Smart Company entrepreneurs: Ash Hunter

Wednesday, 09 December 2009

Mebourne-based entrepreneur Ash Hunter is the owner of Just Magazines (which publishes Australia's top car and motorcycle magazines, Just Cars and Just Bikes) and Hunterfive, an investment company that includes stakes in a record label, a Chinese glass factory and a property development business.

Hunter, who appeared on this year's BRW Young Rich list with a fortune of $58 million, has just launched new websites for his Just Bikes and Just Cars publications as part of a new online push.

In this revealing interview he talks about diversification, surviving the downturn and how old and new media can coexist.

Ash, you really have got an old-fashioned conglomerate with different and quite varied interests. Was that on purpose or did good opportunities just come up?

Well, I guess on paper it looks a little bit confusing, but when we look at our ventures we have an area that is involved in media publishing, video production, music and all our web stuff that sits under the media umbrella.

Property is a traditional secure investment, standard type of investment. Our manufacturing actually came about from a need to learn more about China. And an opportunity did present itself to enter into a venture with some friendlies in China which then has expanded into a number in the food service area over there. But really it started as a way to learn about the Chinese market.

We find that you can only learn so much from study, it's not until you actually jump in and have to sink or swim and it is not theoretical anymore, that you really learn how the government works, how the legal system works, why they have these wacky accounting systems, what you need to do to run a business - it has been a fantastic learning process. Also, it has provided us with some really interesting opportunities in the Asian market.

Is there more to come in China do you think?

Absolutely. Once you start to move overseas and you start to become comfortable with different markets, it is no different to moving to another state, town or city. If you understand the landscape and the market and you see opportunity you are prepared to play. I mean the more you travel, the smaller the world gets.

But really at the centre of all this as you said is the media business and quite a specific niche around automotive. I gather it was really a family business to start with.

Absolutely and it still has the same feel, the same nature to it. Auto is an area that was of a great interest to my dad - my dad loved cars. I've still got some of his model cars, his Matchbox cars he had as a kid.

He grew up reading The Age newspaper and the Motor Market. He used to dream about these cars in text form, but often he'd be flicking through reading the pages and you'd come across a car that he didn't know what it was. So there was a Delage at one stage and he thought, what does a Delage look like? He said, wouldn't it be great if there were pictures with these ads. And that's really where the business stemmed from, his desire to dream about cars.

Over the years I started a photo classified magazine in trucks, Deals on Wheels, started Trader Boat, started Unique Cars, all those titles, really out of a desire out of seeing pictures of things for sale.

We've been very focused on niches. We're not interested in every late model car out there. Modern cars are a commodity. There's a thousand of the same model at about the same price, they're not something that most people get passionate about, they are functional. Whereas collectable cars are something that has an active, vibrant community surrounding it. We have our byline just under our masthead which says: 'Buy, Sell, Dream'. That's what it's all about with these niche markets; it's about buying, selling and dreaming.

You have these tight knit little communities that love to buy, sell, dream. They get together at events, they read the magazine, they talk to their mates. You end up with these great little communities.

And I guess they're not all actually in the market at that time to buy something. A lot of it's just that wish to look at nice cars.

Absolutely, you're not only going to buy the magazine because you're going to buy a car this month, although every person that buys it is a buyer or seller at a point in time. The great thing is they remain active in the market on a monthly basis by reading the magazine or going online. So I guess looking at these niches, while they are these tight little niches in the auto space, you put enough of these niches together, it actually does involve quite large communities. I mean Just Cars is about collectable cars but it is the largest selling car magazine in the country. Just Bikes is the largest motorcycle mag in the country as well and I think they are both in the top 50 sellers in the country.

It's been a pretty difficult year for a lot of media companies in the last 12 months, how has that affected you?

Sales of the magazines have remained very, very strong and I think part of that is that our products are a cheap dream - I mean we're talking about less than five bucks here to dream. In the advertising front, from October last year we had a definite and pronounced fall in advertising revenue but we changed our focus at that point as well. So instead of measuring our dollars, we removed everyone's revenue targets and started measuring customers. So we made sure we focused on looking after our customers, designing the appropriate package. So we spent our time trying to make sure that instead of extracting as much money as we could - which has never been our focus - to making sure we were a useful part, an important part of their business. And we've found the result of doing that has really allowed us to maintain good revenue figures for the '09 year but also set us up for 2010.

Are you seeing things start to improve?

Yes, growth for all four months of the 2010 year which has been great.

So the move into online. I guess you started from a pretty good position in that you've got these loyal communities who like talking to each other. Are they good at talking to each other online?

Well, we're not trying to transition our print audience to online. I don't believe online is the only way to go in the future. It's actually very simple and the way I look at it is providing our customers with what they want, when they want it and how they want.

Effectively people can consume collectable car information or motorcycle information - ads, articles, videos, etc - whenever they want so if they're on a plane they can read the magazine, if they're going to a mate's place it's in their back pocket, if they're at work they can be on the web. But they can choose how they can consume it now. So instead of looking at ourselves as a traditional publishing company where we publish a magazine, we actually look at ourselves a little bit differently now. So we effectively create and collect content and then we distribute what people want when they want it, how they want it.

We also spend a lot of time and have a very, very strong program of distributing our message, our products at events as well. We attend events, car and bike and 4x4 events all around the country singing the same song, talking to the same people, collecting and distributing the same type of information. Face-to-face, web and by magazine.

Although online is going to give a massive opportunity for sort of interactivity though, isn't it? That experience is going to be a lot more customisable for some of these people.

I don't know if it is necessarily more interactive within the community. People look at online and say: 'well isn't it fantastic, people can now communicate'. They can message each other, they can talk to their friends. But what were they doing before? People were doing the same sorts of things. But there is a generation of people that have grown up not going to a newsagent. There's a generation that get the newspaper delivered or heaven forbid don't read newspapers, get everything online. So what we actually do is we introduce an entirely new marketplace or a new bunch of consumers to this collectable car or motorcycle marketplace and I think that's an important way to look at it.

Often people will say it's all the younger people that do it. Yes, there will be some younger people, there's a whole lot of young people that read the magazines now although I will suggest that we do have an older demographic with the magazine. But it's about people consuming the product how they want. And some people of all ages choose to consume via the web. So we now enable these people to do so.

And how long do you think it will take before it gets a bit of momentum?

Well, it depends on what you mean by momentum. We'll have a great following from day one. We have a marketplace that's waiting, who've been talking about this for some time. I suggest that while we will have a good following day one, I'm really not expecting us to know where we are for a good six months. I'd say by the middle of next year, by the end of the 2010 financial year we will have a good picture of how successful it's been.

Just on another print publication in the classifieds area, The Trading Post has stopped its print publication. Were you a bit surprised at that?

I'm very disappointed. The last four or five years under the Sensis rule there's been a number of very disappointing decisions made. Unfortunately they didn't understand the product that they'd bought and the result is where we stand today.

Does it help your product?

Does it help? Look I guess it can't hurt. Certainly there are advertising dollars that are now free to advertise elsewhere. But as we're not in late model cars, which was a large part of that publication, that doesn't affect us. I do hope it can possibly bolster readership because people do enjoy the tactile nature of a print publication. But I don't see a huge effect, a positive or negative to our business because of their closure.

Your record label is another business that's been changed by the internet I guess in the last 20 years, but now you've got a bit of a different strategy with the way you distribute music using things like TV shows. Can you talk a bit about how you've come to that strategy rather than the traditional music business model?

Well, the interesting thing with the music industry is that people get hung up with piracy taking over the sales of CDs and of downloads. Unfortunately, we lose sight of the artists - they're the type of personalities that don't create just because of the money, they need to create. It's part of what they do, it's part of who they are.

But there is an expectation of the marketplace that music's cheap and there's an expectation for upcoming artists that they're going to make a fortune. So we have two very different points of view. So for us, we've actually looked at this slightly differently where our focus has been on online music - downloads being the future and being able to market directly to a really active audience out there. Now it hasn't always been successful, I must say. One part of our business that is less successful is the record part of selling records, whether it be online or physical copies.

The sync part, so syncing in to TV, into ads and so on, that's where there is more value in that the television, film and advertising industry recognise the value of a good song, recognise the value that an artist does bring to their product. And we're finding more opportunities to generate income for our artists by syncing into TV, film, etc.

So given the inbuilt difficulties with that business, is that something that you've got into as a project of love almost?

Everything we do we do because we are passionate about it, we love doing it. There's no business we've entered just because we've thought, hang on we can earn some money here. There's a reason behind more so than just the dollars involved in those things. However, I will say that this jellyfish has had a lot of love over the years, more so than dollars returning from it. It's an industry that's built on a whole lot of passionate people so it probably drives us more than anything else.

Just getting back to China and manufacturing, was that something you knew a lot about before you got into the sector?

I had limited experience in manufacturing prior to getting involved but I had some very good mates of mine who were involved in that industry. So they were certainly more experienced than us but we were able to learn a lot about China in the manufacturing industries together.

I know you're planning a pretty big expansion of the glass making business particularly. Is that driven by Chinese domestic demand or export demand?

Both. I mean, the way that the business came about was that glass manufacturing in the western world has become unviable. Some of my partners opportunistically bought a factory out of the UK and transported the whole thing to China. So we started off with one machine working and that's just to test to see whether we can do it, whether we can make our glass, to train our staff. So the view has always been to have a very, very large presence. We have the machines to have a very large presence over there but we started small over there to test it before we moved to the next stage.

And this is the next stage?

I mean the whole factory's built, the machines are in, all it's waiting on now is financing the working capital which is hopefully going to happen soon. We had it just before Lehman Brothers fell over but once banks stopped trusting each other they knocked on the door and said 'don't start the furnace fellas, we're not going to finance it'. So we've actually used that time with our partners to take stock and make sure that the day we start that furnace which we'll do 60 tonne of glass a day, and that we are very certain that we have a solid marketplace and solid distributors in multiple countries.

Just talking about Lehman Brothers and the lack of credit, has that held you back at all during the year other than that example?

Not really, I mean we don't rely on external finance to fund our business, or we don't rely on it very much. We use it in sensible areas, but debt is not something we've used a lot of in the past. So we internally fund most of our projects.

That's probably been a godsend in the last 12 months?

Well, the nice thing about it is that we don't have any external pressures to perform. So we're able to keep our eye on the goal, we're able to control our own destiny without a creditor knocking on the door saying 'hang on you should be doing this instead' or 'you need to improve your debt ratio'. We just don't have those concerns which works for me, it's the way I run the businesses at this point in time.

Managing all those different types of businesses, is it difficult to get your head in the right space to flip from the record business to glass making back to property and back to publishing?

Well it can be. I find it difficult to do everything at once and we tend to find I cycle through the business. I must say one of my greatest assets is that I have fantastic people that actually have run day-to-day operations and we have very effective planning so we set strategies so that departments can roll out and run themselves. So it doesn't require me to actually drive all of the projects.

However, I will say that I get a bit bored doing the same thing all of the time so it's actually quite handy to have a variety of things to be involved in. I've always had something I'm excited about or finding an opportunity in one of the businesses.

But there are times when we have multiple issues in multiple businesses, I think I can handle things rather poorly. I guess I need three of me.

We are also at a critical size now that a lot of the businesses rely on me for making certain decisions and I know in the future as we grow and we reach certain critical sizes that we will have the capacity to introduce new people that will be able to take those responsibilities. I see it as a short-term issue but long-term we'll do it better.

Now you found yourself on the Young Rich this year. How did you find that experience? I'm a former Young Rich editor at BRW, I know that not everybody enjoys finding themselves on that list.

Well, we asked not to be on there. I wasn't happy about it. As a rule we're quite simple in the way that we do things. We are very focused on our customers. I like having good profiles for our businesses but I'm certainly not that keen on having a high profile myself. I actually don't mind talking about the business but when it starts talking about me, I get a bit uncomfortable. It's there, nothing I can do about it, prefer it wasn't.

That's the way it goes. In 2010 are there any new areas that you'd like to look at?

There are opportunities but for me I'm not super keen on moving into new areas. I'm much more comfortable in expanding existing businesses and offering new complementary products. We do have plans to expand what we're already doing in a number of areas but I can't see myself moving into a new unknown business or area at this point in time.

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