28 September 2012: Government car maker subsidies and Dick Smith plan

AU government paid subsidies of $3 billion over the past decade to car makers Toyota, Ford Australia, and GM Holden. Manufacturing impacted by high dollar, expensive raw materials, and global competition. Government's $5.4 billion New Car Plan will run from 2011 to 2020. Other assistance to the car industry, such as tariffs, estimated at around $670 million a year.   Manufacturing industry overall has shed 125,000 jobs over the past four years. [CR: From my seven years in manufacturing, I get this. Technology changes in digital requires learning new languages and updating hardware. By comparison, staying on top of technology in manufacturing requires millions in capital investment. It is easy to get left behind, and nearly impossible to remain competitive without assistance.]

Dick Smith plan: Sold by Woolworths to Anchorage Capital Partners for $20 million. Earnings before interest and tax last year was $24.6 million. Anchorage Capital Partners believes private equity is the way to turn around a business, "do it outside the day-to-day ASX-listed conventional board room environment and below the radar." Plan is to fix the business, make it perform better, then let the "exit [sale] take care of itself." CEO Nick Abboud's plan is to restock the "bibs and bobs" of electronics accessories. Says that is where the margins are and it will drive foot traffic, then get cross-selling across computers and televisions. Will maintain current store network, introduce more private label products (currently 14 percent of sales), improve markdown management, merchandise mix, online sales, marketing and store layouts. Before the sale, Woolworths "cleared the decks" with 44 store closures. Currently 325 stores achieving EBIDTA profit, no debt, and net assets of $290 million. [CR: I always like a clear strategy on the part of the equity firm and the CEO. "This is what we are going to do" and then they do it. Will be interesting to look back in 12 months and see how effective this was.]

27 September 2012: BYO device discussion and Westpac mobile banking stats

Technology rating on BRW Young Rich list: Atlassian founders now number 1, combined wealth of $480 million up from $360 million, company believed to have turned over $100 million in revenue last year, US venture capital fund Accel Partners paid $60 million for a minority stake in 2010. Young Rich List is the top 100 wealthiest self-made Australians aged 40 and under. Total combined wealth of $5.1 billion, down from $7.3 billion last year. Four of last year's top six members turned 41 and are ineligible for the list. 48 percent of returning members maintained or increased wealth over the past 12 months. Online retailer Ruslan Kogan increased wealth to $145 million from $62 million, up from 34th position to 8th, says biggest challenge is scaling, outgrowing capabilities of service providers they use. Number of women fell from 8 to 6, lowest in the list's ten years. [CR: It would be interesting to see differences in how the under 40s spend their wealth compared to the over 40s.]

Apple co-founder Steve Wozniak moving to Australia within two years, not planning on joining a company or board, will be available for speaking engagements, moving to Sydney but may make home in Melbourne or Hobart. [CR: I admit the man is incredible. I also ask to what extent genius and success is a combination of talent, perseverance, and opportunity.]

Sharp to cut more than 10,000 jobs, 18 percent of its workforce, in plan presented to lenders on Monday. Selling TV factories in Mexico, China and Malasia and US solar developer Recurrent Energy.

Barnes & Nobel introducing new video stream into Nook. Service will allow customers to stream and download movies and television shows for a fee onto televisions and mobile devices, while storing cpontent in the Nook cloud. Microsoft invested hundreds of millions in April in Barnes & Nobel's digital division.  Service will be similar to Apple's iTunes functionality. Walmart entered the streaming space in 2010 with the $US100 million acquisition of Vudu. Verizon and Redbox recently partnered to introduce their own streaming service.  [CR: The future is paved with media from the past. It will be interesting to see to what extent older content can be monotised through new services.]

Outdoor clothing company Kathmandu update: Company listed three years ago, sales rose more than 60 percent ($NZ347 million) since 2009, profit grew 130 percent to $NZ34.9 million. Has delivered 20 percent growth in like sales. Biggest hurdles include delivering further same-store sales growth, avoiding cannibalising sales at existing stores from new stores, and growing market share from competitors Anaconda, BCF, and Mountain Designs. Australian sales penetration is one-third that of NZ, Australian sales generate 61 percent of group revenues. Plans to open more small-format stores in shopping malls rather than "destination locations" to capture bigger share of consumer spending on leisure apparel and footwear. Also boosting online sales, relaunching webstores in Australia and in the UK to boost global presence, investing in new online channels such as Amazon, TradeMe, and eBay. Online sales less than 5 percent of total sales, believes they can reach 30 percent. [CR: I keep seeing that 30 percent number quoted as the future benchmark for retail digital sales, repeated by the likes of Myer and David Jones who are hanging around 1 percent. Is the gap due to a lack of consumer awareness and trust, because of existing poor ecommerce offerings, or a lack of adequate distribution?]

BYO device discussion: Melbourne-based law firm Cornwall Stodart, reduced per user costs from over $2,000 per year to under $1,500 per year when it introduced its 130 staff to use their own devices. Gartner estimates 59 percent of companies allow staff to bring their own smartphones, 52 percent laptops, 42 percent tablets. Consumer purchases of mobile devices outnumber corporate purchases by 10:1, but corporations expected to purchase over a third of all mobile devices by 2015. Laptops expected to last three to five years, tables expected to last 15 to 18 months due to "product envy" as product is perceived to be obsolete. Mobile device network management revenue expected to exceed $US500 million in 2012. Opens issues with security, DSD says 65 percent of cyber attacks on Australian targets have an economic focus. 85 percent of "cyber intrusions" could have been prevented by patching software, restricting administrative privileges, and using application whitelisting.  [CR: Security policies need to be reviewed pretty frequently these days.]

Mobile banking stats: Deliverables from first nine months of Westpac CIO's role: release of the bank's first iPad application, a trial to turn Android smartphones into contact-less payment devices, introduction of an iPad app to replace printed board papers, a 1000 iPad pilot for bank executives, and St George innovation that allows payments from mobile numbers. Edgar Dunn & Co predicts 250 million mobile banking transactions per year in Australia by 2015. Gartner predicts global value of mobile payments will increase 62 percent to $US171.5 billion in 2012. It took 80 months for online banking to reach 1 million customers, only 30 months for mobile to reach 1 million customers. In two months, Westpac iPad app downloaded onto 58,000 devices, used in 137,000 transactions worth $125 million. By comparison, there are 1.5 million users of Westpac smartphone apps. In August, 17 million of the 48 million online sessions (35 percent) across Westpac group came from mobile, 166 percent more from the year prior. One focus of the bank's $2 billion five-year strategic investment priorities program is to web-enable much of its back-end systems while boosting reliability, robsutness, and resilience of core infrastructure. Acknowledges a three to five year addressing of the "long tail of legacy".

18 September 2012: QR National name change and CEOs bonus reduction

QR National to change name to Aurizon: Name combines “Australia” and “horizon”. Also the name of a Canadian goldminer who owns aurizon.com and a UK-based brand of ear drops for dogs. People still confuse QR National, which provides freight rail services, with government-owned Queensland Rail group, which provides passenger rail services. Groups separated in 2010 when QR National listed. Railroad group is 147 years old, floated last year for $6.2 billion. Over 70 companies on the ASX have changed their name since the start of the year, including OneSteel which is now “Arrium”. QR National’s main competitor, Asciano, is also considering a name change. [CR: I catch the train every day, and I know I was not clear on the distinction. Do you wish at times that you could change your name to reinvent your brand? Would you become a brand of ear drops for dogs?]

Bonus reduction for top CEOs: Top 100 CEOs dropped 20.8 percent to $1.255 million, levels not seen since 2003. Reported pay fell an average of $4.724 million last year. Energy retailer AGL CEO pay increased 83 percent to $6.3 million to reflect improved financial results. Around 90 percent of CEOs received a bonus. Executives on pay freezes and bonus cuts (Qantas, BHP Billiton, Rio Tinto, BlueScope Steel, ANZ, Commonwealth Bank) could be headhunted by Asian companies. One-third of CEOs are being paid more than companies tell investors. BHP Billiton CEO reported pay of $11.8 million, received $17.34 million. [CR: Quantum physics and CEO salaries. Both have been explained to me in detail, and both I have yet to fully understand.]

China targeting offshore IT work to take contracts from India: Driven by vast labour pool, government subsidies, and low price of services. Concerns include relatively immature services on offer, poor quality of spoken English, and grave concerns about the security of intellectual property and data privacy. China’s largest outsourcing company is HiSoft, employing 23,000 people, expected to generate $US670 million in 2012. [CR: The game will change over the next few years as China overcomes these barriers.  That said, local work typically sees 20 percent project management, double or triple that for remote work. To make it work, the hourly rate needs to be low enough to offset the increased communication. The rapid rate of change in both technology and requirements means local responsive providers still have a strong market.]

Hewlett-Packard looking at its own smartphone and tablet: HP previously attempted to enter the space with 2010 $1.2 billion acquisition of Palm running on WebOS. Did not catch on, HP eventually offered WebOS as open-source. CEO Meg Whitman did not say which OS the eventual smartphone would use. HP world's leading seller of PCs, focuses on enterprise services to maintain profitability. HP moving ahead with biggest round of employee buyouts and layoffs in the company history, announced this month an additional 2,000 workers will be leaving the company, increasing cutbacks to 29,000 through October 31, 2014, shares trading at an eight-year low. [CR: Do we need another smartphone in the market? I believe that's around 8 percent of their total workforce they are letting go.]

17 September 2012: iSelect IPO and Body scanners for clothes shopping

Rip Curl for sale: Founded in 1969, two founders own 72 percent of the company, could make more than $100 million each if the brand fetches $400 million, but $300 million could be more realistic. Rip Curl operates corporate stores in Australia, New Zealand, Europe, USA, Canada, England, Israel, South America, and South Africa. About half of sales come from Australia. Company booked $7.9 million profit year to June 30 2011, down from $15.5 million in FY2010. Sales fell 8 percent to $362.4 million. During 2012, acquired 24 Rip Curl branded stores in Australia and South Africa. While Billabong and Quicksilver have opted for stockmarket listings to fuel expansion, Rip Curl remains private. [CR: Two guys and a sewing machine 60 years ago, now looking to clear $100 million. Would you stick with what you are doing now for that long for a chance at those returns?]

iSelect seeking IPO: Originally founded as comparison shopping site for the health insurance market, has expanded into life insurance, general insurance, home loans, energy, and broadband. Recorded $112 million revenue FY2012, of which 81 percent came from health insurance arm. EBIDTA worth $24.1 million, up 38 percent came from traditional health insurance arm. If EBIDTA  targets of $30.9 million in FY2013 and $41.8 million are hit, it could mean a $600 million IPO next year. Expected revenue growth of 10 percent per year. NineMSN owns 33 percent of iSelect. Around 500,000 new policies are written annually, of which 215,000 are sales to new market entrants and 285,000 result from switching funds. [CR: Comparison sites are the big winners in a tightly competitive market.  The more the big companies fight, the more the comparison tools win.]

Myer’s online plans: Online sales account for 1 percent of sales, expected to generate 10 percent to 15 percent within a few years. Building core competency rather than acquiring. Myer has spent $600 million on transforming itself into an “omni-retailer”, combining online offer with traditional brick and mortar stores. Company is 75 percent of the way there, with about $30 million still to be spent. Company is likely to shit more stores as online retailing grew. [CR: Online replacing brick and mortar, but creating jobs elsewhere.]

Online banking and debit card stats: PwC research – the websites of the big four banks rank among the top 25 percent most visited sites of the nation. About 75 percent of banking customers use digital banking. Bankwest research - Debit cards are the fastest growing payments category, with 2.6 billion transactions over the year to November 2011. Debit cards account for 37 percent of all non-cash retail transactions in 12  months to November, grew 95 percent over five years.

Body scanners used for clothes shopping: Trials in US using body scanner technology to help with fitting clothes.  Around 89 percent of US clothes shopping happens in bricks-and-mortar stores. UK-based Bodymetrics and LA based Styku both have scanners based on infrared motion sensors found in the Mocrosoft Kinect. Berlin’s Upcload offers home scans using webcams and image-processing technology. Unique Solutions Design has been licensed with similar to airport xray scanners, but not the same that have sparked concerns over x-ray radiation. Americans spent $25 billion on clothes and accessories online  in 12 months to June, out of a total of $173 billion spent online. [CR: We are afraid of the technology in airports, but as soon as it can help us find the right shirt size we think it’s OK.]

Green Building Council of Australia issued its 500^th Green star sustainability rating. There are 8 million square metres of Green Star certified space around Australia. 40,000 people have been trained on sustainability practices.  The rating system is nine years old. Green-star assets deliver a 5 percent value premium and a 12 percent rent premium. The change has been achieved with little government intervention, apart from the move by governments to higher-rated tenancies and rules on advertising ratings.  [CR: Good to see the tipping point.]

14 September 2012: Myer strategy and iPhone NFC discussion

Health industry largest employer in the country: 440,000 jobs in Health created since May 2003, almost 12 percent of the workforce. One-fifth of the 2.3 million jobs created in the last decade have been in health care. Greater shift towards services sector, common across developed world as countries become more service-sector oriented as they become richer. Retail slowed, from 75,000 new jobs between 2003 to 2007, to 5,300 jobs from 2007 as households become more cautious about spending, offshore competition increases, and technology places pressure on the sector.  Mining added 181,000 jobs but only accounts for 2.3 percent of all Australian jobs. Manufacturing hit the hardest but still fourth largest employer at 8.4 percent of all Australian jobs. [CR: Interesting that retail job slowdown attributed to technology, I wonder if this is reflected in an increase in tech-related jobs.]

Myer investment in staff paying off but not in share price: Investment of $17 million in extra staff, contributed to 14.3 percent decline in net profit to $139.3 million for 12 months ending July. Bottom line profit fell 12.7 percent due to higher wages, occupancy costs, and utility bills. Sales slipped 1.3 percent to $3.12 billion due in part to existing catacgories such as white goods and gaming consoles. Five-point strategy: 1) improve customer service; 2) grow exclusive brands; 3) close marginal stores; 4) strengthen customer loyalty; and 5) build a fully integrated ecommerce business. Online sales doubled in 2012 but still represent less than 1 percent of total revenue, target to increase to 10 percent in five years. CEO Bernie Brooks: "If we hadn't invested in customer service, we would have lost our customer franchise and exposed ourselves even more to the world wide web. We had to take our medicine and balance that against the long term view." Result: customer complaints are down, conversion rates improved, average spend rose for the first time in five halves, and sales growth higher for stores that hired extra staff. [CR: Related to observations made on David Jones "style advisers" back in July.]

iPhone NFC discussion: Apple  not including NFC chip in iPhone 5.0 could be seen as as controlling the market, given its 80 percent market share. Global standard for NFC has been in place since 2004, chip included in Samsung Galaxy phones for more than a year. Commonwealth Bank of Australia shows exponential growth since introduction of NFC in 2011, its Kaching application required iPhones to have an iCarte sleeve. Westpac is trialing NFC solution Tap and Pay, roll out date is undecided. Of Westapc's 8 million customers, 3.4 million are actively using online channels, 1.5 million using mobile banking channels. One reason for the expected delay is that Apple is determining how to lock payments up in the Apple ecosystem. [CR: As soon as the technology is there, the applications will proliferate across the market.]

13 September 2012: Japan to abandon nuclear power and Google shares

Difference between Woolworth’s Masters Home Improvement and Bunnings: Article title “A bit pristine for ‘dirty’ tradies. Quotes include: “It’s a little too feminine” and “range adequate for the average DIYer but the [Masters] did not cater for trade”.  Home improvement is a $42 billion industry. Bunnings accounts for 16 percent of the industry. Article states Woolworth’s has made the stores more “female friendly”, with higher levels of customer service, brighter lighting, polished floors, better finishings and fittings and a wide range of decor items such as mirrors and wall art. Woolworths accusing some suppliers of not dealing with Masters due to supplier relationship with Bunnings. [CR: So is customer service now considered “feminine”?]

Cigarettes going clean-skin: From October 1, cigarette manufacturers in Australia will be prohibited from producing branded cigarettes. Retailers will have until December 1 to get rid of stock. Leftover stock will be destroyed. After 1 December, cigarettes will appear in plain olive green packaging. Estimated 80 sites to destroy 540 million cigarettes. [CR: Be interesting to see if there will be an emergence of a temporary black market.]

Domestic tourism up: Spending on overnight stays up 9 percent to $50.8 billion in FY2012 compared to FY2011. Australians made 4.2 million more overnight trips. Qld, QA and NT strongest increase at more than 15 percent. Spending on day trips increased 15.9 percent. Domestic tourism accounts for 75 percent of the $35 billion contribution of tourism to Australia’s GDP. [CR: How does this compare to the overseas spend? Is this just an indicator of a cautious consumer spending dollars closer to home?]

Japan to abandon nuclear power by 2030s. Joins Germany, which has said it will wean itself off nuclear by 2022. [CR: An entire technology platform where people look at it and say “oops, that was a mistake”.]

Vodafone switching on 3G to compete with Telstra’s 4G: Vodafone number three player behind Optus and Telstra, turned on $1.7 billion 3G network upgrade, 4G rollout planned for Q1 2013. Telstra announced in August a $400 million expansion of its 4G network, Optus extended 4G network to retail customers last week. Australia has largest per capita iPhone penetration (around 48%), second only to Switzerland.  As many as 1.7 million customers are expected to upgrade handsets over the next few months. [CR: almost every other person has an iPhone? That’s big numbers, winner takes all.]

Google shares: passed $US700 last week for the first time since last-2007. Shares returned 6 percent for the past five years. Increased free cash flow an average of nearly 50 percent a year between 2007 and 2011. Has $43 billion in cash, earns 20 percent cash return on invested capital. Google added eight times more advertising revenue in the latest quarter than Facebook. Shares trade at 14 times next year’s estimated earnings. [CR: I have $43 in cash. What’s a few zeros?]

10 September 2012: Brisbane-based 3D manufacturing and expected iPhone 5.0 margins

Brisbane firm first to use 3D manufacturing in commercial mass production. Ferra Engineering with $200 million agreement with Lockheed Martin to make titanium parts for the F-35 joint strike fighter (JSF). Additive manufacturing being hailed as the third industrial revolution, uses lasers or ion beams to deposit plastic or metal in layers to build a completed part. [CR: Very cool, this is getting very Star Trek.]

Impact of China’s one-child policy, 30-years on: Fertility rates in 2010 calculated at 1.4 (number of times women give birth), placing China among the countries with the lowest fertility. Resulted in reduction of those in prime working age between 15 and 59, labour shortage  combined with increased demand led to rapid wage inflation. Potential annual GDP fell from 9.8 percent in 1995-2009 to 7.2 percent in 2011-2015 and is expected to be 6.1 percent in 2016-2020. Calls to avoid immediate visible policy changes aimed at affecting short term actual growth (industrial policies, regional development strategies, macro-economic stimulus plans). Address instead with impacts on long-term potential growth rate (education deepening, reform to accept migrant workers, eliminate barriers to moving product between regions). [CR: One challenge leads to another. Will be interesting to see if China will have an internal “globalisation” trend.]

New iPhone 5.0 expected to wipe 3-4 percent off Telstra’s margins due to increased handset subsidy costs. iPhone 4S in October 2011 resulted in a 15 percentage drop in US AT&T margins. Telstra margins reached a new high of 39 percent in year half to June. Mobile revenues grew 8.5 percent to $8.7 billion in 2011-2012, offsetting sharp decline in Sensis and fixed phone lines. iPhone 5.0 will be the launch of the Telstra 4G network. Telstra faces competition from Optus and Vodaphone, with unusually large number of customers rolling off contracts, at risk of any one player deciding to sacrifice margins to buy market share. Increased popularity of Android also raises potential for less of an impact on customer growth than previous periods. [CR: The market balances itself out to try and prevent any one player becoming dominant.  Would love to go forward in five years to see which player we are dismissing now or does not exist at all comes to the forefront.]

Over three-year delays in IT backoffice superannuation management system. IT firm Superpartners, owned by five industry funds – AustralianSuper, Hostplus, HESTA, MTAA, and Cbus. Originaly scheduled for 2010, now slated for release 2013-2014. Original price tag of $70 million, current estimates as high as $260 million. Reasons for delays: the need to cater for the scale and complexity fo several major superannuation funds, the need to “get it right”, and the fact that it is a series of projects. [CR: Using “it’s just really complex” works as a reason? Will need to try that sometime...]

Lululemon doing well: Canadian yoga company selling $1.4 billion this year at 25 percent margins, expect to add another $1 billion by 2015. Revenue growth has been at 30 percent per annum for three straight years. [That’s a lot of rich yoga people. Great market.]

MGM Holdings, Hollywood studio behind James Bond, seeking initial stock sale before October release of latest Bond flick. MGM exited bankruptcy in 2010. [CR: Always good to hear when they make a comeback.]

7 September 2012: August employment numbers and finance sector employment assessment

August employment by the numbers: Hours worked fell for third consecutive month, first such run since 2009, as companies scale back production rather than slash jobs, waiting for a rebound. Participation rates are at 65 percent, a six-year low and one percent lower than last year. Jobless rate dropped slightly to 5.1 percent. Average monthly drop in jobs three months to August is just under 9000, compared to first five months of 2012 when an average 22,000 jobs per month were created. [CR: The worst-case prophet in me sees a gradual softening, employers hoping it will rebound, extending payrolls as far as they can, then everything snaps at once and numbers spike. Given that prophets who were wrong were stoned a few centuries ago, I might keep that to myself.]

Improved Asian literacy could bring from $150 billion in economic growth over ten years, per report by AsiaLink Taskforce for an Asia Capable Workforce. By 2020, Asia will have more middle-class consumers than the rest of the world, by 2030 the Asian economy will exceed the combined US and European economies. Growth is in non-resources exports, including services. Recommends working with education providers on internships and work experiences in Asian businesses. [CR: Not only for businesses, but your personal career. What are you doing to prepare your career and that of your staff for the inevitable?]

Costs of changing GST import tax for online systems: Cost to overhaul border processing systems estimated at $40 million, findings from the parcel processing task force. If all online purchases entering the country were subject to GST, it would cost another $450 million in collection costs by 2014. Imposing GST on imports over $500  instead of the existing $1000 tax-free threshold would cost about $11 million in handling costs. Australians spent about $11.7 billion on internet purchases, 25 percent more than a year ago. [CR: Disappointed the article only focused on the cost, without explicitly stating the potential revenue number and who that revenue would go to. What is the ROI?]

Around $28 million of race wear is sold to Victorian racegoers in the month before the Melbourne Cup. [CR: I wonder how much race wear is purchased online?  I wonder how much greater the number would be if online imports had GST applied?]

Finance sector employment reductions: Bank of Queensland to boost employee efficiency by reducing staff by 50 to 100 (around 7 percent of its workforce), reported a loss of $91 milluion for six months to Febrary to cover bad debts of over $200 million. Australia experiencing the slowest level of annual housing credit growth since the levels started recording in 1977. Westpac "on the front foot" with staff reductions and ANZ also reduced staff counts in past 12 to 18 months. Bendigo and Adelaide Bank added almost 100 staff to a full-time staff count of 4189 year ending June, includes acquisition of Bank of Cyprus Australia. Bendigo operating expenses $752 million, compared to Bank of Queensland operating costs of $395 million. [CR: PR is involved in reductions in staff just as much as selling product.  Westpac is seen as being on the front foot and responding to market pressures, but the same situation could be painted differently.]

6 September 2012: Economy growth halved last quarter and Cigarette record revenue

Economy growth halved last quarter: due to contraction in the mining industry triggered by lower commodity prices, and tighter household spending. Economy expanded by 0.6 percent in three months ending June and 3.7 percent from a year earlier. Net disposable income grew at weakest rate since 2001, excluding the period after the 2008 GFC. Consumer spending low despite June $2.8 billion carbon tax compensation. [CR: You mean a few hundred dollars in handouts did not stimulate the economy. Let’s try that again, it’s sure to work the next time around.]

Commsec report on household spending: Spending from last year on power bills up 12.7 percent, water bills up 10.1 percent, housing up 7.1 percent, operation of vehicles up 8.3 percent, transport services up 9.9 percent. Household spending grew 5.9 percent. [CR: Household spending up 5.9 percent, but consumer spending up 0.6 percent... More spending on necessary means less spending on discretionary.]

Percentage change in ABS Chain volume measures by industry from March Quarter: Wholesale trade +3.0, Transport & post +2.6, Rental & real estate +2.0, Professional services +1.9, Health care +1.6, Retail trade +1.5, Construction +1.1, Finance & insurance +1.0, Education & training +0.7, Ownership of dwellings +0.7, Hotels & food +0.6, Utilities +0.5, Agriculture +0.2, IT, Media, telcos -0.1, Administrative services -1.1, Mining -1.2, Manufacturing -1.4, Arts & recreation -1.4, Public administration -2.5, Other services -3.5 [CR: Where are you, and where are your clients?]

Revenue from cigarettes in Australia topped $10 billion for the first time last year. $7 billion was duties paid to the government. Anti-smoking push has led to above-inflation increases in duties. Phillip Morris spokesman said there was no health benefit in a policy that encouraged adult smokers to switch to cheaper or illicit black market products. Collective net profits of British American Tobacco Australasia, Phillip Morris (Australia), and Imperial Tobacco Australia topped $1 billion in 2011, up from $937.6 million in 2010, despite a decline in number of packs sold. Totoal industry volumes fell 5.4% in 2011. The three tobacco companies paid over $1.26 billion in dividends, royalties and interest to related companies overseas in 2011. 39 percent of revenue excluding duties was sent overseas. [CR: If you smoke, do you think there might be something else you can do with your money? (said as a previous pack-and-a-half smoker in my early 20s)]

 Aldi stats and moving headquarters to Victoria: New Victorian planning regulations make it easier to open supermarkets due to “as of right” land zoning. Aldi has opened an average of 25 stores per year since 2001, accounts for 7 percent of national grocery market, 10 percent in eastern states, recently opened its 288^th store, increasing product range from 900 products to 1250, sales have doubled in last four years and expected to reach $4 billion this year making it as large as Kmart or Big W. [CR: Competition for the big two, but what does this mean for the supply chain?]

Longevity tsunami: Actuaries Institute recommends government encourage people to retire later, turn superannuation savings into long-term income streams, and delay access to super. By 2050, cost of aged pension estimated to rise by 3.9 percent of GDP, up 1.2 percentage points. Austrlians tend to underestimate how long they will live. Australia is fourth ranked country for life expectancy at age 81.4, after Japan (82.7), Switzerland (81.8), and China (81.6). [CR: At what age are you supposed to start thinking about when you will die?]

Two-thirds of YouTube ads are skippable after 5 seconds, viewing rate for TrueView ads are 15 to 45 percent, advertisers pay after viewer wayches advertisement for 30 seconds. YouTube has 800 million viewers and 4 billion hours of video uploaded every month, has 75,000 chanels and has invested capital in 100 of its own channels. [CR: Will this encourage better ads, or getting your information in the first 5 seconds?]

Obesity measure in New York to ban “supersized” sweetened drinks in restaurants, cinemas, and stadiums. Proposed by mayor Bloomberg, backed by Weight Watchers and Jenny Craig, opposed by Coca-Cola, Pepsi Group, and lobby group American Beverage Association. Coke: “New Yorkers expect and deserve better than this. They can make their own choices about the beverages they purchase.” Pepsi signs: “Don’t let the bureaucrats tell you what size beverage you can buy.” New Yorkers for Beverage Choices Group: “These diet companies often emphasise choice and options in their own plans, allowing their customers a wide variety of food and drink. We want the same thing. Restrictions and bans will do nothing to address the very complex issue of obesity.” [CR: Fascination sound bites catering to the pride of humanity: “Don’t let anyone tell you what to do”. The lobby group comparison is like saying “If you can have any brand of apple, than we should be able to sell any brand of heroin.” Their statement that it is a complex issue is the same as the climate change critics, that it is too complex to address.]

Hackers post sensitive information from 1 million Apple devices, from of a 12 million sample. Said they obtained from an FBI agent’s laptop. Leak data centres around the UDID used to track users, which is being phased out [CR: Security is about the weakest link.]

CatchOfTheDay preparing for IPO in 12 to 24 months, could value at $600 million. Australia’s leading online shopping group, operates five sites: CatchOfTheDay, Scoopon, GroceryRun, Vinomofo, and Mumgo. Sales have doubled to $250 million over past 15 months, 2.5 million members, registers 20,000 new customers each week. Online retail industry growth reached 26 percent in 12 months to July. [CR: Will be interesting to see the sustainability of the business model.]

5 September 2012: ACP Magazine purchase and Qantas passenger count decrease

Fortescue Metals Group (AU's third-largest iron ore miner) sacks 1000 employees and contractors in Pilbara expansion delay to save $1.6 billion after snap meeting in Perth Sunday, shelving 40 percent of new production planned to start June 2013. Cites short term loss of confidence in China, a need to be flexible and adaptable, and iron ore price fall.  Iron ore price has fallen 33% since start of July to lowest level since November 2009. Rio Tinto and BHP Billiton are going ahead with current expansions, reluctant to approve new developments. [CR: Is this a trend, or a self-fulfilling prophesy of market hesitation?]

Germany's Bauer Publishing Group to purchase Nine Entertainment's ACP Magazines (Women's Weekly, Women's Day, Ticketek, 50% share of NineMSN, east coast radio stations) for $500 million. ACP contributed $100 million of Nine's $360 million in 2011-12 earnings (EBITDA), forecast to fall to $80 million in 2012-13.  Bauer founded in 1875, based in Hamburg, owns 400 magazines, over 100 websites, around 50 radio and TV programs across 15 countries, run by 35-year old billionaire 5th generation heiress Yvonne Bauer. ACP CEO and director not expected to lose their jobs. Sale expected to make Nine more attractive to sale. [CR: Is rationalisation and centralisation of industry an inevitable trend only held in check by innovation? If there was no innovation and new industry, would we eventually end up with one or two entities loosely held in check by regulation?]

Qantas and Jetstar July decreased revenue seat factor compared to 2011: Qantas domestic passengers down 2.6%, revenue seat factor down 4.3%. Jetstar domestic passengers up 1.6%, revenue seat factor down 2.1%. Qantas increased seats by 5.8%. Quantas and Virgin July 2011 numbers higher due to Tiger Airways grounding on safety concerns. Singapore-based Jetsar Asia increased passengers 21.2% without increase in seats. Qantas shares down 2.6%. Qantas and Jetstar have 65% of Australian market share. [CR: Last year was an anomaly, airlines are pouring on capacity, and they get penalized for a decrease compared to last year and show a decrease in revenue per seat? Question for you if you are a frequent flyer who owns Qantas stocks: Will the continued discount war offset your drop in stock value?]

Financial sector job loss statistics since the GFC: UNI Finance Global report. At least 300,369 banking and insurance jobs slashed worldwide since 2007. 4,054 Australian finance sector positions made redundant or sent offshore in 2012. Westpac 1133 jobs, ANZ 1095 jobs, NAB 1046 jobs (but created 608 new positions). Bank of America in the US cut 30,000 jobs in 2011 and 2012. [CR: You can probably ignore this for what it is worth.  These are sensationalist statistics. The Westpac number represents only 3% of their workforce, the Bank of America is 10% and reflective of the poor conditions in the US.]

Draft proposal to have Europe's listed companies to reserve 40% non-executive board seats for women or face fines under European Commission proposal. In January, only 13.7% of board positions were held by women. [CR: Women are more educated and score higher on most competency tests.  Australia's ASX 200 boards have 8.4 percent female board directors. If the only way to address the inequality is through legislation, then so be it.]

4 September 2012: Average CEO tenure and Comparing digital device growth rates

Darrell Lea sold to VIP Petfoods.  Darrell Lea went into administration on July 10, closed 32 company-owned stores on August 2, remaining 27 stores to close September 9.  Sales had fallen by 20 percent over the past five years to about $80 million. 246 permanent and 172 casual staff to be made redundant, remaining 83 staff to be employed in manufacturing, marketing and distribution roles. Soft licorice and Rocklea Road products will remain. VIP Petfoods run by husband and wife Tony and Christina Quinn, estimated wealth of $350 million, have four factories around Australia, employ about 600 staff, said to be biggest  manufacturer of chilled petfood globally, 20 percent of revenue comes from exports. [CR: It’s all manufacturing food, does it really matter what species it is for?]

Queensland may remove water tank requirement on new homes. No final decision made, would save home buyers $6000. Since 2007, 130,000 rainwater tanks have been installed in homes, 20,000 for commercial premises, said to have 20 billion litres of water and reduced infrastructure costs by up to $1.4 billion. [CR: The pendulum swings between housing affordability and environmental savings. Water scarcity versus housing, until there is a common denominator of true environmental cost policy will continue to swing.]

Brisbane’s Airport Link tunnel falls short, but traffic up?  Road cost $4.1 billion, target of 135,000 per day, attracted 81,470 per day in its first month of operation despite being toll free. Discounted tolls to follow for 15 months. [CR: “If you build it, they will come” (be advised, the size and shape of “they” may be less than expected).]

Average CEO tenure: From article talking about CEOs moving on from companies including Transfield services, Mirvac Group, Pacific brands, Stockland, and FKP Property Group, after yesterday’s article on big wave of write-downs. Goldman Sachs research says average CEO tenure is 5.8 years (down by 11 months in past five years). Exclude eight companies with CEOs who have been in place 15 years and the average tenure drops to 3.9 years. Reasons for shorter tenure said to be based on increased short-termism, globalisation driving increased competition, structural changes, and greater shareholder focus on governance. US CEOs have longer stints (average 8.4 years) said t be due to less focus on governance. [CR: That said, I wonder what the average tenure is in other c-suite positions or even management roles such as General Manager. I would expect it to be decreasing across the board?]

Tablet vs. Smartphone vs. Laptop vs. Desktop growth rates: Australians to buy 2.4 million tablets in 2012, 70 percent higher than 1.4 million in 2011. 15 percent of Australians will own tablets by end of 2012, expected to be 30% by end of 2013, fuelled by cheaper tablets.  Local smartphone sales slowing to a growth of 11 percent, laptop sales fell 10 percent, desktop sales dropped 7.5 percent. Hybrid devices expected to be expensive and take a few years to reach mainstream, tablets to bridge the gap. [CR: The opportunity is to ensure today’s digital solutions are architected to be adaptable for future interfaces.]

Part-time SME owners increasing. Number of people in Australia running their own business part-time is at its highest level in a decade. Of the 1.2 billion people that run SMEs, about 442,000 do so on a part time basis. [CR: I wonder how many of those run more than one business, and what the profitability difference is between focusing on your business or being distracted with a “day job”.]

3 September 2012: Aged worker report and Online group buying stats

Slight break in August as I finished my Masters.  Did you miss me? Welcome back to the FIN Review review...

Aged worker reports and incentives: Deloitte Access Economics report: if participation among workers aged 55 and over boosted by 5 percentage points, GDP would increase by $48 billion (2.4 percent of national income) over the next 12 years. Government to support participation rates through $100 million spending program over next four years. Government announced earlier 2012 a $1000 bonus for hiring long-term unemployed older people. Pension age to raise to 67 by 2023. Report authors state prosperity in 1990s driven by productivity gains, in 2000s by China prices paid for exports, both drivers running on empty. Three out of 10 older workers experience discrimination, Australian Human Rights Commission has seen a 44 percent increase in age-related complaints in the past year. [CR: That means in 15 years, 55 will be the new 40, which means I won't age a day!]

Write-downs at top 50 share-market companies tripled, topped $27 million. Driving factors are global volatility, currency movements, commodity prices.  Seen as a positive based on alignment of what business is presenting and shareholder expectations, but stills aid to end careers and will create uncertainty based on questions around who is valuing the business. [CR: Always the balance between telling bad news early versus the charismatic optimistic leader. It is not that we want bad news early... we just don't want bad news.]

China manufacturing falls to lowest level in nine months. Economic growth slowed for sixth straight quarter in June to 7.6 percent. Property prices fell for eight consecutive months.  [CR: When China sneezes, Australia...]

Online group buying sector posts third consecutive quarter of decline (Telsyte report). Sector dropped 5 percent to $117 million, follows a 14 percent fall in March quarter, 10 percent fall in December quarter.  Sector consumer spending expected to top a record $600 million for 2012, growth will come from second half. First wave of group buying peaked, second wave to come from leveraging technology like mobile deals, customer data segmentation, and real-time push deals through location based services. Declines in revenue said to be from smaller players quitting. 90 percent of the market is controlled by 8 sites, in order of size: Groupon, Scoopon, LivingSocial, Cudo. Spreets, deals.com.au, OurDeal, and Ouffer. Over half of industry sales comes from product, like watches, technology, and travel. [CR: Fascinating to watch a whole industry follow the path from crude customer acquisition to then capitalise on that customer data through segmentation for the next growth cycle.]

Lego building growth: Family-owned company Lego, earnings in first half of 2012 33 percent higher than a year ago, sales were $1.5 billion, equivalent to 12 billion Lego bricks, six for every child on he planet. Performance boosted by sales for girl's toys (Hasbro by example sells four times as many toys for girls as it does toys for boys). Sold twice as many as expected of Lego "Friends" - girls dressed in pink and purple who go riding and shopping, but also are good at map-reading and want to grow up to be engineers. Sales in Asia up more than a quarter. Undertakes constant innovation - 60 percent of products each year are new launches. Sales have grown over 25 percent per annum for the past five years, compared to 1 percent at Mattel, 3 percent at Hasbro. Operating margins consistently 30 percent, double those of its largest peers. [CR: Focus on what you do, and do it well, while expanding to new expressions such as its success in videogame tie-ins. Well done, Lego.]

Yahoo!7 CEO says key areas for revenue growth are mobile devices, video, and social networking. Stu Sayers, 41, holds an MBA from Wharton school of business in the US, worked as consultant at McKinsey, in brand management at Procter and Gamble. [CR: You think? Not much of a story, that.]