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Extreme Ownership in Supply Chain Management
I think it is well known that the supply chain area becomes somewhat of a hub for the corporation. Just about every activity either flows into or flows out of the supply chain area. Great ideas turn into products through the supply chain; Great sales of products cause great products to flow out of the supply chain and into the customer's hands. Through the S&OP (Sales and operations planning) process, just about all planning activities move through the supply chain.
This is why Extreme Ownership is so critical for the supply chain manager. There is a saying in the safety world: "You see it, you own it" and that is true for the supply chain manager. You see the issue, you own the issue and since you are going to see just about all the issues you have to take ownership to get those issues solved. Product defects? You will see it in inflated returns - You see it, you own it! Inventory problems (Too little, not enough) the distribution center manager will see that in his/her distribution center - You see it, you own it!
These ideas are built from a fantastic book called: "Extreme Ownership: How US Navy Seals LEAD and WIN by Jocko Willink and Leif Babin. This book is written for all leaders but especially for the supply chain leader. We see it all and therefore we have to own it.
While there are many types of leaders I think one large macro category could be that there are two types: Victim and Owner. The victim is the one who lists off all the things that have happened to him or her and therefore that is whey they cannot get their job done. If only forecasts were better!! If only we made products which cubed better... If only.... .Well, you get the picture. This person sits back and plays the "if only" game as a complainer, not a participant.
The Owner (in the way of Extreme Ownership) sees the issues and regardless of origin takes ownership. Rather than play the "if only" game as a spectator the Extreme Owner takes action to solve the issue(s). If only forecasts were better! - Action: I am going to meet with the head of planning to discuss how I can give an early warning indicator to things which are not selling (Planning is in supply chain but the early warning indicator may come from outside the planning department). If only products cubed better! - Action: I am going to participate further upstream in product development to educate others on the costs of not cubing properly and how we may be able to meet all the customer needs and ensure a cost efficient way to cube transportation conveyances (Design for Logistics).
My advice here is to take ownership and move out of of your "sphere of influence" and into your "sphere of concern" (Covey). Take action, own the issue and work with your other partners across the company to bring to a resolution.
After reading this book and contemplating for over 1 year (Read it last year), I really have concluded this separates out the great from the good. The great take extreme ownership, the others observe and say "If only...".
This is why Extreme Ownership is so critical for the supply chain manager. There is a saying in the safety world: "You see it, you own it" and that is true for the supply chain manager. You see the issue, you own the issue and since you are going to see just about all the issues you have to take ownership to get those issues solved. Product defects? You will see it in inflated returns - You see it, you own it! Inventory problems (Too little, not enough) the distribution center manager will see that in his/her distribution center - You see it, you own it!
These ideas are built from a fantastic book called: "Extreme Ownership: How US Navy Seals LEAD and WIN by Jocko Willink and Leif Babin. This book is written for all leaders but especially for the supply chain leader. We see it all and therefore we have to own it.
While there are many types of leaders I think one large macro category could be that there are two types: Victim and Owner. The victim is the one who lists off all the things that have happened to him or her and therefore that is whey they cannot get their job done. If only forecasts were better!! If only we made products which cubed better... If only.... .Well, you get the picture. This person sits back and plays the "if only" game as a complainer, not a participant.
The Owner (in the way of Extreme Ownership) sees the issues and regardless of origin takes ownership. Rather than play the "if only" game as a spectator the Extreme Owner takes action to solve the issue(s). If only forecasts were better! - Action: I am going to meet with the head of planning to discuss how I can give an early warning indicator to things which are not selling (Planning is in supply chain but the early warning indicator may come from outside the planning department). If only products cubed better! - Action: I am going to participate further upstream in product development to educate others on the costs of not cubing properly and how we may be able to meet all the customer needs and ensure a cost efficient way to cube transportation conveyances (Design for Logistics).
My advice here is to take ownership and move out of of your "sphere of influence" and into your "sphere of concern" (Covey). Take action, own the issue and work with your other partners across the company to bring to a resolution.
After reading this book and contemplating for over 1 year (Read it last year), I really have concluded this separates out the great from the good. The great take extreme ownership, the others observe and say "If only...".
Registry Direct
Overview
Registry Direct is a software business that provides share registry services to publicly listed and private companies. This includes keeping track of shareholders, facilitating the issuance of new capital, convening shareholder meetings and providing meeting minutes, share raising information and other required communications to shareholders. Registry Direct aims to provide low cost registry services to smaller privately-owned companies than have typically been ignored by the established share registry companies. The maximum raise is 6 million, with a post raise market cap of 20.5 million.
Founder
One of the main things I look at when evaluating the IPO’s of new companies is the strength of the Managing Director/CEO and how long they have been involved in the business. It was a key factor in why I invested in both Oliver’s and Bigtincan, and why I passed on Croplogic. Registry Direct’s founder is a guy called Steuart Roe. Steuart has been a key figure in the Australian investing world for years. He was involved in launching the first Exchange Traded Fund on the ASX back in 2001, and more recently was the manager of Aurora Funds Management from 2010 to 2014. It is his time at Aurora Funds Management that may potentially be a concern for some investors. Aurora Funds Management was created when three separate funds management companies were merged in 2010. One of the funds that was part of the merger was a fund founded by Steart called Sandringham Capital, and Steuart became the Managing Director of Aurora Funds management upon the new funds creation.
Without going too much into the details, the fund performed poorly, and Steuart Roe left the business in 2014. This article has some insight into the problems as does this hot copper thread where someone from registry direct actually turns up to give Steuart’s side of the story.
Having spent some time reading through all of this, it seems Aurora’s problems were caused by a few unlucky investment decisions rather than incompetence or mis-management. As a result, I don’t see how this should have any negative impact on how this IPO is evaluated. On the other hand, the experience and connections Steuart must have picked up in his time running investment funds seem to make him uniquely qualified to lead a successful share registry business. If you look at how quickly Registry Direct has grown since the business began in 2012 a lot of this has to be down to Steuart’s connections and experience enabling him to both design a product that fund managers and company owners would like, and have the connections to sell if effectively. Post listing Steuart will own just under 50% of Registry Direct’s stock and will continue in his current role as managing director. And all in all, I see his significant stock holdings and continued presence in the company as a significant bonus for this IPO.
Financials
Registry Direct are one of the few companies I’ve reviewed whose only pro forma adjustments actually reduce net profit.
Below are the unadjusted audited figures for the last three years:
Whereas the figures once pro forma adjustments have been made are here:
The rationale behind the reduction in revenue is that Registry Direct received consulting fees unrelated to the share registry business in 2015 and 2016 of $377,167 and $555,224 respectively that have been excluded from the pro forma figures. Interestingly enough, these fees came from Steuart’s old company Aurora Funds Management (Aurora Funds Management was renamed SIV Asset Management in 2016). While Steuart stepped down from his Managing Director position in 2014, he only resigned from the board of SIV Asset Management in June 2017. It would be interesting to hear what shareholders of SIV Asset Management think about the company shelling out over $900,000 to a company owned by one of its directors – but that is a
topic for another day.
There can often be a real lag in revenue growth for software companies in early years, with every dollar of revenue dwarfed by massive investments in software development. That Registry Direct managed to grow its revenue so quickly is impressive, as is the fact the company managed to achieve profitability in 2015 and 2016, even if it was only due to the somewhat suspect related party consulting fees.
Industry and strategy
The Share Registry market seems to be a relatively healthy industry, with good growth potential and profitability. Computershare and Link, the two biggest companies in this sector in Australia grew their profits by 68% and 101% respectively over the last financial year. As mentioned at the start of this post, Registry Direct intends to diverge from these companies by providing cheaper registry services to a larger number of smaller privately-owned companies. The prospectus uses the below table to present Registry Direct’s proposed fee structure.
The prospectus also indicates they intend to drive this growth by allowing accountants lawyers and other professionals to sell “white label” versions of the Registry Direct software. From an outside perspective at least, this makes a lot of sense. If Registry Direct can offer simplified registry services through a standard software package, increasing customer numbers by allowing accountants and other professionals to sell Registry Direct’s software on their behalf seems like a logical way to increase revenue without hiring a large salesforce. This strategy should be further buoyed by the Turnbull government’s recent legislation changes regarding crowdfunding in Australia. These changes make it much easier for unlisted companies to raise money from the public, which should result in a dramatic increase in the number of private companies looking for cheap registry services.
Despite how promising this all sounds, it should be noted that at the date of the Prospectus, Registry Direct only had 60 share registry clients and its two largest registry clients made up over $400,000 of the companies FY17 revenue. It seems that last year at least, Registry Direct was still operating more like a typical share registry business, providing tailored services to a smaller number of high paying customers. This pivot to a larger number of lower cost clients may be good in theory, but it is worth remembering that at this stage it is more of a plan than current business operations.
Valuation and Verdict
At only $648,000 of FY17 revenue vs a market cap of 20.5 million, this IPO is a little more expensive than I would prefer. Market cap divided by revenue is a troubling 31.7, vs 6.6 for Bigtincan, a Software IPO I invested in earlier this year. However, considering the company was only founded in 2012 and just how quickly revenue has grown over the last few years, I feel that this expensive price is at least somewhat justified.
At only $648,000 of FY17 revenue vs a market cap of 20.5 million, this IPO is a little more expensive than I would prefer. Market cap divided by revenue is a troubling 31.7, vs 6.6 for Bigtincan, a Software IPO I invested in earlier this year. However, considering the company was only founded in 2012 and just how quickly revenue has grown over the last few years, I feel that this expensive price is at least somewhat justified.
Overall, the main thing that makes me willing to overlook this high valuation is how confident I feel that Registry Direct will be successful. The company has demonstrated that it can grow revenue quickly, has recorded profitability in previous years, and is led by an impressively well connected and experienced Managing Director. What’s more, the company is operating in what seems to already be a relatively profitable industry that is likely to see an explosion of demand thanks to the Turnbull governments legislation changes. While I would be happier if the price was a little lower, for these reasons Registry Direct will be my fourth IPO investment since starting this blog.
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