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Monthly Archives: March 2019

Joint Australian, NZ currency rejected

‘The much smaller size of NZ’s economy means it would probably be hitching itself to the stronger Aussie dollar.’A CURRENCY union between Australia and New Zealand has been rejected by top economic think tanks in both countries, with Europe’s woes with the euro weighing heavily on the proposal.
Nanjing Night Net

For decades a shared currency has been floated by economists as one way of reducing business costs and boosting trans-Tasman trade and investment. The ”Anzac” was suggested as a name.

A joint discussion paper from the productivity commissions of Australia and NZ will dismiss the proposal today. It says that without political integration, the move would give each country less flexibility in managing its economy.

Monetary union would require interest rates to be the same in both countries, giving them less room to respond to local economic conditions. Currencies also tend to act as ”shock absorbers” for economies, by falling in times of weakness, which helps to make exporters more competitive.

But the much smaller size of NZ’s economy means it would probably be hitching itself to the stronger Aussie dollar.

While the paper conceded trade may be increased by a common currency, it added: ”Monetary unions also entail some risks. They imply a loss of autonomy over monetary policy and exchange rate flexibility, which are important tools for macroeconomic stability. There are few instances where monetary union has worked effectively without some degree of political union.”

The proposal for a single currency was examined as part of an inquiry into how to deepen economic relations between Australia and NZ.

This story Administrator ready to work first appeared on Nanjing Night Net.

Chief executives find bonuses a bit skimpy

CASH bonuses for the heads of Australia’s biggest companies have fallen to levels not seen before the financial crisis as profits and share prices have come under pressure.
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The latest annual remuneration report by the Australian Council of Superannuation Investors, showed average bonus payments of $1.25 million last year were down to their lowest level since 2004. The bonus payments were 20 per cent below the previous year.

The ACSI report, to be released today shows the fixed pay of chief executives in Australia’s top 100 listed companies held steady in 2011.

Overall, the average cash pay for a top-100 CEO declined 8.9 per cent from 2010 levels to $3.05 million, reflecting the fall in bonus sizes.

ACSI chief executive Ann Byrne said a more mature conversation on executive pay was taking place between boards and investors.

”It is clear that directors began listening to shareholder views on bonus sizes during 2011 and began making the adjustments that have continued into the first part of 2012,” she said yesterday.

Even so, about 90 per cent of chief executives still received some form of bonus payments over their fixed pay cheque, she noted.

The analysis of remuneration for nation’s top 200 companies by ACSI, which advises the nation’s biggest superannuation funds, throws new light on how much our corporate leaders are really paid.

It shows the pay gap between what is reported in company disclosures and what chief executives often end up taking home. BHP Billiton’s Marius Kloppers was last year paid $11.08 million, but his realised pay was $17.3 million, the ACSI report shows.

Minimum disclosures often fail to take into account the upside chief executives often receive from additional packages such as deferred bonus shares or cashing in on options, which is a right to acquire shares in a company often at a heavily discounted price.

This story Administrator ready to work first appeared on Nanjing Night Net.

Leighton jumps after takeover talk

RUMOURS about a potential takeover saw Leighton shares jump more than 8 per cent to close $1.32 higher at $17.05 yesterday, along with confirmation its desalination plant is now producing drinking water.
Nanjing Night Net

News that a French construction company could be interested in Hochtief’s Australian asset, Leighton Holdings, and a large late trade on Friday afternoon sent investors with short positions scrambling to cover themselves.

A Financial Times Deutschland interview with Xavier Huillard, chief executive of Vinci, revealed ”mergers and acquisitions are in [Vinci’s] genes” and that he finds Australia an ”interesting market”.

He agreed Vinci could be interested in particular activities of debt-laden Spanish firm ACS, which is the biggest shareholder in Hochtief, which owns 54 per cent of Leighton Holdings.

However, Vinci also likes to have full control of its investments, Mr Huillard said, and with Leighton’s complex ownership structure it would not have full control of the Australian company.

Leighton spokesman Justin Grogan said: ”We have no comment to make on the rumour which is a matter of speculation about our major shareholder and their major shareholder.”

A more likely explanation for yesterday’s 8.4 per cent jump against a market that closed 0.3 per cent higher was investors covering their short positions at the ”sniff of a takeover”, according to Commonwealth Bank equity analyst Ben Brownette.

”When you see that kind of volume go through a stock in that circumstance it would appear to be short covering,” he said.

Investors with short positions purchase shares when they believe the share price has bottomed.

Mr Brownette added that talk of Leighton as an acquisition target demonstrates how attractive the company’s geographical footprint across Australia and Asia is to global construction firms and illustrates how undervalued the stock is.

Leighton Holdings yesterday also revealed drinking water has been flowing for seven days from one of three streams at the desalination plant being built by its subsidiary Thiess in Victoria’s south-east. It made the announcement after construction partner Suez Environment put out a similar one on Friday afternoon.

However, the consortium – dubbed AquaSure – will still be denied revenue of $1.8 million per day from the Victorian government until it is operating at full capacity. Leighton has already flagged a $106 million hit to this year’s earnings because of delays at the plant.

”Under the contract, as per most public-private partnership contracts, payments do not commence until project milestones are met,” a spokeswoman for Water Minister Peter Walsh said.

”The current work program has the plant being finished by February 2013. The full payment of the holding charge of $654 million per annum will commence at that time.”

This story Administrator ready to work first appeared on Nanjing Night Net.

Twiggy shaken by the wind in resources sector

THE Lord giveth, the Lord taketh away. Well, some of the time.
Nanjing Night Net

As the great iron ore truck in the sky prepares to unload on Twiggy Forrest’s Fortescue Metals, it’s good to know that even when you’re faced with selling a few assets to keep the banks happy there’s still a payday to look forward to.

Particularly given that Twiggy owns a great swath of Fortescue stock.

Twiggy’s wealth took a hit in the hundreds of millions last week as iron ore prices – and Fortescue’s share price, to which Twiggy’s wealth is inextricably linked – tumbled and concerns were raised about Fortescue’s ability to service its debt.

Twiggy spent about $38 million increasing his stake before the share price was mauled last week as iron ore prices slumped, leading to unpleasant talk about the need to raise capital if those lenders of the odd billion in debt don’t like it.

One can only wonder if an equity raising were to eventuate – and Citi analysts suggest a $500 million capital raising may be necessary – whether Twiggy might use any of the $41 million dividend he will receive to tip into a raising.

Or whether it’s best to hang onto what he still has while he’s got it.

What disclosure?

WHEN Aquila Resources 2011 full-year results were released, the coal and iron ore explorer’s executive pay restraint looked admirable.

In a year when the company reported a near doubling of an annual loss to $64.5 million, Aquila told shareholders that executive chairman and CEO Tony Poli’s salary rose just $14,500 to $572,000. Turns out Tony did a bit better than that, pocketing another $169.4 million. Easy mistake to make.

As the Australian Council of Super Investors pointed out yesterday, Poli had the largest gap between realised pay and reported pay in its latest report card on CEO remuneration on the back of a tidy gain on an exercise of options granted in 2005.

”In December 2010 he exercised 5 million options approved at the 2005 AGM with an exercise price of $4 each and received 19.2 million shares in exchange for a total value at the time of exercise of $169.36 million,” ACSI points out.

There’s no suggestion Aquila has under-reported Poli’s remuneration. We’d hate to appear presumptuous but perhaps the corporate plod might look at pay disclosure requirements.

Note of distinction

A NOTE from the corporate plod straight from the ”we don’t know whether to laugh or cry” files has come to our attention.

The watch-puppy has reminded financial market players of the difference between buffer money and client money. Specifically, it pointed out that ”buffer money is not client money”.

We’d hate to think that means those wearing smart suits and ties at the pointy end of town are having trouble figuring out the subtle difference between what is their money and what is yours.

Market participants regularly deal with large amounts of money relating to financial products on behalf of clients, the Australian Securities and Investments Commission explained. They are required to hold client money in trust accounts for investors who pay them to trade in financial products on their behalf.

”Buffer money is the term used to describe money added by a market participant to the trust account to ensure that the client money trust account has adequate funding,” the plod intoned.

Having pointed out the basic difference, ASIC goes on: ”Buffer money is not client money, as it does not fall within the client money definition in … the Corporations Act, and cannot be considered to be money for the purposes of a client money trust account.”

ASIC adds that the practice of depositing buffer money in a client money trust account is not permitted.

We suspect it’s trying to point out it’s not a good look to use client money to meet funding levels.

Disparate interests

ALIGNING shareholder and management interests may not be easy, but for shareholders at AGL, the contrast is stark enough.

Earnings per share slumped to 24¢ in the year to June from 118.5¢, but that didn’t stop directors giving chief executive Michael Fraser a hefty pay rise – he took home $6.3 million, up from $3.4 million a year earlier.

Still, even using the company’s reckoning of ”underlying” earnings per share of 100¢ for the latest year, up from 91.4¢ a year earlier, Fraser has done very well for himself, although perhaps the proof of the pudding will be in the eating, with the key to shareholders’ prospects lying with the purchase for about $450 million (plus a rather large lump of debt) of Loy Yang A during the year.

Tide’s out

WATCH this space: Steve van Barneveld, boss of Nathan Tinkler’s Hunter Ports, quit last Monday as a director of another Tinkler entity, Ocean Street Holdings, just as it squared off against Mirvac over a small matter of about $17 million it owes the developer for an unfinished property transaction, by order of the Supreme Court.

Van Barneveld’s resignation was effective immediately.

It will be interesting, when the matter reconvenes for a directions hearing in the New South Wales Land and Environment Court this morning, what new evidence Ocean Street seeks to bring as to why it should not have to abide by the umpire’s decision.

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This story Administrator ready to work first appeared on Nanjing Night Net.