Simply No Time To Take Stock For Mr 24/7

The Age

Saturday July 16, 2005

ROD MYER

It's non-stop dealing for Austock chief John Wheeler - and things are about to get heavier, writes Rod Myer.

JOHN Wheeler, managing director of Austock Group, was half asleep at 2am in a Sydney hotel room when a text message came through on his mobile from Eddy Groves, chief executive and founder of ABC Learning, who was at that time in London.

Wheeler, who had earlier completed a fund raising for ABC, read the message. "Where are you when there is no money to raise; fast asleep?"

Two minutes later Wheeler texted back "money never sleeps".

Wheeler is nothing if not focused when he figures he's got a job to do, and he gives his role at Austock "110 per cent", he says. The job at hand is moving Austock towards a $200 million-plus public float in two years.

"I'm supposed to be on holiday in Europe with my missus, she's there and I'm here. My chairman's taken sick and is out of the business for two or three months."

At a recent dinner party, Wheeler says, "I took 11 phone calls. I could have turned the phone off but people ring me for a reason. I just have to accept it in my position with eight different boards (which make up Austock's different parts) needing decisions and guidance. You cannot turn your phone off or go on holiday and be out of contact.

"I realise this isn't forever. Life will be there at some stage."

Wheeler could be said to be a man of extremes in his working habits. Born in Britain, he came to Australia in 1985 to work with broker AC Goode. "I was a trader for Robert Holmes a Court when he was trying to take over BHP."

Then he went into futures trading and did well for himself. "I decided to take a year off in 1989 but it turned out to be nine years before I got back into full-time work."

During those years he travelled extensively in Asia pursuing his passion for golf: "I play off a handicap of five." That eventually turned into a business.

"On my Asian travels through golf I met many Mercedes Benz executives and ended up managing money for them. I needed an office to clear business through so I came into Austock and worked one hour a day, two days a week. Austock asked me if I wanted to get more serious about it and my kids were telling me it was time I became a respectable bum, not just a bum."

Wheeler says he could see that founding partner Martin Ryan was trying to create something special so he joined, soon to be followed by Bill Bessemer, now Austock chairman. "Our skills are very different and it has built our success."

Those skills, observers say, are that Wheeler is a natural trader, Ryan a visionary - he's behind Austock's creation of stock exchanges for junior companies - and Bessemer a quintessentially corporate man who can serve on boards and help grow small companies.

Austock, says Wheeler, has taken 14 years to become an overnight success. In the first 12 years of its existence it was viewed as a small fry that did some interesting things in working with unlisted companies. Then in the past two years the broking arm has become the most profitable independent broker. "After paying $9 million in bonuses we came in with an EBIT line of $20 million," he says.

The thing Austock is most famous for is its innovation in small company financing, firstly through the exempt market it created and more recently through the newly created Australia Pacific Exchange.

The process began when Sigma came to Austock wanting to raise $55 million and wouldn't list on the exchange. Austock found a law that allowed it to create a single market in Sigma's stock, which became the Austock exempt market. That market eventually listed $1 billion of property syndicates put together by the MCS group, $5 billion in Esanda bonds as well as listing SPC, biotech group Starpharma and Brumby's.

"That's ballooned to a point we were told to become a full stock exchange," Wheeler says. "We've just received a licence and are in the process of creating Australia Pacific."

Austock's inspiration for its new market is London's AIM (Alternative Investment Market). In Australia, he says, emerging companies list too early and get caught in compliance and governance issues taking focus away from running their businesses.

"Our model is you list but have a nominated adviser that does the corporate hand-holding and research on you. The adviser does your announcements to the exchange and makes sure your results are presented as they should be." Research for emerging companies is vital, he says. "No research means no knowledge, which means no investment," he says.

"Fees to join the market are far less than the ASX charges, and someone is giving you continual service."

The new exchange will take time to build momentum. Wheeler expects listings of companies valued at $20-$200 million. But Austock is out negotiating with some big agricultural co-operatives that, should they list on Australia Pacific, could be valued at up to $500 million.

Austock sees itself as providing stepping stones for small companies to grow. Sigma, now listed on the ASX, is a $1.4 billion company, SPC was taken over by Coca-Cola and the Sydney Futures Exchange has grown from $140 million to $900 million.

ABC Learning raised $6 million through Austock in 1997 and $400 million recently.

It has also created a property trust, the Australian Education Trust, to hold ABC's child-care centres. These growing companies are "taking Austock up the food chain with them", Wheeler says.

The largest step Austock will take is its own listing, Wheeler says. No decision has been made on whether this will be on the AP or ASX and $13 million in outside capital has just been raised from outside investors who are long-term clients at a price that values Austock at $100 million.

The listing move has some observers bemused. "If you look around, few broking floats have been successful," says one. "There's Macquarie but broking is not the main part of their business. MacIntosh tried but that didn't work out. Revenues from broking are just too volatile."

Wheeler says Austock is transforming itself to rely more on annuity streams from funds management and infrastructure investment, and that for the first time this year all eight divisions will be profitable.