Mr Fix-It back on the job at Seven
It appears that Kerry Stokes' eldest son, Ryan, is in for a few more years of grooming before he gets to sit on the throne of Seven Group Holdings. Instead, Don Voelte has emerged as Stokes' "Mr Fix-It" - the man called in to work in the Seven empire's trouble spots.
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.