Annual reports reveal fools' gold

By Peter V O'Brien

Friday 29th November 2002

There is no end to the gems, fools' gold or howlers appearing in company reports and their officers' addresses to annual meetings.

Probably the year's best were in Tranz Rail chief executive Michael Beard's speech to the annual meeting on November 18.

Referring to the rail services group (RSG) segment of the company's structure, he said the operating model had been transformed through the "Intermodal Transformation Project (ITP) from the old make-and-break system to a modern and efficient freight operation," whatever that meant.

He said RSG was now a streamlined point-to-point operator of timetabled and fixed-capacity services with an emphasis on the higher value containerised traffic. That sounded great, until Mr Beard ruined his argument with examples of how the "results speak for themselves."

He revealed 75-80% of trains were departing on time. Marvellous. No mention of why 20-25% of trains were departing late.

While it is just coincidence that Wellington bus operator Stagecoach is in a joint venture to acquire the region's Tranz Metro commuter services from Tranz Rail, the bus company's system is instructive.

Buses here depart on time, from the north (by Wellington Railway Station) or from east, west and south terminals, except occasionally late at night when drivers shoot through early from suburban terminals to end their shifts.

Stagecoach has timetables at each stop indicating the approximate arrival time of a bus. The estimates are always optimistic and always wrong, given the central city's narrow streets and plethora of traffic lights.

Stagecoach should time its buses and revise the estimates but all vehicles depart the north terminal on time subject to occasional mechanical breakdowns. The company does not boast that "75-80%" of buses are "departing on time."

Mr Beard said the uncertainty that surrounded Tranz Rail was "largely eliminated." That was on November 18. The company asked for share trading suspension on November 21 when it found Citibank demanded a break of an exchange hedging arrangement.

Tranz Rail agreed overnight the same day. No mention on November 18.

No spin doctoring can remove the suspicion the company is incompetent and was milked of funds in gone-by years, the latter being no responsibility of the current board and management.

Chairman Wayne Walden detailed qualifications of four new directors, including him. He had "more than 30 years' experience in the retail and wholesale sectors." Director Jon Cimino was "chairman of one of the country's leading investment banks, a member of the Stock Exchange market surveillance panel and an experienced company director."

The former chief executive of meat company Richmond, John Loughlin, was another new director, as was Roger Armstrong, who was described as "one of New Zealand's most respected financial analysts with a wealth of financial markets' experience."

All are eminent in their chosen professions.

A rail network is a land transport operation and Tranz Rail is a rail monopoly. The transport sector's jargon refers to "transport logistics." Stripped of the jargon, the term means getting freight from point A to point B as quickly as possible by the most efficient route at the lowest cost.

The Tranz Rail board should be stacked with mechanical engineers and transport logistics experts to check on similar people in management.

It does not need financiers, retailers and those whose expertise in rail transport is based on hoping their freight will not fall within the 20-25% of trains failing to leave on time.

Better things came from other annual meetings. Lovely, but perhaps unwittingly loose, comments about our Aussie cousins and their environment were made at carpet manufacturer and wool operator Cavalier Corporation's meeting.

Managing director Alan James referred to the company's microbial technologies: "Two full-scale registration-complaint blowfly trials were completed successfully in Australia ... The trials cover both the prevention of flystrike and the eradication of lice infestation in Australia and the eradication of scab mite in the UK."

A subscriber to The National Business Review sent his copy of Mr James' address with a comment about the Australian references: "How appropriate!"

* Correction: My failure to re-insert a word in last week's column after a deletion led to an error. A sentence related to Tranz Rail's cash issue said: "new subscribers to a 1:2 issue at $1 (as an example) would gain an extra 25c if they took up rights." The word "gain" should be been "pay" an extra 25c.

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