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 thirteen in our series for 2019 and today’s date is Friday, April 26.
First, I have a terrific interview with Fiona Reynolds, the CEO of PRI, the Principles of Responsible Investment. We’ll be talking about what businesses should be doing about climate change. And then I’ll be interviewing economist Nicholas Gruen.
But first, let’s talk to Fiona Reynolds.
Australian inflationary pressures weakened further in the March quarter, increasing the odds the Reserve Bank of Australia (RBA) will cut official interest rates in the months ahead. According to the Australian Bureau of Statistics (ABS), headline consumer price inflation (CPI) was unchanged in the three months to March, coming in zero per cent. This saw the annual increase slow sharply to just 1.3%. Markets had been expecting a quarterly increase of 0.2% and year-ended rate of 1.5%.
Prime Minister Scott Morrison has given an election pledge to help create 25.000 jobs next five years with an equity plan to help existing small and medium-sized businesses through an Australian Business Growth Fund. This will involve the government partnering with banks and providing small and medium business owners with equity needed for expansion without forcing them to give up control. Based on similar funds operating out of the United Kingdom and Canada, it will be seeded with $100 million of government money.
The tussle for Nine’s regional publishing business is set to be played out between private equity firms Anchorage Capital Partners and Allegro Funds, and former Domain chief executive Antony Catalano. Sources close to the sale of Australian Community Media (ACM), which includes Illawarra Mercury and The Canberra Times, said there is a high probability final bids from each of the three potential buyers will be lodged by the Wednesday deadline. Speculation also abounds that a third private equity firm may enter the fray. Sources said the importance of regional titles to their respective communities and the demand for hyper-local news across different publishing platforms made ACM attractive. Former Domain chief executive Antony Catalano is one of the interested parties looking at bidding for ACM. Wayne Taylor However the three bidders have been throwing plenty of questions at Nine about the regional business, which it inherited as part of its $4 billion merger with Fairfax Media in December 2018. Nine, publisher of The Australian Financial Review, declined to comment. Mr Catalano’s bid is backed by Rich Lister and Thorney Assest Management billionaire Alex Waislitz. He is being advised by law firm Arnold Bloch Leibler and accounting and consultancy firm PricewaterhouseCoopers. Anchorage has enlisted the help of former ACM director John Angilley for advice and Allegro brought in former Seven West Media chief operating officer and Bauer Media chief executive Nick Chan. The three bidders have been working with Nine and its advisor on the sale Macquarie for a number of weeks including over the Easter long weekend. Former BRW chief executive and managing director of The Age Stuart Simson had previously shown an interest in the regional publishing portfolio.
Online retailer Kogan has unveiled solid March quarter sales growth and plans to sell cars alongside household goods, mobile phones, insurance, broadband and travel. Revenues rose 9.5% in the March quarter after soaring 46.1% in the year-ago period. No dollar values were provided. Gross transaction values, including sales through the new Kogan Marketplace, Kogan Mobile, Kogan Internet, Kogan Insurance and Kogan Travel, rose 17.5 per cent. Earnings before interest, tax, depreciation and amortisation for the quarter jumped 96%, taking EBITDA growth for the nine months ending March to 15%. Active customer numbers rose 23% to 1.59 million, buoyed by the launch of the online marketplace during the March quarter and new verticals last year.
Two freak weather events in Sydney and Townsville over the summer cost the Australian insurance industry a total of $2.4 billion in claims, the Insurance Council of Australia has revealed. A severe hailstorm in Sydney on December, which prompted the Insurance Council to declare a catastrophe, prompted $1.271 billion worth of claims. The devastating February floods in Townsville, meanwhile, have so far resulted in 27,355 claims worth $1.132 billion, the Insurance Council said, bringing total losses from both events to $2.4 billion. The cost of these two disasters dwarfed the costs of the bushfires in Victoria’s Bunyip State Park, which the Insurance Council said resulted in $19.6 million in insurance losses from 365 claims. Almost 95,000 motor vehicles were damaged or destroyed in the December hailstorm, while insurers received tens of thousands home and contents claims, with damage to roofs, guttering and walls the most common causes. The potential insurance costs of the hailstorm were immediately apparent to insurers, who within hours had declared the event the “costliest of the year”. Suncorp and IAG each gave it special attention in their half-year results in February. IAG said insurance margins fell 4.3 percentage points to 13.7%, largely as a result of a spike in claims following the Sydney hail storm. As of February, the costs of the storm came in at $110 million above IAG’s natural hazards allowance. The hailstorm also contributed to Suncorp’s exceeding its natural hazards allowance for the period, prompting the Queensland-based insurer to put aside an additional $100 million for the next financial year and buy an additional $200 million in reinsurance.
Financial services giant Macquarie Group is preparing to enter the telecommunications market with the launch of the mobile business, in a surprise move likely to ramp-up competition in an already fiercely competitive sector. The new business, called Nu Mobile, will specialise in mobile phone plans that are bundled with used handsets. The model, which is cheaper than buying new smartphones on a plan, is popular in the United States but is yet to take off in Australia. Nu Mobile will not own its own mobile infrastructure, instead of reselling access to Telstra’s mobile network. That will class it as a mobile virtual network operator, putting it in the same category as players such as Amaysim, TPG. Vocus and Kogan, in a $750 million-a-year market. But unlike its MVNO competitors, which increasingly have favoured the SIM-only model, Nu Mobile will only sell mobile plans bundled with used smartphones. Macquarie already leases more than a million smartphones to mobile retailers, which lease them on to customers. The terms of these leases require customers to return the phones after one or two years, meaning Macquarie already owns a large number of used smartphones.
GrainCorp is headed for loss-making territory on its core business as it pushes ahead with plans to demerge highly valuable global malting assets to create a big new ASX-listed agribusiness. The company, which remains the target of a stalled $3.3 billion takeover bid from Tony Shepherd-led Long Term Assets Partners, said on Thursday its grains business had taken a big hit from international trade tensions and continuing drought in eastern Australia. It warned investors that the grains division was likely to suffer a $40 million blow in terms of earnings before interest, taxation, depreciation and amortisation for the half year to March 31. GrainCorp did not give earnings guidance for the division but analysts said it appeared headed for a substantial loss, which will add to concerns about the outlook for what remains of the company following any spin-off or sale of the malt business. The grains divisions contributed $68 million to full-year EBITDA in 2017-18, down from $206 million the previous year. The 2017-18 results reflected drought on the east coast but conditions have become much worse over the past year in terms of grain production.
Amcor is poised to offload $300 million worth of packaging assets in the United States to Tekni-Plex Inc. It’s expected the deal should placate US competition regulators and pave the way for a clear run towards the shareholder meetings on May 2 and the completion of the $9 billion Bemis acquisition by May 15. The transaction involves the sale of healthcare packaging plants in Milwaukee in Wisconsin, Ashland in Massachusetts and part of a plant in Madison in Wisconsin. All up the businesses being divested generate revenues of about $US100 million.
And that’s it for this week. And next week I have a fantastic interview with 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 e-commerce 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 e-commerce 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 latest unemployment figures and the country’s CPI.
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.