Keith McLaughlin, managing director of Baycorp Holdings, is not ashamed of the company’s origins in debt collection. It still makes significant contribution to the company’s earnings.
But in 30 years McLaughlin has transformed what was the family’s Hutt Valley debt-collection business into publicly-listed technology company and business intelligence provider with market capitalisation of around $1 billion. During that time, McLaughlin has championed the respectability of what was once seen as dirty business.
In addition to its Bay Collection Agency, Baycorp’s newer loan-related subsidiaries provide pre-loan credit checking (Baynet CRA), loan administration (Baycorp Management Services), legal services to deal with non-payment (Document and Investigation Services), and debt acquisition (Nationwide Credit Services).
An undisputed stock exchange darling, Baycorp is lauded for creating more shareholder value than any other company in the New Zealand market since the mid 1990s.
The company recently announced its seventh consecutive year of profit growth in excess of 20 percent. In the 12 months to 30 June 2001, Baycorp earned $27.5 million (net profit pre-abnormals) on operating revenue of $67.1 million. In the last 52 weeks the company’s share price has more than doubled from $5.55 to around $12.55.
Steady growth
A former St Bernard’s boy, McLaughlin has always been more comfortable letting the company’s achievements tell Baycorp’s growth story, rather than talking up its successes.
Nevertheless, he attributes much of the company’s steady growth and near-monopoly status to its penchant for taking over rival companies. As result, Baycorp is by far the country’s dominant credit reporting agency and debt collector. What accounts for much of the company’s more recent quantum leap, says McLaughlin is technology and the first move advantage it’s provided.
By adopting clever software, database and internet technology, McLaughlin has engineered Baycorp’s metamorphosis from its old-economy persona to new-economy model. In fact, to many within the broking world, Baycorp is very much technology stock.
Using the internet, the company’s clients can run credit reporting or database access-type system for any organisation, anywhere in the world.
Adopting the internet as key to the business model means that 95 percent of Baycorp’s interactions are electronic. “The integration of e-business and enhancement of existing technology platforms with internet interfaces has been integral to growth and product development,” says McLaughlin.
Future growth
But growth-by-acquisition and technology tells only half the Baycorp story. Much of the company’s future growth mantra is offshore. Back in 1999, the company launched Alliance Group Holdings, 50/50 joint venture with Data Advantage, Australia’s largest credit reporting agency.
The JV marks Baycorp’s foray into market six times New Zealand’s size. Since then the company’s international licensing arm, Baycorp Global Services has been established. Baycorp has also acquired Axcess Consulting, now key provider of fully outsourced loan management services in Australia and New Zealand.
Baycorp had its fingers badly burnt delving into overseas markets 12 years ago, when it had to digest $21 million on failed Australian sortie. Over decade later, McLaughlin seems to have got the formula for expansion into Australia right. In fact, since its launch, Alliance has become leader in the Australian receivables management industry.
Synergy benefits
Underscoring success, within offshore markets, says McLaughlin is picking the right strategic business partner in each geography they’ve gone into. But he admits Baycorp’s biggest coup is still ahead of it. In August Baycorp announced plans to merge with Data Advantage of Australia to create what McLaughlin expects to be the pre-eminent business intelligence and credit services group in Australasia.
Subject to shareholder approval, the merger will be consummated before the end of the year. It will create combined entity that has market capitalisation just nudging $2 billion.
Greater disclosure on how the merger will be done won’t be available until Baycorp’s interim result is released early February 2002. But synergy benefits factor highly among McLaughlin’s merger priorities. The board estimates synergy benefits of NZ$19 million per annum within three years of implementing the merger.
“The increased size of Baycorp Advantage is expected to provide superior scale for raising capital for investing in international markets in the near future,” says McLaughlin.
As managing director of Baycorp Advantage, McLaughlin will be charged with bringing the 350 employees in New Zealand together with Data Advantage’s 400 staff in Australia. The hallmark of an outstanding managing director, says McLaughlin, is an ability to generate staff loyalty. “I see my role as creating an environment where people can be successful without all the associated corporate politics.”
It must be working, Baycorp has over 40 staff who have worked for the company for 10 years or more. But no matter how long they’re worked for Baycorp, he says they must be prepared to embrace change. “If you don’t push the boundaries you will never change. We have an attitude that we wake up each day and come in to change the business. When you come in with that approach, change doesn’t become something you fear, but something you embrace.
“I’m very focused on measuring results… right down to profit per hour per person. I also believe in running the business hard and working people hard, but by working alongside them not breathing down their necks.”
