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CBD

The right man for the job, just ask him

Premier Investments' chairman, Solomon Lew, always seems happy to remind the market about his retailing expertise and ability to put businesses on the right track.

Lew expressed delight yesterday over the "solid result" from his Just Group business. The same business that he predicted could be hit by a retail slowdown before he succeeded in taking it over more than a year ago.

"While we always knew trading would be tough, today's result is a testament to the strategic review we have put in place and the dedication of the Just Group management team who have worked tirelessly, particularly to reinvigorate key brands in the portfolio," the former Coles Myer director reasoned.

There was not one mention of the Federal Government's stimulus package and the resulting pick-up in retail spending. Lew also appears to be relying heavily on his expertise for future performance.

"It is our view that retail conditions will continue to be uncertain, with the possibility of increased unemployment, potential increases in interest rates and potential risks associated with housing valuations which would pose real challenges for consumers," Lew remarked.

Premier also announced the appointment of the former UBSer and Merrill Lyncher Tim Antonie and the former Tasmanian treasurer David "Brother of Simon" Crean, to what could be considered one of the more colourful boards in corporate Australia.

Its other directors include the Bob Dylan groupie and GPG executive director, Gary Weiss, billionaire truckie Lindsay Fox, Arnold Bloch Leibler's managing partner, Henry Lanzer and Federal Labor MP Simon "Brother of David" Crean's former chief of staff, Michael McLeod.

Working out

It is good to see the former UBS Australian chief executive Brad Orgill has not been living idly off his bonuses since leaving the bank last year.

The 49-year-old apparently has become a star pupil at the Elixr Fitness Club's pilates class in the CBD, wowing fellow attendees half his age with his stretching abilities.

Aside from always getting in early to score himself a prime position in his pilates class, Orgill, we are told, is not only looking buff but has taken on a new-age aura.

There are also reports Orgill has gone down the Brendan Nelson route and now sports a diamond-like studded earring.

As for any disparaging remarks about the former UBS Australia head honcho's stretching ways, one of Orgill's ex-workmates said: "They are just jealous he is over 40 and can still bend his legs."

Also spotted doing stretches in Orgill's pilates class recently is Duncan Fairweather, the executive director of the Australian Financial Markets Association. Fairweather is reportedly looking fit but is not as committed as Orgill, who is apparently doing back-to-back classes.

When Orgill was a young, up and coming analyst at Potter Warburg in the early 1990s one of his rivals was Craig Drummond, who left the chair of Goldman Sachs JBWere yesterday to become Merrill Lynch's new Australian boss.

Drummond saw out two sharemarket crashes at JB's, having started there in 1986.

Dockers Lament

Richard Goyder, Wesfarmers chief executive and Fremantle Dockers AFL board member, still appears a little sensitive about his team finishing third to bottom on the ladder this season.

Referring to his Scottish-born supermarket boss, Ian McLeod, Goyder said at an Australian Institute of Company Directors lunch in Sydney yesterday: "He's come to Australia and said he will barrack for St Kilda."

"If he's tackling something like Coles, why wouldn't he tackle something like Freo?" St Kilda will play Geelong in the AFL grand final on Saturday.

Goyder at least expressed relief he could mention Freo in a place where 60 per cent of the room doesn't boo (as they do in Perth, where the Eagles are more popular). And the other mob?

There is little doubt what Transurban's boss, Chris Lynch, will be wishing for when he turns 56 today.

A mad fan and former player for the Geelong Football Club, Lynch first expressed bemusement at last year's full-year results about the use of his team's acronym (GFC) to describe the financial crisis.

Long wait

Meanwhile, in Eagles territory.

The Subiaco energy company Liberty Resources felt impelled to disclose to the ASX yesterday that it had "secured a one-hour meeting with Virgin billionaire, Sir Richard Branson".

The meeting is scheduled for March next year. Perhaps the biggest surprise in the statement was that the Virgin Group founder is indeed a virgin.

It seems Sir Richard is also a lot more interesting than Liberty, given the company provided a blurb in its press release on the publicity seeking tycoon rather than itself.

Lower the flag 

The hammer went down yesterday on one of the last bits of the clothing empire of Lisa Ho's husband, Philip Smouha. His former Waterloo warehouse sold at auction for $8.8 million.

Green Dollars

This column admits it was a little harsh on its analysis of the executive pay rises at the medical device company AtCor.

On Monday CBD noted how AtCor's chief executive, Duncan Ross, enjoyed a 27 per cent rise in base pay to $407,015 last financial year.

Apparently the rise was largely the result of the slump in the Australian dollar. An AtCor spokesman noted that Ross, who works in the suburbs of Chicago (occasionally reporting to West Ryde head office), had more modest pay rise for the period: the US dollars in his pay packet increased 4 per cent.
 

Got a tip? email srochfort@smh.com.au

 

 

Insider

Edited by Jamie Freed


Thanks for the energy, but forget the power stations

There are still many uncertainties surrounding the NSW power privatisation process, which seems to have allowed for a nearly unlimited amount of mix-and-match options for the bidders.

It's said that at least one overseas group that was sniffing around last year has lost interest due to all the delays, along with the view that even Energy Australia, the largest retailer, by itself would not provide an entry into the national market because most states have already sold off their electricity assets.

However, there are suggestions that AGL Energy and Origin Energy – two of the most likely bidders – are not exactly disappointed that the Government took the physical generation assets off the market and is instead only selling the generation trading (gentrader) rights.

That could allow them the right to access power without actual ownership of the dirty black coal power stations that look so unattractive alongside the glossy photos of wind farms in annual reports.

The gentraders are being sold without defined long-term retail contracts. In light of that uncertainty, along with the lack of ownership of the physical assets, it could be very difficult for buyers without retail businesses to obtain a significant amount of debt financing.

There are no physical assets for security, and the cash-flow stream from the gentraders would not have a bankable value without the certainty of a long-term retail contract.

That means the bidders for the retail assets – likely to include AGL, Origin and TRUenergy – will have the upper hand in defining the most accurate value of the gentraders.

Because NSW is insisting on a new entrant into the sector, that could make the prospect of a mooted float of the retail business Integral Energy and the Eraring Energy gentrader more likely.

Counting down

If the Chinese want a discount on Fortescue Metals's iron ore, they better act fast. Or at least, that is what Fortescue would have the market believe, since its agreement to sell its iron ore for 3 per cent less than its rivals is supposedly contingent on completing a $US6 billion ($6.85 billion) debt financing package by next Wednesday.

Fortescue is being advised by Grant Samuel on this deal. The lead banker, John Morrison, goes way back with the Fortescue boss, Andrew Forrest, having been appointed as a director of Anaconda Nickel in 1999 – coincidentally, on the same day as Rodney Adler.

Forrest has publicly denied Fortescue will use the funds to buy back its existing junk bonds. However, it is understood it has long had a detailed plan in place to buy out the bondholders due to the restrictive covenants.

It missed out on a great opportunity earlier this year when the bonds were trading at about 50c on the dollar, versus above face value now.

The most interesting detail of the mooted Chinese funding package will be whether the banks obtain security over the Fortescue assets.

A report from a Senate inquiry last week confirmed the Foreign Investment Review Board is looking at potential legislative fixes to ensure foreign companies do not obtain effective control of a company via loopholes without the need for permission.

For example, under new FIRB guidelines expanding the allowable thresholds for investments, Noble Group, which controls Gloucester Coal and other assets, will not have to seek permission for investments worth less than $209 million because its new investor, the China Investment Corp (advised by Deutsche Bank), will own only 14.5 per cent of Noble after making a $US850 million investment.

But contrary to a broker report circulated in the market yesterday, any company with 15 per cent or more of its shares owned by a government or sovereign wealth fund will need to obtain FIRB's permission before buying a single share of an Australian company.

Retail Therapy

There may be a bit of debate in the market about whether Wesfarmers should divest or spin-off its non-retail businesses now that so much of its attention is on Coles, Target, Kmart, Officeworks and Bunnings.

But the company's managing director, Richard Goyder, yesterday appeared steadfast in maintaining the conglomerate structure.

He admits it is unlikely the market would accept an argument for a new conglomerate – or the idea of Woolworths buying a coalminer, for example – but says it works well for Wesfarmers.

The company examines its structure every year. It had a serious think about spin-offs about five years ago and even met with the management teams of successful offshoots such as BlueScope Steel and Origin Energy.

Its divisions are already so independent that all that would be needed for a public listing would be a new company secretary, treasury department and investor relations personnel.

But Wesfarmers will only divest or spin off businesses if they receive a full offer or if growth options appear limited.

The sceptics of the structure think it worked fine until the Coles acquisition made its portfolio overweight in retail and believe the $1 billion or so a year being spent on Coles means less capital is available to the smaller businesses such as coal, insurance, and health and safety.

Some also argue the non-retail divisions may not be receiving full value in the Wesfarmers share price.


jfreed@smh.com.au

 

 

Briefs

Retail

Pay rises at Noni B

The joint managing directors of clothing retailer Noni B have increased their annual salary despite the group reporting a fall in fiscal 2009 profit. David Kindl received a total of $304,438 for the period, up from $246,469 the previous year. His fellow managing director, James Kindl, received $280,870, up from $247,763. The company did not declare a final dividend.

Internet

iiNet on the prowl

The internet service provider iiNet is looking for acquisitions to quickly boost the size of the company. In its annual report yesterday the chief executive, Michael Malone, said it wanted to expand its share of fixed broadband customers from 8 per cent to about 15 per cent as quickly as possible. He said iiNet's balance sheet was very strong, with gearing of 7 per cent at June 30 and a debt facility of $60 million.

Investment
 
Resource targets

Kagara and CuDeco are two of the companies that may become targets for Chinese and Indian companies after Australia changes its foreign investment laws to attract overseas funds, Citigroup says. The new rules create an extra $12 billion of foreign investment potential in Australian resources companies that will not require regulatory approval, Citigroup analysts said in a report yesterday.

Publishing

Magazine to close

The Far Eastern Economic Review, an Asian news magazine in print since 1946, will close in December after losing readership and advertising revenue, its publisher, Dow Jones, said. The magazine, based in Hong Kong and written in English, is unsustainable "despite several attempts at invigorating the brand," Dow Jones said in a statement. Dow Jones has owned the magazine since 1987.

Infrastructure

Asciano additions

Asciano has appointed three new non-executive directors to its board and named one of them, Malcolm Broomhead, as its new chairman. The other new directors are Dr Bob Edgar and Geoff Kleemann. The appointments will have to be endorsed by stapled security holders at Asciano's annual general meeting on October 23. Asciano's current chairman, Tim Poole, is stepping down.

Aviation

Lenders seek more

Lenders to the struggling Japan Airlines will ask the Japanese Government for a more drastic overhaul of the company, including a move to nationalise its healthy segments. JAL, which lost more than $1.16 billion in the June quarter and asked for additional funds from lenders, has outlined an emergency revival plan under which it would cut 6800 jobs and slash flights.