Friday, July 12, 2013

NBN Co boss MIke Quigley jumps - but was he pushed?

After months of speculation, the embattled chief executive of NBN Co Mike Quigley has announced his resignation.

Mr Quigley, who was appointed to the role four years ago, will remain as CEO until a successor is appointed.

Significantly, Mr Quigley says he will "retire from corporate life" after coming out of retirement to build the National Broadband Network.

Mr Quigley has been plagued by political pressure and more recently has been criticised for delays in the rollout and disputes with contractors.

Wednesday, July 10, 2013

More pain expected for mining industry, expert warns

Insolvency experts are predicting more pain to come over the next six to 12 months as the shakeout in Australia's mining sector takes hold.

Restructuring firm Ernst & Young is expecting to see more receiverships and distressed sales as miners end their investment and construction phase to focus on production.

The forecast comes after almost half of the listed companies exposed to mining services issued profit downgrades as projects are deferred and market conditions falter.

Ernst & Young's Asia Pacific leader of mining and metals transactions, Paul Murphy, told AM the slowdown in mining is starting to reverberate in the sector, especially among companies with high debt

"I think that's inevitable. I think things grew so quickly as all the mining companies were looking at growth at all costs," he said.

"A lot of inefficient companies went along for the ride with that. And some companies that have the higher debt levels and are more vulnerable than others, there will be a rationalisation period that occurs and some will become insolvent and go to the wall.

"Overall it is a bit of a correction in some ways that had to happen. What tends to happen during these periods of rationalisation is that longer-term the industry becomes stronger and better able to withstand these shocks to slow-downs and capital expenditure."

The Reserve Bank has repeatedly warned that mining investment will peak earlier than expected and that other sectors of the economy are not taking over quickly enough.

The transition is also hostage to the fortunes of China, which is undergoing a growth slowdown from double digit pace to the current 7.5 per cent.

Mr Murphy says the recent political uncertainty and the restoration of Kevin Rudd as Prime Minister has contributed to mining sector instability even though the slowdown began a year ago.

"Like any sector really, uncertainty in the political sphere or the regulatory sphere creates a period of uncertainty for the sector and so people tend to delay and defer investment decisions," Mr Murphy said.

He says while capital expenditure in mining is expected to fall by as much as 20 per cent, there will be winners as well as losers.

"Players that are more diversified, that have stronger tender and management practices are going to be in stronger positions," he said.

"That means that the players that don't exhibit those characteristics - they're not diversified, they might have one contract, they tend to have weaker management and tender practices - are going to be more vulnerable.

"It just depends how quickly this slow-down in [capital expenditure] takes hold. So hopefully a lot of these smaller players will be able to reposition, do something about their debt and not necessarily go to the wall. "

Ernst & Young's analysis shows 49 per cent of listed companies which generate revenue from mining services have issued profit downgrades in the past six months - more than third in the past three months.

The study shows the market capitalisation of the 84 listed mining services companies has fallen 16 per cent in the year to June.

The performance of mining companies is expected to be a major focus of the the upcoming reporting season as investors seek to identify winners and losers.

Monday, July 8, 2013

ASIC to monitor analyst briefings in wake of Newcrest investigation

By Business editor Peter Ryan

The corporate watchdog will conduct random checks on companies this reporting season to ensure discussions with analysts don't break insider trading laws.

The Australian Securities & Investments Commission will have its officers sit in on boardroom briefings because of concerns some analysts sometimes receive inside information not available to the general public.

Listen to my interview with ASIC commissioner Cathie Armour broadcast on AM.

The crackdown comes as ASIC investigates allegations that Newcrest Mining selectively briefed analysts days before officially revealing deep job cuts and a multi-billion dollar profit downgrade.

In the leadup to the market announcement on June 7, analysts at six investment houses downgraded their outlook which saw the Newcrest share price fall almost 12 per cent.

Newcrest share price slide in leadup to to June 7 announcement    Source: Bloomberg

ASIC commissioner Cathie Armour says the reporting season is an "opportune time" to send a message to listed companies that the regulator is watching what is said in communications to analysts.

"One of the things we're looking to do is to check with a limited number of companies exactly how they go about doing this, how they go about briefing analysts, and what sort of conversations they have, what sort of procedures they may put in place," Ms Armour told AM.

While the random checks by ASIC will have to be approved by companies, ASIC is expecting a high level of cooperation.

"We think companies will be delighted to do so, because this issue really goes to that heart of market integrity and this is a matter that companies are as interested as ASIC is," Ms Armour said.

However, Ms Armour rejected criticisms that companies will be on their best behaviour if an ASIC officer is sitting in on briefings.

"It doesn't matter if there's great behaviour when we go along; we learn something from that. We have some guidance already that we've published about how companies should interact with analysts, and the things we learn from what we see will inform our assessment of whether the guidance we have is good enough."

Ms Armour refused to rule out the option of using telephone interceptions if there was evidence of insider trading.

"If there's a reason for a concern, we'll consider using all of our powers. At the moment, we're just talking about a thematic and proactive approach to the issue, as distinct from a law enforcement approach."

The crackdown from ASIC might prompt better boardroom behaviour, but a tougher challenge will be to eliminate the informal passing of privileged information away from offices.

ASIC has refused to comment on the Newcrest investigation.

Newcrest recently appointmed former ASX and ABC chairman Maurice Newman to review its adherence continuous disclosure laws.