Good groundwork the story of Neil Craig's life

Neil Craig is handing over day-to-day control of ABN AMBRO Craigs and spending more time on nurturing his cricket pitch.

It's all very eighties.

Neil Craig, the founder of one of New Zealand's largest sharebroking firms, is also the proud possessor of his own private cricket ground. It's a relic of a sports trip to South Africa when Craig visited the cricket oval owned by billionaire diamond magnate Nicky Oppenheimer, chairman of De Beers.

"I took the idea from the best," says Craig.

It says something about the down-to-earth Tauranga-based businessman that while he may own a cricket ground - with the initials MCG, no less - he also gets down on his hands and knees to dig up the weeds.

"I spend every spare moment mowing, watering, rolling and pulling weeds," says the amateur groundsman, who takes advice on turf from the experts. "I haven't got time for tennis or golf."

MCG stands for Matapihi Cricket Ground and, in a former existence, it was an orchard that was too small to be commercial.

Craig may soon have slightly more time for weeding, having just handed day-to-day control of ABN AMRO Craigs to his understudy, Frank Aldridge. It doesn't signal any intention to leave the company he loves. He plans to stay with the brokerage for a number of years yet.

But with ABN AMRO Craigs still growing strongly, it was time for fresh blood and fresh ideas.

"It's a common sense thing that a lot of companies don't do, refresh internally well before it's forced upon them by non-performance."

Craig, formerly managing principal, will remain as executive chairman and head of investment banking, while Aldridge has become the firm's chief executive.

Non-performance is not something Craig has had to worry about for some time. ABN AMRO Craigs, now 50 per cent owned by staff and 50 per cent by Europe's fifth biggest bank, ABN AMRO, has revenue of about $50 million a year and the company has not had an unprofitable quarter since its formation in 1984.

It now has 13 offices and employs more than 200 staff, including 15 in research covering 70 different stocks.

But he recalls dark days after the 1987 sharemarket crash as the money faded away. The still small brokerage, then Craig & Co, had just moved its headquarters to Tauranga.

"We sat around in 1990 when the market really hit the bottom of the trough, just before the Telecom float. We sat around in the head office and the phones just didn't ring ... we were debating whether we could afford the one carpark we had."

The answer to the carpark question was no, but the experience taught the team to pick up the phones and ring clients to drum up business.

But Craig says he never doubted they would pull through. A former economist for Tasman Pulp & Paper, Craig founded the company with the purchase of a small firm called CJ Rogers in Whakatane with financial adviser Brent Sheather. By the time the crash came, the renamed Craig & Co employed about 12 people.

"To our surprise, through good luck and good management, we escaped the crash in fine shape."

The fledgling brokerage had avoided principal positions and avoided trading in its own right, policies maintained today.

As a "poor cousin from the provinces", the firm wasn't offered stock in some of the initial public offerings that later cost the clients of other brokers dear. Although not saying Craig & Co or its clients escaped unscathed, Craig believes it helped, as did its outsider's point of view.

He remembers "the lies that were told by people raising capital" and finding that when Craig & Co reconciled its trading positions in August 1987, a monthly requirement by the stock exchange, none of the 27 brokerages his company dealt with sent reconciled positions back.

"We were absolutely alert and on our toes at that point ... the market was out of control and brokerages didn't have their houses in order."

But the late 1980s was to prove a pivotal time for the company, because Craig & Co went on the front foot. By the mid-1990s, it had bought seven other brokerages - most for free - with the promise of a percentage of earnings generated. The best were offered a share of the enlarged firm's equity.

"We recognised that there was a unique opportunity where other people were basically happy to close their doors and set about acquiring their client bases," says Craig.

"We literally bought on a promise we would ensure survival for them and give them equity participation where appropriate ... it was either a sink-or-swim situation for most of those people. We recognised that nobody likes to go broke."

It worked. By 2000, the firm had a different problem. The industry was moving away from a pure broking model to one of looking after client funds. But Craig & Co didn't have the research capability or perceived financial strength to attract funds.

After putting the firm on the block, and finding great interest, Craig and his team set about building the model of a "perfect" business combining the strength of staff ownership with that of a global bank. The deal with ABN AMRO went through in February 2001, one of a spate of mergers and acquisitions in the industry around that time.

It's a deal Craig says he has never regretted. He owns 4 per cent of the company, about 80 other staff also hold shares. The deal took the best of the global bank's systems - such as internal audits - but didn't force the Craigs' brokers into a rigid overseas model not suited for its market.

That's a mistake Craig has seen others make, as international brokerages have bought into New Zealand, then sold out as their model failed to bring growth.

Before the ink had dried on the ABN AMRO deal, ABN AMRO Craigs bought the New Zealand retail advisory business of Merrill Lynch, which was leaving New Zealand.

That trend has been discussed widely in the past: Craig thinks it bought benefits. "I don't think it is detrimental. No clients lose money. Have we got new ideas passed through the New Zealand businesses? Yes. Have we got hold of new people? Yes, we have. It has helped."

The 181-year-old ABN AMRO is a stayer in New Zealand, he believes, looking not just to brokerage profits but the benefits a network of offices brings in corporate finance.

So what does the head of a firm forged during the travails of the sharemarket crash think about the current state of play?

Craig is worried. "I am concerned that at this point the market is not recognising that the fundamental economy is being squeezed ... the export sector is finding it very tough. The property market is very overbought. With interest rates rising and the currency staying high, that is the recipe for a hard landing."

ABN AMRO Craigs clients are as cashed up as they have ever been when it comes to NZ shares.

He thinks there is a window of opportunity to avoid a hard landing, if the property market goes into a holding pattern in the next few months and the currency falls.

Another positive is the growing recognition of the outlook, with shares falling in recent weeks.

Craig does not predict another 1987. Rather a downturn, if it comes, will be a short-term hiccup. "Our companies are in strong shape in terms of profitability and balance sheets ... we don't have junk on our sharemarket any more."

He believes the far bigger risk lies with the property-backed debentures now proving alluring for investors.

Neil Craig

Age
* 54
Family
* Born in Taumarunui, one of four children (two brothers, one sister), Craig lives in Tauranga with his partner, Sheryl, and daughter, Anna.
Education
* Ag Com Economics degree from Lincoln University.
Previous work history
* Farm worker, research officer for Federated Farmers, economist for Tasman Pulp & Paper.
Present employment
* Chairman of investment advisory and sharebroking firm ABN AMRO Craigs and of Comvita. A director of Kiwifruit International and on the board of several private horticultural companies.