Wednesday 20 March 2019
Sunday 17 March 2019
Ancient Earth - 720 million years back in time
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Click the link below to access:
Ancient Earth
Monday 31 December 2018
Share buybacks by corporations - in whose interest ?
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The oft stated justification from companies is that a buy-back creates value by reducing the number of shares on issue and are a way of returning capital to shareholders. Little other information ever eventuates such as the overall rationale for the decision - what is the target price being sought ? What is the intrinsic value per share ? What is the timeline for the buy-back ? Some of the announced buy-backs have also resulted in little to no actual share purchases occurring hence the tactic appears to be for other reasons - such as placing a floor underneath the price of shares particularly if short sellers have been active in the market.
A raft of companies have been doing these buy-backs including CSL, Qantas, AGL, Navitas, CSR, Oroton, Platinum Asset Management, Cardno, QBE to name a few.
Management consultancy, McKinsey & Co, has challenged the value of share buy-backs in terms of using it as a method of improving earnings-per-share (EPS) or total return to shareholders (TRS), both of which are key revenue measures of a company's performance. McKinsey's have noted in one example that a company had pursued an aggressive share buy-back over several years and reduced around 20% of the share capital on issue and thus increased its earnings per share by 8% yet the overall net income for the business had continued falling. The overall revenue situation remained poor and the market discounted the company's shares by 40% relative to the market index. McKinsey's also commented that companies rarely time their repurchases well.
Shareholders would be well-placed to question the value of a company using investment capital or worse, debt financing, for share buy-backs rather than being used for revenue generation or 'growing the business'.
Saturday 29 December 2018
New Year 2019 beckons
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The latest Economic Conditions Snapshot, December 2018 from McKinsey & Co shows increasing pessimism about the overall economic outlook from executives around the world whether reflecting on their own domestic situation or globally. While there is some glimmer of optimism in India and Latin America, overall executives are glum about the next 12 months whether in developed-economies or emerging economies.
The key risks are defined as being related to policy and politics and are considered 'the most pressing threats'. The most commonly cited examples being trade policy, a China economic slow-down and the United Kingdom's exit from the European Union. Transitions in political leadership and geopolitical instability are the second most cited concern. Of particular note, rising interest rates have largely fallen ranking only fifth of the five most pressing issues.
Happy New Year !
2018 - a year of shareholder voting strikes on corporate remuneration
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Under the Australian Corporations Act 2001 (Section 300A), companies listed on the Australian Stock Exchange (the ASX), must present a remuneration report at every Annual General Meeting which sets out the policies for the amount of remuneration paid to key management personnel as established by the company's governing Board. Key management personnel are typically the Chief Executive Officer and senior executives including directors on the Board itself. The report must show the nature of the remuneration and exact value including salary, bonuses, short and long term incentives, options on shares and an explanation on performance hurdles which apply.
Since an amendment to the Act in 2011, there is now a two strikes voting power and re-election process for the Board itself should shareholders find the remuneration report repeatedly unacceptable. What this means is that for the first strike, a 'no' vote of 25 per cent or more of the votes cast rejecting the adoption of the remuneration report at the Annual General Meeting is needed. Should this occur the Board is required to provide an explanation on the proposed action the Board will take or a reason for taking no action on the remuneration report. If, in the following year at the next Annual General Meeting, a 'no' vote of 25 per cent or more occurs again, there must be a 'spill' motion of the positions of all members of the company Board responsible for the remuneration report at that meeting.
For the spill motion of the Board to succeed, the resolution must be passed with 50 per cent or more of eligible votes. Should the 'spill' motion succeed, within 90 days the directors must stand for re-election to the Board.
In 2018 there were a record number of first strikes for many companies -
Company Name and % of votes against the remuneration report:
National Australia Bank 88.1%
Mineral Resources 63.62 %
AMP 62.20%
Telstra Corporation 61.98%
Harvey Norman 50.63%
NRW Holdings 49.05%
Westfield Corporation 47.50%
QBE Insurance 45.60%
Goodman Group 45.46%
Tabcorp Holdings 40.40%
Myer Holdings 38.17%
Austal Limited 37.24%
Karoon 37.05%
Computershare 31.89%
Healthscope 29.29%
APA Group 24.96%
Many other companies received a high level of 'no' votes but not sufficient to reach the 25% threshold of a first strike. These include Ramsay Healthcare, MYOB, Japara Healthcare, Challenger Limited, JB Hi-Fi, Seek, Qube Holdings, IOOF Holdings, APN Outdoor, Coca-Cola Amatil. All of the companies with a first strike will need to work hard to avoid a second strike in 2019.
Monday 24 December 2018
Christmas 2018
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Wherever you may be, happy Christmas !
Sunday 11 November 2018
100 years on - The Armistice of 1918
British troops arrive in Cologne following the Armistice 1918 |
The cost for Australia in terms of lives lost in World War 1 was very high:
- 416,809 enlisted
- 62,000 killed
- 156,000 wounded
It would only be twenty-one years later than another World War would commence.
Lest we forget.
Film Review - Journey's End
The horror and senselessness of trench warfare on the Western Front during World War 1 is brought into very dark focus by the evocative British film Journey's End. Based on the stage play of the same title by R.C. Sherriff, the story is centred on a small part of the Front where a company of British infantry are positioned in trenches just metres from the German Army lines. It is the eve of the 1918 Spring Offensive by the Germans and the British are all too aware that a major action is impending.
The futility of their position is already well understood as the troops have been in combat for years and there is a sense of resignation to fate as they alternate between rest periods in the rear areas before rotation back to the front line. Much of the scenes are in the company command bunker with the focus predominantly centred on the officers as the key characters. The story commences with the arrival of young second Lieutenant Raleigh, fresh from officer training, to join the infantry company as his old school friend and love interest of his sister is the company commander, Captain Stanhope. After years of horrifying war, Stanhope is no longer the man he once was, and now needs whisky every day to stay sane.
Directed by Saul Dibb this is a well crafted film with skilled performances by Sam Claflin (as company commander, Captain Stanhope), Asa Butterfield (as Second Lieutenant Raleigh), Paul Bettany (as Lieutenant Osborne) Tom Sturridge (as Second Lieutenant Hibbert) and Toby Jones (as Private Mason, the officer's mess cook and batman).
Robert Cedric Sherriff wrote from first hand experience of World War 1 as he served as a Captain in the 9th Battalion of the East Surrey Regiment and fought at Vimy Ridge, Loos and the notorious Passchendaele being wounded in the last engagement.
This is a film which has no happy ending but conveys a story which continues to resonate 100 years later.
This is a film which has no happy ending but conveys a story which continues to resonate 100 years later.
Saturday 27 October 2018
Sculpture by the Sea 2018
Time and motion - Ron Gromboc |
Now in its 22nd year, Sculpture by the Sea returns to the coast walk between Tamarama beach and Bondi beach with over 100 works featuring all manner of creations and images. Some works are within the more recognised traditional medium of sculpture and others with more unusual. There is a strong representation of Australian (and NSW) artists selected with the wider international submissions coming from Spain, China, Sweden, South Korea, England, South Africa, Austria, Norway, Canada. France, Turkey, Israel, New Zealand with Japan being the largest source apart from Australia.
The exhibition runs from 10 October to 4 November 2018 and its free.
Disc Vane- Ivan Black |
Monday 30 April 2018
AMP's epic fail - The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry
The departure of AMP Board Chair, Catherine Brenner and Corporate Counsel, Brian Salter following the earlier resignation of Chief Executive Officer,Craig Meller should be seen as just the beginning of an essential overhaul of this once trusted company. AMP has seriously breached legal obligations and corporate governance principles and requirements.
Essentially AMP has been found by the Royal Commission to have committed two serious categories of misconduct, potentially criminal in intent: the first being the deliberate effort to blindside the Australian Securities and Investment Commission (ASIC) on at least 20 separate occasion regarding the theft of client funds. The second being the altering of an alleged independent report by Clayton Utz to ASIC with 25 different versions being 'workshopped' by AMP including the participation of the Board Chair.
In its own corporate governance statement, AMP states its goal is -
Essentially AMP has been found by the Royal Commission to have committed two serious categories of misconduct, potentially criminal in intent: the first being the deliberate effort to blindside the Australian Securities and Investment Commission (ASIC) on at least 20 separate occasion regarding the theft of client funds. The second being the altering of an alleged independent report by Clayton Utz to ASIC with 25 different versions being 'workshopped' by AMP including the participation of the Board Chair.
In its own corporate governance statement, AMP states its goal is -
"Acting ethically and responsibly AMP
wants to create a better tomorrow for our customers, employees, business
partners, communities and shareholders. Everything we do, every decision we
make has an impact, not only on the long-term success of our business but also
on the lives of our customers. We are committed to acting with professionalism,
honesty and integrity so all our stakeholders know they can trust us to do the
right thing".
How hollow this statement now reads.
In terms of its own Code of Conduct, what AMP expects of their staff -
"We
trust you will act in the best interests of AMP, its customers, business
partners and shareholders AMP is proud of its reputation for delivering on its
commitments and relies on your commitment to speak up. We put adherence to
these principles above financial gain.
You will not be criticised or penalised for any
loss of business resulting from adhering to these principles and other
mandatory policies and instructions. We all make mistakes but at AMP we act
quickly to rectify errors and learn from our mistakes".
Was this Code also applicable to AMP's Board of Directors ?
With a market capitalisation of $14.9B, there is a justified public expectation that AMP should set a high bar for corporate governance.
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