Forum Archive Index - October 2000

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

A good turnout of what one observer quipped to be 'the former wealthy 
of Christchurch' turned out at the Christchurch Town Hall to see what 
could be salvaged from their BIL investment currently trading just 
above its record low share price.

Most of the board members found good excuses not to be there, but Sir 
Selwyn Cushing, Hon Philip Burden and new MD Greg Terry were on hand.

My first impression was, why had they appointed a 'giant' to head the 
company?   Mr Terry is a big fella, not grossly fat nor LA Laker 
tall, but overall big enough and tall enough to make one think twice 
about stepping into a wrestling ring with him.

What followed was a very detailed analysis indeed of where the firm 
had come from and where the firm was headed to.  If you hadn't read 
the Annual Report before attending there were enough numbers and 
balance sheets to overwhelm any casual observer.   The key management 
team was on hand and several short talks were given on different 
aspects of the business.  Apparently BIL won some award in 
Singapore for transparency in reporting, and it looks like this very 
thorough and full disclosure of results is part of the new BIL 
culture.

Greg Terry articulated the philosophy for the new BIL around three 
key trends.

1/Computers: Peoples desire to do less work will push more and more 
computer automation behind the scenes.   So BIL will be on the look 
out for existing businesses where this type of automation can add 
significant value to a business.
2/Leisure: People are going to travel more and be looking for quality 
leisure experiences.  So BIL will be looking to leverage value out of 
such things as Air New Zealands on line booking facilities, and on 
line booking into Thistle Hotels.  Thistle Hotels have been moved up 
market by a million pound a week refurbishment program.
3/Healthcare: People are wanting to live longer and in greater 
health, and again BIL plans to leverage more value out of such 
businesses using technology.

So as I took it BIL will be seeking out undervalued businesses, not 
those that are asset rich like in the old days, but businesses  that 
can use technology to run more efficiently.   BIL is planning to 
look particularly at companies in the health and leisure sectors in 
Singapore Hong Kong Australia and New Zealand that can benefit from 
this kind of expertise.   It is this kind of 'adding value' that will 
become their new specialty.

Of the existing legacy, Thistle Hotels is still the key to freeing up 
enough funds to really pursue this future direction with vigour.
   
The UK sharemarket is hostile to hotels, with P/Es for that sector 
dropping from 12 to 8 in the last year.   Thus the only sure way to 
get cash out of this business which is trading at half its asset 
backing is to sell the assets.   The plan is to sell around 75% of 
the equity in the hotel properties to third parties, retaining just 
enough (25%) to have some owner interest.   Thistle will become known 
more for its management expertise, than as an owner of properties in 
its own right.   The plan seems to be to grow Thistle Hotels by 
effectively franchising the management expertise to other hotels 
not currently in the chain at all.  An interesting aside was that the 
average business traveller pays *twice* the room tariff, that the 
average leisure visitor pays.   This means business travellers and 
business conferences are key profitability drivers for Thistle.

The Molokai Ranch 'leisure park' in Hawaii is as good as sold to a 
developer with the bags of cash that will be needed to really turn it 
into a significant resort.   Plans are in the wind to sell the rest 
of the undeveloped land on Molokai as soon as BIL can leverage some 
more value out of it, based on the fact that the money the new 
developer is pouring in will highlight the value of the remaining 
land.

There may be a fillip to results in coming years results if some 
of the exit strategies that BIL are pursuing come to fruition.   I 
thought we had heard the last of Graham Field, but apparently it is 
due to come out of bankruptcy in 2002 and some residual value may be 
written back into the books then.  It is a similar story with 
'Asiapower' which is being sold this year for some cash 
consideration, even though the book value of this investment is nil.

There were only two bursts of applause during the 115 minute 
briefing.  Once when the head of NZ operations said 
that they have moved out of their Ivory Tower in Wellington and that 
two of the three floors had been sub leased.   The other was 
after Mr Greg Terry had summarized and brought together in a 
closing statement the different management presentations before 
question time.

The past 10 months since Chinese new year has been almost entirely 
focussed on building the new management team at BIL.  As a result 
no excuse was offered for the fact that really all that had been 
presented was a vision with no runs on the board.  Mr Terry hinted 
that within 5 years he would no longer be there, as in his opinion 
by that time the company would derive more benefit from having an 
injection of new ideas from a new MD than by retaining him.  It is 
clear that the new management team do have big plans for the company 
and a tight timeframe in which to do it.  And whether Greg Terry 
stages a giant turnaround, or this new recipe is a giant mistake 
might determine whether he sails off into the sunset, or whether he 
has to fund his pension by donning tights and spending his last
pre-retirement years in the professional wrestling ring. 

SNOOPY

  
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