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  • Journal of Corporate Renewal

    12-11-14
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    To review the most recent edition - click here  The Journal of Corporate Renewal is now available for digital reading. Access JCR anytime, anywhere and ...

    To review the most recent edition - click here

     The Journal of Corporate Renewal is now available for digital reading. Access JCR anytime, anywhere and stay up-to-date on the latest in turnaround management, corporate restructuring, and distressed investing.

    The October 2014 issue of the Journal is currently available online, on the App Store, and on Google Play:

    Online
    View JCR online at work or at home, with full access to the entire issue and interactive links.

     

    App Store
    Download the JCR app and view the publication on your iPad and iPhone.

     

     Google Play

    Get the JCR app for your Android phone or tablet, or the Amazon Kindle Fire.

    About JCR
    JCR offers readers informative practice strategies and trends in the corporate renewal industry, current legal updates, economic perspectives, and e-commerce developments. In addition, look to JCR for the latest local TMA chapter activity highlights, as well as coming events.

    Each monthly issue of JCR contains a number of feature-length articles written by experts in the turnaround industry. The monthly features are designed to inform and educate TMA members in various disciplines of the turnaround industry.

    In addition to feature stories, JCR contains several monthly departments focusing on specialized areas of interest. For recent information, members turn to the "Legal Bulletin" and "Of Interest" features. The new members, local chapter events calendar, and recent chapter activity highlights offer members a look at what’s happening in TMA chapters worldwide.

  • Danger in FIFO witch-hunt

    30-10-14
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    Addressing the Turnaround Management Association in Brisbane today, Queensland Resources Council Chief Executive Michael Roche said that blaming fly-in, fly-out (FIFO) operations for a coal industry downturn bore the hallmarks ...

    Addressing the Turnaround Management Association in Brisbane today, Queensland Resources Council Chief Executive Michael Roche said that blaming fly-in, fly-out (FIFO) operations for a coal industry downturn bore the hallmarks of a witch-hunt.  Read more...click here

  • Release of 5th Annual Survey analysing Corporate Turnarounds in Australia

    19-09-14
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    To View - Click Here...

    To View - Click Here

  • Malcolm Turnbull's Opening Address at the 2014 TMA National Conference

    18-09-14
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    To View Malcolm Turnbull's address - click here...

    To View Malcolm Turnbull's address - click here

  • Submission to the Financial Sector Inquiry - Voluntary Administration and Recycling Capital

    25-08-14
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    To View - Click Here...

    To View - Click Here

  • Keeping Businesses Alive

    30-09-13
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    To view article from the Financial Review - click here...

    To view article from the Financial Review - click here

  • 333 Management / TMA Survey - Insights from the Australian Turnaround Industry

    09-09-13
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    To view this year's survey - click here...

    To view this year's survey - click here

  • McFadden's Skilled transition from woe to go

    22-11-12
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    The Australian Damon Kitney PRINT EDITION: 22 November 2012 FOR most of her executive career, Vickki McFadden has been the one giving the advice. But 2 1/2 years ago, as chairwoman of the audit ...

    The Australian

    Damon Kitney

    PRINT EDITION: 22 November 2012

    FOR most of her executive career, Vickki McFadden has been the one giving the advice.

    But 2 1/2 years ago, as chairwoman of the audit committee of the then crisis-ridden labour hire and recruitment firm Skilled Group, it was the former high-flying investment banker who was on the receiving end. And the advice was, at times, anything but pleasant.

    "I had a lot of people in my ear, particularly our shareholders," McFadden, now Skilled chairwoman, tells The Australian before a great bellow of laughter. She may be smiling now after Skilled in August reported a big turnaround in profits and appears well down the road to recovery, but McFadden has battle scars after surviving a unique and challenging episode that few experience in the corporate world.

    That is piloting the transition of what was essentially a family company with an Australian Securities Exchange listing through a near-death experience to one that is now a properly governed, functioning and, most importantly, profitable listed entity with a diverse shareholding base.

     

    She knew what she was in for five years ago when she joined a board with eight directors, five of whom had close ties to the group's cornerstone shareholder, the Hargrave family. The Sydney-based mother of three was warned about Skilled's "blokey" culture.

    But never did she expect the company would be fighting for its life two years later.

    As head of investment banking at Merrill Lynch, she had advised some of the biggest names in corporate Australia. She became one of only three external directors to be invited on to the prestigious and highly secretive Myer family board. She was also a member of the prestigious takeover's panel.

    McFadden presents immaculately, appears wise and considered -- a legacy of her legal and accounting background -- and speaks in almost regal manner.

    Yet for a nasty period Skilled looked like being a big black mark on an otherwise celebrated career. The 53-year-old admits to having some frank conversations with former Skilled chief executive Greg Hargrave, whose eclectic acquisitions pushed gearing to a stunning and unsustainable 113.7 per cent in the 2009 financial year. During the next 12 months Skilled announced two profit warnings in six months. By April 2010, Hargrave told the market he was going.

    "I was the chair of the audit committee. So I did have close association with Greg as the chief executive. My relationship with Greg was good. I think I could sit down with him and have a very open and frank discussion with him about the changes and he was receptive. The way I like to operate is on a very open basis and to express my view, not to be directive," she says.

    "That process of change, I think, is always difficult, but I would have to say that a process of change and transition occurs much more effectively when you have the outgoing individuals willing and assisting to allow the transition to occur."

    Hargrave did not formally step down until the appointment of former Coles Group chief operating officer Mick McMahon in November that year.

    But McFadden and the chairman of the time, 16-year Skilled veteran Ken Loughnan, weren't just managing internal matters.

    Skilled's investors, including Alex Waislitz's Thorney Investments and activist manager Orbis, both of which had more than 10 per cent, wanted change. And they were vocal.

    Waislitz freely admits he was initially suspicious of McFadden.

    "We've been pleasantly surprised by Vickki. When Thorney first got involved with Skilled we thought that Vickki was part of an old guard that had significantly underperformed. But we've been very happy with the way Vickki has supported new management to help turn the company around and deliver solid returns for shareholders," he says.

    McFadden said the key was not to panic. After the appointment of McMahon, Skilled made changes to its board, announced a capital raising, then renegotiated its debt profile. "The temptation is to change a whole lot of management quickly, but you can't do that. You have to still run the business," she says. "You have to be controlled and pace yourself through the change."

    "It is difficult but the process needs to be considered and they (the shareholders) do respect that if they can see a process is happening. It is not the change they want, it is the outcome they want more quickly."

    Her recipe for survival on a board in crisis is simple. Choose your team wisely. "You need to have the right board composition around you. Confidence in your board colleagues. The appointment of the CEO is also so important," she says.

    Since taking over at the head of the board table at the end of 2010, a rare female in such a role in corporate Australia, she says she has sought to foster an open relationship with McMahon and notes she has found Skilled to be anything but "blokey".

    "I like to hear about the good and the bad; in fact I prefer to hear about the bad first. Together we work on problems. Not fix it and tell me what you think I want to hear. It is about not interfering in the management but getting close enough to understand the strategy and the rate of change."

    McFadden says her investment banking background also gave her confidence to stand firm in the crisis. At Merrill Lynch she had worked on many successful transactions including the takeover of Optus by Singtel and the initial public offering of Seven Network. "The investment banking career gave me good background with the market, investors, and on how patient or impatient they would be, and how you go about raising capital in circumstances like that." Interestingly, she claims she would do nothing differently in the boardroom if she had her time over again. She says she always felt the fundamental business of Skilled was sound despite what the outside world at times was thinking.

    "The acquisitions were generally good acquisitions. They were made when the economy was going well and funded by debt. I don't think it was the acquisitions themselves that were the issue. We found ourselves, when the GFC hit, carrying too much debt and we failed to integrate the businesses effectively. This is the problem with good times -- they cover up a lot of issues."

    Greg Hargrave has now resigned as a Skilled director after taking leave of absence, but the Hargrave family retains a 13 per cent shareholding, down from 30 per cent two years ago.

    McFadden says she knows family patriarch and Skilled founder Frank Hargrave, the father of Greg, but not well.

    He flew up especially to meet her at her Sydney office after her appointment to the board. "He is delightful," is all she will say.

    So what has the founder taught her most of all? "That this business is about people. He is a very good people person. His background is as an electrician and he understood the needs of clients and what employees need. His focus was on the trades and that is a focus we are trying to maintain," she says.

    It's the recipe that McMahon has used to turn around the business. Last year he reduced Skilled's cost base by $13.5 million, well ahead of the $10m forecast, as the group moved from its lavish headquarters on St Kilda Road to a new base in suburban Hawthorn. But, most importantly, he has focused the company back on its core business: providing the best service for clients.

    Orbis principal Simon Marais has nothing but praise for the turnaround. Orbis has cut its Skilled shareholding to below 5 per cent, booking profits from the 50 per cent-plus rise in the share price over the past year.

    "This company has been extraordinarily well managed. They are one of the best turnarounds from management that we have seen," he says.

    And on McFadden, specifically, he says: "I'm not sure how much credit she can take or how much management can take, but at least she had the foresight to pick someone like Mick McMahon."

    McFadden says the journey is far from complete: the next focus is achieving major productivity and efficiency gains by automation of Skilled's processes.

    "They might be simple things like introducing automated workplace risk assessments. We can provide a better service to our clients and on a more efficient and cheaper basis. We are just starting on that stage of the transformation. I think that is very exciting," she says.

    She believes Skilled has a responsibility to redirect and focus training to meet skills shortages in certain sectors of the economy, but wants the government to do more. Relocation, she says, is not the answer. "It needs to be the coming together of government and industry to identify the demands and the needs and then to have a framework for achieving the training that is required because . . . there will be some relocation, but that is not the only answer. It is reskilling and retraining," she says.

    But for the moment it is the organic opportunities for Skilled that excite her and McMahon.

    "We have a lot of potential in the core business," she says.

    "We have 11 per cent market share, and we are the market leader, so there is a lot of room for organic growth in that space. If you provide on a cheaper cost platform, a better service and labour solutions for our clients, I think there is lots of opportunity."

  • Directors drowning in risks, say Gonski

    10-09-12
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    The Australian Financial Review Paulina Duran PRINT EDITION: 10 September 2012 Self-proclaimed “serial director” David Gonski says the best mitigant against the many risks that threaten modern company directors is ...

    The Australian Financial Review

    Paulina Duran

    PRINT EDITION: 10 September 2012

    Self-proclaimed “serial director” David Gonski says the best mitigant against the many risks that threaten modern company directors is luck.

    “I don’t look down on those directors who have been found guilty of things unless it is fraud or opaque motive, because it could happen to anyone,” the straight-shooting chairman of the $73 billion Future Fund, Coca-Cola Amatil and the Sydney Theatre Company told the Turnaround Management Awards dinner.

    Despite his extensive board membership, which includes more than 20 current, and many former, directorships, Gonski has been lucky, having not been caught by the growing risks. “I do reserve the right to come back if my luck changes,” he joked.

    Gonski shared some insights into the risks of being a company director with an audience of about 500 industry professionals, including lenders, investors, advisers, managers, and directors of companies facing either financial or operational stress.

    A lot has changed since the lawyer turned banker started his career 35 years ago. Being a director then was great. “It was a pleasure, it was a privilege,” he said.

    “In fact, not to be too unkind, I think the greatest risk that a director had 35 years ago, was whether that new gadget called the breathalyser test would pick you up on the way home from lunch.

    “And if you think I’m joking, you weren’t around 35 years ago.”

    Since then, several risk factors have appeared in director’s landscape. New regulations, escalating business complexity, technology, a greater level of scrutiny, lack of empathy from judges, social media, and what Gonski calls “internationality”, means directors are exposed to personal liability from many fronts.

    Even though luck is a key factor, Gonski said directors can mitigate other risks by focusing on people, culture, asking the right questions, and being extremely careful about which companies to direct.

    No director can claim, nor should he or she be expected to, know everything that is going on in the company, he said.

    “Coca-Cola Amatil [he has been on the board since 2001] has 365,000 vending machines in Australia and New Zealand. I make the admission to all of you, I have not gone to check they are all there.”

    Gonski, who has been in the headlines for the most part of this year, after being appointed chairman to the Future fund and leading a report on the future of school funding in Australia, says people and culture are key.

    “I have chosen wrongly in my 35 years and that can be pretty bad,” he said. “But now I am careful and in general I know things can go bad, but I know who will be sailing with me and I have a very strong view that we would be through it.”

    In Gonski’s rule book, the right culture involves diversity, transparency and openness.

    “Let me absolutely and categorically say that I believe you can minimise risk by having diversity around the board table. The fact is that you need people to question, you need people from the opposite gender who look at things differently, who could absolutely say: “is that the way to do it?” You need people who have been there a while, who are older. And even, dare I say it, who are younger as well.”

    He said education was extremely important. “I believe that directors need to educate all of you who are not involved in being directors and all of the judiciary as well as to what they actually do.”

    The life of a director is full of satisfaction from the contributions to the community, he said. But his advice for those sitting at company board tables is to always keep risks at bay.

    “I believe to mitigate risks, we have got to be aware that there are risks.”

  • Fund battle not lost on media boss

    26-11-11
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    The Australian Financial Review Paulina Duran PRINT EDITION: 26 Nov 2011, page 17 Seven West Media chief financial officer Peter Lewis is one of many executives who have experienced the dire consequences of ...

    The Australian Financial Review
    Paulina Duran
    PRINT EDITION: 26 Nov 2011, page 17

    Seven West Media chief financial officer Peter Lewis is one of many executives who have experienced the dire consequences of the European debt crisis first hand. 

    Through this volatile period, Seven West successfully refinanced $2 billion in debt but, in the process, Australia’s largest media company lost BNP Paribas as a key lender, ending a relationship going back more than 15 years.

    “We all know at the moment some banks, especially the European banks, are having a difficult time,” Mr Lewis told the Financial Review CFO Conference during the week.

    “All but one of the banks that we dealt with were very prepared to step up.”

    The anecdote is a reminder to companies that while, geographically, Europe cannot be further away from home, its problems are causing the availability of funding to shrink and the cost of debt to rise.

    Seven West was ultimately banked by 12 local and international banks, including all four majors, which have demonstrated an appetite to lend to good companies.

    Grant Samuel director Guy Fergusson told the conference it’s not all doom and gloom.

    “Whilst it has been a challenging market at times, borrowers with a good profile have been well covered,” he said.

    But with an estimated $100 billion “debt wall” due to be refinanced over the next 18 months, not only is the financial industry worried that the local banks’ balance sheets will not be sufficient to deal with the funding task, it is concerned this could affect the broader economy.

    National president of the Turnaround Management Association of Australia John Nestel told the Weekend Financial Review: “The withdrawal of credit is the single biggest catalyst for converting struggling business conditions into business failures and loss of employment.”

    In the past week, the Financial Review revealed Europe-based banks were reducing their local balance sheets by offloading their loans in the secondary loan market.