That's all today, we'll be back tomorrow at 9am for another big earnings day. Stay tuned.
We'll be posting the evening wrap of today's session shortly.
Ahead of tomorrow's CBA full-year earnings report, here are five key points to look out for:
- Dividends: Last year the CBA paid a final dividend of $2.00 a share. Analysts reckon this will increase to at least $2.14. But some some caution that CBA may resist super-sizing its dividend because it is facing pressure to set aside more capital, rather than return it to shareholders.
- Capital: Capital is the buffer banks keep to help them absorb losses, and banks have already set aside billions more of it since the global financial crisis. But they are facing pressure to set aside even more to ensure the financial system remains stable, with last month's financial system inquiry raising this as one policy option. CBA's ratio of tier-one capital to assets was 8.5 per cent in the latest half. The market will be keen to know what ratio it is targeting, because this could affect future dividend payouts.
- Bad debts: A significant reason bank earnings have grown so strongly in a weak economy is the fall in bad and doubtful debts, which are at historic lows. Investors will be closely watching whether this trend has continued. Six months ago Commonwealth Bank reported that impaired assets were 0.16 per cent of its total assets, which is slightly higher than Westpac, its closest peer. Macquarie analyst Mike Wiblin points out that CBA has been more conservative than some rivals on this front, suggesting its bad debts could fall even further. With interest rates at record lows, credit quality has remained very healthy for banks because so few borrowers are defaulting.
- Margins: Banks are competing fiercely to win new mortgage customers by offering competitive interest rates. There is a chance this competition will squeeze net interest margins - banks' cost of funds versus what they charge for loans. In the latest half, CBA's net interest margin declined by 3 basis points to 2.14 per cent, and competition has continued since then. At the same time, however, CBA has benefited from lower funding costs. The question is whether lower funding costs are offsetting the impact of competition.
- The financial planning scandal: Any further detail on the impact of the scandal in CBA's planning arm would be closely watched. So far, the bank has paid out $52 million in compensation, and has not said how much more it expects to pay. Macquarie's Wiblin says any further disclosure of the scandal's impact, if any, will be a key focus for investors. The chair of a scathing Senate inquiry into the scandal, Mark Bishop, has estimated the total compensation bill could be $250 million, but the bank argues it is very hard to quantify its exposure.
Here are today's best and worst performers among the top 200 stocks:
While the local market rallied, other bourses posted smaller gains or are trading lower.
Japan's Nikkei extended its recovery, rising 0.2 per cent to 15,161.31, after Monday's 2.3 per cent rally.
In Hong Kong, the Hang Seng is down 0.2 per cent, Korea's Kospi has added 0.1 per cent, the Shanghai Composite has slipped 0.4 per cent and Singapore's Straits Times Index is up 0.1 per cent.
The sharemarket has closed with strong gains, fuelled by the banks ahead of CBA's earnings report tomorrow morning and a rally in Domino's.
The benchmark S&P/ASX200 jumped 73.3 points, or 1.3 per cent, to 5530.3, while the broader All Ords gained 73.7 points, or 1.4 per cent, to 5523.1.
Among the sectors, financials and materials both added 1.4 per cent, while industrials rose 1.8 per cent.
With a series of hopeful education providers lining up to list on the ASX like school children outside an exam room, the question must be asked: Do they represent an opportunity for private investors to take advantage of shifting trends in the employment and education spheres or are they simply the result of opportunistic private owners seeking to make a timely exit?
The sector is distorted by government funding, the whims of international students (and their fee-paying parents), widely varying levels of quality and a tendency for some to grow by simply gobbling up competitors.
All the while, the prospect of cheaper education online is challenging institutions at all levels around the world, from universities with more than one hundred years of history to pop-up operators offering courses of questionable merit.
Education providers have long been under-represented on the ASX when compared with global peers. There are only 11 stocks that could be classified as “education services” with a combined market cap of about $3 billion.
The sector is also highly concentrated, with a single firm, Navitas, valued at about two-thirds of the total education market cap. Another company, the recently listed Vocation, accounts for 10 per cent of the market with the rest falling into the “rats and mice” category.
But a rash of recent education company listings, and rumours of several more to come, indicate growing investor demand in the sector.
As well as Vocation, which listed last December, New Zealand-based firm Intueri joined the ASX boards this May, while online education specialist 3P Learning was admitted in July.
An inquiry into the financial system describes why competition between superannuation funds isn't working. Ross Gittins comments in this video:
Gittins: high superannuation fees
An inquiry into the financial system describes why competition between superannuation funds isn't working. Ross Gittins comments.PT3M25S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-3dkgf 620 349 August 12, 2014
While equities are on the move, the concern at the moment is the fact that major forex pairs and assets such as gold remain relatively sidelined, says IG's Stan Shamu:
- This shows there is still a great deal of uncertainty as far as sentiment is concerned. Yesterday I highlighted there is a risk that equities could be sold into strength in the near term.
- It has been a quiet session on the Asian economic calendar, but tomorrow we get some key data out of China and Japan. Perhaps this is driving the cautious tone in those markets. In China we get industrial production, fixed asset investment and retail sales, whilst in Japan we have GDP and minutes.
- The ASX 200 has outperformed the region today, with the banks really ramping up heading into CBA’s full-year results. All the big banks have posted gains of at least 1% and this has driven the local market’s gains.
- We finally received some positive local data today which has contributed towards the banking gains we are seeing. The NAB business confidence and conditions surveys showed a strong bounce from the previous month. The house price index also showed a much better-than-expected 1.8% reading, beating estimates of around 1% growth.
Domino’s has highlighted the rewards on offer for companies investing against the economic cycle with a blistering earnings outlook that has sent its shares just shy of a fresh record high.
Worryingly for investors, stocks such as Domino’s are rare finds. Of the consumer stocks to update the market so far, strong profits from Domino’s Pizza are countered by weakness in tablet sales at JB Hi-Fi, reduced profit at Wotif, and missed targets within Woolworths’ hardware arm.
Early Domino’s investor Tim Samway of Hyperion Asset Management characterised the company as “a very specific story, so I don’t think you can just translate it across consumers”.
“We look at Domino’s as a long-term roll-out story that’s combined with their clever use of technology that has improved their efficiencies. It’s not just a pizza shop. If you think it’s a pizza shop investors have missed the point,” he says.
Samway identifies REA Group as another company going up against a soft economy and recording consistent earnings growth.
“Look at REA, there’s a company delivering substantial growth and it has been for years against a headwind of a sluggish housing market.”
However, investors did not respond to REA’s profit on Friday with the same enthusiasm as they did Domino’s.
REA shares fell 8.7 per cent on the day, from $46.83 to $42.78, but have recovered almost all of that loss since to trade at $44.92 apiece today.
Iron ore futures in China have dropped to their lowest in more than two weeks, reflecting sustained pressure from a well supplied market that has shaved spot prices by 29 per cent this year and stunted any recovery.
"The market is still under the shadow of oversupply," an iron ore trader in Shanghai told Reuters. "Demand is still growing but not as fast as before. That's the key issue."
The most-active January iron ore contract on the Dalian Commodity Exchange fell to
664 yuan ($US108) a tonne, its weakest since July 25, and was down nearly 1 per cent at 667 yuan by midday.
Iron ore for immediate delivery to China dropped 0.4 per cent to $US95.30 a tonne on Monday.
Chinese traders cut their offers for iron ore cargoes stocked at ports by 5-10 yuan per tonne, Steel Index said, underlining lean demand.
The benchmark spot price fell below $US100 in mid-May and has languished below that level
since, although it has rebounded from a 21-month trough of $US89 reached in June.
Morgan Stanley expects a global supply surplus of 79 million tonnes this year, 158 million tonnes in 2015 and 256 million tonnes in 2018.
"Amid uncertainty surrounding China's property market, the key steel end-use sector, as well as credit and cash restraints, steel mills will continue to be reluctant to undertake any large-scale restocking," Morgan Stanley said in a report. "As a result, upward pressure on spot iron ore prices is likely to be subdued."
Gold has extended declines from the highest level in three weeks as ebbing tensions in the Middle East and Ukraine boosted global equities, lowering demand for the metal as an alternative investment.
Gold for immediate delivery fell as much as 0.2 per cent to $US1306.48 an ounce. Approval of US air strikes in Iraq on Friday sent the metal to $US1322.76, the highest since July 18. Prices have since retreated as haven demand decreased.
Geopolitical risks in Ukraine, Iraq and Gaza helped gold rebound this year after prices lost 28 per cent in 2013 on speculation the Federal Reserve will cut stimulus.
‘‘Gold edged lower as geopolitical risks eased,’’ Howard Wen, an analyst at HSBC Securities, wrote in a note. ‘‘Bullion is weighed down by risk-on appetite as global equities rally.’’
Here's another snippet of eco data, from earlier today. While the latest business confidence reading was positive, consumer confidence declined for a second consecutive week, falling a sharp 5.7 per cent to 108.5 in the week ending August 10, according to the weekly ANZ/Roy Morgan measure. ANZ notes:
- This may reflect concerns related to the unexpected spike in the reported unemployment rate (from 6.0% to 6.4%), a fall in the Australian sharemarket and geopolitical tensions surrounding Iraq and the Ukraine.
- Confidence fell around 15% over the second half of April and May in response to negative newsflow related to the Federal budget before rebounding sharply over June and July as the ‘sticker shock’ from the Budget proved temporary. The fall last week leaves confidence back below its long run average (since 1990) and is a sizable reaction if related to the disappointing labour market data.
- Behind the fall last week was weakness in household perceptions about ‘economic conditions in a year’s time’ (-9.1%), ‘economic conditions in five years’ time’ (-8.9%) as well as ‘time to buy a major household item’ (-7.8%).
- We continue to expect that consumer spending growth will remain moderate this year, before improving next year, supported by solid fundamentals including rising house prices and an improving labour market. However, the trajectory of consumer confidence remains key for the recovery in consumer spending and we will closely monitor developments.
Wotif would face a “hard slog” in stemming a decline in its core online accommodation bookings business in the absence of an agreed $703 million takeover offer from US travel giant Expedia, says Wotif chief executive Scott Blume.
Wotif reported a 15.4 per cent fall in full-year net profit to $43.2 million, in line with its latest guidance, amid intense competition from rivals Expedia and Priceline Group in the local market.
The local online travel group reported a 10.8 per cent fall in booked room nights to 6.04 million, despite an increase in spending on marketing and technology that lowered its operating margin to 48 per cent from 54.5 per cent a year earlier.
Wotif chief executive Scott Blume said the negative booking trend, which had accelerated in the second half, had remained since the start of this year.
“I see no sign of abating in the competitive environment,” he said.
Priceline Group on Monday said its Booking.com brand was now the “largest online accommodation service in Australia.”
Blume said he suspected that was based on web traffic rather than sales, but said he couldn’t be sure.
Blume said he believed Priceline and Expedia had targeted Australia over the last few years due to the high margins available in the online travel sector. Both have spent millions of dollars on marketing to build their brands.
High costs and slowing Chinese demand growth are tipped to continue weighing on local coal operations.
The downturn in the coal mining sector may have further to run, with no upturn expected anytime soon as investment bank Citi warns of a further decline in capital spending which will pressure the near term prospects for a range of heavy engineering and mine servicing operators.
And the fall-out may be felt more keenly in Queensland where many of the planned thermal coal mines may not proceed.
In a review to clients, Citi says thermal coal prices in particular need to recover to the $US100 a tonne level if it is to help restart investment in new coal mines from the present level of around $US70, which is likely to be three to four years away.
With China signalling a shift away from coal as it seeks to improve air quality, many Australian coal exporters have indicated they intend to move their focus to India, where a new round of investment in coal-fired power stations is anticipated, as it seeks to overcome a lack of generation capacity.
"Increasing regulations and the establishment of carbon markets promise to limit the attractiveness of coal" in China, Citi told clients. "Moreover, the country is aggressively pursuing an 'everything but coal' development plan for the power sector, with rapid growth in capacity for alternative energy sources.
Even though this could see poor quality Indonesian coal dislodged from the Chinese market, high costs are a continuing penalty for Australian coal miners.
‘‘Australian producers enjoy relatively high quality thermal coal, but labour and production costs are high,’’ Citi says. ‘‘and the infrastructure requirements (port and rail) associated with touted projects would be significant.
‘‘Many of these projects would only be economic ... if there were to be the very favourable combination of higher prices, cost containment and a lower Australian dollar.’’
As a result, as much as $70 billion of uncommitted coal projects could be at risk, which will weigh on the level of overall capital spending in the broader economy.
The warning comes as the managing director of heavy engineer Bradken told securities analysts it sees no near term uplift in its coal mining revenues.
Time's up for Paul Zahra, David Jones' accidental chief executive, comments Elizabeth Knight:
A few months back David Jones boss Paul Zahra applied to his soon-to-be new South African masters at Woolworths to retain his position running David Jones, Australia’s iconic up-market department store group.
As the story goes, his application was successful.
But barely has the ink dried on the change of ownership and Zahra is leaving.
When a chief executive leaves abruptly under new ownership it is almost a given that he or she has been shown the door.
But when it comes to David Jones management recent history demonstrates clearly that conventions have been thrown out the window.
Zahra was catapulted from obscurity into running the multi-billion department store group - a move which resulted in him being dubbed the "accidental chief executive".
As predictable as frost in winter or the All Blacks taking home the Bledisloe Cup, the Commonwealth Bank is set to announce another record profit.
Analysts expect Australia’s biggest bank to announce a cash profit of around $8.7 billion in its full year results tomorrow morning, up about 11 per cent on a year ago.
‘‘One thing I can say with certainty is you’re going to see a record profit, it’s just going to happen,’’ IG market strategist Evan Lucas says.
What’s less certain, however, is how the market will react to the result for the 2013-14 financial year. While a profit increase of about 11 per cent is nothing to sneeze at, it’s well known that Commonwealth shares are a long way from cheap.
Lucas says the bank, which has a market capitalisation of around $131 billion, is currently trading at around 2.14 times the value of its assets.
‘‘That makes them well and truly the most expensive bank on the planet in terms of price-to-book and they still have a market cap that is higher than all of Germany’s banks combined,’’ he says.
But Lucas says if CBA beats analysts’ expectations, which it has a history of doing, and lifts its dividend, then its shares should rise.
‘‘If they deliver on the dividend and they deliver on the cash profit, there’s no reason why the share price won’t go up.’’
Morningstar analyst David Ellis says the bank has benefited from the growing housing market, which is likely to have boosted its loan book by about 6 per cent.
And he expects the bank’s net interest margin - how much money it makes on its loans - to have held up ok as lower funding costs offset the impact of cut-throat lending competition among the big four banks.
‘‘While there is certainly intense competition for loans, there has also been a very pleasing material easing in funding costs,’’ he says.
Shares are up 1 per cent at $81.22, but still well below the record high of $83.92 hit on July 31.
Are we being misled over house prices? the AFR's Christopher Joye asks:
Today, the Australian Bureau of Statistics published its quarterly house price index results, which showed house prices had surged 10.1 per cent over the 12 months to 30 June with values across Sydney rocketing more than 15 per cent.
But we already knew this because the most timely indices had reported their more comprehensive data through to the end of July over a month ago.
So, do we get too much house price information? Are monthly house price index releases excessively noisy and liable to mislead consumers? And how volatile is this asset class compared to other investments?
Recently Australia’s largest real estate information business – RP Data, which spends $15 million a year collecting property data – has come in for criticism over its monthly house price benchmarks.
A key source of the dispute was RP Data’s estimate of 3.7 per cent house price growth in Melbourne over the month of July, because it annualises to capital gains of 44 per cent.
“Anyone watching this space over the past few months will know that according to RP Data, the nation’s property values are bounding around like a yo-yo,” one journalist said.
This debate requires several clarifications. The first is that RP Data’s “hedonic” home value index, which is probably the most sophisticated measure of house price movements in the world (and the Reserve Bank of Australia’s index of choice), is not nearly as volatile as it seems.
The next thing to note is that the risk to which an individual home buyer is exposed is about five times greater than the indices RP Data publishes.
Put differently, when you buy a home you get one asset in one street in contrast to the circa 8 million homes that underpin RP Data’s national capital city benchmark. So whereas RP Data’s index suggested prices across the nation slumped 8 per cent over 2011 and 2012, the losses within some suburbs, and on individual homes, were much steeper than that.
Source: Rismark International, RP Data-Rismark Indices
Gains on the local market are accelerating, with the ASX200 now up 1.1 per cent.
The catalyst for the gains is, as it was yesterday, a general easing of geopolitical concerns, says CMC trader William Leys:
- Global sentiment continued to recover overnight as the conflict in the Ukraine appeared to moderate, at least temporarily. In addition, the situation in Iraq is not currently troubling markets, despite the resumption of US strikes.
- While these issues are not likely to disappear anytime soon, it seems the markets are finding some degree of acceptance, and unwinding some of the risk premium built in prices. However, whether this optimism and ‘acceptance’ will continue is probably dependant on further developments in the respective regions.
- Locally, gains are across the board. The Material, Financial and Industrial sectors have all rallied around 1%, which is a reflection of the general return to ‘risk on’ sentiment. Today’s key data drop, the NAB Business Confidence figures, has contributed to the general cheer, coming in at a read of 11, compared to last month’s read of eight.
- The one notable red spot on the heat map is Woolworths. The retailer has shed over 1% after it’s Masters stores posted larger than expected losses.
- In addition to any geopolitical developments, investors will be eyeing tomorrow’s industrial production data out of China. Those invested in the materials sector will be especially hopeful that the recent run of good Chinese data continues.
Here's an interesting lunchtime read: Inside the secretive Apple University
Apple may well be the only tech company on the planet that would dare compare itself to Picasso.
In a class at the company’s internal training program, the so-called Apple University, the instructor likened the 11 lithographs that make up Picasso’s “The Bull” to the way Apple builds its smartphones and other devices. The idea: Apple designers strive for simplicity just as Picasso eliminated details to create a great work of art.
Steve Jobs established Apple University as a way to inculcate employees into Apple’s business culture and educate them about its history, particularly as the company grew and the tech business changed. Courses are not required, only recommended, but getting new employees to enroll is rarely a problem.
Although many companies have such internal programs, sometimes referred to as indoctrination, Apple’s version is a topic of speculation and fascination in the tech world.
It is highly secretive and rarely written about, referred to briefly in the biography of Jobs by Walter Isaacson. Apple employees are discouraged from talking about the company in general, and the classes are no exception. No pictures of the classrooms have surfaced publicly. And a spokeswoman for Apple declined to make instructors available for interviews for this article.
Capital city house prices rose a stronger than expected 1.8 per cent in the June quarter, official figures show.
That followed a rise 1.5 per cent in the March quarter. In the year to June, the house price index rose 10.1 per cent, the ABS said. Economists had expected a rise of one per cent for the June quarter.
Here are the gains in the year to June:
- Sydney: +15.6%
- Melbourne: +9.3%
- Perth: +3.6%
- Brisbane: +6.8%
- Adelaide: +5.6%
- Hobart: +4.3%
- Darwin: +3.4%
- Canberra: +2.2%
Business conditions hit the highest in four years in July as firms reported a sharp pick up in sales and profitability, though many remained reluctant to hire new workers.
NAB's survey of more than 400 firms showed its index of business conditions jumped 6 points to stand at +8 in July, the highest since early 2010 and an upbeat sign for the economy in the third quarter.
The report's index of business confidence also improved, rising 3 points to +11 led by strength in home construction and retailing.
The survey's measure of sales climbed 7 points to +14, while that for profitability surged 7 points to +10. The employment index added 3 points but was still soft overall at 0.
The pick-up in activity also looked to have legs with the index of forward orders rising 4 points to +5, well above its long-run average.
"Firms still appear unfazed by the federal government's 'tough budget', possibly taking comfort in the bounce back in consumer confidence," said NAB's chief economist, Alan Oster.
"Stronger sales and profits are driving the trend, but the recovery continues to be relatively jobless with the employment index seeing more moderate gains."
The dollar rose about one-tenth of a cent to 92.62 US cents on the back of the survey.
Wilson HTM Investment Group has confirmed it is in talks and early due diligence with its rival Shaw Stockbroking as part of a strategic review of its broking operations.
In a statement to the Australian Securities Exchange, Wilson confirmed a report in Street Talk that suggested it may offload or merge its stockbroking arm with Shaw and remain a listed funds management group.
“In response to speculation in today’s Australian Financial Review, Wilson HTM Investment Group Ltd (Wilson HTM) advises that it is engaged in an ongoing dialogue with Shaw Stockbroking Limited (Shaw) as part of a continuing review of Wilson HTM’s future strategy regarding its securities business,” the statement said. “Preliminary due diligence is being undertaken under appropriate confidentiality arrangements.”
The discussions come as corporate advisory activity surges but equity trading volumes remain in the doldrums, despite a small uptick in August. Wilson, which has a market capitalisation of $66 million, reports its full-year earnings later this month.
The board noted, however, that a transaction may not occur.
Combining Wilson’s and Shaw’s stockbroking arms does make sense on paper. The former accounts for 0.24 per cent of local trading in 2014 to-date, compared to Shaw’s 0.33 per cent. Shaw is a privately held company based in Sydney and chaired by industry stalwart and former Austock boss Paul Masi.
Shares are up 5.5 per cent at 67.5 cents.
Oil Search has evacuated “non-essential” personnel from its Kurdistan operations but drilling and other exploration work is continuing even as an increasing number of companies operating further north in the oil-rich region shut down wells due to the advance of Islamic State militants.
US independent Hess Corporation has become the latest to suspend drilling in Kurdistan, with partner Petroceltic International reporting the companies’ Shireen-1 exploration well had been temporarily suspended as a precautionary measure. Explorers including Chevron, Afren and Oryx Petroleum have also reported some disruption to their work in the region, and some evacuation of personnel.
Oil Search is drilling the Taza-2 well in Kurdistan, in partnership with French oil major Total and the Kurdistan Regional Government. A spokeswoman said Oil Search has over 200 people working in Kurdistan, mostly contractors, on three operations: Taza-2, preparations for another well Taza-3 and on seismic work.
Oil Search has been studying the possibility of a 5000 barrels per day oil production facility at Taza as part of a long-term test of the discovery.
Kurdistan has seen a surge of interest from international oil companies over the past several years, attracted by estimates it holds some 40 billion barrels of oil and 60 trillion cubic feet of gas.
Asian markets are opening higher, following Wall Street's rise overnight and amid optimism that geopolitical risks are receding.
The Nikkei us up 0.3 per cent, adding to yesterday's strong rally, while Seoul's Kospi has added 0.7 per cent and in New Zealand the NZX50 is up 0.1 per cent.
‘‘You had a quiet day in the US last night and it looks like some of the geopolitical concerns are easing,’’ said Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors. ‘‘Overall it will be a good day, we should see stabilisation in the equity market and markets should be able to gain some of the lost ground.’’
Slater & Gordon is one of the big winners this morning, up more than 6 per cent at $5.23 after the expanding firm beat guidance and announced two acquisitions.
Its full-year net profit jumped 47 per cent to $61.1 million, on a 40 per cent rise in revenues to $418.5 million. Slater & Gordon is paying a final dividend of 5 cents a share.
The firm expects 2015 total revenue of $500 million and an EBITDA margin of 23 to 24 per cent, slightly below the current margin.
Slater & Grodon said it is planning to buy Victorian personal injury law firm Nowicki Carbone and Queensland consumer law firm Schultz Toomey O’Brien, paying $45.2 million in cash and issuing of $18.8 million in Slater & Gordon shares which are subject to restraints on sale.
The cash component of the acquisitions, which are expected to be completed in November, will be funded using existing debt facilities, the company said.
A ‘‘very large number’’ of bank customers stand to benefit from a new bank fees class action lodged today, the lawyer in charge of the lawsuit says.
Maurice Blackburn principal Andrew Watson this morning confirmed a Fairfax Media report that the firm was expanding its existing legal action against banks and credit card companies over credit card late fees.
While its previous actions required bank customers to sign up and join, the new lawsuit, lodged today in the NSW Supreme Court, automatically takes in all those affected.
ANZ, Citibank and Westpac are the first institutions targeted in the new action, with NAB, American Express and the Commonwealth Bank to follow.
‘‘There must be some people who managed their affairs so carefully they were never charged one of these things but I am not one of them,’’ Watson said. ‘‘They’ll be open class proceedings. That will mean all customers who’ve ever been charged a late payment fee will benefit from the action.
‘‘It’s got to be a very large number of customers.’’
He said the new action would be bigger than Maurice Blackburn’s existing claims, which have signed up more than 180,000 people with claims worth more than $220 million.
Here's how some of the stocks in the news are performing:
- Dominos (profit rise): +5.2% at $21.69
- Wotif (drop in profit): -0.15% at $3.305
- Bradken (profit slump): -0.9% at $4.28
- Woolies (Masters underperforming): -1.5% at $35.35
- Graincorp (new CEO): +0.2% at $8.61
- Tabcorp (ex div): -2.6% at $3.525
The local market has opened higher, following a second day of gains on Wall Street.
The benchmark S&P/ASX200 is up 17.2 points, or 0.3 per cent, to 5474.2, while the broader All Ords has gained 16.8 points, or 0.3 per cent, to 5466.2.
Among the sectors, marterials are up 0.7 per cent and financials have added 0.4 per cent.
Woolworths has put the brakes on its loss-making home improvement business after revealing that losses in 2014 had exceeded previous guidance and conceding that the business would not break even in 2016 as planned.
The retail giant plans to open fewer Masters stores over the next two years and will not reach its 90-store target by the end of 2016. It plans to open around 10 to 15 Masters stores a year for the next few years, adding to its existing base of 49 stores.
In a trading update this morning, Woolworths said the home improvement business lost $169 million in the 12 months ended June 30, exceeding losses of $138.9 million in 2013.
Losses from the Masters big box stores rose to $176 million from $156.6 million, while profits in the Home Timber & Hardware business fell to $7 million from $17.7 million.
Woolworths had previously advised the market that losses in 2014 would be no greater than those in 2013 as it fights the market dominance of Wesfarmers’s Bunnings building improvement centres.
Woolworths also backed away from its forecast that the home improvement business would break even during 2016.
“We are disappointed we will not reach this guidance,” said chief executive Grant O’Brien.
“However, we were right to set challenging targets for the business and will continue to set stringent internal hurdles for the Home Improvement business.”
Some more executive news: GrainCorp has appointed Mark Palmquist as its new chief executive, ending an eight-month search.
Palmquist will join GrainCorp, Australia's largest listed agribusiness, from CHS, where he worked for 35 years, most recently as chief operating officer, Ag Business.
GrainCorp's previous CEO, Alison Watkins, resigned in December last year just days after the federal government rejected a takeover of the company by US agribusiness giant Archer Daniels Midland.
Meanwhile, the chief executive of Westpac New Zealand and one of Gail Kelly's longest-serving lieutenants, Peter Clare, has resigned following a major heart operation.
Clare, who has worked with Kelly for more than a decade, will immediately leave the company in order to provide himself with the best opportunity to fully recover from a major medical procedure to correct a heart condition.
Telstra has continued its push into digital media, taking a controlling stake in video streaming and analytics provider Ooyala.
The telecommunications company will lift its stake from 23 per cent to 98 per cent, paying a further $US270 million ($291 million) on top of the $US61 million it had invested over the last two years.
The company provides solutions for customers such as broadcasters, pay-TV operators and online media sites globally. Ooyala is based in California’s Silicon Valley.
Australian pay TV operator Foxtel, which is 50 per cent owned by Telstra, used Ooyala to help launch its video movie streaming service Presto.
The move comes as Telstra continues to look to expand outside its traditional telecommunications business and transform itself into a multimedia company.
Ooyala was founded in 2007 and now has 330 employees. It has a forecast revenue of $US65 million this calendar year.
Engineering group Bradken’s full year net profit has more than halved to $21.5 million as the slowdown in mining investment continues to bite.
The company says there has been an improvement in orders for big ticket mining machinery in 2014.
Bradken said its underlying net profit after tax for the year was down 43 per cent to $55.1 million, with one-off adjustments for manufacturing restructure costs and foreign exchange losses. Sales revenue was down in all of the company’s divisions, including mining products, mineral processing, the rail division and US-based engineered products.
The company has axed 1,800 jobs in less than two years.
‘‘We expect an improvement in order intake as delayed expenditure at mine sites is released and mine production volumes continue to increase, supporting sales in the second half,’’ Managing director Brian Hodges said. ‘‘It remains unclear when the mining capital cycle will improve, but we are not solely relying on it to do so.’’
Net debt levels decreased to $377.2 million from $431.5 million in the previous year due mainly to the lower capital expenditure, reduced working capital level and also lower cash dividend payments, the company said.
An unfranked final dividend of 11 cents per share was declared, taking the total for the year to 26 cents, down 32 per cent.
Here are more details on Zahra's resignation, making it sound like he was encouraged to leave:
David Jones chief executive Paul Zahra has resigned from the retalier following its $2.2 billion takeover by Woolworths South Africa, with the new owner of Australia's oldest department store pushing through a raft of management changes this morning as it takes control of the business.
Woolworths said this morning that Zahra would step down immediately saying it was the best time for the CEO to depart as part of a change of management leadership.
Zahra was heaved into the CEO role at the upmarket store four years ago following the shock sacking of former David Jones boss Mark McIness.
Woolworths said this morning in a statement that Iain Nairn would be the new boss of David Jones. Nairn was the former CEO of Country Road which was also swallowed up by Woolworths last month as part of its takeover of David Jones.
David Thomas, also from Country Road, will move across to be the new chief operating officer of David Jones, while Witchery (owned by Woolworths) former boss Matt Keogh will become the new CEO of Country Road.
The new management structure comes as Woolworths, which is based in South Africa, begins to set about transforming the upmarket department store after its $2.2 billion takeover bid for the group.
Its plans include selling more private label fashion in the stores, introducing a loyalty program and other operational changes to squeeze out more than $130 million in extra profits over the next few years.
Last year Zahra said he would resign, citing tiredness, but was lobbied to bin his resignation plans after the departure of two directord and the chairman.
Change at the top: Former Country Road chief Ian Nairn will take over from Zahra. Photo: Peter Braig
News just coming in that David Jones chief Paul Zahra has resigned.
It's not the first time we're hearing resignation plans: late last year Zahra announced his decision to step down ''for personal reasons", but he backflipped earlier this year.
David Jones soon to be ex-CEO Paul Zahra Photo: Louie Douvis
Also just out, Wotif has reported a 15.4 per cent fall in profit to $43.2 million, in line with its latest guidance, as it awaits regulatory approval for an agreed $703 million takeover by US online travel giant Expedia.
“The decline in profit last financial year is directly attributable to the response by the company to the competition in its Australian market, and an investment in strategy designed to introduce the new sources of revenue,” Wotif chairman Dick McIlwain said.
Hotel room nights in Australia and New Zealand, its core business, declined by 9.4 per cent due to an extremely competitive market, although average room rates rose by 3 per cent.
When the Expedia deal was agreed in July, Wotif said it expected full-year revenue of $149 million, earnings before interest, tax, depreciation and amortisation of $71 million and net profit of $43 million. It reported figures in line with those forecasts this morning.
Expedia is offering $3.06 a share cash plus a 24¢ a share fully franked special dividend for Wotif, implying $3.40 a share of value for those able to take advantage of the franking credits. The company’s shares closed 1¢ higher at $3.31 on Monday.
Wotif did not declare a final dividend, as a result of the takeover offer.
In earnings reports this morning, Domino's Pizza Enterprises is riding a wave of hungry customers who are increasingly using their iPhones and tablets to order pizzas with the fast-food company reporting double-digit sales growth for the first five weeks of fiscal 2015 across its key European, Australian and New Zealand markets.
In its first full year of owning a controlling 75 per cent interest in the Domino's pizza chain in Japan, the Australian based company this morning reported a 50.4 per cent lift in underlying net profit to $45.8 million as revenue nearly doubled – thanks to the acquisition of the Japanese franchise – to $588.7 million for 2013-14.
Net profit for the year was $42.3 million against a profit of $28.7 million in the previous financial year.
The company said Domino's Pizza reported a 70 per cent lift in underlying EBITDA to $95.1 million to which its newly acquired stake in the Japanese Domino's chain contributed EBITDA of $27.4 million.
Domino's Pizza said this morning that strong trading results in Australia and New Zealand, structural changes gaining momentum at its European stores as well as a store relocation strategy and new advertising push across Japan had bolstered the full year results for the group.
The company declared a final fully franked dividend of 19 cents per share, in addition to the interim dividend of 17.7 cents per share paid earlier this year, bringing the full year payout to 36.7 cents per share an increase of 18.8 per cent over the prior year.
Local shares are set to open higher for a second session as global equities extended gains on corporate news and an easing of some geopolitical concerns.
What you need2know:
- SPI futures up 24 pts at 5416
- AUD at 92.61 US cents, 94.67 Japanese yen, 69.22 Euro cents and 55.18 British pence.
- On Wall St, S&P 500 +0.3%, Dow +0.1%, Nasdaq +0.7%
- In Europe, Euro Stoxx 50 +1.4%, FTSE +1%, CAC +1.2%, DAX +1.9%
- Spot gold fell 0.2% to $US1309.05 an ounce
- Brent oil down 0.5% to $US104.54 per barrel
- Iron ore slipped 0.4% to $US95.30 per metric tonne
What’s on today
GPT Group, Bradken, Dominos Pizza, Slater & Gordon results; Australia Q2 house prices, NAB July business conditions/confidence, US July NFIB small business optimism
Speedcast (SDA): debuts on ASX at 12pm after $150m IPO