I am Leon Gettler. My job is to review and monitor the week’s news in business, finance, and economics. I bring it all to you, every week.
This is episode number two in our series for 2020 and today’s date is Friday February 14.
First I talk to Ada Xiao, the chief strategy officer for PlatON, the pioneering global privacy-preserving computing network. Located in Hangzhou, Innova City is envisaged to be China’s largest blockchain-powered smart city project with an estimated 90,000 citizens expected to occupy the city by its completion in 2025. PlatON’s blockchain solution will also be used to monitor driving behavioral data to train auto-driving systems, as well as to record and monitor electric vehicle life cycles, in order to manage ecological waste efficiently, among other use cases.
And then I’ll be talking to AMP Capital chief economist Shane Oliver looking at the reporting season and what’s happening in the market.
But first, let’s talk to Ada Xiao.
Australian companies are being increasingly caught in the fallout from the coronavirus outbreak as a ban on Chinese tourists curbs demand in Australia and manufacturing shutdowns across China hit supply chains. Vitamins group Blackmores went into a trading halt on the ASX as uncertainty rises over the impact of the coronavirus on its China and Australian business, while electronics retailer JB Hi-Fi says it will use its market clout to ensure it has first access to electronics goods and mobile phones if Chinese manufacturers started to be squeezed.
Aurizon’s chief executive Andrew Harding warned the coronavirus would delay the arrival of 66 rail wagons being made in Wuhan, China, after the Chinese manufacturer declared force majeure, invoking a clause in the contract over unavoidable delays outside of its control. And some Australian building contractors are starting to warn clients of potential project delays where China is the source of materials being used in local projects.
Former Reserve Bank of Australia board member Bob Gregory told The Sydney Morning Herald that the promised surplus, a key part of the Coalition’s election campaign, relied on a string of good luck, “so if the coronavirus did not get them this year, something else would in the near future, namely lack of wage inflation”. Finance Department figures show the budget is $1.1 billion behind expectations and the Reserve Bank predicted the bushfires would hit economic growth by 0.2 percentage points through the December and March quarters, while Deloitte Access Economics estimated the coronavirus would cut about $1.8 billion from budget revenue this financial year.
Low rates had been feeding into the housing sector. The Australian Bureau of Statistics reports a 4.4% lift in home loans through to December. The 4.4% increase excluding refinancing of existing loans – was the biggest monthly gain since the 4.9% increase seen in September 2016 and lifted December’s total to $19.6 billion, The ABS says loan loans for owner-occupiers up 22.8% since May. The number of loan commitments to owner-occupier first home buyers rose 6.2% in December following subdued first home buyer activity over the prior three months. December’s rise was the second strongest of 2019 with owner-occupier first home buyer commitments up 21.3% in December 2018.
National Australia Bank’s monthly business survey showed that business conditions were unchanged in January at 3 points, the same reading as December., The employment index declined 3 points to 1 point, from 4 points in December, and the trading conditions index edged 1 point lower to 5 points. Profitability rose 1 point in the month, from a reading of 2 points in December. All three sub-components are now below average, according to the survey. Business confidence improved slightly to minus 1 index points from minus 2 points, following two consecutive declines.
The restaurant business of former Masterchef judge George Calombaris has been put into administration, only months after being rocked by a staff underpayment scandal, with almost all venues to cease trading immediately. A statement from KordaMentha this afternoon said the company had been appointed voluntary administrators of 22 companies in the MAdE Establishment Group. “The appointment excludes the Yo-Chi operations which will continue to trade as usual,” the statement said. “All other venues have stopped trading immediately.
Employees have been paid all outstanding wages and superannuation up to the date of the appointment.” In a statement posted to Instagram, Mr. Calombaris said that the decision was made with “deep sadness and regret” and thanked his team for their loyalty and friendship. “On a personal note, the last few months have been the most challenging I have ever faced,” he said. “I am so sorry all our collective efforts have not proved to be enough. I’m gutted that it’s come to this.” MAdE, founded by Mr. Calombaris, operates 12 restaurants and food venues in Melbourne. The KordaMentha statement said the appointment of administrators followed “declining trade across venues” since the announcement of an enforceable undertaking with the Fair Work Ombudsman after self-disclosure of underpayments at the Group’s Press Club, Gazi and Hellenic Republic restaurants up to 2017.
Australia’s cruise ship industry is reporting a dent in its local bookings. The sector has been buffeted by a variety of issues including Australia’s fire crisis, unrest in the Middle East, political upheaval in Hong Kong and the coronavirus. One of the world’s largest cruise companies, Royal Caribbean, told investors over the weekend that Australia accounts for 7% of its bookings and that bookings here have “suffered.” Last year, the cruise industry’s value to the local econ0omy jumped by 11.2% from the previous year.
Australian Chamber of Tourism chairman John Hart says the Chinese tourism market, which contributes $711m a week on average to the economy, has effectively “come to a dead stop” after the coronavirus outbreak prompted the government to shut its borders. Mr. Hart said the loss of the Chinese market was a double blow after a horror bushfire season that had impacted on international tourism, as imagines of the inferno were broadcast across the world. It comes after the Chief Medical Officer raised concerns on Tuesday about xenophobia and racial profiling in Australia as a result of the outbreak, and Scott Morrison and Anthony Albanese both urged Australians to “stand up and speak out” against racism after restaurants and shops run by Chinese-Australians reported a reduction in customers over recent weeks. The Prime Minister said parliament “stands as one” on the issue of supporting the Chinese-Australian community.
Shine Lawyers is investigating a class action against embattled wealth manager AMP alleging it breached its fiduciary duty to an estimated 100,000 customers and ripped them off by selling in-house insurance policies with high premiums. The plaintiff law firm has confirmed it will “imminently” file a lawsuit in the Federal Court of Australia against AMP’s life insurance arm and three of its financial advice subsidiaries, AMP Financial Planning, Charter Financial Planning and Hillross. The class action is being bankrolled by London-based Woodsford Litigation Funding.
Horizon Oil chief executive Michael Sheridan has been suspended with immediate effect as the company announces the establishment of an independent investigation after the Australian Federal Police are examining a cache of documents obtained by The Australian Financial Review in which lawyers repeatedly raised corruption concerns over a $US10.3 million ($15.4 million) payment made by the ASX-listed Horizon Oil to an unknown shell company in Papua New Guinea.
As shares in Horizon fell 30% on Monday following the revelations, the petroleum company said it would conduct an “independent investigation into the matter”. In the same documents, the lawyers warned about “illicit payments” and of the US Department, Justice Department or Securities Exchange Commission is “likely” to investigate if the transaction was ever examined by regulators. The federal police confirmed they had received the Horizon documents and said: “the information is being assessed at the current time.” “The AFP takes all allegations of foreign bribery offences by Australian entities and citizens seriously, and is committed to combating this insidious crime type,” the statement said.
And the profit reporting season continues. Commonwealth Bank has beaten expectations after reporting a 4.3% fall in cash profit in continuing operations to $4.47 billion against expectations for $4.34 billion.
Blackmores reported first-half statutory net profit after tax of $18.3 million, from $34.3 million a year ago. Revenue reached $309.2 million, down 5% on a year ago.
Evolution Mining’s statutory net profit after tax came in at a record $147.2 million for the first six months of the year while underlying net profit after tax was also a record $149.1 million.
Orora’s statutory net profit after tax fell 13.3% to $76.6 million from the prior corresponding period while earnings before interest and tax slid 4.1% to $133.1 million.
Downer’s earnings before interest and tax fell 23.8% to $180.4 million from the prior corresponding period while statutory net profit after tax fell 35.4% to $91.4 million.
Auto parts supplier Bapcor has reported an adjusted net profit up 5.1% to $45.3 million on sales up 10.4% to $702.5 million.
Global study-abroad facilitator IDP Education reported EBITDA of $106.2 million for the half-year ended December 31, up 59% on the same period last year, and net profit of $57.7 million, which is 42% higher year-on-year.
Charter Hall Social Infrastructure REIT reported a statutory profit of $49 million, up 16.1% compared to a year ago.
Computershare is forecasting a stronger second half result after earnings before interest and tax fell by $US24.2 million ($36.1 million) in the first half of the year.
Insurance Australia Group has reported a 43.4% fall in its net profit, leading to a cut in its interim dividend. The group’s net profit attributable to shareholders of the parent fell to $283 million for the first six months of the year, down from $500 in the prior corresponding period.
Mineral Resources said that its statutory net profit surged to $884 million, from $13.1 million a year ago, in the six months to the end of December.
New Zealand broadcaster Sky Network has reported a half-year net profit of $NZ11.9 million on revenue down 5% to $NZ385 million for the half-year ending December 31, 2019.
NBN Co has posted a six-month loss of $2.14 billion, a 25% deterioration in the corresponding period last year.
Dual-listed Contact Energy reported a 40% fall in profit from continuing operations, and a 79% in statutory profit, to $NZ59 million during what it described as a period of natural gas scarcity and rising thermal generation costs.
Aurizon’s interim net profit rose 51% to $343 million boosted by asset sales but the rail group has cut its full-year coal haulage forecasts. Coal volumes were lower than expected in the six months ended December 31, running flat at 106 million tonnes because of a 3% drop in Queensland volumes, which Aurizon attributed to “customer specific maintenance and production issues.” GPT Group reported a full year net profit after tax of $880 million, down 39.4% from a year ago. Revenue and other income fell 27.1% to $1.37 billion.
Charter Hall Long WALE REIT has delivered an 8.5% increase in operating earnings to $52.2 million and pushed out its average lease expiry.
Platforms business Praemium has reported a half-year net profit of $1.4 million on revenue and other income of $24.2 million for the half-year period ending December 31, 2019. The profit and revenue are up 122% and 5% on the prior corresponding period respectively JB Hi-Fi has upped its full-year guidance after delivering a better than expected 6.5% increase in net profit to $170.6 million in the six months to December 31. Strong sales of phones, audio equipment and internet-connected appliances – particularly over Black Friday – offset weak demand for music CDs and movie DVDs. The result, which was helped by lower rent and administration costs, exceeded consensus forecasts of around $166.5 million. Earnings from JB Hi-Fi’s Australian business rose 6.5% and profits at The Good Guys rose 14.7%, offsetting a 2.5% slide in profits in New Zealand.
Gold miner Northern Star reported a net profit of $126.8 million for the first six months of the year, with cash flow from operating activities up 76% to $297.5 million on the prior corresponding period.
Challenger reported a normalised net profit after tax down 4% to $191 million for the half-year to December 31, 2019. Suncorp Group has reported a fall in its underlying profit during the first half of the financial year, with cash earnings down 11.6% on the previous year. While group net profit after tax rose 156.8% compared with the previous year, excluding the $293 million sales of Capital SMART and ACM Parts, the company’s profit after tax from ongoing functions declined 6.2%.
Macquarie Group has maintained its full-year guidance for the 2020 financial year, with mixed performance across its businesses during the third quarter. The company stuck with its forecast that it expected the group’s result for the 2020 financial year to be “slightly down” in 2019.
Transurban reported an increase in underlying earnings on higher toll revenues but a fall in net profit. The company said statutory EBITDA excluding significant items was $1.107 billion in the half-year to December 31, up 12.2% on the previous first half. Proportionate EBITDA excluding significant items was $1.094 billion for the period, up 9.5%. Proportionate toll revenue was up 8.6% over the six months to $1.396 billion with average daily traffic increasing 2.3%. But statutory net profit excluding significant items was $169 million, 25% down on the prior corresponding period.
Beach Energy has downgraded its production guidance after a weaker first half of the year which saw revenue and profit decline compared with the prior corresponding period. Revenue from ordinary activities decreased 10% to $948.3 million while underlying net profit after tax dipped 2% to $273.5 million.
Cochlear downgraded its fiscal-year 2020 earnings guidance, citing the coronavirus. Cochlear Limited reduced the guidance outlook for FY20 from $290-300 million, a 9-13% increase on underlying net profit1 for FY19, to $270-290 million, It made the downgrade “due to an expected impact from the novel coronavirus in Greater China.” Hospitals across Greater China – including Hong Kong and Taiwan – are deferring surgeries, including cochlear implants, to limit the risk of infection from coronavirus, the firm said.
Aventus Group says full-year growth in earnings will be at the top of its guidance range after reporting a 12% rise in funds from operations (FFO). The owner of big-box retail properties reported FFO of $53 million, up from $47 million at the same time last year.
IT services company DWS reported revenue of $83 million and underlying EBITDA of $12.3 million for the half-year ended December 31. Both revenue and profit were largely flat compared to a year ago.
Buy now, pay later provider Openpay said it expects to report a loss before tax in a range of $35 million to $40 million for the 2020 financial year.
Fresh Food Industries reported a 15% increase in net profit to $1.8 million.
Edtech small-cap Janison Education reported revenue of $11.4 million for the half-year to December 31, up 14% growth in the previous first half.
Megaport has reported a $19 million loss in the first six months of the financial year, 14.4% more than its loss in the prior corresponding period despite a 70.3% increase in the company’s revenue. Amcor’s adjusted earnings before interest and tax rose 4.4% in constant currency terms to $US699 million ($1.04 billion) from the prior corresponding period while adjusted net income rose 10.3% to $US473 million ($704.5 million).
And that’s it for this week. And next week, I’ll be talking to Sydney Thomas who came here with the Girl Geek Academy as an expert-in-residence working with women start-up founders. And I’ll be talking to CommSec chief economist Craig James about what’s happening in the market the following week.
In the meantime, you can find me on Twitter at talkingbizz, on Facebook and on LinkedIn. And if you want, leave a comment. Wishing you all a terrific week, and looking forward to bringing you Talking Business next week.