Amcor Limited (AMC):
Packaging group Amcor has broken one of investment guru Warren Buffett's main rules of never paying upfront for cost synergies when two businesses are merged, as analysts question the high price tag in a deal which has a $175 million break fee in place should an outsider enter with a competing proposal. The break fee of US$130 million ($175 million) is outlined in the fine print of the 98-page buyout agreement between Amcor and United States packaging company Bemis Co, which also reveals that Amcor chief executive Ron Delia and his Bemis counterpart Bill Austen will be setting up an integration plan taskforce straight away even though the buyout isn't likely to be finalised until the first quarter of calendar 2019. The CEOs and their management teams will "work to develop a post-closing integration plan" but there will be strict protocols in place to stop either party influencing operational decisions until finalisation of the transaction, which requires approval from both sets of shareholders and regulators. The share prices of both Bemis, which trades on the New York Stock Exchange, and Amcor, on the ASX, both had substantial drops on their first day of trading after the $9 billion buyout was announced amid concerns from investors that while the acquisition made strategic sense for Amcor, it was paying an expensive multiple in the all-scrip deal. Amcor shares slipped again by 2 per cent in early trading on Wednesday, after a 5.8 per cent drop on Tuesday.
AMP Limited (AMP):
AMP has admitted that royal commission hearings that exposed the fee-for-no-service scandal have hurt flows into its wealth management business, in addition to provisions for remediation that slashed its half year net profit by 74 per cent. AMP (AMP) today posted a $115 million interim net profit, down from $445 million a year earlier as a result of provisions announced last month for likely repayments to customers that were affected by the scandal that also cost the chairman and chief executive their jobs. Underlying profit — which excludes the provisions, also fell, from $533 million to $495 million — thanks largely to higher claims for total and permanent disability and capitalised losses in its wealth protection business. Earnings also fell in AMP's New Zealand financial services and for older-style products in Australia. But earnings at AMP Bank rose 20 per cent and both the majority-owned funds management business AMP Capital and the Australian Wealth Management managed small increases. AMP will pay a 10c dividend, 50 per cent franked.
Commonwealth Bank of Australia (CBA):
Commonwealth Bank has posted a full-year cash profit of $9.23 billion, down 4.8 per cent on the year before, snapping an eight-year run of profit growth. Its result was dented by the cost of settling a money-laundering compliance lawsuit and a jump in compliance and regulatory costs. Net profit declined by 6 per cent to $9.33 billion in the year through June from a record $9.93 billion the year before. It is the first weakening of earnings since the height of the global financial crisis, breaking growth that has averaged more than 8 per cent. It has been a turbulent year for Australia’s largest bank by market value and its biggest mortgage provider, as it ushered in a new chief executive and executive team, refreshed its board, proposed spinning off unwanted operations and faced up to heightened scrutiny from regulators and the government following a string of industry scandals that sparked an ongoing judicial probe of misconduct. The bank in June agreed to pay $700 million to settle the suit, brought by the country’s financial-intelligence agency, and admitted to failings including the late filing of mandatory reports and not sufficiently assessing risk.
Eclipx Group Ltd (ECX):
Sales financing group Eclipx flopped in the market yesterday after it halved guidance for its full-year profit growth, down to between 13 per cent and 17 per cent, from as much as 30 per cent. It resulted in more than 40 per cent of the company’s market valuation being wiped off as its shares traded at historic lows, closing yesterday at $1.80 — well below its April 2015 listing price of $2.30. The owner of the GraysOnline business told the market on Monday night that its new range for net profit after tax was between $77 million and $80m. That was down from previous guidance of $87m-$89m, but still up as much as 17 per cent on the previous year. “GraysOnline auction activity is being affected both by a 10-year low in bank-initiated insolvencies in Australia and the current buoyant construction sector resulting in reduced auctioned equipment disposals,” the company said. It estimated a decline of more than 50 per cent in insolvency-related asset sales, which analysts at CLSA said was probably cyclic. CSLA analyst Scott Hudson said the company’s accident management arm, Right2Drive, was more troubling.
National Australia Bank Ltd. (NAB):
The process that saw NAB's superannuation trustee NULIS advised by the bank's wealth management arm was hopelessly conflicted, the Hayne royal commission has heard. Counsel assisting Michael Hodge QC put to former NULIS chairman Nicole Smith that there was an inherent conflict of interest between the trustee, which had the sole duty of acting in the best interests of the super fund members, and the administrator, which was concerned with making profits for the bank. "It's hopelessly conflicted isn't it? How can it advice you as to what's to be done...when it's the one that will have to pay the money back?" Mr Hodge said. Mr Hodge was exploring the sequence of events that saw NAB's wealth management arm advising its superannuation trustee about what was to be done in relation to the charging of superannuation customers for advice when no advice had been given. NAB would ultimately refund customers $87 million. Ms Smith would deliver a qualified agreement after more than an hour of questioning in the witness box, saying "I believe it was a conflicted position I do not agree it was hopelessly conflicted."
SKYCITY Entertainment Group Limited (SKC):
SkyCity Entertainment said its net profit rebounded sharply last fiscal year, benefiting from a recovery in overseas high-rollers visiting its Australian and New Zealand casinos. SkyCity (SKC) reported a net profit of $NZ169.5 million for the 12 months through June, up from $NZ44.9 million a year ago. Normalised net profit, which strips out unusual items, rose by 10 per cent to $NZ169.9 million. “Key drivers were strong growth in international business, continued growth in Auckland, improved performance in Adelaide and effective cost management at the properties, offset by increase in corporate costs,” SkyCity said in an accompanying presentation. Directors of the company declared a final dividend of NZ10 cents per share, in line with a year earlier.
Tabcorp Holdings Limited (TAH):
Wagering giant Tabcorp has bounced back to profit after its takeover of Tatts Group, with digital sales in wagering and lotteries helping to drive the result. The company (TAH) reported today that its net profit after tax was $28.7m, which was an increase on last year’s $20.8m loss. Revenue increased 71.4 per cent to $3.8 billion. Tabcorp noted that, as previously flagged to the market, its annual result was impacted by a $217.5m significant items expense, which included the Tatts merger, exit of its failed UK joint venture Sun Bets and the closure of Luxbet. Tabcorp had announced last month it would pay News UK about $71m to exit the Sun Bets business. “During the year we accelerated digitalisation across the company, launched new products and implemented new licences,” Tabcorp chief executive David Attenborough said. “The group delivered a positive second half performance and we are well positioned for profitable growth and sustainable returns to shareholders.” Tabcorp, labelling its results as a “company-defining year”, said post its takeover of Tatts Group it was now a top 50 ASX company with annualised revenues in excess of $5bn. It said synergies and business improvements from the combination were on track and had delivered $8m in fiscal 2018.
(Source: AIMS)
Latest comments