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 three in our series for 2020 and today’s date is Friday February 21.
First I talk to Sydney Thomas, an associate of Precursor Ventures, an early-stage investment fund working with start-ups who visited Australia with the Girl Geek Academy as an expert-in-residence working with women start-up founders.
And then I’ll be talking to CommSec chief economist Craig James about what’s happening in the market next week.
But first, let’s talk to Sydney Thomas
Wages growth flatlined as expected in the December quarter, expanding by just 0.5% – the same as in the September quarter. Total hourly rates of pay, excluding bonuses, rose by a seasonally adjusted 2.2% year-on-year, according to figures from the Australian Bureau of Statistics. This was the lowest public sector growth rate since the commencement of the index in December quarter 1997.
Around half of the slowdown in wages growth in Australia is the result of weakening productivity, which is now going backward for the first time since the mining boom, the Productivity Commission says. The commission’s chair Michael Brennan says ongoing output growth has pushed Australia’s recession-free “hot streak” out to 28 consecutive years, “a record that is the envy of policymakers the world over”. “That said, this year, Australia’s productivity has slid backward for the first time since the mining boom,” Mr. Brennan says in the report released on Monday. “Output growth has been driven by strong growth in employment, rather than ’doing things better’.” The report shows two measures of productivity fell in 2018/19. Labour productivity dropped 0.2% in that financial year, while multi-factor productivity was down 0.4% – the latter was the first fall since 2011.
Low-interest rates increase housing wealth inequality, research by the Reserve Bank has found, as governor Philip Lowe signals interest rates could remain low for decades. Using three decades of house price data between 1990 and 2019, the research found housing prices in more expensive areas are more sensitive to changes in interest rates than in cheaper areas. The research, released by the central bank on Monday, said housing prices are more sensitive to monetary policy in regions with higher shares of housing investors and higher levels of income because they are more easily able to borrow when interest rates are low. “This suggests that lower interest rates increase housing wealth inequality, while higher rates do the opposite,” the research said.
Coles says it has underpaid staff in its supermarket and liquor stores and has set aside $20 million to pay back employees. Coles says about 5% of its liquor and supermarket managers have not been paid to industry standard. This makes up about 1% of all staff, with the review going back six years The company said it was reviewing arrangements for staff who were paid a salary under the General Retail Industry Award (GRIA) and had so far found about 5% of supermarket and liquor store managers were not paid correctly. The total underpayments plus interest came to $16 million from its supermarket arm and $4 million from the liquor division and affected 1% of total staff. Chief executive Steven Cain apologised to the affected staff and said they would be contacted once the review was finalised. Wesfarmers discovered underpayments at its Target stores.
With Coles joining companies like Woolworths, Bunnings, Subway, and Wesfarmers in underpaying workers, Canberra is considering measures to crack down on the underpayment of workers which could include company directors being disqualified from holding office. Attorney-General Christian Porter is set to bring legislation to parliament to make it a criminal offence to exploit workers, including fines and jail terms
Toll Group is struggling to restore its networks after it was subjected to the most significant cyberattack in Australian corporate history. The shipping behemoth is facing growing discontent from a cluster of massive clients including Telstra, Officeworks, and Footlocker as it attempts to recover from the crippling ransomware attack, which infected its systems two weeks ago. The attack paralysed many of its delivery and tracking systems, leaving it unable to tell customers where their parcels were. It now faces stiff financial penalties from disgruntled clients.
About 600 Holden employees will lose their jobs after parent company General Motors announced it would axe the iconic Australian car brand by the end of the year. The company pledged to provide at least 10 more years of customer service for Holden owners. GM executives said the brand was struggling in a fragmented right-hand-drive market GM said the brand was no longer competitive in the current market and would be “retired” from sales, design, and engineering across Australia and New Zealand by 2021. The announcement drew criticism from the Government, with Prime Minister Scott Morrison saying he was angry the brand was allowed to “wither away”. Federal Industry Minister Karen Andrews said it was “unacceptable” the decision was made without consulting the Government. Holden ended its Australian manufacturing operations in October 2017, forcing hundreds of job losses.
About 800 Holden employees had remained in Australia, including 600 Melbourne workers focused on designing cars for the Australian market. GM International Operations senior vice president, Julian Blissett, said Monday’s announcement would mean the “overwhelming majority” of Holden staff would lose their jobs by the end of June 2020.
Mining giant Rio Tinto has become the latest major iron ore miner in West Australia’s Pilbara region to turn to renewables to lowest costs and cut emissions, announcing that a new solar farm and a lithium-ion battery will supply all the daytime electricity needs and two-thirds of the annual requirements of its new $2.6 billion Koodaideri project.
Rio Tinto says it will spend $98 million on a new 34MW solar farm at the Koodaideri mine in the Pilbara, as well as a 45MW/12MWh lithium-ion battery energy storage system that will help power its entire Pilbara power network. It will be Rio Tinto’s first company-owned solar facility, although it also has a small solar facility located at its bauxite mine in Weipa. Rio Tinto joins other iron ore majors in the Pilbara also shifting to solar and battery storage because of the lower costs. Andrew Twiggy Forrest’s Fortescue Mines announced last month that it will build an extra 150MW of solar, and a big battery as it links up all its iron ore resources in the Pilbara into a single network for the first time.
KPMG has revealed it failed to flag problems with the financial statements of two of the eight collapsed listed companies it audited over the last 10 years. The firm was an auditor of MRI Holdings, Nylex, CP1, Gunns, Forge Group, WDS, Mirabela Nickel, and Arrium immediately before their corporate failures. The big four consulting firms have all been asked by Greens senator Peter Whish-Wilson to provide details of collapsed companies they audited in the past decade as part of the ongoing audit quality inquiry. KPMG also admitted it had settled six legal actions related to its audit quality of collapsed companies in the last decade.
And the profit reporting season continues.
BHP Group’s revenue rose 7% to $US22.3 billion ($33.2 billion) while profit after taxation climbed to $US4.9 billion.
Fortescue posted a $US2.45 billion ($3.66 billion) half-year profit on Wednesday which was well above the $US2.3 billion expected by analysts, and well above the $US644 million result posted in the same period of last year.
Coles’ net profit fell 33.7% to $489 million in the December-half as modest earnings growth in supermarkets was offset by weaker profits from liquor and convenience stores after the restructuring of its hotel and fuel businesses. Underlying earnings before interest and tax for the 27 weeks to January 5 rose 0.4% to $725 million, in line with Coles’ guidance for EBIT between $710 million and $730 million.
Tabcorp’s revenue rose 4.4% to $2.9 billion while net profit before significant items climbed 2.9% to $213.5 million.
Domino’s Pizza reported a 29% increase in revenue to $905.8 million while net profit rose 29.8% to $69.2 million.
Sonic Healthcare’s underlying EBITDA for the first half of the year rose 14% to $548 million while revenue grew 15% to $3.3 billion.
Crown’s normalised EBITDA slid 9% to $381.3 million while normalised net profit dipped 11% to $172.7 million.
Vocus Group’s half-year statutory net profit fell 22% to $12.8 million, although on an adjusted basis it reported a flat profit of $54.4 million.
Pact Group’s revenue fell 3% to $886 million for the first half while EBITDA rose 2% to $145 million. Net profit after tax rose 4% to $33 million.
Seven West Media has reported a $66.3 million loss in the first six months of the financial year, down from an $83.8 million profit in the prior corresponding period.
Sims has reported an underlying earnings (EBIT) loss of $23.2 million down from a positive $109.6 million in the first half of last year. Engineering and mining services business Monadelphous has reported a half-year net profit down 7.4% to $28.4 million on total sales up 0.1% to $777.5 million.
Accounting platform Reckon has reported a full-year net profit up 5% to $8.1 million on revenue flat at $75.4 million.
Ansell reported sales of $US753.3 million ($1.12 billion), up 3.9% on the previous half while earnings before interest and tax firmed 4.8% to $US91.8 million.
Cochlear’s first-half underlying net profit was flat at $132.7 million at Cochlear, and revenue increased 9% to $777.6 million.
Bendigo & Adelaide Bank’s statutory net profit fell 28.2% to $145.8 million while cash earnings after tax slid 2% to $215.4 million.
QBE’s adjusted net cash profit after tax was $733 million, up 6% from the previous year. The group’s combined operating ratio of 97.5% was higher than its target range of 94.5 to 96.5%, largely due to adverse weather conditions which it said severely impacted its US crop insurance business.
Saracen Mineral Holdings has reported an 84% increase in its underlying net profit after tax.
GWA Group’s earnings before interest and tax dropped 2.6% to $38.1 million, leading to the group reducing its interim dividend from 9¢ to 8¢.
Regis Resources has reported a record net profit up 17% to $93.4 million on revenue of $371.4 million for the half-year ended December 31, 2019.
Brambles have reported a first-half underlying profit of $US435.5 million, up 1% net on the prior corresponding period and 5% higher excluding foreign exchange impacts.
Mining technology company Imdex has reported 12% increase in underlying earnings in the first half of the financial year driven largely by increased activity within Asia-Pacific.
Asset manager Elanor Investments has reported a statutory loss of $12.39 million for the half-year period ending December 31, 2019.
Lending provider Money 3’s first-half revenue rose 55% to $62.7 million while earnings before interest, taxes, depreciation, and amortisation grew 36.9% to $30.5 million and net profit after tax rose 34.6% to $15.7 million.
Wilson Asset Management’s listed investment company (LIC) WAM Research has reported a half-year operating profit after tax up 159% to $11 million.
SGC Fleet’s net profit for the first six months of the fiscal year fell 16.6% to $24.5 million from the prior corresponding period.
Mining services company Emeco Holdings reported a 16% increase in operating EBITDA to $119.1 million while net profit after tax rose 33% to $42.1 million in the prior corresponding period.
Westfield owner Scentre Group has forecast 2020 operating earnings of 24.75¢ to 24.8¢ a share, or pro-forma growth of 3.1% after delivering its full-year result.
Netwealth’s total income rose 21.7% to $58.7 million while net profit after tax climbed 26.3% to $20.5 million.
APA Group reported a 6.9% increase in earnings before interest, tax, depreciation, and amortisation to $842.2 million while net profit after tax rose 11.2% to $175 million.
Class Limited has reported a 30% fall in profit for the first six months of the financial year following a 25% increase in its product investment. The company said it was pleased with the performance in the first half of the year, with operating revenue rising 8% to $20.5 million while EBITDA slid 7% to $8.1 million.
South East Asia-focused dark fibre business Superloop has reported a half-year net loss of $21.4 million on a total income of $51.3 million. The net loss nearly tripled on the prior year’s $8.7 million with revenue down 14.9%.
Nickel miner Western Areas’ sales revenue rose from $123.7 million in the previous year to $156.2 million while EBITDA increased 128% to $69.7 million.
Abacus Property Group has reported a first-half underlying profit of $64.3 million, down 10.7% in the first six months of last year.
Jobs marketplace Freelancer has reported a slightly wider full-year net loss of $1.59 million on sales up 12% to a record $58 million.
ARB Corporation’s revenue for the first half rose 7.3% to $233.4 million while net profit after tax declined to $25.3 million.
Online retailer Kogan.com reported a 16.4% increase in gross sales to $322.9 million while revenue slid 5.3% t to $219.5 million following the launch of Kogan Marketplace. Gross profit for the six month period was up 10.6% to $49.9 million.
High-flying software group Altium reported net profit was down slightly to $US23 million due to a higher tax rate, but EBITDA was up 22% to $36.8 million.
IOOF Holdings has reported a 39.2% fall in underlying net profit after tax from continuing operations to $56.6 million, reflecting a “focus in reshaping the business to be ‘fit for purpose’ for the opportunities ahead”.
Ingenia Communities reported a revenue increase of 25% to $116.9 million on the prior corresponding period while earnings before interest and tax rose to $32.2 million. Underlying profit rose 52% to $26.5 million and statutory profit firmed 81% to $23.6 million.
Oz Minerals reported its underlying net profit falling to $164 million, down from $228 million in the prior year.
Cleanaway Waste Management’s gross revenue rose 4.1% to $1.2 billion while underlying EBITDA rose 2.5% to $234.6 million.
Wesfarmers net profit from continuing operations rose 4.4% to $1.13 billion, Nearmap has reported an $18.6 million loss in the first half of the year, as the company increased its operating expenses significantly. The loss was well down on the $2 million loss from the prior corresponding period.
Lovisa said its first-half net profit after tax rose 4.5% on a statutory basis to $26.7 million. Salary packaging novated leasing and asset management company Macmillan Shakespeare reported a 1% fall in revenue to $270.4 million and a 0.3% slide in net profit after tax to $34 million.
Gift card business EML Payments has marginally adjusted its profit guidance for financial 2020 and reported record first-half adjusted EBITDA up 42% to $59.2 million. Its statutory half-year profit climbed 68% to $4.3 million.
Webjet reported half-year earnings (EBITDA) of $86.3 million, with a 43% lift on the previous half-year. Medical Development reported a half-year net profit up 82% to $240,000.
Asaleo Care swung to a full-year net profit after tax of $22.1 million, from a loss of $108.7 million a year ago.
Vicinity Centres’ revenue for the first half fell 3.6% to $635.5 million while funds from operations dropped 3.6% to $337 million. Internet and cloud services business Over the Wire Holdings’ half-year profit fell 27% to $2.3 million on EBITDA (operating income) up 1% to $8.2 million. It will pay an interim dividend of 1.5 cents per share.
Santa Barbara reported a statutory profit after tax of $39 million, down from $83 million in the prior corresponding period while underlying profit after tax fell to $35 million from $77 million.
Stockland reported a 6% fall in full-year funds from operations from its residential division ($134 million) at an operating profit margin of 17.2%. (It has forecast 19% for the full year). California-based regenerative medicine group Avita Medical has reported its net loss widened 67% to $23.8 million.
McPherson’s posted a 3% rise in first-half net profit to $5.7 million.
And that’s it for this week. And next week, I’ll be talking to Eugene Dubossarsky, head of the Analytics Academy and the Chief Data Scientist at AlphaZetta, looking at how companies should manage their data. And I‘ll be talking to Indeed economist Callam Pickering, looking at Australia’s latest unemployment and wages figures.
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.