After he wrested control of the company he relocated to the UK and embarked on a painful restructuring of the A$4.1bn group’s core European operations, to turn it around and, in the process, "save" the print industry.
Darryl Danielli I know that you’ve been heavily involved in print for a while, but you first cropped up on the UK industry’s radar last year – what’s your backstory?
Andrew Price Do you want the full 30 years? Well, I first joined the paper industry when I was 17; I started in the warehouse and then worked my way up to sales. I worked at a couple of merchants in the early years, but most of my time, around 14 years, was at Spicers Paper, which became part of Paperlinx. I left Spicers in 1998 and started a firm called Stream Solutions. The idea came from looking at the print industry and its customers. In Australia back then we had some very large corporates who had their own purchasing departments, so I set up a print management business and went after them.
Was there not much in the way of professional print management in Australia at the time then?
Well, there was, there were a lot of brokers, but they didn’t really have anything to them. And it was also the dawning of the internet age and we went out with a fairly high-tech offering, online ordering and such. That’s all commonplace today, but it was pretty revolutionary in 1998. The business grew and grew, and to help me take it to the next level, I got an investor on board. We were turning over around $35m US at the time.
Who was the investor?
Patrick Corporation, they were a high-profile stevedoring-logistics company that was famous in Australia for breaking the wharf union. With their support, the business continued to grow and then Toll Corporation bought Patrick [which had a 66% stake in Stream by this point] in 2006 and then [a year later] they decided they wanted to buy the whole Stream business. I had to hang around until late 2010 on a three-year earn-out.
By which time the business was turning over hundreds of millions of dollars I guess?
I’m not allowed to say, but it was much bigger than $35m. You can speculate whatever you want. Anyway, so I retired at 47.
Nice age to retire.
Not really, it was too young. So we took off and went travelling and I was sitting on a beach in the French Riviera, quietly drinking a mojito when a friend emailed me and said I should have a look at Paperlinx, and I replied ‘are you mad?’.
You had no interest in it at that point? No shares?
I had a few shares, not many. But I had a look at the business and it just gnawed away at me, because I’d come from Spicers and I knew what a great business it was. I started to do some research. I started to make a few calls, to talk to some people. I rang a number of printers in Europe; visited a couple.
Was it at that stage that you started to become a thorn in Paperlinx’s side, by openly criticising the board?
I hadn’t even started at that point.
You were just warming up?
I was doing research, but even at that stage I could see a whole heap of things that Paperlinx’s previous board and management were doing wrong. They were wasting money left, right and centre.
It does seem that the company has bounced from one calamity to another over the past few years.
A mentor of mine has a saying: ‘no one does it to you, you do it to yourself’. And nothing could be truer of Paperlinx. The various crises that Paperlinx has faced in the past were all largely of its own making. Yes, we are in tough market; yes, we are in tough times; and yes, we do have to work very hard to make a dollar. But if I look back at some of the decisions that were made, I’m not surprised. There were just so many inefficiencies within the business; it looked like a stamp collection with all these different logos that were being collected. And when you started to get under the skin and talk to all these different businesses, it was obvious that they were all competing with each other. Just look at the UK, you had Howard Smith, PaperCo and Robert Horne all competing with each other – at what possible level does that make sense? Especially when the cost of running those three businesses separately ran into millions every year – that was shareholders’ and customers’ money.
So what did you do?
Well, I ran the numbers and it was obvious that there was a lot of value in the business, so I decided that it would be great project to try and turn it around. And fortunately – or unfortunately – I have an emotional tie to this industry; I just saw that it was something I needed to be involved in, because it was frustrating to see the company just fall apart. So I rang the Paperlinx chairman [Harry Boon] and said I wanted to talk to him and he said I was just a shareholder and he was too busy.
Did you still have a tiny stake in the business at that stage?
Well, not tiny exactly, I had been buying shares for a while by then, but I certainly wasn’t in the top 20. But after that, I just thought ‘well, if that’s the way you want to play it’. So I got together with a few friends and associates and we nutted out a broad plan to turn the business around.
When was this?
December 2011. So we decided that we were going to go for the business, so I started buying stock and my friends started buying stock.
Were the shares good value?
It was still a massive risk, they were only around A$0.07, [from a high of A$5.37 in 2003] but they were still going down. Then I tried to engage the chairman again, unsuccessfully again, so I launched an extraordinary general meeting (EGM).
Why didn’t you just buy the company?
It wasn’t an option because the number of shareholders [around 47,000] and the complexity of the share register makes it very difficult.
[Prior to Price’s involvement, Paperlinx raised A$285m in 2007 with an issue of hybrid securities at A$100 each. It is obliged to buy back the hybrids if it wishes to alter the company’s capital structure.]
Is it something you would have liked to do though?
It would be a lot easier to do what we’re doing out of the public eye, but that wasn’t an option. Look, if you play poker you get dealt five cards; there’s no point whinging about them – that’s what you’ve got to play with. I knew that upfront. So anyway, by this stage we could muster more than 5% of the share capital, so we could trigger an EGM and away we went. We lost that EGM by 1.8%.
Lost in what sense?
I proposed to remove the chairman and be elected to the board. After that, I decided I needed to go away and get some more shares and have another go – so that’s what I did. I was then invited to join the board.
Invited?
Well, I think they knew that I was going to do it again, so they thought it would be less disruptive to just invite me to join the board. Before I took up my role last summer, though, I asked for some time to go through the business in detail and put together a plan on how to fix it.
So you spent time at all the international businesses?
Well, Europe. The rest of the business is doing very well; it was continental Europe and the UK that needed the most attention. So I did that and then flew back to Australia for my first board meeting, and at that meeting all of the directors, bar one, resigned effective immediately. The other director resigned, but stayed until the next board meeting.
Before you went through your plan or afterwards?
Before. You can draw whatever conclusions you want from that.
Did you have an inkling that was going to happen?
I wasn’t sure what was going to happen at that meeting. But I did have very strong views on where the business needed to go. Anyway, at that same board meeting two new board members were appointed, Michael Barker and Robert Kaye.
In terms of the executive board now, though, you’re it aren’t you – in the sense that you run the business?
There are three directors, Michael, Robert and me. I’m the only executive director, although Mike and Robert are far more involved with the business than a typical non-exec, because there’s so much to be unwound.
But you still have a chief executive, David Allen, how does that work?
He still runs the business day-to-day. It’s my job to oversee the restructuring. Dave’s got his hands full running the business, so I sit down with him and talk about specific projects that I will take on. I’ve always believed that you can’t work on your business, when you’re in your business.
So what is the new strategy?
I look at the business as having three children: we have a commercial print division, which sells paper; a packaging division, which sells packaging funnily enough; and VTS, Visual Technology Solution, which is the old sign and display division. We love all of them the same, but we have to manage each of them differently.
Which one is the problem child?
Without doubt it’s the paper business, because it’s in deep decline.
But we’re talking about volume being in decline, that doesn’t mean that the value is.
Absolutely. We say it’s in decline because of the number of tonnes going out of the door. I don’t care about that, I care about profit. But to manage that properly there’s a number of things we can do. First we need to make sure we have the most efficient supply chain possible, that means the lowest cost in all aspects of the business, purchasing, warehousing, logistics and to be the most competitive. Basically, the strategy of a paper business can be summed up in a joke: There are two guys in the jungle and all of a sudden a man-eating lion starts running towards them and the first guy starts to run, but the other guy stops and takes his shoes off and puts running shoes on. The first guy says to him ‘what are you doing, you’re never going to outrun a lion’. The second guy replies, ‘I don’t have to outrun the lion, I just need to outrun you’. Our strategy has to be focused on being more efficient than our competitors, to make the hard decisions and to pull costs out of business faster than them.
So it’s a last man standing strategy?
That’s part of it. We’re the largest independent merchant in the world, by that I mean we’re not owned by a mill. So we have huge value to the mills, because we’re completely supplier agnostic. We’re particularly attractive to those in, as you like to say here, the Far East. We call it Asia. Over time that will give us a real competitive advantage. Also, we have to get our cost base under control. The most important thing for our business, though, is to save the print industry by coming up with ideas to help. That’s our responsibility.
Is that another joke though, when you say you want to save the print industry?
Actually no, I’m deadly serious.
Saving the industry or saving Paperlinx though?
It’s one and the same. We can’t survive without our customers. It’s our responsibility to give added-value options. Our customers have been saying for years that we need to add value to their business, and we haven’t. You look at the market in the UK and we’ve been saying that we sell our sheet of paper 5% cheaper than our rival; that’s not adding value. The market here is about us trying to sell purely on price, or saying our paper is whiter than the other guy’s, or greener than the other guy’s – that must stop.
But what else is there when it comes to paper?
Look, I probably used to be just like the rest of the paper industry when I started 30 years ago, but I’m looking at this differently now. I’m looking at it as someone who ran the largest print buyer in South East Asia; I have a completely different perspective on paper and I know what’s important – and it’s not who has the shiniest paper, or whose comes from the mill with the best name.
What is important then?
There are three things we have to think about: how do we get a product to our customer that is better, faster, cheaper. And how do we become better, faster, cheaper. It also gets back to us saving the industry – how do we really add value for our printers. Just doing one of those three things is not enough, we have to do all three and, on top of that, we have to look at other things we can do. If people just want to buy paper from us, that’s fine, we’ll be better, faster, cheaper. However, we want to add value in other ways. One is the Car Wrap Club and another was Printers’ web stores. There will be other initiatives too. At the end of the day, people don’t care where their paper comes from.
You mentioned working with Asian paper manufacturers... some people are still a bit twitchy about that aren’t they?
You mean environmental credentials?
Exactly.
In Australia and Canada our main supplies come out of Asia, purely because of lead times. We’re very cautious that we deal with properly accredited mills, environmentally I mean, but also those that adhere to things like the ISO 26000 social responsibility standard. We’re a global company and we should be able to offer our customers the best possible deal, and having a sourcing office in China is critical, to ensure quality control. There are a lot of complexities, but we’re exploring all supply options – we have to.
What about end-user concerns?
I was a print buyer, I wanted to do the right thing environmentally and the right thing from a CSR perspective, but I also wanted a good price. And look, some of the initial pricing that has been tabled by the Asian mills is astonishing; what that means, who knows, but we’ll look at all options.
What about staff concerns about the other changes to the business, I’m guessing you’ve maybe laid off around 10% of the workforce since you became a director?
It’s probably a little more than that. If there’s one part of the job that stops you from wanting to get out of bed in the morning, that’s it.
Do you think that some people see you as the hatchet man who’s come to take chunks out of the business?
I’m sure some do. There’s a balance – making those big cuts is not easy. It’s all about mathematics; running a business has to be about the maths – numbers don’t lie. Looking from the bottom up, we’ve got some fantastic staff at Paperlinx that are engaged, passionate and are driven about this business. And considering what they’ve been though, that’s pretty amazing. We’ve got to get the business right and make it sustainable, though. Losing people hurts; it’s not something I wanted to do, but it had to be done and it had to be done quickly because, frankly, the business was heading for disaster.
How long do you think it would have had if things had carried on as they were?
My belief is that if we hadn’t made these changes, I’m not sure we would be talking today. But we’re on the right road now, and I’m as confident as anyone can be about a business.
How are you going to measure that success?
When we start making acceptable, sustainable returns to shareholders. Let’s not beat around the bush, we’re going to make a large loss this year when our results come out, because we’ve done so much restructuring.
And next year?
I can’t make forward-looking statements, because we’re in media black-out right now, until we announce our results next month.
Will you still be in the UK next year, or are you heading back to Australia after your 12-month visa expires?
I’m here for a minimum of 12 months, and at this stage I can’t see me being here for less than two years, because there’s a lot to do. There’s a huge gap in this market for where we’re taking this business. We have got enormous opportunities coming up, we just need to mobilise.
So you’re in it for the long haul then?
Absolutely, my wife just went out and bought some kitchen utensils – you don’t do that if you’re only here for a few months.
When will you step back from an executive role and get back to enjoying your retirement, mojito in hand?
When we start making sustainable profits, with the right cost base, the right customer base and the right market positioning, then I can step back.
What’s your ultimate exit strategy though?
Passing on my Paperlinx shares in my will, knowing that they will generate great dividends for my descendants for years to come.
