Mr Fix-It back on the job at Seven
Having just announced he is moving on from Seven West Media, Voelte has been installed as chief executive in Stokes' top-listed company, Seven Group Holdings, and in doing so has replaced long-term lieutenant Peter Gammell.
Voelte seemed a particularly odd choice to run Seven West Media given his background as an oil and gas executive. His appointment to Seven Group is easier to understand given the company's investment in mining investment services and WesTrac (which operates Caterpillar franchises.)
But at Seven West he was seen as the toe cutter/hard head in charge of getting the media group into shape to deal with the cyclical and structural problems the company and the industry are facing. He had to cut budgets, costs and people in a dispassionate way, which is easier as an outsider. He is now recognised as having done a good job.
While the Seven West gig lasted only a year, Stokes said he envisaged Voelte would stay three years or more at Seven Group. Thus it appears to be a proper appointment rather than an interim job.
Word started to leak out a few weeks ago that Gammell was not happy with Ryan Stokes being given more responsibility within the Seven Group.
So it's particularly interesting that Ryan is not being elevated to the top job. The market will assume that he will ultimately take over from Voelte. He was recently moved to chief operating officer, where he is getting an opportunity to work across all areas of the business and with a more hands-on role.
Despite being the heir-apparent of the largest shareholder, it would have been unpopular with minority shareholders to have placed Ryan into the top job at this stage.
Rupert Murdoch has a history of placing his children into senior management positions and investors generally made little protest. But when James Murdoch was made chairman of BSkyB the other shareholders were up in
arms. (Ultimately he did a good job in this role.)
But what of Gammell? He went to great lengths to argue that his decision to leave had nothing to do with the ascension of Ryan. Gammell put it down trans-continental flying fatigue. And he says he respects Ryan's prodigious work ethic.
Whatever the reason, Stokes senior is unlikely to sever ties with his long-serving lieutenant, who has been a central strategy adviser for 20 years.
"I enjoy thinking about new ideas without the confines of a public company," Gammell said. "Kerry and I have fun doing stuff that people are not expecting."
Meanwhile, given Seven Group Holdings is more an investment company than an operating company, Voelte might be
charged with whipping the portfolio into shape.
The company has already appointed advisers to look at options for the Coates business, which it holds in a joint venture with private equity firm Carlyle.
Stokes appeared happy enough with the prospect of keeping Coates if an appropriate deal couldn't be struck. One has to think the option of a float in the current volatile market would not be looking positive. Given the slow construction market and the slowing mining sector, it is not a great time to be selling assets that are fed by them.
The more urgent issue for Voelte to tackle is the dramatic demise in fortunes of the mining services industry, of which Seven Group's Caterpillar is a part.
A recent report from the research team at CLSA said Caterpillar's new sales are set to fall 43 per cent over the next year thanks to an oversupplied market for mining equipment.
It said several suppliers were set to exit the industry in the near term, which gives mining companies the opportunity to get cheaper equipment from what in effect will be the "closing down sales".
The mining services industry was on a growth trajectory back in 2010 when Stokes sold his private company into his listed entity. Until recently WesTrac was operating with very healthy margins but these are also said to be moving into a decline.
Stokes said the mining services market was "soft and softening" but he is holding to February's guidance from Seven Group Holdings for a flat current half.
In regards to the coal sector, Stokes asserted that no one was expecting the next year to be anywhere near as good as the previous 12 months.
Frequently Asked Questions about this Article…
Don Voelte is the executive who recently moved on from Seven West Media and has been installed as chief executive of Seven Group Holdings. Known in the article as Kerry Stokes' "Mr Fix-It," Voelte has an oil-and-gas background but is seen as a good fit for Seven Group because the company has significant investments in mining services and WesTrac (which operates Caterpillar franchises). Stokes indicated he expects Voelte to stay three years or more, suggesting this is a substantive appointment rather than an interim role.
For investors, Voelte’s appointment signals a focus on restructuring and portfolio management: the article says he may be tasked with "whipping the portfolio into shape." That could mean strategic reviews of assets such as Coates and a more active approach to managing mining-services and WesTrac exposure. His track record as a cost-cutter at Seven West Media also suggests management may prioritise efficiency and tougher decision-making.
Peter Gammell, a long-serving lieutenant and central strategy adviser for about 20 years, has been replaced by Voelte. Gammell says his decision to leave was due to trans-continental flying fatigue and that he respects Ryan Stokes’ work ethic. The article notes rumours that Gammell was unhappy with Ryan Stokes’ increasing responsibility, but that Stokes senior is unlikely to sever ties. For shareholders, Gammell’s departure ends a long era of continuity but the article suggests it may not be a sharp break in strategy.
No — Ryan Stokes has been moved into the chief operating officer role and is getting broader, hands-on experience across the business, but he was not elevated to the top job. The market may assume he could ultimately succeed Voelte, but at this stage he is positioned as the heir-apparent rather than the CEO. The article points out that appointing him CEO immediately would likely have been unpopular with minority shareholders.
Seven Group has already appointed advisers to explore options for the Coates business, which it holds in a joint venture with private equity firm Carlyle. The article notes Kerry Stokes would be happy to keep Coates if no appropriate deal is available, and that a float in the current volatile market would not look positive given the slow construction market and a slowing mining sector.
Seven Group has meaningful exposure: WesTrac, which operates Caterpillar franchises, is part of its portfolio and the article says margins there are moving into decline. A CLSA research note cited in the article forecasts Caterpillar’s new sales could fall about 43% over the next year because of an oversupplied market, and suggests several suppliers may exit the industry — all signs of pressure on mining services revenues and margins.
Kerry Stokes is holding to February guidance for a flat current half, while cautioning the mining services market is "soft and softening." The article also says Stokes expects the coal sector not to perform anywhere near as well in the coming year as it did in the previous 12 months, so the near-term outlook is cautious.
Investors should monitor the outcome of the Coates strategic review, any announced asset sales or restructures, WesTrac/Caterpillar sales trends and margin updates, official company guidance updates, and the succession path for Ryan Stokes. Management commentary from Voelte and updates on the mining-services market will be particularly important given the company’s exposure.
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