Executive Summary: Thursday, 18 June, 2009
By | smh.com.au | 10 June
Business Focus
Sydney Morning Herald, Wednesday, 10 June, 2009
Lend Lease suit
The property developer Lend Lease is facing more legal action in the US, after it received subpoenas for alleged over-billing by its Bovis arm at various New York construction projects, including the September 11 Memorial site. It is the second legal stoush the group's contracting arm has incurred in New York.
AACo board stoush
The Australian Shareholders' Association has thrown its weight behind the IFFCO ticket and opposes half the board in what is likely to be a bitterly contested election at the annual meeting of Australian Agricultural Company on Friday. The proxy advisers RiskMetrics and CGI Glass Lewis also support the proposal from IFFCO, which is AACo's largest shareholder.
Confidence rises
Businesses were more optimistic last month than at any time in more than a year, but the brighter economic outlook has yet to translate into better trading conditions, according to National Australia Bank's monthly business survey. It found business confidence rose 12 index points to minus two points last month.
Coffey upgrade
The engineering firm Coffey has tipped a slight rise in full-year earnings to between $54 million and $57 million, despite weak trading conditions in the March quarter, saying the Federal Government's stimulus package is helping the business.
Croesus rebirth
The cash-strapped corporate shell Croesus Mining plans to become a nickel-focused base metals explorer under a deal with the gold miner Apex Minerals, after raising up to $7 million from a stock placement.
Centro
Centro Properties Group is not in administration despite yesterday's article "Billion-dollar errors" that cited "the claim launched against PwC by Centro's administrators".
However, Centro has made a claim against its auditor PwC.
Xchange
Edited by Miriam Steffens, Sydney Morning Herald, Wednesday, 10 June, 2009
Origin traces profit troubles to a slump in earnings across the Tasman
Origin Energy will see analysts slash consensus estimates after the electricity and gas retailer cut its profit guidance again, dragged down by its half stake in New Zealand's Contact Energy, which expects a 33 per cent earnings slump this year.
The downgrade from Wellington meant Origin's own profit growth was "unlikely to be more than 20 per cent", down from a February forecast of up to 25 per cent and hopes in October that earnings could jump 40 per cent, Origin said.
The warning triggered a 3.7 per cent share price fall, closing 55c down at $14.45.
While investors were aware of New Zealand's low wholesale electricity prices, Goldman Sachs JBWere was surprised by Origin's warning that it had missed out on about $40 million in retail margins because of a lower-than-expected tariff increase in Queensland.
"This once again highlights the risk around retail margins in a regulated retail price environment," the broker said.
But it retained its buy call: "We see current levels as a good entry point."
Job losses out west
West Australian Newspapers embarked on a large restructure of its business last night, part of efforts by the new chief executive, Chris Wharton, to stop a decline in earnings.
The publisher warned it will take a $10 million pretax charge as it plans to cut about 5 per cent of its 1250-1300 workforce through voluntary redundancies "where appropriate".
WAN, which is 23 per cent owned by Kerry Stokes's Seven Network, warned last month that profit could fall by close to a quarter this year as the recession has all but ended the mining boom in the state, hurting advertising revenues.
Surf's up at 15%
Billabong International's US-listed arch rival, Quiksilver, has reported weaker earnings but fixed its ailing balance sheet. The US company earned $US6.6 million ($8.3 million) in the quarter to April, compared with $US38.7 million ayear ago.
Quiksilver's boss, Bob McKnight, told analysts that retail conditions did not appear to be worsening, even though orders were down for the US autumn.
Billabong recently cut its profit forecast in tandem with a $290 million equity raising, saying conditions in the US in particular had worsened in late April and early May.
Quiksilver had been in an even weaker condition due to problems with its balance sheet, but that situation appears to have been resolved at a high cost. It has taken $US150 million in loans from a
European private equity group, Rhone. But it will have to pay a hefty 15 per cent interest rate, with 7.5 per cent in cash and the rest payable in kind.
The deal allowed it to refinance another $US200 million credit facility.
Guangdong digs in
Copper and zinc miner Kagara is expected to announce today a raising of between $180 million and $210 million at 60c a share.
The Chinese fund Guangdong Asset Management Company will end up with a strategic 19.9 per cent stake after taking a placement and underwriting a rights issue.
Xchange was told the fund did not have any links to Guangdong Rising Assets Management, which recently paid $180 million for a 19.9 per cent stake in rival copper miner PanAust, despite the similar name.
Murdoch speaks
Keeping alive the succession speculation at News Corp, Rupert Murdoch told the company's Fox Business channel that the return of Chase Carey to replace departing second-in-command Peter Chernin did not mean the manager was his heir apparent.
"I don't think we're making any commitments on that at all," Mr Murdoch said. Which leaves all options open for his son James to ascend the throne one day.
In the same interview Mr Murdoch predicted nearly all newspapers would be delivered electronically within a decade, with print editions of even flagships such as his Wall Street Journal eventually disappearing. "We think of newspapers in the old-fashioned way, printed on crushed wood so to speak, [but] it's going to be digital. I can see the day, it may be 20 years away, where you don't actually have paper and ink and printing presses."
CBD
Michael Evans, Sydney Morning Herald, Wednesday, 10 June, 2009
Telstra is never one to disappoint.
While the company paid Sol Trujillo more than $30 million to blow it up, his successor, David Thodey, maxes out at about $9 million to fix up the mess.
But it's only fair. In the wake of all Sol's hard work, Telstra is going to be a much smaller company, after all.
Still, after the hoo-hah of an imported CEO getting an import-sized salary, a local lad gets a local-sized salary. Eh, bro?
It's not all bad news for Thodey, though, given his $3.9 million effort at his last outing.
Even if there is a clause in his contract allowing the board to give him two months to fix any "performance issues", then turf him on four months' notice.
Not to mention another that Thodey even has to pay Telstra back if it accidentally overpays him. Wonder if that one was tried with Trujillo?
Thodey gets a $2 million base salary compared with Trujillo's $3 million. But Sol got swathes of options and all that special treatment.
Nevertheless, Thodey can get up to 80 per cent of his salary as a short-term bonus and 160 per cent as a long-term kicker.
Perhaps as Thodey ponders his numbers against those of his predecessor, the new Telstra boss could be forgiven for pushing the spin. "I'm not Sol. But you are Sol."
In no hurry
Lindsay Fox knows it is important for a truckie to take his time on the road.
But it appears the Linfox trucker also figures it's an appropriate pace to lodge his director's dealings for his spot on Solly Lew's Premier Investments board. The market neighbourhood watcher, the ASX, has pinged Fox for taking nearly two years to disclose that he bought 250,000 shares in late 2007, pointing out that Fox may be in breach of the Corporations Act.
Premier told the market of the purchase only last week.
While many of us would notice spending $2 million on a pile of shares, it turns out Fox's Alljet fessed to Lew's mob that he had "not previously notified Premier" of the 2007 purchase due to "an administrative error".
Key clients
David Coe won't be short of a nice venue or some toys to share around as the one-time Allco banana works the contact book to get reaccepted into the chairman's club at the pointy end of town. We pointed out yesterday that Coe would be suckling the taxpayer teat as the V8 Supercars roar around the lively Homebush Bay Olympic site later this year.
But consider some of the other assets Sports & Entertainment Ltd manages.
For starters there is the lucrative merchandising contract with Cricket Australia. Coe's mob also manages all aspects of the Australian Rugby Union's licensing program. Coe's lot even runs the retail operations of the Sydney Opera House.
Which got us thinking: given Coe's connections to the Museum of Contemporary Art, the Opera House and the Allco offices towering over the Cahill Expressway, at one point Coe controlled all sides of Circular Quay.
And if he needs to do some schmoozing out of the limelight, Coe can always take the troops down to the Southern Highlands.
After all, SEL owns and runs Mount Broughton Golf and Country Club.
Nothing like doing a few rough years in the doghouse.
From ear to ear
There hasn't been much to put a smile on the face of Macquarie bankers this year in the rights issue department.
After all, UBS has been getting pretty much all the work since coming to Sir Ralph of Auckland's rescue and picking up the ball after Merrill Lynch's bumble on the Commonwealth Bank.
But the drought has broken; in fact it's flooding. In one fell swoop Macquarie has all but reined in UBS with its role in Rio's $US15.2 billion rights issue, including a major role in the Australian component.
UBS is out in the cold, having supported BHP in its hostile advances against Rio and not being involved this time around.
Meanwhile, over at Gresham, it's entirely possible banker, David Feetham, will be feeling a bit miffed. Not that Feetham is one to complain.
But we suspect he's slightly taken aback by an offhand reference in The Wall Street Journal of Gresham's role of late advising BHP.
"One bank that isn't likely to complain: Gresham Partners, a little-known Australian firm that parlayed its ties to BHP into an advisory role with Goldman," the Journal sniffed.
Only a few multibillions
As Rupert Murdoch yesterday mused about a world without newspapers sometime in the next decade, the News Corp boss was asked on his own Fox News how he felt about the company's share price bouncing off recent lows.
"I don't know if it's going higher or if it's going to stay here," he offered. "I try not to watch the stock and just watch the profits of the company. They've been stabilised very well."
The reporter persisted: you don't watch the stock price? "Not much, no."
Really? "No."
The reporter pointed out News stock is down about three quarters and that 75 per cent of Rupert's wealth is tied up in the company, gently adding: "You're still a multibillionaire but you've lost a lot of multibillions."
Rupert: "Well, yeah, yeah. I enjoy working. I don't mind about that."
The reporter dropped the topic pronto.
Stumping stumped
More money well spent by Foster's, backing Australia's inspired Twenty-20 performance at the World Cup. The VB-sponsored Aussies were out of the comp before the team got over the jetlag. Andrew Symonds didn't miss much.
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First published by Smh.com.au on June 10 2009
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