Windsurfer rides Brierley wave

Press, 15 January 1986, Page 27

Windsurfer rides Brierley wave

By

SIMON LOUISSON

in Wellington

You might come across him on his windsurfer down at the beach or just jogging on the wharves. Even when he is in his more formal dark-suited work attire, more elderly directors could be forgiven for asking him where the boss is. But, at 32, Paul Collins has just been apKiinted chief executive of ew Zealand’s largest company by market capitalisation.

The position gives him control over some 20 publicly listed companies in New Zealand plus unlisted companies such as the Whitcoulls Group worth around ?100M, and a 52 per cent stake in Industrial Equity, Ltd, Australia’s fourteenth largest company. Mr Collins, whose moustache partially hides his fresh-faced looks, was appointed to the top job just before Christmas when Mr Bruce Hancox was made deputy chairman of BIL. He says that Mr Hancox’s appointment was necessary because of the growth of the company; otherwise Mr Hancox would still be chief executive.

The change at the top will mean no change in BlL’s activities, although there may be a change in operational style. Mr Hancox is orientated towards trading-

type activities while Mr Collins’ bias is towards the financial side. The difference, he says, merely reflects their personal backgrounds. “I apply different criteria in the way I look at things but, hopefully, we come up with thee same answers.”

The real strength of BIL, says Mr Collins, is that, unlike many other large companies, it has never been deflected from its basic philosophy — acquiring shares in companies which BIL perceives to be undervalued.

Mr Collins joined BIL in 1976 after working for five years in the Wellington Gas Company, in which BIL held a 20 per cent stake. He was one of three applicants for a position as management accountant and he believes he got the job because he worked for a Brierley-asso-ciated company. While working for Wellington Gas he completed a B.C.A. part time, achieving “very, very average” academic results.

He spent his early days with Brierley in Christchurch running operations on the financial side with companies such as A.B. Consolidated, Beaths, and Mason and Struthers. He says he enjoyed his time in Christchurch, but, with a

wife and three children under five, plus his job commitment, he would find it hard to live there now.

In April 1979 Mr Collins and a BIL director, Mr Bruce Judge, left Brierleys to join Mr Cyril Smith of H. W. Smith’s (later to become Buntings following merger with the brush manufacturer).

Mr Collins says that the move was crucial to the development of his skills and experience. “You need a challenge to show you could do the same thing from the start and set up a business organisation which could be profitable following the same sorts of philosphy as Brierley did. “In hindsight, it was a very valuable thing for me to have done. Certainly it made it far easier for me when I came back to Brierley’s because I had the responsibility of running the Bunting group, which I probably would not have got with a larger group at that age.”

In four years the capitalisation rose from S3M to SIOOM when the group merged with BIL in 1984.

The major acquisition of Bunting was Winstones, Ltd. Many people doubted the wisdom of this purchase. Mr Collins says though

that the Winstone purchase characterises the BrierleyBunting philosophy. Long hours of research showed that, although the company was having its problems, all activities apart from the Karioi Mill were profitable and the company was well managed. Buntings bought in at a very attractive entry price and the profit result has risen from S3M in 1981 to J26M last year. While the activities of BIL will not change character, Mr Collins recognises that the growth impetus will come more and more from overseas. Even though investment in New Zealand in absolute terms will increase, as a proportion of total investment it will decline relatively. But Mr Collins is certain that BIL will remain the most important company in the group. He sees BIL as the grandfather, lEL as the father and Industrial Equity Pacific as the child. But, unlike a domestic situation, the parent company has to maintain financial dominance.

He does acknowledge that maintaining New Zealand ownership of BIL will be virtually impossible if the group is to maintain its growth path. That is why

the company has listed in Australia, placed S7BM worth of shares there and plans to raise JIOOM through a Swiss franc bond issue in February. “We perceive that to achieve the rate of growth our shareholders require in the future we are going to have to have a level of overseas shareholders in the company. It would be nice to remain totally New Zea-land-owned, but it is simply not realistic to achieve the rate of growth expected.”

He does not even rule out a shift of the principal holding company of the group from New Zealand if that is the logical step, although this is not contemplated at present. Mr Collins has no intention of changing some of the more controversial of BlL’s accounting methods, such as the surplus on acquisition or the failure to equityaccount companies in which BIL has considerable influence. “I probably endorse the accounting policies as strongly as, if not more strongly than, anyone else in the company other than Ron Brierley. I regard our accounts as the most conservative set of annual ac-

counts of any publicly listed company in New Zealand,” he says. He says the conservatism is not hiding profits for a rainy year, but is realistic. Looking at the year ahead, Mr Collins is quite pessimistic about business prospects. He does not believe that many of the effects of the changes brought about by the present Government have flowed through yet He believes the sharemarket is overvalued in view of lower profit performances expected. Although investors are now infatuated with investment companies, the poorer results expected of trading companies will flow through to investment companies. He is worried that the recent phenomenal rise in the BIL share price will result in shareholder disappointment when the company announces its expected good result in 1986. Mr Collins does not expect his work hours to increase from his present 12hour day in his new job. When he is not working, he devotes most of his time to his family and sporting interests — tennis, windsurfing and jogging. He is not interested in the

material benefits of the job, He does the job because he likes the work and the people he works with. (Even so, his 370,000 shares listed in the 1985 report are valued at $3.3M.)

The main danger for BIL, says Mr Collins, is that the company becomes complacent and too bureaucratic

through growth. But with only 30 executive employees he does not see that happening. An investment company is people. The difference between a good investment company and a bad one is the degree to which the people manage the investments under their control,” he says.