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Tranz Rail moves to lift its value

By Ray Lilley

Friday 25th August 2000

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Using other people's capital through lease-backs and contracting out services are emerging as keys to the redirection of Tranz Rail as new-broom chief executive Michael Beard aims to lift shareholder value.

Company insiders say it's a business structure Mr Beard has used in the past to ensure a major reduction in the amount of capital - and risk - on company books. The approach should see the leasing of the rail ferry and truck fleets, the sale and contracting back of core support activities such as the railway workshops and a slimline corporate management structure.

Mr Beard signalled his reshaping this week by reducing the number of managers reporting directly to him as chief executive. Two top managers will resign and two more will take up independent contract work.

For Tranz Rail this will be a major cultural change to its traditional rail business, which internationally is accepted as capital expenditure-hungry. Mr Beard may even reinforce the change by moving the corporate office to Auckland.

Company spokesman Fred Cockram said a shift was "being considered" among a wide range of options but nothing had been decided.

While there have been no indications of what will happen to unprofitable parts of the core rail business, such as the Northland and Wairarapa lines, Tranz Rail has confirmed it is working closely on this with community, customer and interest groups.

It will take three to five years to turn the rail-cum-transport company from its big capital project approach of the past to a focused shareholder-value company. Analysts have predicted it will be at least five years before the company is fully profitable.

Mr Beard will be offshore for about a month, selling the family home in the US and at board meetings for Tranz Rail. He is due to unveil the initial stages of his change plans by late next month.

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