That's all for today - thanks for reading this blog and posting comments.
We'll be back tomorrow from 9am.
Before we sign off, here's an interesting chart showing that founder-led companies have dramatically outperformed the (US) sharemarket.
Worth taking a look if that's the case over here too, and how the News Corps, Harvey Normans, Fortescues or Westfields are performing. But we'll leave that for another day.
Healthy gains in the big banks and the miners were just enough to offset losses in a number of index heavyweights including Wesfarmers and Telstra on another day of mixed earnings reports.
The S&P/ASX 200 inched up 0.1 per cent to 5561.7 and the All Ordinaries added 0.1 per cent to 5653.6.
Despite big movements in individual shares, particularly of companies reporting, the benchmark index once again remained reluctant to break out of the range of between 5480 and 5580 points in which it has been stuck for most of August.
"There does seem to be a feeling in global markets that many investors are waiting for everyone to return from northern hemisphere summer holidays to see some direction in markets," said IG market analyst Angus Nicholson.
"With valuations high, and yields low, we have seen much of the gains in the past week being driven by funds seeking out the more safe-haven like parts of the market, such as utilities, consumer staples and piling into higher yielding names."
Telstra was the biggest drag on the benchmark index, losing 3.5 per cent as the stock traded ex-dividend.
Retail and resources conglomerate Wesfarmers was another blue chip weighing heavily on the market, losing 2.2 per cent after recording its worst net profit in 15 years.
Other stocks that were sold off following their earnings reports included A2 Milk, Boral, McMillan Shakespeare and Blackmores.
But it wasn't all bad news on the earnings front. Ardent Leisure was one of the biggest winner on the ASX200, surging 14 per cent after unveiling a 32 per cent rise in annual profit, thanks to rising numbers of Chinese visitors to its theme parks.
Sirtex Medical and Spotless Group also posted health gains after reporting their results.
Overall, it's been an underwhelming earnings season so far, according to Nicholson.
"With 125/195 companies having reported earnings so far, total earnings for the index have been 12.4 per cent below where analyst consensus estimates were expecting. It's only the energy and materials sectors that have managed to beat consensus estimates."
After nearly three decades in charge, John McGrath has stepped down as chief executive of estate agent McGrath, handing the reins to new star recruit Cameron Judson.
Mr McGrath has assumed a new role of executive director and will take responsibility for the strategic direction of the business leaving Mr Judson, the recently appointed co-CEO, to take on the day-to-day running of the business on his own.
Mr Judson, former boss of recruitment firm Chandler Macleod, was only announced as co-chief executive a little over a month ago. He will assume sole CEO duties on Thursday.
Mr McGrath's new role, announced as McGrath Limited released inaugural full-year results in line with revised guidance, is one of a raft of senior personnel changes since McGrath Limited's disastrous float in December.
Long-standing chief operating officer Geoff Lucas left the business in August while McGrath head of property management Maria Carlino left in March.
Also leaving is chairman David Mackay, the former Woolworths director after just over a year in the role, replaced by investment banker and current board member Cass O'Connor. Former Housing Industry Association CEO Elizabeth Couch has been appointed as a new non-executive director with Mr McGrath the only executive director on the board.
Speaking to the Australian Financial Review after the company released its inaugural full-year results as a listed company, Mr McGrath stressed that his commitment to the business remained unchanged and that his new role had the full support of the McGrath board.
"None of this should be confused with anything disappointing or regretful relating to the listing of McGrath or any disappointment in me. It's appropriate that as Cameron comes in and my role changes.
"God-willing I will be here another 30 years," he said, adding that in his new role he would focus on things like "growth, innovation, people and brand".
Mr McGrath has also taken a big pay cut, with his annual remuneration falling 56 per cent to $327,415 in 2016 compared with $744,765 in 2015.
He remains the biggest shareholder in McGrath Limited with more than 27 per cent.
McGrath share are 4.5 per cent higher at $1.17. The stock listed in December at $2.10.
As many readers will by now have seen elsewhere, Italy has been shaken by a series of earthquakes, with at least 10 people reported dead.
The quake struck at a depth of 10 kilometres around 43 kilometres from the town of Rieti in central Italy. Shaking was felt in buildings in Rome and there were a series of aftershocks reported.
The metro websites are running a live blog with constant updates.
Back to top
Shares in cleaning and catering business Spotless have jumped despite a 14 per cent fall in annual profit to $122.2 million.
The company said the issues behind the profit fall, related to slower than expected profit growth from new business and complications with acquisitions, have now been resolved.
Spotless shares are up 6.8 per cent.
Is this as good as it gets for Qantas, given it just reported its biggest profit in history? Elizabeth Knight asks:
The answer is almost certainly no. But make no mistake - Qantas is certainly in a sweet spot.
Despite the big numbers it produced in the 2016 financial year result - a 57 per cent boost in pretax earnings to more than $1.5 billion - this outcome was achieved amid a domestic aviation environment that is still pretty patchy.
For the most part, Qantas was able to post its record profit on the back of what it calls a transformation, which has been in progress for a couple of years, and a very strong tail wind from low fuel prices.
Put simply Qantas has nearly completed an overhaul of its operations that puts in place a structure and cost regime that should allow it to make even more money if the domestic market gets a bit stronger and it achieves better pricing power for its airfares.
Qantas had already warned investors that their earlier expectations for 2016 would not be met because of some softness in the domestic market, and even after downgrading their forecasts analysts had still been expecting 2016 profit to be a bit higher.
Interesting one from the WSJ on the distortions in the market caused by the ECB's massive bond-buying program:
The European Central Bank's corporate-bond-buying program has stirred so much action in credit markets that some investment banks and companies are creating new debt especially for the central bank to buy.
In two instances, the ECB has bought bonds directly from European companies through so-called private placements, in which debt is sold to a tight circle of buyers without the formality of a wider auction.
It is a startling example of how banks and companies are quickly adapting to the extremes of monetary policy in what is an already unconventional age.
In the past decade, wide-scale purchases of government bonds—a bid to lower the cost of borrowing in the economy and persuade investors to take more risk—have become commonplace. Central banks more recently have moved to negative interest rates, flipping on their head the ancient customs of money lending. Now, they are all but inviting private actors to concoct specific things for them to buy so they can continue pumping money into the financial system.
The ECB doesn't directly instruct companies to create specific bonds. But it makes plain that it is an eager purchaser, and it lays out the specifics of its wish list. And the ECB isn't alone: The Bank of Japan said late last year it would buy exchange-traded funds comprising shares of companies that spend a growing amount on "physical and human capital," essentially steering fund managers to make such ETFs available to buy.
Is the Wesfarmers outperformance about to end?
Despite today's loss, the shares have gained 9 per cent over the past 12 months, while its main rival Woolies is down 4.5 per cent.
Today the conglomerate revealed that competition in the cut throat food and liquor business escalated in the three months to June ahead of the revitalisation strategy at arch rival Woolworths.
Coles recorded comparable food store sales for fiscal 2016 of 4.3 per cent but in the final quarter comparable food store sales growth slumped to 3.2 per cent, the lowest growth rate since the first half of 2009.
Coles and Woolworths are both facing increased competitive pressure from German owned discount retailer Aldi. It has aggressive expansion plans.
Despite the weak quarterly sales data released, Coles managed to cling on to its profit margin of 4.7 per cent in 2016. Food and liquor deflation was 1.7 per cent for the year and 2.4 per cent for the fourth quarter. The fourth quarter deflation was the biggest year-on-year price decline since the March quarter of 2014.
Poll
With Wesfarmers feeling the competitive heat as Woolies launches its attempted comeback, is it time for investors to switch out of WES and into WOW?
Poll closed 25 Aug, 2016
Disclaimer: These polls are not scientific and reflect the opinion only of visitors who have chosen to participate.
Several downgrades have taken their toll on Aconex, a highflyer of this year.
The construction software maker on Tuesday reported a 50 per cent rise in revenue yesterday and an operating profit of $13.6 million, which came in slightly below the lofty expectations of the analyst crowd.
Both Credit Suisse and Deutsche cut their recommendations by one notch and are now neutral on the stock, mainly due to its high valuation after soaring more than 40 per cent this year.
The shares are down 6.2 per cent at $7.29, below the analysts' price target of $7.40.
But Deutsche remains a fan of Aconex, saying the company is well-placed to expand market share as well as applauding its "globally scalable, highly cash-generative" software licensing model.
Analysts are becoming more sceptical of central banks and their ultra-loose monetary policies, which aren't doing much more than fuelling asset bubbles.
Market prices are increasingly driven by cheap liquidity, the Federal Reserve's near-term policy stance, and domestic real rates, rather than market and macro fundamentals, they lament.
In a research report last week, Citi credit analysts lamented this brave new world of "deeply dysfunctional" fixed-income and equity markets, citing, among other factors, the broken relationships between corporate profits and credit spreads, and the structural reduction of volatility despite a slew of macro headwinds.
Here are six ways central banks have bred market dysfunction, according to Citi:
- Macro factors rather than fundamentals are increasingly important in driving returns in developed-world equity markets, a development the analysts say is leading to herding behaviour among US mutual funds.
- With year-to-date defaults now equaling 2015's full-year total, according to S&P Global, high-yield credit spreads in Europe and the US haven't materially adjusted. "With macro this dominant, credit no longer seems bothered by defaults," Citi says.
- The correlation between US corporate spreads and corporate leverage has broken down since 2011, while equity markets echo the fixed-income market's relative nonchalance with respect to bad debt.
- In Europe, an uptick in bad news in recent years, as tracked by the Baker, Bloom & Davis economic policy uncertainty indexes, has had little discernible correlation with credit spreads.
- Typically, when the economy is buoyant, government bonds sell-off and corporate spreads tighten as investors reckon good growth prospects justify risk-taking - and vice versa. However, this negative correlation has broken down in recent years, Citi notes.
- Volatility is extremely low, despite a rise in cross-asset correlations, and the upcoming US elections, negative news in Japan and political risks in Europe.
Is this as good as it gets for Blackmores? asks The AFR's companies editor, James Thomson:
There's a fascinating titbit in the annual report of vitamins giant and sharemarket darling Blackmores – 50 employees in the company's Sydney head office are learning to speak Mandarin.
But here's one Mandarin phrase management will be hoping they don't need to learn: Is the party over?
Because that's certainly the question top of mind for investors, who dumped Blackmores after it warned that sales in the first quarter of the 2017 financial year (the three months to September 30) would be "down compared to the prior corresponding period".
Blackmores shares have tumbled 13 per cent or $20.54 to $140.32. Yes, the stock is still up 72 per cent over the last 12 months, but it is now well off the $220 it peaked at in early January.
The vitamins company blamed the first quarter stumble on the "volatile" Australian wholesale market, which it says have softened in recent weeks.
In addition, Blackmores report that some exporters have changed the channels through which they acquire product.
"We expect sales will improve as the year progresses and will continue to develop our business model, building new growth channels, adapting our cost base and accelerating our transition to support the changing retail landscape to ensure out continued optimism for long-term growth," chief executive Christine Holgate said.
That turn of phrase might shake a few investors up too.
Blackmores has become an example of the great new Australian growth story, selling our clean, green products to a hungry Chinese market.
The115 per cent rise in net profit and the $2.10 final dividend the company handed down this morning – fuelled by booming sales in Asia and even stronger sales in Australia (driven by Chinse tourists shopping here) – shows how well that has been working.
The big retailer channels – the big pharmacy chains and the supermarkets – bought up lots of stock towards the end of 2015-16 in anticipation of the boom in vitamins continuing.
But the Chinese businesses in Australia that have been raiding the shelves of these retailers for years to send back to China – they're known as daigou – are becoming a lot more sophisticated, and are looking to buy directly from the manufacturer to avoid the retail mark-up.
Slater and Gordon chief executive Andrew Grech has brushed off an "extremely disappointing" first half and delivered a much narrower loss in the final six months of 2015-16.
The listed law firm on Wednesday provided an update on its expectations for the year ended June 30, ahead of publishing a full set of results on August 30.
Slaters, which has spent the last year embroiled in controversy relating to its acquisition of London law firm Quindell, an investigation by the corporate watchdog and the looming threat of class actions, said its full-year loss would be just over $1 billion.
This figure will include "a significant level of goodwill impairment, non-recurring restructuring expenditure and refinancing costs," the company said in a statement.
After climbing sharply at the open, Slaters shares quickly moved lower and are now 7 per cent down for the session at 54 cents.
The company said its second half net loss after tax was expected to be $59.3 million, which compares to a first half loss of $958.3 million.
The listed law firm said it expected revenue for the year ended June 30 to hit $908.2 million, which is below expectations, but well above the $552.1 million earned last year. The estimate from three analysts surveyed by Bloomberg was for revenue of $1 billion.
In December Slaters was forced to abandon earlier guidance for 2015-16 after it admitted it was struggling to accurately predict its financial performance. Only weeks earlier the company had reaffirmed guidance for revenue of $1.15 billion and EBITDA and movements in work and progress of $205 billion.
On Wednesday Slaters said its EBITDAW would be $36.6 million, made up of a first half loss of $58.3 million and a second half positive result of $8.9 million.
Mr Grech called the performance "a story of two different halves".
"The results for the first half were extremely disappointing and well below expectations," he said in a statement. "In the second half we have taken significant steps towards turning around the performance of the UK business. Whilst the UK performance improvement programme is still in its early stages, the second half results indicate that our efforts are beginning to bear fruit."
A merger of Woolworths' Home Timber & Hardware business and Mitre 10 has been finalised, creating a new $2.2 billion hardware giant set to take on Bunnings.
Mitre 10's owner Metcash has just announced it will buy the Home chain, which has over 400 stores, from Woolworths for $165 million, creating a new 900-store player in the DIY and home improvement sector.
Woolworths put Home on the market after deciding to exit hardware, including its loss-making Masters chain.
Woolworths is also looking to sell or wind up its stake in its loss-making hardware chain Masters. According to the Financial Review, the Masters' property and inventory assets are set to be sold separately.
Woolworths is already facing increased competition in its core supermarket business brought about by new entrants such as Aldi, contributing to its first loss in 23 years in February.
Last month, it announced a restructure including job cuts and store closures.
Woolworths reports its results tomorrow, with analysts predicting a $1b loss.
Evolution Mining will pay Glencore $880 million in a deal to take an economic interest in the Ernest Henry copper and gold mine in Queensland.
Australia's second largest gold miner by output, Evolution will take all future gold production and 30 per cent of future copper and silver production from the Glencore-owned mine, and pay 30 per cent of future production costs.
Glencore said the deal is part of its debt reduction strategy. Evolution says the deal will be earnings, cash flow and value accretive and extends the company's average reserve life.
The company is raising $401 million through an underwritten rights share offer to partly fund the transaction, and will raise a $500 million five-year term loan to fund the balance.
Evolution shares were put in a trading halt ahead of the share offer and last traded at $2.43.
The amount of construction work in Australia fell 3.7 per cent in the June quarter, which was worse than economists' expectations of a 2.0 per cent fall.
In the 12 months to June, it was down 10.6 per cent, the ABS said.
Total building work done on homes and non-residential buildings such as offices and shops, rose 1.2 per cent in the quarter.
Engineering work done, which includes mines, roads, bridges and the like, was down 9.9 per cent in the June quarter.
The Australian dollar largely ignored the data and is currently trading at 76.13 US cents.
In other news, Argentina has cut interest rates for the fourth week in a row after inflation eased further in August, part of an effort by policymakers to pull the economy out of recession.
The bank cut the official rate 50 basis points to 28.75 per cent, a move aimed at pushing cash into the economy by making central bank notes less attractive to investors. This helps gross domestic product grow, but it can also be inflationary.
The rate cut was a sign that inflation is falling enough to allow policymakers to focus less on keeping a lid on consumer prices and more on resuscitating the economy.
Monthly inflation was 2.0 per cent in July, down from 3.1 per cent in June and 4.2 per cent in May, when the official Indec statistics agency issued its first consumer price report since President Mauricio Macri took office in December.
Macri has tried to increase foreign investment with a slew of reforms including the revamp of Indec, which had been widely accused of reporting false data meant to make the economy look better than it was under previous President Cristina Fernandez.
Gross domestic product is expected to shrink 1.3 per cent in full-year 2016 before snapping back to 3.2 per cent growth in 2017, according to a recent central bank poll of analysts.
Annual inflation was expected at 40.2 per cent in 2016, one of the world's highest rates, and 19.4 per cent in 2017, according to the poll.
Lower inflation should increase investment and savings, which should in turn help jumpstart growth, credit rating agency Moody's said in a note to clients.
"We expect an investment-led push to start to improve economic activity towards the end of the year. While growth in private investment will initially be slow, increased consumption and public investment will help drive the turnaround," the note said. "We expect stronger economic growth for 2017 and beyond."
Former UBS Australia managing director David Di Pilla is leading the family office consortium in line to buy Masters' property assets from retailer Woolworths, the AFR's Street Talk is reporting citing sources.
It's understood Di Pilla is acting independently of the Salteri family office, of which he has ties to, and has teamed with the Melbourne-based family offices which own Spotlight and Chemist Warehouse, Street Talk says.
Chemist Warehouse is owned by Mario Verrocci and Jack Gance, while Zac Fried and Morry Fraid own Spoltight.
As Street Talk earlier revealed, Woolworths' hardware business is set to be split three ways.
Di Pilla's group is in line to take the property, while Metcash takes the Home Timber & Hardware business and Great American Group will take the hardware inventory.
The Reject Shop's shares have dived, despite the discount retailer forecasting another year of profit growth in 2017 after lifting bottom line net profit by 20.1 per cent to $17.1 million, buoyed by solid sales growth and cost savings.
Underlying profits, excluding a extra week's trading and $10 million in costs to close a warehouse in Melbourne, jumped 47.5 per cent to $21 million, falling just short of consensus forecasts around $21.7 million.
The result followed a 43 per cent increase in first-half net profit to $18.3 million.
Sales rose 5.7 per cent to $799.9 million, swelled by a net eight new stores and same-store sales growth of 3 per cent - a big improvement on -0.8 per cent same-store sales growth in 2015.
Like for like sales growth slowed to 1.3 per cent in the June-half after growing 4.4 per cent in the December-half.
The company increased its final dividend from 13.5¢ to 19¢, payable October 17, taking the full year payout to 44¢ a share vs 30¢.
Investors weren't impressed by the result, selling the shares down 11 per cent to $13.24.
Here's a snap analysis of the Wesfarmers result by UBS analyst Ben Gilbert:
"Overall a solid result relative to expectations with the small underlying beat due to lower 'other costs' and stronger Chemicals & Fertilisers earnings. We wouldn't expect the stock to move too much with the overall result broadly in line in the key retail divisions."
Strong profit results from the company's Coles and Bunnings stores were overshadowed by hefty writedowns linked to Target and its coal assets.
Gilbert notes that Wesfarmers continued its habit of not providing earnings guidance, but says the conglomerate is well positioned to deliver growth in retail while the outlook remains challenging for its industrials branches.
Wesfarmers shares are down 2.5 per cent at $42.52, the second-biggest drag on the ASX after Telstra, which is trading ex-dividend.
Back to topSearch pagination
1 new post(s) available. View post(s) Dismiss