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 four in our series for 2020 and today’s date is Friday February 28.
First I talk to Eugene Dubossarsky, head of the Analytics Academy and the Chief Data Scientist at AlphaZetta, looking at how companies should manage their data.
And then I’ll be talking to Indeed economist Callam Pickering, looking at Australia’s latest unemployment and wages figures.
But first, let’s talk to Eugene Dubossarsky
With fears of a global pandemic as the virus affects 80,000 people and kills more than 2600 people across 30 countries, the markets have plunged. The worry is the bond market has flashed its most popular recession indicator with the yield for the 10-year Treasury note and 30-year Treasury bond plunging to its lowest level on record.
Investors are fleeing to what they assume is the safety of US government bonds and an inverted yield curve has preceded all US recessions since 1950. It will affect us. And potentially Donald Trump next November. Stock markets have slumped around the world falling for several days to their lowest level in four years as the deadly coronavirus continued to spread across Europe and Asia, with airlines and tourism companies taking a heavy hit.
Growing fears of a coronavirus pandemic pushed shares sharply lower, as investors rushed to buy “safe haven” investments such as gold, sending gold prices surging to a seven-year high of $1683 an ounce. The FTSE 100 index in London lost 240 points to 7163.70, a 3.2% drop. Among the worst-hit stocks were the budget airline EasyJet, down 12.6%, tour operator Tui, down 7.9%, and British Airways owner IAG, down 7.5%. Shares in Carnival, the cruise ship operator which has faced an outbreak of the virus on its Diamond Princess cruise ship, shed 6.4%. Italy is at the centre of the coronavirus crisis in Europe, reporting its fourth death on Monday as the number of cases in the country rose to 152, the highest number outside Asia.
The eurozone’s third-largest economy is already contracting and the rapid spread of the virus has sparked fears of a recession. Italian authorities have responded by locking down 12 cities in the north of the country, and the Venice carnival has also been cut short by two days. The Italian stock market tumbled 1,095 points to 23,676.17, a 4.3% fall, putting it on track for its worst day since 2016. Elsewhere in Europe, Germany’s Dax index fell 3.5% while France’s Cac 40 lost 3.7%. Milan’s stock market plunged over 4.5% after a spike in cases of the virus left parts of Italy’s industrial north in virtual lockdown. Frankfurt and Paris both fell more than 3.5% and London’s FTSE dropped 3.3%, wiping at least $US400 billion ($606 billion) off the region’s market value in a few hours. In Asia, Hong Kong’s Hang Seng index fell 1.8%, while South Korea’s Kospi slumped 3.9%. The ASX 200 lost 2.25% to 6,978 points — it’s the biggest one-day percentage fall since August — with consumer and energy stocks leading the losses.
Scott Morrison is clearing the way for a government retreat on the budget surplus, with Treasurer Josh Frydenberg declaring the economic hit from the coronavirus outbreak would be worse than the bushfires. After uncertainty over the epidemic wiped $82bn off the stock market in the past two days, the Prime Minister warned that the damage from the health crisis was “not limited to the education sector and tourism sector”. “It’s affecting the building industry,’’ Mr. Morrison said. “It’s affecting the manufacturing industry. It’s affecting our export industry. When planes aren’t coming in, planes aren’t going out, and the bellies of those planes aren’t taking Australian produce into those markets.” As the Treasurer revealed that G20 finance ministers and central banks were so concerned about the rippling effects of the epidemic that they feared the “shutters could come down on the global economy”, the government gave its strongest signal yet that its predicted $5bn surplus may not be possible. Mr. Morrison refused to give a guarantee, saying: “When we framed the budget a year ago … who thought there was going to be a coronavirus epidemic?
The ANZ-Roy Morgan Consumer Confidence index found consumer confidence declined 0.7% last week, driven lower by weakness in financial conditions. ‘Current finances’ fell 4% compared to the prior week, while ‘future finances’ declined 5.2% – its second straight weekly loss.
Total construction done fell 3% in Dec quarter, says the Australian Bureau of Statistics. Markets had been looking for a 1% drop.
The prudential regulator will conduct “vulnerability assessments” of the major banks next year to ensure the financial impacts of climate change and the transition to a low carbon economy are being properly considered by management and disclosed to investors. The Australian Prudential Regulation Authority also said it would develop a new “climate change financial risk prudential practice guide” to clarify expectations about climate change-related financial risk disclosures. The new assessments, which will be coordinated through the Council of Financial Regulators, will begin with banks and extend to the superannuation and insurance sectors. APRA wants to drive a consistent approach to scenario analysis and disclosure and will use the assessments to analyse the macro-economic impacts of climate change alongside the Reserve Bank.
Celebrity chef George Calombaris’s food empire collapsed owing its secured creditors $22.3m and having racked up a merry-go-round of intercompany loans totaling $17.8m, new documents reveal. Calombaris’s Made Establishment, which comprised 12 restaurants and food outlets, went bust on February 11, with just $389 left in the bank, according to reports filed to the failed hospitality group’s administrator KordaMentha. The statement of Made’s activities and property reveals that the Matt Comyn-led Commonwealth Bank is owed $8.5m, comprising $7.1m via a finance facility and $1.46m via bank guarantees. CBA is expected to get only about $1m of its money back. Calombaris’s partner in the failed enterprise, Swisse vitamins millionaire Radek Sali, claims to be owed $13.7m from the corporate collapse.
Ardent Leisure has been referred to the Queensland Office of Industrial Relations for potential prosecution over the Thunder River Rapid disaster at Dreamworld that killed four people. In a stinging rebuke to the listed company, Coroner James McDougall said Ardent Leisure was responsible for systemic safety failures at its popular Gold Coast theme park. With Ardent Leisure chairman Gary Weiss sitting in the front row of court 17 in Brisbane Magistrates Court on Monday, Coroner McDougall outlined a litany of safety failures on the on Thunder River Rapid ride over 30 years. He said there had been no proper safety assessment of the ride by a qualified engineer since it opened in 1987 and there had been “ad hoc” modifications. He said managers at Dreamworld had ignored previous incidents where there had been problems on the ride and not done anything to fix underlying problems.
The security and reliability of Australia’s power grid are now at “critical” status, according to a report out this morning from the Energy Security Board (ESB), even as power prices start falling. Electricity prices are forecast to fall more than 7% within a couple of years The Government’s Energy Security Board warns that the grid is struggling to cope with both climate change and increased renewable energy generation In its annual health check of the grid, the board said extreme weather over the summer and the strain on aging coal-fired power stations have stretched the capacity of the system. ESB chair Dr Kerry Schott told the ABC’s AM program that the surge in wind and solar generation has been an added complication in the grid’s ability to handle new energy sources. Dr. Schott said climate change was a factor in the extreme weather events and has warned of more to come.
Casual clothing chain Jeanswest, which collapsed last month, has been sold back to its former owners after closing a quarter of its stores but there will be no return to unsecured creditors owed about $10 million. Harbour Guidance Pty Ltd, a subsidiary of a Hong Kong company owned by clothing and textiles mogul Chun Fan Yeung and his family, has reached an agreement with administrators to buy back Jeanswest after directors including Mr. Yeung placed it into administration last month.
And it’s the profit reporting season. BlueScope Steel reported a 70% fall in its first-half statutory net profit to $185.8 million.
Health fund nib’s half-year net profit after tax has fallen 23% to $57.3 million, as rising hospital claims offset higher revenue from its growing membership base.
Air New Zealand is the latest company to report a hit from the Covid-19 outbreak, with the company flagging a fall in earnings of between $NZ35 million and $NZ75 million ($33.5 million to $71.8 million).
Audio technology business Audinate’s interim net profit fell 60% to $341,000.
Household goods manufacturer Pental reported a 2.6% increase in December-half net profit to $1.47 million.
Reliance Worldwide reported that its full-year net profit is expected to be $140 million to $150 million, down from the previous guidance of between $150 million and $165 million.
HT&E reported a statutory loss of $14.2 million for the 2019 full year, compared with a $225.5 million profit in the previous year.
Viva Energy’s underlying net profit – the figure most closely watched by the market – fell to $135.8 million in the year to December 31, down from $231.5 million in 2018. Bottom-line net profit, including one-time items and changes in the value of stockpiles, plunged 78% to $113.3 million.
Childcare provider G8 Education reported a 13% fall in full-year profit of $62.5 million for the year to December 31, factoring a hit from new leasing standards.
Regional TV broadcaster Prime Media reported a 56.2% slump in net profit to $4.5 million in the first half of 2019-20, which also included a $1.5 million cost hit from its failed merger with affiliate partner Seven West Media.
Softer commodity prices drove a decline in Oil Search’s full-year profit to $US312.4 million ($473.3 million) in the year ended December 31, from $US341.2 million in 2018. Sales edged up 3% to $US1.58 billion.
ASX-listed fintech and super fund Hub24 announced statutory net profit after tax (NPAT) of $6 million for the half-year to December 31, up 90% on December 2018.
SEEK said its 2019-20 result could be lower than current guidance of up to $120 million in revenue, up to $45 million in earnings before interest, tax, depreciation and amortisation and reported net profit of about $25 million.
Treasury Wine Estates said it now had sufficient information about sales in China to say that it no longer believed it would be able to achieve its previous profit guidance of earnings growth of between 5% and 10% for 2019-20.
Insurance builder Johns Lyng which repairs insured property damage for companies such as IAG, Suncorp and QBE, reported interim earnings before interest, tax, depreciation and amortisation of $20 million, up 77% from the year-earlier period.
Blackmores’ net profit dived 47% to $18.2m for the six months to December 31. Qube Holdings reported a 16% drop in interim profits to $51.7 million.
Alumina Limited reported a 53% lump in full-year profits to $US326.6 million ($494.5 million).
Livestock exporter Wellard reported a net loss after tax of $2.1 million, down from a profit of $2.9 million at the same time last year, as revenues fell 73.9% to $49.1 million.
Jeweler Michael Hill’s first-half net profit rose 19.6% to $21.4 million, after revenue rose 4.4% to $329.5 million.
Steadfast Group reported net loss for the year to $71.9 million.
Adelaide Brighton’s full-year profit slumped 74.5% to $47.3 million.
Funerals business Invocare Matin Earp reported a half-year net profit up 55% to $63.8 million. Net profit after tax for Healius rose from $20.4 million to $66.3 million.
Regis Healthcare’s net profit fell from $24.4 million in the prior corresponding period to $12.1 million. Equity Trustees reported a 2.3% increase in first-half net profit of $11.5 million.
Cash Converters has reported a $19.4 million loss in the first half of the year following a $42.5 million settlement and associated legal costs of a class action in Queensland.
RedBubble’s operational earnings (EBITDA) increased to $10.1 million, up from $6.9 million in the last first half.
Mader Group delivered an adjusted net profit after tax of $8.7 million compared to a prospectus forecast of $9 million.
AMA Group has reported an $11.6 million loss following a “disappointing” first half result.
Stockfeed producer Ridley Corp’s half-year profit fell to $396,000 after it recorded a number of restructuring charges, notably the $7.2 million cost of closing its Murray Bride feed mill.
Virgin Australia has warned of a hit to earnings of between $50 million and $75 million after an increase in cancellations and reduction in forwarding bookings to leisure destinations and Tigerair routes due to the coronavirus outbreak.
Net profit for medical devices business Nanonsonics dived 20% to $5.7 million.
National Storage REIT has reported a first-half profit of $150.7 million, up from $28 million in the prior half-year after a $123.6 million net increase in the value of its assets.
Woolworths profit dipped by 7.7% to $887 million in the first half of the year despite revenue rising 6% to $32.4 billion.
Retail property landlord Home Consortium reported funds from operations of $0.3 million in the first half but says full-year FFO will be 10% above forecast FFO of $15.2 million.
Freight company K&S Corporation reported a 70% drop in interim profit to $2.9 million.
Nine Entertainment’s total statutory net profit for the year was down 49% to $87.3 million.
Bubs Australia reported a first-half statutory loss of $7.6 million from $8.8 million.
Gross profit for PointsBet rose to $12.28 million (up from $6.89 million)
Ferry operator SeaLink’s net profit after tax climbed 3.8% to $13.6 million on sales up 4.6% to $132.9 million.
AV Jennings net profit after tax rose to $8.9 million from $1.4 million.
PolyNovo has reported a $2.4 million loss for the first half-year, extending its losses by 26% from last year despite revenue for the period rising 80% to $80.2 million.
Sports analytics business Catapult has narrowed its half-year net loss to $4.8 million, versus $9.3 million in the prior corresponding period.
Non-bank residential mortgage lender Resimac has lifted its first-half net interest income by 53% to $84.3 million, with net profit after tax up 44% to $27.2 million.
Perth based developer Peet reported a 78% fall in statutory profit to $5.1 million.
Australian Ethical reported net fund inflows of $295.8 million in the half-year ended December 31, close to double the result of the previous first half.
Think Childcare’s net profit for the year was down 59.5% to $2 million however, with AASB changes wiping $13.1 million from the company’s earnings. AgTech company Bio-Gene Technology reported a loss after tax of $1.1 million, from $1.3 million.
And that’s it for this week. And next week I’ll be talking to lawyer Rob Bryden who will provide commentary on what franchisees should do if they find themselves in a dispute against a franchisor, And then I’ll be talking to Rabobank economist Michael Every about the impact of the coronavirus on the global economy.
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.