Babcock audit fight, BHP tilt, Bradken SPP, Rich Listers and record traffic
February 2, 2010
Dear Mayne Reporters,
The big news yesterday was this very brief profit warning from Babcock & Brown, which caused the stock to plunge 80c to $6. Today it has shed another 30c to a 6 week low of $5.70 and I've put a buy order on at $5.01 as it probably has further to fall.
I gave the Babcock boys both barrels in this interview with 702 ABC Sydney's Deborah Cameron this morning, pointing out that it was another example of auditor Ernst & Young getting tough with a major client.
Whilst Macquarie Group uses PwC to audit the head stock and all its satellilte funds, Babcock & Brown has taken the moral high ground by retaining Ernst & Young for the parent and primarily using PwC in its satellite funds.
However, it is not a good look that Babcock & Brown audit committee chief Michael Sharpe, also one of the ASX directors who tolerated all those Babcock disclosure waivers, has an office provided by PwC.
The market was confused and outraged yesterday that Babcock couldn't give a more accurate profit forecast for the June half than a drop of between 25% and 40%. This was 42 days after books closed and less than 2 weeks before the resullts are actually released.
When a major company issues a downgrade, normally the CEO gets on the blower with analysts in a conference call. ANZ CEO Mike Smith has already done it twice this year.
Babcock CEO Phil Green was nowhere to be seen yesterday, leaving it to his finance director Michael Larkin to blame the audit process in comments to individual journalists.
Clearly there are some very tense negotiations going on over the size of write-downs and the lawyers insisted that it be disclosed, even though it left Green with egg on his face having reiterated that full year net profit would exceed $750 million as recently as June 25.
This forecast was always based on the hope that the coming European wind farm disposals would deliver profits of up to $500 million. This still might happen but that doesn't mean write-downs in other areas shouldn't be contemplated in the first half.
After all, Babcock claimed to have net assets of $2.5 billion in its latest annual report, yet the company is today capitalised at about $1.9 billion, so this $600 million disparity is something that auditors should address.
We didn't get much help from auditors at Centro, Allco or MFS, but it seems to be a different story with Ernst & Young at ABC Learning and Babcock & Brown, which is a good thing.
Full marks to Babcock auditor Mark O'Sullivan and the same goes for Ernst & Young's Brian Long who forced ABC Learning to break out its development profits in February. The stock has never recovered.
Meanwhile, click through for the full edition as we're keen to hear your views on this planned board tilt at BHP-Billiton, have got another 12 Rich Listers, details on record traffic figures for July and some goods news on the SPP front with Nick Greiner's Bradken delivering in spades.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.
The big news yesterday was this very brief profit warning from Babcock & Brown, which caused the stock to plunge 80c to $6. Today it has shed another 30c to a 6 week low of $5.70 and I've put a buy order on at $5.01 as it probably has further to fall.
I gave the Babcock boys both barrels in this interview with 702 ABC Sydney's Deborah Cameron this morning, pointing out that it was another example of auditor Ernst & Young getting tough with a major client.
Whilst Macquarie Group uses PwC to audit the head stock and all its satellilte funds, Babcock & Brown has taken the moral high ground by retaining Ernst & Young for the parent and primarily using PwC in its satellite funds.
However, it is not a good look that Babcock & Brown audit committee chief Michael Sharpe, also one of the ASX directors who tolerated all those Babcock disclosure waivers, has an office provided by PwC.
The market was confused and outraged yesterday that Babcock couldn't give a more accurate profit forecast for the June half than a drop of between 25% and 40%. This was 42 days after books closed and less than 2 weeks before the resullts are actually released.
When a major company issues a downgrade, normally the CEO gets on the blower with analysts in a conference call. ANZ CEO Mike Smith has already done it twice this year.
Babcock CEO Phil Green was nowhere to be seen yesterday, leaving it to his finance director Michael Larkin to blame the audit process in comments to individual journalists.
Clearly there are some very tense negotiations going on over the size of write-downs and the lawyers insisted that it be disclosed, even though it left Green with egg on his face having reiterated that full year net profit would exceed $750 million as recently as June 25.
This forecast was always based on the hope that the coming European wind farm disposals would deliver profits of up to $500 million. This still might happen but that doesn't mean write-downs in other areas shouldn't be contemplated in the first half.
After all, Babcock claimed to have net assets of $2.5 billion in its latest annual report, yet the company is today capitalised at about $1.9 billion, so this $600 million disparity is something that auditors should address.
We didn't get much help from auditors at Centro, Allco or MFS, but it seems to be a different story with Ernst & Young at ABC Learning and Babcock & Brown, which is a good thing.
Full marks to Babcock auditor Mark O'Sullivan and the same goes for Ernst & Young's Brian Long who forced ABC Learning to break out its development profits in February. The stock has never recovered.
Meanwhile, click through for the full edition as we're keen to hear your views on this planned board tilt at BHP-Billiton, have got another 12 Rich Listers, details on record traffic figures for July and some goods news on the SPP front with Nick Greiner's Bradken delivering in spades.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.
Counsel sought on BHP board tilt
A fund manager subscriber has been in touch suggesting the proposed board tilt for BHP-Billiton this year would be a bad move. Now a speaking gig at the Australian Investor Relations Association annual conference has popped up in Sydney on November 2007 - the same day as the Australian BHP-Billiton AGM which is being held in Melbourne this year.
It is never a good look to run for a board and then not show up at the AGM, so I'd be interested in your advice on this matter. For instance, here is the proposed script for a video announcing the BHP board tilt.
Today, I'm formally announcing an intention to contest the forthcoming elections for the board of BHP-Billiton.
The platform is very simple – I reckon BHP needs a new chairman and am against the time and money being wasted on this empire building proposal to buy Rio Tinto and create one of the world's biggest companies.
Australia has long had a problem of too much corporate concentration whether it be Telstra, Qantas, Westfield, News Corp, the beer duopoly, the supermarket duopoly or the big bank oligopoply.
Why do it again in vital Australian industries such as iron-ore, coal and aluminium by putting BHP and Rio together? Besides the Chinese are furious that BHP wants to create something almost as powerful as OPEC.
BHP first made its proposal public on November 8 last year – right at the top of the market - and has been bogged down for more than 9 months without even knowing if regulators will allow such a bid.
With the commodity bubble bursting there are some cracking buys out there but BHP-Billiton is distracted with the big one. For heaven's sake, the combined Oxiana-Zinifex, now known as Oz Minerals, has halved in value and is capitalised at less than $6 billion. BHP should buy Oz Minerals, not Rio.
London-based investors are particularly disturbed by BHP's tactics, so we're going to give them an outlet to express their displeasure: vote for me to send BHP-Billiton a message that you want the Rio merger abandoned and a new chairman to replace Don Argus.
Argus has a lot to answer for in driving the disastrous Billiton merger in 2001. Business commentator Alan Kohler used words such as “terrorism” and “hijacking” when describing this deal in the Fairfax press in 2006 after calculating that it amounted to a $30 billion transfer of value from BHP to Billiton shareholders.
Crikey commentator and corporate lawyer Adam Schwab reckons the soaring coal, iron-ore and oil price mean the transfer now exceeds $40 billion.
So if Don Argus has already delivered one hugely dilutive premium through an expensive mining "merger", why should BHP shareholders trust him with another?
Besides, Argus is getting decidedly long in the tooth and it really is time he retired after 10 years in charge. And don't get me started on the mess he helped create at Southcorp, the millions of lost pallets at Brambles and the clubby AFIC board that he sits on with discredited corporate leaders such as Stan Wallis.
Even the record at NAB is looking decidedly tardy now that Westpac last week relegated it to number three in terms of market capitalisation. Don has apparently been ringing journalists defending his NAB record when he was was the bloke who personally selected Frank Cicutto as his successor, he was the bloke who drove the disastrous Homeside acquisition and he was also the bloke who encouraged his mates Graham Kraehe and Michael Chaney to step up as the last two NAB chairs.
All feedback and advice to stephen@maynereport.com.
It is never a good look to run for a board and then not show up at the AGM, so I'd be interested in your advice on this matter. For instance, here is the proposed script for a video announcing the BHP board tilt.
Today, I'm formally announcing an intention to contest the forthcoming elections for the board of BHP-Billiton.
The platform is very simple – I reckon BHP needs a new chairman and am against the time and money being wasted on this empire building proposal to buy Rio Tinto and create one of the world's biggest companies.
Australia has long had a problem of too much corporate concentration whether it be Telstra, Qantas, Westfield, News Corp, the beer duopoly, the supermarket duopoly or the big bank oligopoply.
Why do it again in vital Australian industries such as iron-ore, coal and aluminium by putting BHP and Rio together? Besides the Chinese are furious that BHP wants to create something almost as powerful as OPEC.
BHP first made its proposal public on November 8 last year – right at the top of the market - and has been bogged down for more than 9 months without even knowing if regulators will allow such a bid.
With the commodity bubble bursting there are some cracking buys out there but BHP-Billiton is distracted with the big one. For heaven's sake, the combined Oxiana-Zinifex, now known as Oz Minerals, has halved in value and is capitalised at less than $6 billion. BHP should buy Oz Minerals, not Rio.
London-based investors are particularly disturbed by BHP's tactics, so we're going to give them an outlet to express their displeasure: vote for me to send BHP-Billiton a message that you want the Rio merger abandoned and a new chairman to replace Don Argus.
Argus has a lot to answer for in driving the disastrous Billiton merger in 2001. Business commentator Alan Kohler used words such as “terrorism” and “hijacking” when describing this deal in the Fairfax press in 2006 after calculating that it amounted to a $30 billion transfer of value from BHP to Billiton shareholders.
Crikey commentator and corporate lawyer Adam Schwab reckons the soaring coal, iron-ore and oil price mean the transfer now exceeds $40 billion.
So if Don Argus has already delivered one hugely dilutive premium through an expensive mining "merger", why should BHP shareholders trust him with another?
Besides, Argus is getting decidedly long in the tooth and it really is time he retired after 10 years in charge. And don't get me started on the mess he helped create at Southcorp, the millions of lost pallets at Brambles and the clubby AFIC board that he sits on with discredited corporate leaders such as Stan Wallis.
Even the record at NAB is looking decidedly tardy now that Westpac last week relegated it to number three in terms of market capitalisation. Don has apparently been ringing journalists defending his NAB record when he was was the bloke who personally selected Frank Cicutto as his successor, he was the bloke who drove the disastrous Homeside acquisition and he was also the bloke who encouraged his mates Graham Kraehe and Michael Chaney to step up as the last two NAB chairs.
All feedback and advice to stephen@maynereport.com.
At last, Bradken delivers a decent SPP
Nick Greiner has long been regarded as the only politician to have made it as a professional director and yesterday's mail bag put him in our good books when mining services company Bradken wrote to shareholders with an attractively priced share purchase plan.
I only own 63 shares, but Big Nick is offering a chance to buy another 621 at $8.05, matching the price that institutions recently paid in a $110 million placement to fund expansion into the US market. Bradken shares jumped 30c to $10.05 in morning trade after releasing this impressive profit result.
The missus will be pleased as that represents a tasty profit of more than $1000, although we won't be entitled to the 37c final dividend which is payable on September 6, three days before the new SPP shares are allocated.
We need a few more breaks like this as the existing $175,000 portfolio is showing paper losses of about $70,000, although this is after most of the profitable holdings have been crystallised, just leaving the dross behind.
Unfortunately, there are plenty of other companies at the moment, especially in the mining sector, which are doing placements without following up with an SPP for small shareholders, so well done to Bradken and Nick Greiner for doing a value-enhancing deal and then including small shareholders on the equity raising action.
Bradken is also the latest addition to our lists tracking the 80-something Australian companies generating more than $200 million a year offshore so it really is a good story given our woeful record in global business, especially compared with our performances at the Olympics.
I only own 63 shares, but Big Nick is offering a chance to buy another 621 at $8.05, matching the price that institutions recently paid in a $110 million placement to fund expansion into the US market. Bradken shares jumped 30c to $10.05 in morning trade after releasing this impressive profit result.
The missus will be pleased as that represents a tasty profit of more than $1000, although we won't be entitled to the 37c final dividend which is payable on September 6, three days before the new SPP shares are allocated.
We need a few more breaks like this as the existing $175,000 portfolio is showing paper losses of about $70,000, although this is after most of the profitable holdings have been crystallised, just leaving the dross behind.
Unfortunately, there are plenty of other companies at the moment, especially in the mining sector, which are doing placements without following up with an SPP for small shareholders, so well done to Bradken and Nick Greiner for doing a value-enhancing deal and then including small shareholders on the equity raising action.
Bradken is also the latest addition to our lists tracking the 80-something Australian companies generating more than $200 million a year offshore so it really is a good story given our woeful record in global business, especially compared with our performances at the Olympics.
Another 12 Rich Listers
The Mayne Report Rich List remains our most popular feature and here is the latest names we've added:
David Airey: the former Bank of Melbourne CEO made plenty when Westpac bought the bank and also collected what many regarded as an obscene $2.7 million payout on leaving Tasmania's Trust Bank just 7 months into a 3 year contract.
Cavasinni family: the long standing family owned construction business, Cavasinni Constructions, will be partially funding Resibuildco Pty Ltd - which trades as Beechwood Homes. Mr Cavasinni has said that this agreement is a logical step towards expansion and includes all assets of the company including existing land, buildings, contracts, intellectual property and copyright.
John and Judith Barnes: this wealthy Perth couple left Australia in February 2007 for Britain amid allegations of owing the ATO more than $10 million. They are returning to fight against bankruptcy, and continue their very comfortable life here.
Susan Susskind: the Table Eight fashion founder is selling her Point Piper home, which should fetch at least $5 million.
Bongiorno family: well known financial services providers and investors in Melbourne.
David Skellern: co-founder of wireless technology company Radiata Inc which began out of a lab at Sydney's Macquarie University before being purchased by Cisco Systems for $500 million.
Neil Weste: co-founder of wireless technology company Radiata Inc which began out of a lab at Sydney's Macquarie University before being purchased by US company Cisco Systems for $500 million.
Paul Anderson: the former BHP CEO who made about $30 million from his four years with The Big Australian and is now back on the board as a non-excecutive director.
David Higgins: former CEO of Lend Lease who had an annual salary of more than $4 million is now CEO of the London Olympics authority.
Wal King: long-serving Leighton CEO who now earns more than $5 million a year.
Fiszman family: from humble beginnings, the late Sam Fiszman arrived in Australia and began selling carpet door-to-door which was built into a carpet empire that his son runs today. Was also a prolific Labor Party fund raiser in Sydney over the years.
Lev Mizikovsky: executive chairman of Queensland home builder Tamawood Ltd who owns 25.5 million shares worth more than $50 million.
David Airey: the former Bank of Melbourne CEO made plenty when Westpac bought the bank and also collected what many regarded as an obscene $2.7 million payout on leaving Tasmania's Trust Bank just 7 months into a 3 year contract.
Cavasinni family: the long standing family owned construction business, Cavasinni Constructions, will be partially funding Resibuildco Pty Ltd - which trades as Beechwood Homes. Mr Cavasinni has said that this agreement is a logical step towards expansion and includes all assets of the company including existing land, buildings, contracts, intellectual property and copyright.
John and Judith Barnes: this wealthy Perth couple left Australia in February 2007 for Britain amid allegations of owing the ATO more than $10 million. They are returning to fight against bankruptcy, and continue their very comfortable life here.
Susan Susskind: the Table Eight fashion founder is selling her Point Piper home, which should fetch at least $5 million.
Bongiorno family: well known financial services providers and investors in Melbourne.
David Skellern: co-founder of wireless technology company Radiata Inc which began out of a lab at Sydney's Macquarie University before being purchased by Cisco Systems for $500 million.
Neil Weste: co-founder of wireless technology company Radiata Inc which began out of a lab at Sydney's Macquarie University before being purchased by US company Cisco Systems for $500 million.
Paul Anderson: the former BHP CEO who made about $30 million from his four years with The Big Australian and is now back on the board as a non-excecutive director.
David Higgins: former CEO of Lend Lease who had an annual salary of more than $4 million is now CEO of the London Olympics authority.
Wal King: long-serving Leighton CEO who now earns more than $5 million a year.
Fiszman family: from humble beginnings, the late Sam Fiszman arrived in Australia and began selling carpet door-to-door which was built into a carpet empire that his son runs today. Was also a prolific Labor Party fund raiser in Sydney over the years.
Lev Mizikovsky: executive chairman of Queensland home builder Tamawood Ltd who owns 25.5 million shares worth more than $50 million.
Record page views in August
The May traffic figures are in and we're continuing to grow steadily. There are two main directories that make up the public website - a words section and a video section. Whilst these member updates are separate again, below are the latest encouraging visitor numbers for the words section.
*Unique Visits or UV are the most accurate statistics for gauging the popularity of a website. Second most accurate is page views or PV.
WORDS SECTION STATS
January 2008 | 17,190 UV | 26,200 PV
February 2008 | 22,952 UV | 34,900 PV
March 2008 | 21,340 UV | 27,979 PV
April 2008 | 24,869 UV | 31,793 PV
May 2008 | 26,477 UV | 36,175 PV
June 2008 | 28,384 UV | 39,551 PV
July 2008 | 28,357 UV | 47,531 PV
Following the interest generated from the Babcock & Brown AGM in May, in July the traffic followed the Macquarie AGM.
In particular, the following exchange was the most listened to this month with over 1100 people tuning in - What's the total disparity between the book value of our investments in various listed funds and market value? The most popular article again this month was The Mayne Report Rich List with 2,534 visits. Our news feed page What I've been up to lately had over 2000 visits and came in second most popular on the site.
Three times this month nearly 3000 viewers were tuned into The Mayne report video blog. The three videos that spiked interest were:
Time to get Glenn Milne off the ABC with 2,889 views
Macquarie Model a dead parrot with 2,898 views
Vale Channel Nine's Sunday program which was seen by nearly 2,500 people.
Check them out if you haven't had a chance yet.
*Unique Visits or UV are the most accurate statistics for gauging the popularity of a website. Second most accurate is page views or PV.
WORDS SECTION STATS
January 2008 | 17,190 UV | 26,200 PV
February 2008 | 22,952 UV | 34,900 PV
March 2008 | 21,340 UV | 27,979 PV
April 2008 | 24,869 UV | 31,793 PV
May 2008 | 26,477 UV | 36,175 PV
June 2008 | 28,384 UV | 39,551 PV
July 2008 | 28,357 UV | 47,531 PV
Following the interest generated from the Babcock & Brown AGM in May, in July the traffic followed the Macquarie AGM.
In particular, the following exchange was the most listened to this month with over 1100 people tuning in - What's the total disparity between the book value of our investments in various listed funds and market value? The most popular article again this month was The Mayne Report Rich List with 2,534 visits. Our news feed page What I've been up to lately had over 2000 visits and came in second most popular on the site.
Three times this month nearly 3000 viewers were tuned into The Mayne report video blog. The three videos that spiked interest were:
Time to get Glenn Milne off the ABC with 2,889 views
Macquarie Model a dead parrot with 2,898 views
Vale Channel Nine's Sunday program which was seen by nearly 2,500 people.
Check them out if you haven't had a chance yet.