Cash splash: Another $6b to line investor pockets

Six of the major businesses reporting this week plan to pay out a total $6.3 billion in dividends. Photo: Peter BraigCompanies are continuing to line investor pockets with cash returns this reporting season, with more than $6 billion in dividends paid this week.
Shanghai night field

Wesfarmers, BHP, Fortescue, Suncorp, Woodside and Seek are amongst the group of corporates splashing cash on investors.

Fortescue surprised investors on Wednesday, when it announced a total dividend payout of $US292 million ($324.41 million), of which close to $103 million with be paid to its biggest shareholder and company chairman Andrew ‘Twiggy’ Forrest.

Combined, six of the major businesses reporting this week plan to pay out $6.3 billion in dividends, a sign of confidence in their own businesses, and the Australian economy.

In the case of Woodside and Suncorp, dividends were increased, despite profits falling.

Forecasts have varied and there is still some worry surrounding Australia’s transition away from the mining economy, but payout ratios continue around record highs.

The 10-year average S&P/ASX 200 payout ratio is about 60 per cent but has been as low as 52.2 per cent – the payout in 2007 – Perpetual’s figures show.

Healthy dividends are popular with Australian investors and companies, despite cut-backs, have been keen to keep investors happy with solid and growing returns.

Consumer spending is slowly returning and the aggressive cost-cutting has allowed the flow of dividends to keeping pushing through.

Stronger balance sheets, repositioned asset portfolios and underlying profitability have given businesses the confidence to pay out increased dividends, Morgan Stanley head of investment strategy Malcolm Wood said.

”It is a vote of confidence in the future, of course. Companies don’t like mucking around with their dividends too often and the market still offers a very attractive dividend yield, vis-a-vis alternative assets,” Mr Wood said.

”I guess that management and boards are saying they’re fairly comfortable with the outlook.”

The yield theme has been prominent for the Australian market in recent years.

Falling bond yields, short and long term rate cuts, and less appealing term deposits have sent investors looking for a more profitable use of their money.

So far this earnings season, things have looked positive.

Of the 30 per cent of companies that have reported, more than half have beat net profit expectations, Deutsche Bank strategist Tim Baker said.

“The change to earnings is more modest (+1-1.5 per cent for financial years 2014 and 2015), but still positive. And this should be viewed against the backdrop of only very mild earnings downgrades coming into results, making the hurdle of beating expectations higher,” Mr Baker said.

Read More

Why the ‘Penfolds curse’ could strike again

Penfolds’ earnings potential in the next two years is vast. Photo: Tamara DeanIs there a Penfolds curse at work? A succession of six corporate owners of Australia’s most famous wine brand over the past three decades have either been taken over or run into financial strife, and the prospect of it happening again remains high.
Shanghai night field

It’s as if the ghosts of the founders Dr Christopher and Mary Penfold, who started Penfolds in 1844, are wreaking their revenge because the wine brand has strayed so far from its original purpose of being a medicinal benefit for patients of Christopher’s medical practice.

The latest custodians, Treasury Wine Estates, have earned the wrath of investment markets and the credibility of the board and management is in tatters, as they battle to try and restore some confidence in the company’s direction after a run of disasters. Much depends on the reception received by Treasury chairman Paul Rayner and his stand-in chief executive Warwick Every-Burns, who stepped out of the Treasury boardroom to run the company last September. They will attempt to defend their strategy on Thursday when they outline the full details of the $40 million full-year profit downgrade announced three weeks ago, as Treasury officially unveils its first-half profit results. But how long will Treasury be around in its current form?

The irony is that Penfolds itself is a highly-profitable business and the jewel in the crown of Treasury. Penfolds is estimated to make around $180 million in profits annually, which is about three quarters of the total profits of Treasury’s sprawling wine business which also includes the Beringer brands in the United States, and Wolf Blass, Rosemount, Seppelt, Lindemans and Wynns in Australia.

Penfolds’ earnings potential in the next two years is vast, as a treasure trove of up to $280 million worth of high-quality red wines currently maturing in barrel halls will hit the market.

This is why potential suitors are closely eyeing the corporate mess that Treasury has found itself in and the potential upside for a new owner. Speculation centres on Chinese firms and private equity buyers as those most interested.

The Penfolds brand, with a 170-year-old history, has proven very resilient over three decades of corporate ructions with the brand having passed through six different sets of corporate owners since the early 1980s. The prestige of the flagship Penfold’s Grange, the latest release of which the company was selling for $785 per bottle, is a huge strength and the halo effect down through the range is a winner in the marketplace.

Bruce Kemp was chief executive of Southcorp Wines, a forerunner of Treasury, for most of the 1990s and is today chairman of Tasmanian wine company Pipers Brook. He says Penfolds has enormous cache in the marketplace.

“It still stands out,” Mr Kemp says. Penfolds Grange and the higher-quality Penfolds range that sits underneath it were big profit drivers in the 1990s, and two decades on, the “halo” effect is still intact. “There’s a pretty big halo, and a big shadow down the line,” Mr Kemp says.

Bank of America Merrill Lynch analyst David Errington has all but given up on Treasury’s current board and management and says ”if the board’s focus turns to maximising shareholder returns, it will need to consider breaking the company up”.

A break-up would result in a scramble for the best assets, with Penfolds at the top of the tree. The one possible saviour in the ongoing Treasury saga is the prospect of a new, highly-respected chief executive being appointed soon. There are persistent rumours about the long-time boss of Coca-Cola Amatil’s Australian operations, Warwick White, having been approached to take the job. Outgoing CCA chief executive Terry Davis, who had been the subject of speculation that he has being courted, says he has not interest in taking another chief executive role at a public company.

But Penfolds has been through a lot. It’s had six owners in just over three decades. In the mid-1970s, Penfolds was acquired by then NSW brewer Tooth & Co, and then in the 1980s became part of corporate raider John Spalvins, Adelaide Steamship Company, which also owned Woolworths, David Jones and a host of big-name food brands including Peters ice-cream and Four’N’Twenty pies.

Mr Spalvin’s empire fell apart after the 1987 sharemarket crash under the weight of $7 billion in debts, and Penfolds was sold off to another beer company, SA Brewing, in 1990. SA Brewing, an ASX-listed company, changed its name to Southcorp in 1993, sold off packaging and water heaters businesses, and Southcorp Wines became a stand-alone wine business. It then merged with privately-owned Rosemount Wines in 2001 in what was effectively a reverse takeover, to become the world’s largest wine company. But things went awry under new management and in 2005 it was taken over by Foster’s Group. But plans by Foster’s to extract efficiencies from selling beer and wine into the same liquor retailers didn’t work properly, and after further management changes, Foster’s was split into two companies in 2011. The wine company was re-badged Treasury Wine Estates and in May, 2011 set sail on his new voyage as an ASX-listed debt-free wine group, with Penfolds as the biggest brand.

Chief executive David Dearie lasted a little over two years but was then punted by the board in September, 2013, taking the blame for $160 million in writedowns connected with the United States wine operations.

A potential predator of Treasury will be closely eyeing the red wine inventory sitting in barrel halls at Penfolds. Bank of America Merrill Lynch believes the profit increase from the Penfolds business over the next two to three years is substantial, with Penfolds having increased inventory levels of its higher-priced wines from $50 million worth in 2011, to $280 million in 2013. The stockbroking firm estimates that Penfolds currently contributes 75 per cent of Treasury’s total depressed earnings before interest and tax, and given the difficulties Treasury has faced with under $10 bottled wines in Australia with its other commercial brands, that proportion of profits may be even higher.

Read More

Peter Betham says failure not an option for Waratahs back line against Western Force

Confident: Peter Betham throws a last-gasp inside ball in the Waratahs’ trial against Auckland Blues on February 7. Photo: Anthony JohnsonWaratahs winger Peter Betham is fully aware of the danger of the Force back row stifling vital ball supply to the NSW back line in Sunday’s Super Rugby clash at Allianz Stadium.
Shanghai night field

But the New Zealand-born flyer says the threat will not provide just cause for the Waratahs failing to showcase the potency of the NSW back line. Such is Betham’s new strength of mind, galvanised by the confidence he gained from his performances last year that lead him to make his Wallabies Test debut.

Betham, 25, says he realises the quality of ball the NSW backs receive from their formidable forward pack will depend on their West Australian opposition. “Especially with the type of back row the Force always produce, it’s definitely going to be a battle at the breakdown,” he said. “It’s not an excuse for the backs to not play. We are definitely going to make gains.”

This time last year the former Brumbies and Rebels player was at the dawn of a new season with the Waratahs that would end with him scoring five tries from 15 games in Super Rugby. Last year also saw the Sydney University winger play his first – and so far only – Test for the Wallabies: in the starting side that lost 41-33 to the All Blacks in Dunedin.

Asked about his mindset on the eve of season two under Waratahs coach Michael Cheika, Betham said: “I am quietly confident. That lack of confidence which led to errors in games [beforehand] is pretty much a no-go for me. That [confidence] is one thing I will take into this season. I will put my [best] foot forward. It won’t stop me from doing the same things that I do.”

Betham, who has 24 Super Rugby caps, says he is physically superior now: “I am getting faster,’’ he said. ‘‘My general fitness is going pretty well, so when it comes to fitness your numbers generally get a bit higher with your speed.”

With this new speed and confidence, Betham hopes he will be more assured and effective on the field – from anticipating opportunities to running on to the ball. “It’s [about] getting the confidence up and putting yourself in situations where you are under pressure but confident in your ability to get the job done,” Betham said.

It helps being in a Waratahs back line that offers so much strike power and laden with various options in attack with Nick Phipps at No.9, Bernard Foley at No.10, Kurtley Beale at No.12, Adam Ashley-Cooper at No.13, rookie Alofa Alofa at No.14 and Israel Folau at No.15.

“It is a back line that has matured, and [with] the additions we have had with Kurtley Beale and Nick Phipps, it [has] more firepower,” Betham said. “It’s just about getting the right combinations on the day. It’s not exactly [that] the best players will be on the field, but the best players on the day will be on the field.”

Betham rates Foley’s skills at five-eighth highly: “There are a lot of things of his game that are unseen – his communication skills, his leadership role in the team.”

As for the competition for the NSW wing slots, heightened by Alofa’s push into the starting side after joining the Waratahs squad from the ranks of Shute Shield rugby? “It’s definitely healthy competition,” Betham said. “Having guys like Alofa is refreshing and it adds a different dimension to our back line.”

Read More

Stevie Nicks reveals love of Game of Thrones: ‘It blows my mind’

Joffrey Baratheon (Jack Gleeson), who Nicks describes as ‘sickly, deeply, sadistically evil’, in Game of Thrones. Photo: SuppliedFleetwood Mac’s Stevie Nicks has confessed she’s a huge fan of Game of Thrones and wants to write music for the show.
Shanghai night field

Nicks told Britain’s Radio Times that after she contracted pneumonia and her mother died in 2011, she became a recluse and was comforted by the HBO drama.

“I didn’t leave the house for almost five months … With my pneumonia and my mother’s death I watched the entire first season of Game of Thrones. That certainly took my mind off everything,” she said.

Nicks thought so much about George RR Martin’s characters and plot that she now wants to contribute to it.

“I would love to write some music for the show. I’ve written a bunch of poetry about it — one for each of the characters. On Jon Snow … on Arya … on Cersei … on Cersei and Jaime, the blonde on blonde … on Khaleesi …

“I’m always looking for that kind of inspiration, and I’m very inspired by it.”

Nicks admires Martin’s ability to create complex worlds with such well-drawn characters.

“The guy who wrote these stories [Martin] is my age now, and I think: how in the world does somebody come up with these 15 or so characters and then everything that’s wrapped around each one of the 15 characters? It blows my mind that he’s able to create this vast, interlinked world.”

Nicks admitted a fondness for many of the show’s female characters – whether good or evil.

“Khaleesi [Emilia Clarke] is my new favourite heroine. And Cersei [Lena Headey] is fantastic. She’s just mean as shit. And you know who else is mean? Not Joffrey [Jack Gleeson] — he’s beyond. He’s just sickly, deeply, sadistically evil. But no, the one that’s going to marry him, Margaery [played by Natalie Dormer]. She is just such a great evil person. And she thinks she is going to be able to handle him. And then you have Brienne of Tarth [Gwendoline Christie] — I love her.”

– Peter Vincent

Read More

Best of Sochi: Day 11GALLERY

Martin Fourcade of France stretches for the finish line next to Emil Hegle Svendsen of Norway during the Men’s 15 km Mass Start during day 11 of the Sochi 2014 Winter Olympics at Laura Cross-country Ski & Biathlon Center on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES Short track speed skaters compete in the Short Track Ladies’ 3000m Relay Final B at Iceberg Skating Palace on day 11 of the 2014 Sochi Winter Olympics on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES
Shanghai night field

Tina Maze of Slovenia reacts after a run during the Alpine Skiing Women’s Giant Slalom on day 11 of the Sochi 2014 Winter Olympics at Rosa Khutor Alpine Center on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Marianne St. Gelais of Canada falls while competing in the Short Track Ladies’ 1000m Heat at Iceberg Skating Palace on day 11 of the 2014 Sochi Winter Olympics on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Tina Maze of Slovenia wins the gold medal during the Alpine Skiing Women’s Giant Slalom at the Sochi 2014 Winter Olympic Games at Rosa Khutor Alpine Centre on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Taihei Kato of Japan crashes as he competes in the Nordic Combined Men’s Individual LH during day 11 of the Sochi 2014 Winter Olympics at RusSki Gorki Jumping Center on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Nathan Smith of Canada competes at the shooting range in the Men’s 15 km Mass Start during day 11 of the Sochi 2014 Winter Olympics at Laura Cross-country Ski & Biathlon Center on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

A coaching staff of South Korean short track team celebrate winning the gold medal in the Short Track Ladies’ 3000m Relay Final at Iceberg Skating Palace on day 11 of the 2014 Sochi Winter Olympics on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Armin Bauer of Italy competes during the Nordic Combined Men’s Individual LH on day 10 of the Sochi 2014 Winter Olympics at RusSki Gorki Jumping Center on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Martin Fourcade of France practises at the shooting range in foggy conditions before the Men’s 15 km Mass Start during day 11 of the Sochi 2014 Winter Olympics at Laura Cross-country Ski & Biathlon Center on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Omar Visintin of Italy (red bib), Pierre Vaultier of France (green bib), Jarryd Hughes of Australia (blue bib), Hanno Douschan of Austria (white bib) and Konstantin Schad of Germany (yellow) compete in the Men’s Snowboard Cross Quarterfinals on day eleven of the 2014 Winter Olympics at Rosa Khutor Extreme Park on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Hanno Douschan of Austria (white bib), Luca Matteotti of Italy (blue bib), Pierre Vaultier of France (green bib), Paul-Henri De Le Rue of France (yellow bib), Omar Visintin of Italy (red bib) and Cameron Bolton of Australia (black bib) compete in the Men’s Snowboard Cross Semifinals on day eleven of the 2014 Winter Olympics at Rosa Khutor Extreme Park on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Michael Goodfellow and Greg Drummond of Great Britain sweep the ice while playing Norway during the Curling at Ice Cube Curling Center on day 11 of the 2014 Sochi Winter Olympics on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Cameron Bolton of Australia looks on after the Men’s Snowboard Cross 1/8 Finals on day eleven of the 2014 Winter Olympics at Rosa Khutor Extreme Park on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Joergen Graabak of Norway leads the pack in the Nordic Combined Men’s 10km Cross Country during day 11 of the Sochi 2014 Winter Olympics at RusSki Gorki Nordic Combined Skiing Stadium on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Lavinia Chrystal of Australia makes a run during the Alpine Skiing Women’s Giant Slalom on day 11 of the Sochi 2014 Winter Olympics at Rosa Khutor Alpine Center on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Ole Einar Bjoerndalen of Norway practises at the shooting range before the Men’s 15 km Mass Start during day 11 of the Sochi 2014 Winter Olympics at Laura Cross-country Ski & Biathlon Center on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Janne Ryynaenen of Finland makes a trial jump as he competes in the Nordic Combined Men’s Individual LH during day 11 of the Sochi 2014 Winter Olympics at RusSki Gorki Jumping Center on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Vanessa Vanakorn of Thailand prepares to make a run during the Alpine Skiing Women’s Giant Slalom on day 11 of the Sochi 2014 Winter Olympics at Rosa Khutor Alpine Center on February 18, 2014 in Sochi, Russia. Photo: GETTY IMAGES

Photo: GETTY IMAGES

Read More