Virgin Blue will soon be the largest of our listed airlines: that’s when Qantas leaves with the Australian Airline Partners takeover almost certain to go ahead, Government and politicians willing.
Qantas used to be something of a forward indicator for oil prices: when prices rose, Qantas shares would fall: last year saw a long fall in Qantas shares to a low of $3.91 mid year and then a rise back to around $4.20 or so before the takeover news broke;
The rise in the second half of the year came as oil prices fell from a record $US78.80 a barrel in May to around the $US50-$US60 range (or about where they are now.
Qantas shares haven’t moved much because of the bid so VBA (Virgin Blue) is now the proxy.
It is complicated by the small float because Toll Holdings owns 62 per cent and wants to keep it.
But there’s still a sneaking suspicion among investors that a generous offer might see Toll exit, especially as airlines are far more volatile a business than the sorts of transport infrastructure and logistics businesses Toll is currently interested in.
So yesterday’s 15c fall to $2.40 for VBA shares was a bit late in happening seeing that oil prices are up 16 per cent from the lows of just under $US50 a barrel early last month.
There is a bit of concern about the appearance of the Singapore Airlines-Ryan Air backed Tiger Airways in Australia as well.
VBA CEO, Brett Godfrey was in The Australian arguing against any more competition in Australia that wasn’t fair, claiming the airline decided on its billion dollar plan to fly the Pacific when the Federal Government excluded Singapore Airlines from the Pacific routes to the US.
He says any move to lift the restrictions in the event of Qantas being taken over, would hurt Virgin but you have to wonder about the moans.
After all, Sir Richard Branson still has a stake in VBA and still controls Virgin Airlines (which flies into Australia via Hong Kong). Singapore Airlines owns 49 per cent of Branson’s airline so it’s all a bit incestuous.
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Regional operator, Bendigo Bank (BEN) says prospects look good in a tough environment. The underlying results for the December half year, released yesterday confirm that the bank managed to turn in a solid result for the December half.
Unlike its smaller operator Adelaide Bank (ADB) which reduced its guidance late last year and met it ten days ago (much to the relief of the market), BEN has produced some good figures.
It posted 1.9 per cent lift in net earnings to $54.3 million for the first half but that was after a significant item of almost $6 million for a staff share scheme issue (required under the new accounting rules).
Before the banks’ profit before the significant item was up 15 per cent to almost $60 million, after a 12 per cent rise in revenue to $277.7 million.
Chief executive Rob Hunt said the health of the bank was reflected in its strong margin performance – a 13 basis point improvement for the six months to December 31, 2006.
Which goes against the trend for most banks in the past couple of years when margin compression has been the norm (Adelaide Bank experienced it)
Bendigo said cash earnings per share rose 12 per cent to 39.0 cents, for half after cash earnings rose from $48.4 million in the corresponding period in 2006 to $55.4 million in the latest half.
Profit after tax and before significant items rose.15.2 per cent, to $59.9 million.
Interim dividend was boosted 2c a share to a fully-franked 24.0 cents a share. 1
The shares finished 25c higher at $14.31.
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Lend lease hasn’t had the easiest of periods these past few years. Earnings have been volatile at times, management has been uncertain and some project investments poor.
It has battled to overcome market scepticism, even to the point of paying CEO Greg Clarke a controversial bonus last financial year even though he didn’t appear to earn it.
But the market swallowed that and sent the shares to a high of $19.58 late last week (amid the general market bullishness) and then bad news struck again with a qualified piece of market guidance yesterday which left the market a touch confused.
And when investors are confused or disappointed, they sell. And sell they did, LLC shares plunging 92c by the close to $18.58.
Lend Lease said first-half profit fell 2.4 per cent as it took a charge in its UK construction unit.
Operating profit was $163 million in the six months to December 31 compared to $167 million in the first half of 2006.
Lend Lease said it will take a charge of $120 million, mainly due to delays at its Manchester Joint Hospitals project in the UK. This comes after cost blowouts at the BBC Broadcasting House in London and the Bridgewater Place development in Leeds last year and led the company to replace its UK management team.
(Always a sign of problems. Multiplex did that on its Wembley contract and Leighton did when its Spencer Street and Sydney Hilton projects got into trouble several years ago)
Lend Lease says full-year profit will be $399 million, or around that forecast by analysts, which in these days of markets demanding growth, isn’t the best outcome.
In a statement Lend Lease promoted the update like this:
“Lend Lease Managing Director and CEO, Greg Clarke, said the UK provision, combined with the skew of operating earnings to the second half, meant that the forthcoming interim result, to be announced on 28 February, would not provide a meaningful guide to expected full year earnings.
“First half reported net operating profit after tax will be flat compared to the previous corresponding period,” Mr Clarke said.
“However, we remain comfortable with recent market consensus on operating earnings for the year to June 2007, despite taking the UK construction provision and without relying
