Performing on the international stage
By Ashley Gardyne, Portfolio Manager, Property & Infrastructure
01 November, 2016
A casual media observer could be forgiven for thinking that New Zealand businesses only ever fail when seeking to expand overseas. New Zealand companies are lauded when they sell part or all of their businesses to offshore interests (who can supposedly give them access to bigger markets and spearhead their growth) but companies that choose to go it alone and open offices and branches offshore are viewed with scepticism. Last week the sceptics seemed justified with Pumpkin Patch placed in voluntary administration and its hasty international expansion being at least partially to blame.
But it's not black and white. New Zealand is a small market and it is hard to imagine that large New Zealand companies can deliver long term growth for shareholders without an international strategy. Many of New Zealand's best growth stories, like portfolio holdings Fisher & Paykel Healthcare, Vista Group, Mainfreight and Ryman Healthcare, are becoming increasingly dependent on their international operations for growth.
Without the willingness to launch themselves onto the global stage, some of these stories may have played out differently.
Many of the failed international exploits of New Zealand's listed companies have resulted from acquisition-led expansion (The Warehouse), rapid debt-fuelled growth (Pumpkin Patch), or attempting to compete in competitive and cyclical industries with insufficient scale (Rakon). As shareholders, our focus should not just be on whether a company is expanding beyond its home borders, but rather, whether they have the right product, strategy and management team to compete.
We recently attended Mainfreight's investor day in Melbourne. We heard from management, inspected their new logistics facility in Epping, and took the opportunity to talk with the heads of their international divisions. As usual, we were impressed with the depth of talent in the business and their well-articulated strategic plans for growth in each market. Importantly, Mainfreight's disciplined and long-term approach provides us with confidence that they can grow their international operations profitably for many years to come.