Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast app, the Apple Podcast store or wherever you go to get your podcasts. Or you can get it at the Business Acumen website at www.businessacumen.biz.
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 fourteen in our series for 2019 and today’s date is Friday, May 3.
First I talk to Rob Lambert, the CEO of Flowers Across Australia. It’s a fascinating company. The team behind Flowers Across Melbourne – who set out to completely disrupt the flower industry 10 years ago – announces it has quadrupled the size of their business in five years, averaging a growth of 42% year on year in that time and now employ 40 staff.
The directors are a married couple, Rob being the tech ecommerce genius (who taught himself to code) and his wife Nadina, a florist. Flowers Across Melbourne are one of the biggest florists in Melbourne and have one of the largest ranges of flower and plants in Australia. The team has sent out 300,000+ bouquets and arrangements since its inception.
They have two sister companies based in Melbourne, Plants Across Melbourne, and Hampers Across Melbourne as well as a branch in Sydney called Flowers Across Sydney. As well as managing the four ecommerce websites, Rob has also custom built his own app which tracks employee KPIs and happiness, via the iPads that all the florists use across the company.
And I’ll be talking to Indeed economist Callum Pickering analysing Australia’s zero level CPI, what it says about the economy and what it means for the RBA.
But first, let’s talk to Rob Lambert.
Lending to property buyers crept up in March but at a slightly slower pace than in the previous month, while personal loans continued to fall, statistics from the central bank suggest. The numbers showed overall private sector credit grew 0.3 per cent in March – meeting market expectations and equalling February’s result – and that credit for mortgages increased 0.2 per cent compared to the previous month while credit to business was also up 0.5 per cent but personal credit fell 0.3 per cent.
ANZ Banking Group has met expectations against a difficult operating environment for banks by announcing a 2 per cent rise in cash profit from continuing operations to $3.564 billion. The bank paid $175 million in customer compensation over the half to March 31 or a total of $928 million since 2017. ANZ said the bank was investing in the remediation processes to ensure they were done swiftly and efficiently. ANZ has made provisions for another $533 million worth of customer repayments in the second half which will include the aligned adviser cohort. Westpac announced a similar provision. The bank has shed another 2221 employees between the previous corresponding half taking the number of full time equivalents from 41,580 to 39,359.
A 190 page statement of claim bound for the Federal Court from the Australian Prudential Regulation Authority seeks to have five of IOOF’s former and current directors and executives banned from acting as superannuation trustees. APRA alleges that IOOF broke the law when it sought to fix its mistakes by compensating customers with more than $5 million in funds taken from the members’ own reserves instead of penalising itself for the mistake. APRA says raiding the members reserves demonstrated a failure or unwillingness to understand its obligations. APRA is seeking to ban current IOOF directors and executives including chief financial officer David Coulter, chief legal officer Gary Riordan and company secretary Paul Vine because they are “not fit and proper” to act as superannuation guardians and to act as a deterrent.
The statement of claim alleges the five men broke laws including aspects of the Superannuation Industry Supervision Act that require trustees act in the best interests of the members, act as a prudent superannuation trustee and give priority to fund members above all others. APRA claims the firm’s dual structure, which allowed it to operate as both owner of the investment arm and trustee for the members, led to a conflict whereby it would on occasion prioritise the profits from the investment arm over the interests of members.
The small business ombudsman has branded the tax office’s use of debt recovery actions against small business “excessive” and said it is sending small businesses to the wall. A report released by the ombudsman examines the Australian Taxation Office’s practice of utilising garnishee orders against small businesses. Garnishee notices are debt-collecting tools that allow the tax office to order a bank to hand over money from a taxpayer’s account, without consulting the taxpayer.
Their use was exposed in a joint investigation by The Age, Sydney Morning Herald and Four Corners into the alleged unfair treatment and heavy-handed tactics of the ATO in respect of small business taxpayers. Following publication the ombudsman received 159 requests for assistance and submissions from small businesses and their advisors, prompting the report. The ombudsman’s report highlights the “devastating impact” of garnishee notices which small businesses often only find out about when their bank stops honouring payments such as wages, rent, suppliers’ invoices or loans.
Strong forms of debt recovery action by the ATO, such as garnishee notices, can destroy a small business. Ombudsman Kate Carnell said there is a real question as to whether such action is even effective since businesses will not generally have the means to recover from a garnishee order to pay their ongoing tax bills, let alone carry on with their business.
The ombudsman found the tax office issues garnishee notices in at least 12 per cent of cases where tax disputes were before the Administrative Appeals Tribunal and she called for the tax office to immediately cease debt recovery actions against small businesses with a tax dispute before the AAT.
The Australian Taxation Office has launched a data matching program to catch cryptocurrency investors who fail to pay the right amount of tax. It is collecting records from the intermediaries who facilitate the purchase and sale of cryptocurrency. It will use these to match the declarations made in people’s tax returns. ATO officials estimate there are between 500,000 to a million Australians who have invested in crypto assets They are concerned about the use of cryptocurrency to move funds within the black economy and hide money offshore. The assets are also linked to unexplained wealth and undeclared taxable capital gains.
Chevron has reported a hit to production in the March quarter from an outage at the Gorgon LNG plant and disruptions due to cyclones, while maintenance work will also limit production at the West Australian venture this year. Chief executive Mike Wirth said that “some downtime” at one of the three production trains at the $US54 billion ($77 billion) Gorgon LNG plant and “slowdowns: at Gorgon and the $US34 billion Wheatstone plants due to cyclones had reduced production by 29,000 barrels a day in the quarter.
News Corp and Telstra are considering an equity injection of up to $500 million into Foxtel as part of a $2.5 billion refinancing package to help their under pressure pay-TV operator fight back against its dominant streaming rivals Netflix and Stan. The equity injection is one of a number of options being canvassed by News Corp, which controls Foxtel finances from its global headquarters in New York. Other options being considered include News Corp lending money directly from its own balance sheet to Foxtel.
It comes as Foxtel faces significant pressure to turnaround its fortunes in the face of competition from streaming businesses such as Netflix and Stan, which is owned by Nine, publisher of The Australian Financial Review, The Age and Sydney Morning Herald. Foxtel was consolidated into News Corp’s financial accounts following the completion of the merger of Foxtel and Fox Sports in mid-2018 which changed Foxtel’s ownership structure. News Corp now owns 65 per cent of Foxtel, while Telstra owns 35 per cent. Previously News Corp and Telstra owned Foxtel 50-50 and Fox Sports was wholly-owned by News Corp.
Higher prices for fresh foods and customer demand for stick-on plastic figurines helped Coles lift same-store supermarket sales by 2.4 percent in the March quarter. The result, reported on Monday, was in line with analysts’ forecasts but is likely to fall short of same-store sales at Woolworths, which are expected to grow 3.3 per cent. Adjusted for the timing of New Year’s Eve, same-store food sales rose 2.2 per cent. However, growth appears to be moderating, with same-store sales so far in the June quarter ‘moving towards’ the 1.5 percent (New years Eve adjusted) growth delivered in the December quarter, Coles said.
Like-for-like sales across Super Retail Group rose 4.3 per cent in the 17 weeks ended April 27, buoyed by 4.2 per cent same-store sales growth at its biggest division, Super Cheap Auto. This was marginally stronger than the last trading update in February. This took same-store sales growth at Super Cheap Auto for the year to date to 2.7 per cent. Boating camping and fishing chain BCF, which has underperformed in recent years, delivered 5.3 per cent same-store sales growth over the past 17 weeks, down from 8 per cent at the half year, taking growth for the year to date to 3.3 per cent. Rebel Sport also performed well, growing same-store sales 4 per cent over the past four months (versus 8 per cent in the first half), taking same-store sales for the year to date to 3.5 per cent.
And in good news for another retailer, JB Hi-Fi chief executive Richard Murray has reaffirmed full year sales and profit guidance after sales momentum improved at The Good Guys and in New Zealand in the March quarter. Speaking at the Macquarie Australia conference on Tuesday, Mr Murray said same-store sales at JB Hi-Fi Australia stores rose 1.5 per cent in the March quarter (Easter adjusted). This was in line with growth in the December-half but less than half the rate of growth (4.3 per cent) in the previous corresponding period as customers cut back on discretionary spending.
Total sales at JB Hi-Fi’s Australian stores for the year to date rose 4.1 per cent, compared with 9.8 per cent in the same period last year. In New Zealand, same-store sales rose 4.6 per cent, up from 4.1 per cent in the December-half and a big improvement on the 0.6 per cent decline in the same period last year,
Nine Entertainment said it has sold its regional newspaper and publishing business to former Domain chief executive Antony Catalano for up to $125 million. The newspapers are part of a package that Fairfax had acquired in 2006 for $2.8 billion, a clear sign of how newspapers have fallen in value. Australian Community Media, which Nine inherited when it merged with Fairfax Media in December 2018, includes titles such as The Canberra Times, The Newcastle Herald and Illawarra Mercury. Mr Catalano, with backing from billionaire investor Alex Waislitz’s Thorney Investment Group, will pay $115 million for the business.
Nine is also set to receive up to $10 million of advertising on ACM properties in the three years following completion of the deal. There are about 170 titles in ACM’s regional portfolio, including agricultural titles such as The Land, Stock and Land and Queensland Country Life.
Oil refiner Viva Energy has issued its third profit warning in five months, advising of a hit to its retail earnings of up to $35 million in the first four months of the year because of squeezed margins on sales of petrol and diesel. Viva said trading conditions this year have been “challenging” due to recent sharp increases in the oil price, which have put pressure on retail fuel margins. As a result, underlying earnings before interest, tax, depreciation and amortisation for Viva’s retail business have been reduced by $30 million to $35 million in the January-April period compared with expectations.
Virgin Australia has confirmed it will defer taking delivery of its first Boeing 737 MAX aircraft, from November 2019 to July 2021, due to safety concerns. Aside from deferring the first delivery, Virgin is shifting its order to more 737 MAX 10s and less MAX 8s Virgin says, “We will not introduce any new aircraft to the fleet unless we are completely satisfied with its safety” This follows last month’s Ethiopian Airlines crash and the Lion Air crash in October 2018— which involved Boeing’s 737 MAX planes crashing shortly after take-off and killing hundreds of people on both flights.
Like your job? Sadly it could be automated sooner than you think, according to a new Organisation for Economic Co-operation and Development (OECD) report. About 36% of Aussie jobs could soon be handled by machines, and 14% could disappear altogether in 15 years. The report also found Australia has one of the highest rates of casual workers in the OECD, offering little stability. The report’s release comes amid a debate about wages growth and job insecurity during the federal election campaign.
And that’s it for this week. And next week I’ll be talking to Tom Uhlhorn, who runs the Melbourne based Customer Experience consultancy Tiny CX. It has launched the first practical online CX course, known as the CX Academy.
And I’ll be talking to CommSec economist Craig James looking at what’s ahead for the markets next week.
And of course, I’ll be bringing you all the week’s news. In the meantime, you can find me on Twitter at talkingbizz, on Facebook and on LinkedIn. And if you want, leave a comment. Have a great week, take care, be good and looking forward to bringing you Talking Business next week.