suX: "Unfortunately for management, objective measures of performance never change". See why and how to measure below.
If PPX employees only read the popular press, those in Melbourne would be fearful when there is no reason to be; and those in the UK may be enjoying a false sense of comfort.
In the Herald Sun report, in small type under the Reflex pack: "Paperlinx says increasing use of email and the internet has continued to hurt the business".
As usual, there's always a scapegoat beyond PPX. There's been weakening demand for paper for years, or doesn't anyone read the Chairman's Addresses in the Annual Reports?
Other UK merchants make money in this climate, see their smiling faces here.
This is unfair on investors and employees alike.
This is a history of PPX from the announcement of its demerger from Amcor on Feb 17, 2000, until Tom Park's appointment on Feb 1, 2004 - the Wightwick years.
It is a precis of 33 references to source documents, all of which are are ASX announcement except for three - ie Company facts published in ASX releases and not my opinion.
For each acquisition in 2001-2003, a sales per employee figure is highlighted in red. For example, when Coast Paper was acquired in 2001, it had sales per employee of $921K pa.
In 2011, the PPX Global equivalent figure was $753K, 10 years and umpteen restructures later!
It logically follows that PPX bought Coast because it was profitable because it was efficient. PPX today is financially stuffed because it's inefficient.
Another example from your figures of July 4, 2011 - 1,760 employees and £750 million sales in 2011 which is £426K or AUD 660K per employee pa through FY2011, using 1.55 average conversion.
The average PPX UK employee in FY2011 produced AUD 93K less than the average PPX Global employee, or 12.5%.
Alternatively, I've heard AUD 1 million per employee as being necessary and achievable which suggests the UK was over staffed by 587 in FY2011.
The same report advised: "A statement from the company said that the move was 'expected to reduce overall headcount across the three businesses, although at this stage no numbers have been confirmed'."
I read into that statement that management of PPX UK didn't know that it didn't know, or if it did know was too afraid to spell it out to the troops. Is there a third possibility?
Headcount is a damning indictment of Toby Marchant, and those who have reported to him since 2003. It's even more damning of those to whom Toby reported - PPX boards over the years. I realise this doesn't leave many "good guys" but someone has to state the bleeding obvious.
In Putting lipstick on pig posted on June 4, I said:
- the imminent review, due before 30 June, will be nothing more than putting lipstick on a pig (got that right);
- PaperlinhX could go bust sooner than most will admit (last minute sale of US operations doesn't solve the problem, it merely defers the problem);
- the demise of Hastie Group was a predictable, and predicted by some, despite what Harry Boon still says (no change);
- PaperlinX's core problem is the same as Hastie Group's, and unsurprisingly had the same origins see Hubris & Global Paper Merchanting at PPX - a textbook case of PRIDE COMES BEFORE A FALL;
- PaperlinX needs to shed about 1,200 employees (it appears we now generally agree); and
- One objective measure reveals the truth about PPX and cannot be hidden or glossed over (unfortunately for management, objective measures of performance never change).
PPX hasn't made a satisfactory return on equity (ROE%) for so long, revisit objective measure, that the only honourable thing to do, for investors and staff, is to retain this cash and sell off ALL businesses to others who may run them profitably.
That is the only certain way for staff to have clarity about their futures and investors to salvage something from the wreckage of $2 Bn of market cap dissipated over eight years due to similar unsupported feelgood statements. Otherwise I conclude that PaperlinX is being run for the benefit of persons other than shareholders.
The PPX model was flawed then, in 2002, and has been so ever since.
- There was lack of continuous disclosure - suX heard the rumour at least 3-4 weeks ago, and the dogs were barking late last week from identified credible sources who appear independent. All along the market was apparently uninformed; OR
- PPX realised a poor price as a desperate vendor (June 30 deadline) negotiating with a very strong purchaser.
The Company purports to encourage dialogue but that's far from reality. Is 24 days a reasonable period not to respond to a simple question about a serious matter of governance?
This forces a direct or activist approach which offends some; however the greater offence is how senior executives of PPX have lost $2 Bn in eight years and were paid handsomely to do so.
If others take these matters personally then maybe they are unsuited for the high office they hold. I hope to hear from you about Item #2.