WHK Group

There has been little official news from WHK Group since WHK: Goggle-eyed over costs from 23 Feb 12 (Long Term Buy – $0.83). The company has redeemed the remaining $10m of convertible notes owing to Macquarie Group, although some of this debt will have been replaced by bank borrowings.

There have been rumblings from within WHK that the company’s new remuneration model, which became effective on 1 July, is causing disquiet. A number of staff from WHK’s Sydney office have reportedly resigned as a result. In response, chief executive John Lombard noted that the Sydney office had been one of the group’s poorer-performing businesses and ‘needed to be re-energised’.

Change to staff remuneration policies can be unsettling, but there is no doubt the company needed to do something. Staff costs have been rising, which is unsustainable during a period of flat revenues. At least Lombard is looking at the incentive structure at the company, even if this creates short-term disruption.

WHK will release its results for the 2012 financial year on 27 August, at which point we’ll make further comment. The share price has risen 8% since 23 Feb 12 and the stock remains a LONG TERM BUY.

The model Income portfolio owns shares in WHK Group.