MPG - Metro Glass

[JeremyALD]

Maybe I got a bit carried away with my "very positive announcement" but given the circumstances I think it's hard to say this was bad news remembering the SP has been hit by over 30% since the annual meeting. Surely that factored in a worse announcement than what we had today.

I think the market has made it clear that they have lost confidence in MPG leadership and therefore a strategic review would need to take place externally to give more credibility to the findings. I think its fair to say there's probably some dead wood at MPG who will be cleaned out after the review and I see Sir John as falling on his own knife as a positive. I think the fact he's staying on for now until a new chair is found as gaining him some credibility that he wants to do the best job possible, otherwise why not just leave now before anymore **** hits the fan?

At the current SP I'm fairly confident we'll see a slow upward movement if they can deliver on their forecasts. There's a lot of goodwill lost in MPG so it's going to take a couple of decent results to gain back the faith. In the meantime I'm pretty happy with a 7cps dividend in the upcoming year.

[winner69]

Hey winner, speaking of hope, I hope you have booked your Bryan Adams tickets for his upcoming tour in Jan18, a legend returns for the last time I'd say.

Was brilliant last time a few years ago .....but these holiday season outdoor venues put me off ....and so far away

But Summer of 18 will be just as good as Summer of 69 (he wrote that thinking of me)

[winner69]

I still wondering who that shareholder who was keen to become a director was ....pity Sir John gave him the word he wasn’t welcome and to just run away and don’t bother.

[Beagle]

Probably too many open questions and issues:
- Confirmation that NZ NPAT is dropping (only Australian revenue helps them to keep it flat) is not good (though sort of expected).
- good that the chair does not want to stand anymore - but hasn't he just started a new 3 year term?
- the next plant refurbishment period is "ante portas". Last time this happened (a year ago) was quite margin depressing ...

I did some more thinking about the NZ building industry and there is in my view one other issue which is likely to longterm impact on their revenues and margins:

NZ houses are at current ridiculously expensive compared to buildings in other parts of the world. One of the reasons: Our houses are - despite looking all the same - hardly size standardised. Referring to windows this means that you can't buy them at Bunnings, but each window is basically differently sized and a one-off product. Same cr*p frame for each window, but each measure is different making them expensive to manufacture and keeping overseas competition to the detriment of the NZ consumer at bay.

I my view one of the main methods to reduce building costs in NZ (and at the same time increasing the quality) is to create a number of "standardised" building blocks which can then be cheaply and in large volumes manufactured. Windows are one of these components. As soon as they sell say 50% of all new windows in just 3 different sizes it is very easy to buy these windows cheap anywhere in the world.

If this happens, than MPG will inevitably lose market share to overseas competitors and on top of that will lose margin for the remaining product.

I am sure they will survive (still lots of replacement business - and room to reduce the margins), but I don't take it anymore for granted that they will soon return to their previous growth rates ... and I think a further margin reduction is more likely than not.

Look what difference a lost endowment effect can do to your thinking ... but on the other hand do I now probably suffer under confirmation bias - i.e. better DYOR;

Good post but yeah it is a slippery slope the ol confirmation bias. Mass prefabricated buildings are one way of the future but I doubt we'll see much of that as it almost guarantees a future suburb that's undesirable. Auckland has to go up and that means more high rise and we know developers are notorious for buying in bulk in the cheapest means and that probably means buying from cheap Chinese sources. Net result is probably the same as you've suggested. I think any talk of future profit growth will be far, far more subdued than it has been in the past. The stock currently trades on a PE of 10 at arguably the peak of the building cycle which suggests to me its fully priced until such time as directors can prove the often talked about profit growth they aspire too.

Jeremy makes a good point above about dividend yield and from memory its fully imputed but there's other places to get better yield that I rate as having at least as good prospects, HLG.

I thought briefly about buying back in this morning but for some reason I couldn't get the image out of my mind of my dog who recently overate and went back to its own vomit. Such a graphic image makes it easier to endorse one's own confirmation bias lol

[winner69]

You can always tell what business school the CEO went to and/or which consulting outfit the company uses when you you see a slide like this

Gives you the warm fuzzies eh ..... but if used properly can be a good way way of communicating 'stategy' but this example lacks some key things - results/outcomes being one

[winner69]

Sir John saying “as a consequence of significant variations in the timing of both residential and commercial work put in place in New Zealand between Metro Glass’ assumptions and the actual market...' is an indictement on Metro strategic planning process

That sentence is code for we just don't understand the market we are in

There's more to understanding their market than a few Stats NZ reports and what you read in the media

[Beagle]

Agree but in my view the hiring of external consultants just like FBU have done is the bigger indictment in as much as they're saying that we don't understand the market but we also don't understand how to make our business perform properly in that market or what changes we need to make to our business model. It also begs another question, why bother trying to expand into Australia when they don't seem to have their domestic operations operating efficiently and effectively ?

I don't understand how these building companies, (and I am talking plural here including FBU and STU as well) can make such a hash of a multi year building boom ?

[percy]

Easy....
They just did what the last lot of consultants told them to do.!!

ps.
Can anyone imagine Don Baird at Mainfreight bringing in consultants?
Or Dean Bracewell at Freightways,or Mark Waller at Ebos.
No,!!! They understand their businesses better than any consultant would.
It is their life.

[winner69]

Agree but in my view the hiring of external consultants just like FBU have done is the bigger indictment in as much as they're saying that we don't understand the market but we also don't understand how to make our business perform properly in that market or what changes we need to make to our business model. It also begs another question, why bother trying to expand into Australia when they don't seem to have their domestic operations operating efficiently and effectively ?

I don't understand how these building companies, (and I am talking plural here including FBU and STU as well) can make such a hash of a multi year building boom ?

Announcement doesn’t specifically say they are using external consultants .....I would hazard a guess an internal job ith a bit of help of the likes of Infometrics to give them market insights.

Oops - they have used them in the past ....maybe they should come a’calling on bull and winner.

[winner69]

Easy....
They just did what the last lot of consultants told them to do.!!

ps.
Can anyone imagine Don Baird at Mainfreight bringing in consultants?
Or Dean Bracewell at Freightways,or Mark Waller at Ebos.
No,!!! They understand their businesses better than any consultant would.
It is their life.

Exactly

Don’t forget private equity owned Metro for some years and the pretty pictures in the presentations were to make things look good well into the future ......they now need to face up to reality

Problem being they have unrealistically raised market expectations ....something that Braid, Cederwall or Waller would never have done eh Percy.