelated to Price.

3.    Boon is sitting on a scandal that blows Price out of the water on election eve. This often happens with preselection of political candidates. If you want a laugh, click LNP candidate dumped over swingers  
If Price really has 10% or more, it is game over. Perhaps he should disclose his hand now.

3 Profile of Senior Executives Part 2

Meet Toby Marchant

Candid camera

Toby Marchant quoted in The Age and Sydney Morning Herald on February 23, 2012 – see original here.

He said the company did not see coming the sudden and severe reduction in paper volumes in Europe in the first half, but admitted that ''we should have restructured a long time ago.''

The Company didn’t see:

Paper and related packaging products are widely accepted as a leading economic indicator. PaperlinX has tens of thousands of clients in this sector and presumably it monitors future demand. That is a sad commentary on forward planning at PaperlinX.

We should have restructured a long time ago:

You were MD at Robert Horne when PaperlinX acquired its parent Buhrmann in late 2003, thereafter you were appointed:

·        Regional President of PaperlinX UK in 2005;

·        CEO of PaperlinX Europe in July 2008; and

·        MD PaperlinX Limited in October 2010.

Now you have the gall to say “we should have restructured a long time ago”. Fortunately your CV has been nicely restructured over the past six years.

Meet Chris Creighton

Chris Creighton is unique within PaperlinX senior management. Yes, I understand the meaning of the word. He’s unique for four reasons:

1.    With 31 years continuous service, he is by far the longest serving senior executive of PaperlinX;

2.    He’s held the one position for 15 years;

3.    He has bought shares in PaperlinX, as opposed to receiving them as part of his package;

4.    He’s responsible for a region that has been consistently profitable for PaperlinX.

It appears from his LinkedIn profile click here he started with Spicers in Australia in 1980 and moved to become President Spicers North America in 1997.

From the PaperlinX 2011 Annual Report we know that since July 2011 he’s ‘President NA/ANZA’ being North America, Australia, NZ and Asia; or the ‘PaperlinX world’ ex Europe. Creighton is a very important person in PaperlinX.

If my reading of his career path is correct, he left Australia for Spicers NA well before PaperlinX existed in 2000. He’s the invisible man of PaperlinX except to the board and senior executives.

From this one gathers that he’s competent, loyal and certainly understands corporate politics.

The only gripe suX has received about Chris Creighton is that he lives in Seattle and not LA near Regional HO PaperlinX NA at Santa Fe Springs, which is obviously an industrial suburb of greater LA.

Who wouldn’t prefer Seattle over LA? Given his principal responsibility for NA, and more recently Pacific Rim, it really doesn’t matter where he lives.

Enquiries reveal, be assured that suX pursues all issues with equal vigour, that residing in Seattle is related to bona fide family reasons. He has a young second family and is active in his local PTA. In case you were thinking, no; his wife isn’t and wasn’t a PaperlinX person.

PaperlinX needs more people like Chris Creighton - career executives with grass roots paper wholesaling experience.

4 Executive brickbats and bouquets

We think executive reviews are important – send your info to paperlinxsux@gmail.com or call me on 03 9005 5969

They give some perspective as to where a company and its people have been and where they’re possibly going.

For example, if Chris Creighton is typical of a model executive for PaperlinX then the UK urgently needs to foster a culture allowing people like him to emerge. That isn’t happening now.

One day, hopefully not too late, the board will appreciate that Robert Horne isn’t the centre of excellence in paper merchanting.

This is another Marchanting merchanting furphy. As one identified source from the UK advised me directly, not via this blog:

“Many ……. here read your blog with interest. PaperlinX’s European troubles nearly all stem back to bad management at middle, senior and top levels. Here in the UK they are in the process of crunching together PaperCo, Howard Smith Paper Group and Robert Horne Paper – badly.

All through that operation Robert Horne people get the bulk of the new roles created. This despite the fact that many within senior management at Robert Horne have levels of incompetence matched only by their arrogance”.

How does this relate to Andrew Price?

Observant followers of PaperlinX will have read the Notice of General Meting issued Feb 22, 2012, click here which included statements from Harry Boon and Andrew Price soliciting shareholder support.

Chris Creighton started at Spicers in 1980. By 1997, he was off running Spicers USA.

Andrew Price worked at Spicers 1984-1998. His final position was Regional Manager of Spicers Paper NSW/ACT. The relative size or importance of Spicers USA vs NSW/ACT in 1997/98 isn’t known.

Given the circumstances, i.e. 17 years versus 14 years of service and the uncertainty of when opportunities for advancement arise within a business, their careers at Spicers had parallels up to 1997/98.

Thereafter, Creighton pursued a corporate career and Price an entrepreneurial path. Both have been successful in different ways.

Drawing a line through Creighton, two things emerge about Price:

1.    He’s a stayer, 14 years at Spicers and 10 years at Stream Solutions; and

2.    Unlike most of the directors and senior executives at PaperlinX, he’s also succeeded as an entrepreneur. This will resonate with Lindsey Cattermole.

5 What did Mr Market say last week?

PPX benefitted from the announcements of Feb 22 re possible stopped distributions out to September 2013. Lots of chart resistance at 10.5¢.

PXUPA close unchanged on light volume.

IMO, the PXUPA chart looks to have a better ‘base’ than the PPX chart. The sellers have gone away. Have heard that one insto is now buying.

The test for both PPX and PXUPA is the EGM which is still four long weeks away.

Weekly Price Change			Comment
PXUPA	$21.50	+0.0%	13 W high close
PPX	10.0¢	+5.3%	Highest weekly close in nearly 6 months.
XJO	+2.6%