Hard slog continues for beleaguered Brocker boss

Brocker Technology Group new chief executive Richard Justice has had a tough first few weeks in the job -- and faces more hard yards yet.

Brocker Technology Group new chief executive Richard Justice has had a tough first few weeks in the job – and faces more hard yards yet.

His troubled Brocker group is going through a radical restructuring, last week quitting the computer distribution business and starting to wind down several operations. The results of an independent audit of the group’s accounts by PricewaterhouseCoopers - following irregularities in Brocker's Australian arm’s accounts - are due out in a week.

A “tired” Justice wants to finish the changes soon, in the hope of a “nice, clean” start for the new financial year on March 31.

“It's been pretty challenging,” he says. “Planning the operation in Australia, working on the new divisions, having to make people redundant; which is not easy and [is] tragic for the people involved.”

Justice, formerly Brocker New Zealand chief executive and group finance and operating chief, first discovered the Australian irregularities along with new finance chief Grant Hope earlier in February. At roughly the same time, group chief executive Mike Ridgway stepped (he remains board vice-chairman) and Justice was appointed. A week later Justice and a team flew unannounced to Australia and discovered the forward booking of sales invoices. Australia, preliminary results show, had overstated $C4.5 million in sales income.

Justice says closing down that arm’s distribution unit had been planned for some time – staff knew of the changes and vendor relationships had been wound down in recent months – but says the problems there accelerated and widened the redundancy net.

But he is forthright that closing the same business here was a fast-made decision, to the surprise of the 40 staff that lost their jobs.

Brocker had wanted a trans-Tasman computer distribution unit, based on the fact that Australia’s arm itself looked stable, but once that arm fell over with problems, “there was no logic in keeping just New Zealand going. It caused a rethink,” he says.

Brocker is now tidying up still-messy relationships with vendors here, which have all ceased, except for the Autodesk CAD product - even the recently announced Digi contract.

Brocker’s unease with the long term viability of the computer distribution business stems back to when it lost “sole distributor” rights and therefore margins with a number of vendors – the key one of which was Compaq – and vendors began selling direct over the internet, Justice says. Brocker had the sole distribution rights to Digital before it sold to Compaq and after that had to join a range of distributors.

Brocker is keeping its redefined telecommunications service unit - including modem distribution, cellular services, professional services and Datec. Justice admits at this stage, though, even flagship messaging product Bloodhound is not safe from being restructured or sold.

Justice says Brocker is moving away from “speculative [intellectual property]” interests – it called off the acquisition of a video streaming company in December – and is focusing on these core four units.

After the changes, Brocker expects to have 90 staff in New Zealand, down from a high of 250, with several staff spread in the Pacific and Datec’s 300 staff unaffected, Justice says.

He is confident the audit will show the accounting problems are confined to Australia “and will be truly dead astounded” if the review shows they go further.

After the review, Brocker may still pursue a stock split designed to bring its share price up above the Nasdaq’s minimum bid price of $US1. The Nasdaq halted trading in Brocker’s shares when the accounting problems were announced on February 15.

For the six months ended September 30, 2000, Brocker recorded revenues of $C55.1 million, compared to $C74.2 million in the comparable period in 1999. It also recorded a net loss for that period of $C860,000 comparted to $C148,000 in the 1999 period.

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