In this kind of retail market, it makes sense to have a Plan B, but investors have taken a dim view of Vita Group founder Maxine Horne, injecting a little botox into her Telstra retail operator.
Vita Group founder Maxine Horne. Photo: Dom Lorrimer
Vita, which owns Fone Zone, has watched its stock drop more than 20 per cent since announcing last month it had agreed to enter the superficial zone with the acquisition of Clear Complexions.
Vita shares continued to fall on Tuesday after it announced that the deal had been consummated.
Matt Barrie of Freelancer. Photo: Louise Kennerley
It was great news for the Complexions team, which received $1 million worth of stock at these reduced prices, as well as $8.5 million in cash.
Let’s not kid ourselves, Horne would not have considered such a drastic move if it wasn’t for the fact that Andy Penn‘s Telstra has started to squeeze profit margins at its Fone Zone stores.
So how do you sell your shareholders on the move from selling mobiles and broadband to chemical facial peels, skin peels, botox injections, body sculpting and tattoo removal?
“There is great alignment between the two businesses … both organisations are firmly focused on meeting customers’ needs, and on delivering an exceptional customer experience,” said Horne when the deal was announced last month.
Illustration: John Shakespeare
The non-invasive medical medical aesthetics (NIMA) market is worth around $1 billion a year, it has high margins, a clear growth trajectory and the opportunity to consolidate a fragmented sector. In other words, it is the same opportunity that presented itself in the mobile phone retail business all those decades ago.
Horne backed her words with the purchase of 561,000 shares this month for just over $700,000, but it’s small beer compared with the 25 million shares she sold last year for $92 million.
What is it that Mark Twain once said about history not repeating itself, but it rhymes?
Two years have passed since a troubled, but still viable, Slater and Gordon changed auditors.
The team from Pitcher Partners was replaced with some smart bods from Ernst & Young.
As they say in the classics, the rest is history. Pitcher’s audit team have now been dragged into the Slater and Gordon class action over allegations they wrongly signed off on accounts that inflated the firm’s revenue. The firm denies the allegation.
But CBD noted back in 2015 that there had been another occasion where an audit team from E&Y replaced Pitcher.
It was in 2007. Eddy Grove‘s childcare empire, ABC Learning, called in E&Y to replace Pitcher.
The new auditors, led by E&Y’s Brian Long, who went on to become Network Ten’s chairman (speaking of collapses), challenged ABC’s treatment of revenue and earnings in its half-year accounts.
The revisions created a vastly different financial picture of the group at its half-year results in February 2008 and sent the share price spiralling.
The childcare empire collapsed before the year was out.
In 2012, ASIC’s Greg Medcraft received an enforceable undertaking from ABC’s former auditor, Pitcher Partner Simon Green, suspending him for five years.
“Auditors are important gatekeepers who are relied upon to provide assurance and market confidence in the quality of financial reports,” said Medcraft at the time.
“ASIC continues to focus auditors on the importance of applying professional scepticism.”
It looks as if our top corporate cop did not do a good job on this front. Medcraft was still slamming the audit quality of our big firms before his departure this month.
“Often what we found was that there was a lack of scepticism and generally a lack of challenging what was in front of them,” said Medcraft after an ASIC review of the work of big audit firms.
Freelancer founder Matt Barrie has taken time out from the important job of ridiculing Sydney’s nightlife, to sound off about the entire economy in an essay he has posted on social media.
There is nothing new in Barrie’s contention about our “dumb luck” in being so closely tied to the China boom. But it is sobering to see that the only other economies so dependent on the Middle Kingdom include the Democratic Republic of the Congo, Gambia, the Lao People’s Democratic Republic, the Central African Republic, Iran and Liberia.
“Does anything sound a bit funny about that?” asks Barrie.
“As a whole, the Australian economy has grown through a property bubble inflating on top of a mining bubble, built on top of a commodities bubble, driven by a China bubble.”
These are just some of the opening lines from his magnum opus, which offers Barrie’s version of the China boom-and-bust story as well as the quantitative easing doom story.
But where would we be without a Barrie spear tackle on our hospitality sector?
“With an economy that is 68 per cent services, as I believe John Hewson put it, the entire country is basically sitting around serving each other cups of coffee or, as the Chief Scientist of Australia would prefer, smashed avocado.”