{"id":90657,"date":"1999-12-31T00:44:00","date_gmt":"1999-12-30T13:44:00","guid":{"rendered":"http:\/\/smartoffice.com.au\/anchorage-capital-claims-dick-smith-was-a-viable-business-pigs-arse\/"},"modified":"1999-12-31T00:44:00","modified_gmt":"1999-12-30T13:44:00","slug":"anchorage-capital-claims-dick-smith-was-a-viable-business-pigs-arse","status":"publish","type":"post","link":"https:\/\/staging.strixdevelopment.net\/smartoffice\/1999\/12\/31\/anchorage-capital-claims-dick-smith-was-a-viable-business-pigs-arse\/","title":{"rendered":"Anchorage Capital Claims Dick Smith Was A Viable Business..&#8221;Pigs Arse&#8221;"},"content":{"rendered":"<p>COMMENT:The now failed Dick Smith retail business was&#8221; viable&#8221; and &#8220;absolutely&#8221; had a sustainable business model when it was floated on the share market for hundreds of millions, Anchorage Capital boss Philip Cave bleated to the Australian newspaper on Friday.<\/p>\n<div><span style=\"font-family: sans-serif; font-size: 13.3333px;\">Seriously, Mr Cave, who are you kidding.<\/span><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">The business was a mess when you bought it and is still a mess today.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">What Anchorage Capital have become are &nbsp;masters at applying lipstick on a pig.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">What Anchorage Capital got away with was pure manipulation and the hiding of facts which the Australian Companies and Investment Commission are set to investigate.&nbsp;<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">What you did may be legal on paper but it was morally wrong.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Cave and his cronies, had one objective and that was to screw as much as they could from the deal for Anchorage Capital investors and then disappear.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">It was not till Cave quit the board as Chairman and Rob Murray the former Lion Nathan executive took over, that the pack of cards at Dick Smith started to crumble.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">While Cave was running the show Nick Aboud the former CEO was seen as the golden haired boy a person who in the eyes of Cave and his cronies could do nothing wrong.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">The problem was that by the time Murray was bought on board the Company was a mess, costs were blowing out, suppliers were starting to get tetchy because of late payments and boatloads of unsalable house brand stock was arriving into Dick Smith warehouses.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Dick Smith was a train wreck and no one, had a clue how to stop the bleeding.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">The smart executives in the group quit.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">The facts are that on average a good JB Hi Fi, Harvey Norman, or Good Guys stores turns over $20M.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Dick Smith stores were struggling to make $3M.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Even Dick Smith stores in New Zealand were being jacked up and are still being jacked up today.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">What Nick Aboud and Marketing Director Neil Merola did to cut costs in New Zealand was shift the operational side of the business back to Australia.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">This allowed them to shift around $4M from the bottom line of the business which when added back into the cost of running the New Zealand business would show that the New Zealand business is not as profitable as Ferrier Hodgson the receivers at Dick Smith are making out.&nbsp;<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">In FY 2015 Dick Smith New Zealand had an EBITDA of $2M add back in $4M operational cost and the Dick Smith New Zealand stores could be a bigger mess than Australia which is why retailers such as JB Hi Fi, Harvey Norman or the Good Guys will not be bidding for them.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">&nbsp; &#8220;It was a great model and it had a lot of opportunities to grow the business,&#8221; Cave, told The Weekend Australian.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Cave went on to claim that every single one of the Dick Smith were profitable, there were no loss-making stores, so was it a sustainable model? Absolutely&#8221; He said.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">So why was it that arguments were taking place between Nick Aboud and store managers over &#8220;unprofitable&#8221; stores back in April and May 2015.&nbsp;<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">And why was it that stores like Dick Smith in North Sydney were being closed down.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Mr Cave also defended private equity practices and questioned the board&#8217;s decision to write down stock by $60 million.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Dick Smith collapsed on January 4 when its lenders &#8211; National Australia Bank and HSBC &#8211; withdrew support for the company following poor sales over Christmas.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">That followed a profit downgrade in October and a $60m stock write down in October as well as a clearance sale ahead of the all-important holiday trading period.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Last week the receivers instructed Dick Smith stores to lift the price of house branded goods.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">One NSW Dick Smith store manager said &#8220;I don&#8217;t know what is happening. We were selling audio cables for $5.00 and they were selling. Then we got instructions to lift the price to $25, now no one is buying the cables&#8221;.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">He added &#8220;Most of our stock is house brand it&#8217;s either Move or Dick Smith branded and it is not selling. Take TV&#8217;s why would you buy a Dick Smith branded TV when the Company could not be around in a few weeks&#8221;.&nbsp;<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">&nbsp;<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Several observers have questioned how Dick Smith could go from reporting record profits in August to calling in administrators in the first days of January, and highlighted the huge profit Anchorage made buying and selling the business between August 2012 and December 2013.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Forager Funds Management called the deal, in which Anchorage bought the business for $94m in 2012 and floated it at the end of 2013 for $520m, &#8220;the greatest private equity heist of all time&#8221;.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">But Mr Cave said he was disappointed with the &#8220;inflammatory tone and misleading nature&#8221; of commentary about the collapse and that &#8220;undeniable historical facts&#8221; about the business had been overlooked.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Mr Cave, who chaired the retailer in private ownership and through its first 14 months as a public company, said it was up to the board-appointed administrator, &#8220;not Anchorage or anyone else&#8221;, to determine the substantive reasons for Dick Smith&#8217;s collapse.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Forager investment analyst Matt Ryan, said that management was forced to borrow to build up stock levels after Anchorage ran them down from $370m to $170m ahead of selling the business.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">As well as the inventory writedown, Anchorage put writedowns on onerous leases and other assets that reduced future charges and boosted profits in a way that would inflate the price they could onsell the business for.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">A spokesman for Anchorage said while the balance of the purchase price was funded from cash generated by run-down sales of significant amounts of excess and slow-moving stock, it was incorrect to argue that this left the business needing to take on debt to rebuild inventory.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">&nbsp;<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Dick Smith had cash and short-term receivables of $90m in December 2013 after the float and $95m in December 2014, when it remained debt-free, he said.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Anchorage said criticism of the increase in inventory to $293m at the end of 2015 failed to take into account the growth in store numbers &#8211; they increased by 25 per cent as a public company &#8211; and the change in business mix, with Dick Smith making a push into higher-margin home-brand product to balance the slim pickings from big brands.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">The collapse has imperilled the jobs of more than 3000 employees and could see the long-established brand and its network of more than 300 stores collapse if it cannot be sold.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Already 11 people have been sacked from the accounts department according to a circular to staff by administrators yesterday.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">Mr Cave said he hoped the brand would survive and the firm would work &#8220;constructively&#8221; to assist the administrator.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">&nbsp;&#8220;Everyone at ACP shares the dismay felt by many in the community regarding the circumstances at Dick Smith,&#8221; he said.<\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\"><br \/><\/span><\/font><\/div>\n<div><font face=\"sans-serif\"><span style=\"font-size: 13.3333px;\">This is a guy who along with AC, got $320M out of the &nbsp;Dick Smith float, while leaving hundreds of investors with worthless stock and over 3,000 staff now looking for a job.&nbsp;<\/span><\/font><\/div>\n<div style=\"font-family: sans-serif; font-size: 10pt;\"><\/div>\n","protected":false},"excerpt":{"rendered":"<p>COMMENT:The now failed Dick Smith retail business was&#8221; viable&#8221; and &#8220;absolutely&#8221; had a sustainable business model when it was floated on the share market for hundreds of millions, Anchorage Capital boss Philip Cave bleated to the Australian newspaper on Friday.<\/p>\n","protected":false},"author":42,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[28,64],"tags":[],"class_list":["post-90657","post","type-post","status-publish","format-gallery","hentry","category-archive","category-comment-archive","post_format-post-format-gallery"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.2 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Anchorage Capital Claims Dick Smith Was A Viable Business..&quot;Pigs Arse&quot; - Smart Office<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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