By NZPA
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Friday 21st February 2003 |
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Rather, the blue-blooded South Island businessman lucked out to seasoned campaigner Sir Selwyn Cushing, buying up the Cushing family's interests in Vertex just a day before it issued its second profit warning in four months.
"In yachting terms, the wind shifts and if you're in the right place, good -- and if you're in the wrong place, bad," a cheerful Sir Selwyn told NZPA.
"There was a wind shift in Vertex's profit rating and I'm Alinghi today," he said, referring to the Swiss challenger which is three up on Team New Zealand in best of nine America's Cup series.
Mr Gould's investment company, Gould Holdings, last week paid $1.45 a share on market for 10 percent of Vertex.
A rival bidder, millionaire businessman Sir Selwyn, had been building up his holding -- through H&G Holdings, a company jointly owned with his son David -- since September.
H&G stepped back into the market at the same time as Gould Holdings and boosted its stake to 7.57 percent. In the ensuing bidding war Vertex shares soared, hitting a high of $1.65 on Wednesday.
Realising they couldn't both reach a goal of just under 20 percent -- the maximum allowed before a full takeover trigger kicks in -- Sir Selwyn backed down, selling his holding for $4 million, or $1.67 per share -- and booking a tidy $500,000 profit for his troubles.
"We were there as long term holders but then another party came by who wanted to do the same thing," Sir Selwyn said.
"We had no intention of selling... (but) it's not in the best interests of the company to have competing interests with possibly different agendas aiming for 19.9 percent."
It was here Mr Gould's "golden touch" went awry.
Vertex -- a Carter Holt Harvey spinoff and maker of plastic containers for household brands like Tip Top icecream and Fresh 'N Fruity yoghurt -- on Thursday forecast its earnings before interest and tax for the current March year would be between $9.2 million and $9.6 million, compared with a $10.1 million estimate in September and a $11.2 million prospectus forecast.
It blamed weak consumer demand, high raw material costs and a strong New Zealand dollar for the latest reduction.
That saw Vertex's shares shed all of last week's gains -- which at the peak of $1.65 were about 12 percent -- to $1.46.
Mr Gould went to ground today, but in an interview with the Christchurch Press yesterday he said his investment had been based on published information about the company.
"I didn't ask for or have any access to any due diligence," -- a process which could have revealed the weaker earnings.
He declined to say what his next move would be.
Independent market commentator Brian Gaynor said Mr Gould wouldn't be happy about the developments.
"He would have thought the company would keep the market fully informed."
Neither will the hapless investors who climbed on board the Gould Express when the going was good -- Gould Holdings earlier this week raised $6.2 million in new equity by increasing the shareholder base to 18 from one, diluting Mr Gould's stake to 71.5 percent.
The Securities Commission is already looking into an earlier Vertex profit downgrade, in September -- just three months after the company listed at $2.05.
Market analysts say the latest downgrade will likely see Mr Gould take an active role in the company, quick smart. And he may point the finger at Vertex's management.
"The perception is that the managing director (Paddy Boyle) isn't that startling in his role," one analyst, who declined to be named, said.
"He's got a background in human resource management within corporates and for some reason he ended up heading the plastics division of Carter Holt when they decided to spin it off.
"I get the impression that he kind of ended up there by accident more or less."
Mr Gould -- billed by some market commentators as one of the sharemarket's up and coming stars -- has a tough road ahead of him.
The plastics business is a competitive one, with thin margins and little room for growth.
One fund manager, explaining her reasons for not investing in Vertex, said that a quick scan of the yellow pages showed the company had 12 competitors in the plastics business in Auckland alone.
"If you're in a business like that it all comes down to what you pay for it. It is producing low margins but it could be just a cash cow," another unnamed analyst said.
"It all comes down to what you think it's worth. Peoples' expectations of its worth have declined significantly."
Mr Gould, chief executive of rural services firm Pyne Gould Guinness, has proved a canny investor in the past. He turned around Amuri, a struggling listed company with interests in motor vehicles, food, property and apparel; Wairarapa Electricity; and Designer Textiles.
Designer Textiles was the best performer on the New Zealand Stock Exchange last year, recording a 169 percent rise in share price.
Mr Gould restructured the business to focus on high-end products like merino wool and bumped up marketing. Last week Designer Textiles recorded a 25 percent increase in net profit to $1.65 million for the half year to December 31.
Its share price has jumped from 20c when Mr Gould bought into the company two years ago, to a year high of $1.20.
Vertex is a more mature business, however, and it could be difficult for Mr Gould to work his magic.
Analysts see the company's Hamilton-based Technical Injection division and Securefresh -- which manufactures long-life chilled meat packaging -- as its best growth prospects, although they are facing sales and cost problems.
"Both of those have undershot what they thought they could do to date," one analyst said.
The plastics side of the business is also on shaky ground.
Mr Boyle said yesterday trading conditions for consumer packaging for dairy, horticulture, and meat were becoming more difficult.
Share price isn't everything, however. Even companies that meet expectations are struggling in the current uncertain investment climate.
Take Skellmax, another new market entrant.
The agricultural equipment maker this month posted a $6.3 million after tax profit for the six months ending December 31.
The result was 15 percent ahead of pro forma figures for the same period last year, and showed the company was on track to meet full year prospectus forecasts of a $12.44 million profit.
Despite that its shares last traded today at $1.08, against a listing price in June last year of $1.15.
Mr Gould's past record shows he may be prepared to sit tight and wait for better times.
"When you have 20 percent of a company you're there for the long term," Mr Gaynor said.
"I'd be surprised if he was too worried about what happened to the share price in the course of a week."
Whatever happens, prospecting is a risky business, as Mr Gould this week found out.
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