Twitter has laid off at least 200 more workers. The platform now employs less than 2,000, down from 7500 when Elon Musk took over.
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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 05 in our series for 2023 and today’s date is Friday March 3
Today. I’ll be talking to Dan Frechtling from Boltive about the convoluted digital ad ecosystem. And I’ll be taking to AMP Capital chief economist Shane Oliver about the reporting season.
But now, let’s talk to Dan Frechtling.
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So what’s happening in the news?
Twitter’s massive job cuts continued this weekend, as the company cut about 10% of its remaining staff. The latest axing of about 200 jobs takes the company’s headcount down to under 2000 staffers. That’s down from the 7500 who worked for the social media platform before Elon Musk bought the company for $US44 billion. The cuts hit product managers, data scientists and engineers who worked on machine learning and site reliability, which helps keep Twitter’s various features online. The “monetization infrastructure team,” which maintains the services through which Twitter makes money, was reduced to fewer than eight people from 30. Twitter has been losing advertisers since Musk took over. Ad revenue had been responsible for more than 90% of company revenue. Musk’s plans to raise revenue directly from Twitter users by selling verification of accounts has thus far not worked as planned.
Australia’s economy slowed 0.5% in the December quarter, compared with 0.7% in the previous quarter, under forecasts of 0.8%, as inflation and higher interest rate cooled demand, data from the Australian Bureau of Statistics on Wednesday showed. Annual gross domestic product (GDP) grew 2.7%, in line with expectations. While household spending continued to rise at the end of last year, the growth rate has started to slow in the face of rising interest rates and high inflation.
Australia’s retail sales rose just 1.9% in January from December, when they dived 4.0%. Sales of $35.1 billion were 7.5% higher than a year earlier.
Australian Prime Minister Anthony Albanese called on the country’s big banks to boost deposit rates for savers amid concerns rate hikes are only being passed on in full for borrowers. “It is completely unacceptable,” Albanese said in a TV interview on Flashpoint WA broadcast Sunday. “The banks need to get their act together.” Albanese said the government had communicated its concerns “very loudly and I’m doing that again now.” The country’s competition watchdog this month launched an inquiry into the issue, saying increases on interests rates for deposits had been “smaller and less consistent” than those applied to mortgages. In an attempt to quell inflation running at a three-decade high of 7.8%, the Reserve Bank of Australia has raised rates by 3.25 percentage points since May and said more hikes are likely needed. This means that people in Australia — one of the world’s most heavily indebted nations — are being squeezed on two fronts. For Albanese, the challenge is trying to manage the political fallout and reassure a nervous electorate.
Treasurer Jim Chalmers will double the tax rates paid by Australians with superannuation account balances worth more than $3 million, in a move he says is about budget sustainability and equity. There has been an escalating war of words between Labor and the Coalition in the past week as the treasurer has continued what he is calling a national conversation on tax breaks paid to fewer than 0.5% of superannuation accounts. Mr Chalmers said currently earnings from superannuation in the accumulation phase are taxed at a concessional rate of up to 15% and that this will continue for all superannuation accounts with balances below $3 million. However, 2025-26, the concessional tax rate applied to future earnings for balances above $3 million will be 30%. “This is expected to apply to around 80,000 people, and they will continue to benefit from more generous tax breaks on earnings from the $3 million below the threshold,” Mr Chalmers said.
EnergyAustralia will bring forward $400 million of maintenance work at its Yallourn coal-fired power station in Victoria as it attempts to arrest deteriorating profitability at the plant that contributed to a $HK5.3 billion ($A1 billion) full-year loss. The heavy operating deficit for the year ended December 31 compared with a loss of $HK83 million a year earlier and came in what its Hong Kong-listed parent company CLP Group described as “unprecedented conditions”, which included a suspension of the National Electricity Market last June. The result completes a challenging reporting period for Australia’s biggest energy retailers, which are being squeezed by soaring fuel costs, plant outages and regulated tariffs. Both EnergyAustralia’s biggest rivals, AGL Energy and Origin Energy, posted weaker-than-expected results for the December half, with AGL slumping to a bottom-line loss of more than $1 billion. Melbourne-based EnergyAustralia, Australia’s third-biggest retailer of power and gas, said it will close down each of the four units at Yallourn in turn to address the root causes of forced outages at the 1480-megawatt generator last year.
A major supplier to Australia’s biggest supermarkets has been plunged into receivership, putting 1500 jobs at risk and threatening the delivery of food supplies. One of the country’s biggest trucking companies, Scott’s Refrigerated Logistics supplies all major supermarkets, including Woolworths, Coles, IGA and Aldi, as well as Foodbank Australia. It is understood the company has engaged in high-level talks with grocery executives about its collapse. While the company’s trucks will keep delivering food to supermarkets for now, supplies could be put at risk if a rescue deal cannot be hatched. It is hoped a buyer can be found for the business, which employs 1500 staff plus subcontractors and has 24 cold storage warehouses in all mainland states. It is understood supermarkets are engaged closely in the process to keep stock flowing.
Bunnings will launch a new and expanded pets offer next month that will see the biggest single category expansion by the hardware retailer in two decades as it makes a play for the fast-growing pet care and products sector that is worth as much as $10bn. The hardware giant has begun fitting out its national network of stores to carry a much stronger and hugely expanded pets range, which will take up a large space within the traditional Bunnings store and be rolled out through most of its operations by the end of March. Its push into petcare goods, from cages and enclosures to rugs and pet food, will cash in on soaring pet ownership levels in Australia since the Covid-19 lockdowns, with pet owners increasingly spending more money on their animal companions to make them often the most spoiled members of the family.
Qantas has appointed former Air New Zealand executive Cam Wallace to lead its international business, creating a three-way race to replace chief executive Alan Joyce after his expected retirement later this year. Mr Wallace resigned from Air New Zealand, where he was chief commercial and customer officer, in 2020 to become the chief executive of MediaWorks, the owner of a network of commercial radio stations. Senior Qantas figures expect he will be a candidate to replace Mr Joyce later this year, putting him in competition with Qantas Loyalty chief executive Olivia Wirth and the airline’s chief financial officer Vanessa Hudson. Mr Wallace will take over from Qantas International and Freight’s Andrew David on July 1.
The Australian Signals Directorate could be given authority to directly commandeer the IT systems of almost every company in the country that suffers a cyberattack under reforms proposed after the Optus and Medibank hacks. This will see Anthony Albanese setting up a new agency to lead Australia’s fight against mass cyber attacks by state sponsored hackers and criminal gangs, under a seven-year strategy to strengthen defences and end blame-shifting inside government and across the private sector. Prime Minister Anthony Albanese will also announce, at an industry roundtable on Monday, the creation of a federal coordinator for cybersecurity backed by a National Office for Cyber Security within the Home Affairs department. The overhaul of Scott Morrison’s $1.7bn 10-year national cyber security strategy comes amid fears Australia’s legislative, government and private sector cyber defences are not keeping pace with fast-moving technological and geostrategic threats. The appointment of a new co-ordinator for cyber security, who will lead the National Office for Cyber Security within the Department of Home Affairs, follows Joe Biden’s establishment of a US Office of the National Cyber Director in 2021. The proposal for a controversial and dramatic potential expansion in the agency’s “step in” powers comes from an expert group established by Labor after the high-profile hacks last year. The move to sharpen bureaucratic management and the possible expansion in security agency powers in the face of attacks on companies follows frustration within the Labor government since the damaging attacks. Home Affairs and Cybersecurity Minister Clare O’Neil in October described current laws as “bloody useless” in dealing with the Optus breach of 9.8 million customers by an anonymous hacker. She subsequently tapped former Telstra boss Andy Penn alongside former Air Force chief Mel Hupfeld and head of the Cyber Security Cooperative Research Centre Rachael Falk to come up with potential solutions. Speaking on Monday as she releases Mr Penn’s discussion paper, Ms O’Neil will say the case for change is clear.
Profit margins of Australian companies are starting to come under pressure as central banks become more hawkish in their attempts to curb persistent inflation, according to Goldman Sachs. The investment bank said while the ASX 200 has notched up 12% earnings growth in the half-year reporting season, companies reported more misses than usual, with 49% reporting lower-than-expected margins. Soaring input costs are beginning to peak as pandemic-fuelled supply chain crunches ease and commodity prices fall. But wages remain high amid an ongoing labour shortage, hindering the ability of some companies to undertake projects, particularly in the mining and construction sectors, Goldman Sachs analyst Matthew Ross said.
Department store Myer Holdings is due to report its half-year results next week and major shareholder Solomon Lew’s Premier Investments has upped its stake just in time. He has made it difficult for any rival suitor to step in, with his retail powerhouse buying another 3% stake in his long held target, boosting his stake to nearly 26%, up from 22.87%. Mr Lew’s Premier is allowed to “creep” by buying up to 3% of the target’s shares every six months.
Australia’s love affair with rooftop solar has unseated all other forms of generation, paving the way for solar to become the nation’s largest power source when Liddell goes offline next month. Households have taken up rooftop solar at a rising rate since 2008, as panels became cheaper and governments rolled out subsidies to curb electricity bills and cut the reliance on coal generation in the power grid. Installed rooftop capacity cruised past 3.4 million homes and businesses in February, with users seeking relief from the East Coast electricity market crunch driven by the global energy crisis. The new analysis by solar industry consultancy SunWiz shows the 20 gigawatts (20,000 MW) in the market is set to overtake coal generation capacity in April, when AGL’s ageing coal-fired power station, Liddell, permanently shuts down its turbines.
And the profit reporting season continues. Woodside’s Core net profit, the figure most closely watched by the market, jumped to $US5.23 billion in the year ended December 31, up 223% from 2021 but shy of the market consensus. Bottom-line profit rose 228% to $US6.5 billion on sales that increased 142% to $US16.8 billion. Furniture giant Harvey Norman said its profit before tax slipped 11.7% to $430.7 million for the six months to December 31. Biotechnology company Mesoblast reported its revenue at $US3.6 million ($AU5.6 million), a 39.2% decline in its half-year results. It reported a net loss of $US41.4 million, a 14.,9% improvement compared to the prior corresponding period. Payments company Tyro has reported a statutory profit for the first time since 2015, delivering a 106% increase in its interim profit to $1.1 million. Data centre business NextDC has swung to a net loss of $2.8 million for the six months to December 31, versus a profit of $10.2 million in the prior corresponding six-month period. Bookmaker PointsBet has seen its interim statutory loss deepen 22% to $178.2 million. Normalised losses fell to $163 million. Buy now, pay later junior Sezzle has trimmed its net loss to $US39.3 million on revenue that climbed 9.4% to $US125.6 million for the year to December 31. Cognitive therapy business Cogstate has posted an operating cash loss of $US200,000 as sales fell to $US19.5 million ($28.9 million) for the six months ending December 31.Droneshield reported an after tax loss of $949,000, down 82% from the losses posted in 202. Downer reported a $68.1 million of profit – a 20.3% fall on that of the prior comparable period (pcp). Kogan reported a statutory loss after tax of $23.8 million and an adjusted loss after tax of $9.6 million. TPG Telecom reported $2.1 billion of earnings before tax, depreciation and amortisation – a 23.6% increase. Dicker Data earnings before interest, tax, depreciation and amortisation (EBITDA) is up 9.4% to $129.8 million. Lynas Rare Earths earnings before interest, tax, depreciation and amortisation (EBITDA) were flat at $189 million. Adore Beauty posted a $90,000 loss, (down by 105% from the $1.97m profit in 1H 2022).and detailed $93.6 million of revenue – down 17% on that of the prior comparable period. City Chic Collective posted a $3.4 million loss and a statutory net loss after tax of $27.2 million. Aussie Broadband posted a $8.6 million net profit after tax – a 516% jump on that of the prior comparable period (pcp). Praemium reported a 17% increase in revenue to $35.4 million and a 52% jump in EBITDA to $11.4 million. Appen reported an underlying net loss after tax of US$22.8 million. Cromwell Property Group posted a HY loss after tax of A$129.5 MILLION versus a profit of A$132.5 MILLION. Pathology and medical imaging company Healius suffered a statutory net loss of $28.7 million in the six months ended December 31, compared with a $233.2 million net profit in the year-earlier period. Interim underlying profit fell to $8.1 million from the year-earlier $244 million. Adbri on Tuesday reported a 12..1% decline in net profit for the 12 months to December, dropping to $102.6m as the company. Struggling retailer Booktopia posted a $3.9m loss. Cooper Energy’s interim after-tax loss was $6.3m. Liberty Financial Group’s financial assets increased by 6% to $13.2 billion and its statutory NPAT fell to $104 million, as a result of not passing all costs of funding increases to customers. The group’s underlying NPATA, meanwhile, was at $104.8 million, after removing non-recurring items. Invocare posted a 12% increase in revenue but a loss of $1.8 million. Yancoal’s profit after tax was A$3.59 billion ($2.41 billion) for the year ended Dec. 31, 2022, a five-fold increase A$791 million a year earlier. Stanmore said net profits for the year ended December 31 totalled $US727 million ($1.08 billion), up from just $US7 million reported by the mining company a year earlier. Medical company Nove Eye reported its half-year loss had widened 115% to $6.6 million. Software company Limeade reported a profit loss of $13.2 million, a 33% increase in its full-year financial results. Online retailer Harris Technology reported a profit loss at $2 million, a 632% increase in its half-year results.
And that’s it for this week. And next week, I’ll be talking to Andy Squires, the CEO of Securely, the app that provides tradies and subcontractors with a payment platform. And I’ll be talking to economist Nicholas Gruen about how the RBA can control inflation without rate rises.
This show was brought to you by Multi-Award Winning Law firm McDonald Legal, experts in the areas of Dispute Resolution and Commercial and Property Law. For a free consultation on your legal matter, McDonald Legal can be reached on 03 9070 1107 or by visiting the website www.mcdonaldlegal.com.au.
In the meantime you can catch me on Facebook, Twitter, Instagram, LinkedIn and YouTube. And if you want leave a comment. For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business on the Apple podcast store or on my website leongettler.com.
Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week.