Archive For 20/08/2019

Godolphin focus Impending on big Sydney sprints

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Sprinting autumn: Impending gets the better of Divine Prophet to win the Stan Fox Stakes last September. Photo: bradleyphotos南京夜网419论坛Wizard of Odds: Live Odds, Form and Alerts for all Racing
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Godolphin trainer John O’Shea will focus classy three-year-old Impending on the Sydney sprints scene in the autumn, starting in the Southern Cross Stakes at Randwick on Saturday.

Impending was very competitive up to a mile in the spring, winning the Stan Fox Stakes over 1500 metres and being placed in the Golden Rose before running fourth in the Caulfield Guineas.

However, after spelling well a decision has been taken to keep him sharper and using his power over the shorter trips.

“He has strengthened up quite a lot and we are going to keep him to sprints,” O’Shea said. “He has always been one of our better colts and is a real stallion prospect.

“Races like the Canterbury Stakes, TJ Smith and All Aged are clearly in his sights and he’ll be staying in Sydney and racing here.

“We know here that what sort of tracks we will get and we will not be disadvantaged by draws.”

Impending is part a great three-year-old class, which has already proven a match for older rivals, and he has been put up as a $2.30 favourite by Ladbrokes against all-comers on Saturday.

“He had a good trial and gets in well at the weights with only 53.5 kilos,” O’Shea said. “It is a good place for him to start and we are expecting him to step up with every run.”

Godolphin have a strong team across the country with Street Cry colt Marsupial sent to Melbourne for Saturday’s Blue Diamond Prelude.

A Canterbury winner on debut, Marsupial is not nominated for the Blue Diamond but is out to earn his spot in the group 1 at Caulfield.

“If he runs a good race, I would say you will see him in the Blue Diamond,” O’Shea said.

“He’s had a look at Caulfield this week and seemed to handle it well enough and the draw [of gate five] gives him the chance to take a good position.

“It will be a matter of finding out if he is good enough but he is a lovely colt.”

The ultimate racing form guide with free tips, live odds and alerts for all racing.

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Significant regional investment

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LOCAL PLANNING COMMITTEE: The $20 million Regional Jobs and Investment Package will be used to fund local infrastructure, business innovation and skills and training.CLAIRE Wiseman has beenappointed chair of theLocal Planning Committee responsible foridentifying investment priorities for the $20 millionRegional Jobs and Investment Package (RJIP).
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Minister for Regional Development Fiona Nash and federal Member for Grey Rowan Ramsey announced theUpper Spencer Gulf RJIP Local Planning Committee on Thursday February 9.

Ms Wiseman will lead a committee consisting ofBrenton Bandenoch, Andrew Cole, Mark Hanlon, Daniel Rowlands, Aileen Shannon, Brenton Vanstone and Jack Velthuizen.

Ms Nash said the committee members will nominate the sectors of local industry the package will invest in.

“I aim to help build the kinds of communities our children and grandchildren either want to stay in or come back to, and investing in sustainable local jobs helps grow that kind of community,” she said.

The RJIP will provide funding grants forbusiness innovation, local infrastructure and skills and training.

The committee must first develop a Local Investment Plan, listing the growth sectors which it believes will create sustainable jobs. Mr Ramsey said the Coalitionaimsto produce more jobs and export opportunities.

“Once the Local Investment Plan is done, the applications from Upper Spencer Gulf region can roll in,” he said.

The Upper Spencer Gulf is one of the 10 Australian regions set to receive funding through the federal government’s $220 million regional injection.

“We’re so proud to give the Upper Spencer Gulf region a $20 million shot in the arm,” Mr Ramseysaid.

Visit theRegional Jobs and Investment Package website for more information.

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Bellamy’s five weeks of hell

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Bellamy’s Organic chief financial officer Shona Ollington. Picture: Scott GelstonBellamy’s had gone from a Tasmanian family-run business to the poster child for Australian success in China in less than a decade as it took advantage of surging demand for foreign infant formula which became known as “white gold”. Then disaster. AFR correspondents in Shanghai Angus Grigg and Lisa Murray investigate.
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In the days after Bellamy’s Australia admitted in a vaguely worded statement to problems in China, the infant formula maker hurriedly established a war room in the Melbourne offices of law firm Herbert Smith Freehills.

The company’s “business update” delivered on December 2 last year had wiped $500 million from its sharemarket value and as its problems grew, so too did those around the war room table on level 43 of 101 Collins Street.

What started out as a temporary office for out-of-town Bellamy’s directors Patria Mann and Michael Wadley soon became a critical command post with just one mission – to save the company.

“Nobody really knows how close it went to going under,” says one person involved.

Bellamy’s has started its fightback, but it will be slow and potentially risky for would-be investors. Picture: Kylie Pickett

The abrupt decline was all the more striking given how high Bellamy’s had soared.

In less than a decade, it had gone from a Tasmanian family-run business to the poster child for Australian success in China as it took advantage of surging demand for foreign infant formula which became known as “white gold”.

In a series of interviews with the key players over the past month, The Australian Financial Review has pieced together how that disappointing sales update on December 2 eventually contributed to the departure of the chief executive, company secretary, head of sales, the demotion of the chief financial officer and, in the months ahead, will likely see the chairman step down.

And it all happened in just five weeks, while at the same time two class actions were launched against Bellamy’s and a group of disgruntled shareholders, led by Tasmanian investor Jan Cameron, agitated to overthrow the board and take control of the company.

In those early days of December, before class actions and management purges were even contemplated, it was simply practical for the Bellamy’s directors to congregate at Freehills, partly because the company’s own Melbourne office was being renovated.

But as the days went on, the choice of location became highly symbolic for how the crisis would be handled.

This would be one for the lawyers.

Rather than being the sober voice of caution in the corner, the lawyers were hosting the party and that would eventually lead to chief executive Laura McBain and chairman Rob Woolley being sidelined, as the independent directors took control of the company.

It meant legal precedent trumped the assurances of management.

And in those pre-Christmas days at the Paris end of Collins St, it eventually led to the mention of James Hardie.

For any company director, that would be an alarming comparison. At Bellamy’s, it was made in the context of a 2012 High Court ruling which found the directors of James Hardie had breached their duties by not seeking a second opinion on financial statements that claimed the company’s asbestos victims’ compensation scheme was “fully funded”.

“The High Court could not have been more clear that best practice was to get a second opinion,” said one person involved.

For the board of Bellamy’s, that precedent meant obtaining an additional insurance policy by hiring PPB Advisory, a firm which specialises in “corporate advisory, restructuring and insolvency”.

They are not the people you call when business is good, but a firm directors seek out when they need comfort around assumptions which might one day be tested in court.

“They [the directors] had to be sure the company was solvent,” said the person involved.

By that point it had become about limiting the risks, a strategy that demanded at least two other delicate phone calls in those days before Christmas.

One of these was to the company’s bankers at HSBC to see if they continued to have a “degree of confidence” in the business, given its changed circumstances.

It later emerged slowing demand in China and a failure to quickly halt the production of excess infant formula had left the company with just $1 million in cash and reliant on the grace of its bankers to fund working capital.

“In that situation, you want to call the bank, not the other way around,” said the source.

“If they didn’t reach an understanding with the bank, then they would have had to seek a cash injection.”

The other delicate call at that time was made to the firm providing Bellamy’s with director’s liability insurance to make doubly sure everyone at the top table was adequately covered if the worst were to happen.

The road taken was the cautious one, by a group of professional directors who all had more to lose than $92,000 a year in board fees. Such caution was not overly surprising, given their backgrounds.

Launa Inman, an independent Bellamy’s director and veteran retail executive who now sits on the Commonwealth Bank board, had seen this movie before.

She was hired to clean up the mess at surfwear maker Billabong International in May 2012 after a similar profit downgrade had wiped out half the company’s value, allowing the class action lawyers to swoop.

Hardened from that experience, Inman was always going to be sceptical of the assurances given by management. As was Patria Mann, another independent director and forensic accountant, who had spent much of her professional life as a partner at KPMG.

Then there was Michael Wadley, the longest-standing independent director, who previously ran the China practice for London “Silver Circle” law firm Ashurst, while the other director, Charles Sitch, had spent a lifetime at McKinsey.

“Under every rock they [the directors] looked, there was another problem,” says one source.

But before unleashing the “turnaround” specialists at PPB on the accounts, management was asked to take another look at the new data coming out of China.

While McBain was still involved in this process, the main work was done by the former Bain consultant, Andrew Cohen, who since July had been Bellamy’s chief operating officer.

For the year prior to this, he had been consulting to the company. As a result of the post-December shakeout which led to McBain’s departure, Cohen is now acting CEO.

“The board wanted another perspective on the business in China, a hard number crunch,” says the source.

That would eventually result in Bellamy’s shares being suspended from trading on the ASX on December 12. They would remain in a trading halt for a month.

During this period it would emerge the company had a year’s worth of inventory or around $110 million of stock sitting in factories and warehouses, a crucial fact not mentioned during the December 2 “business update”.

It was this revelation that pushed the company right to the brink.

There was too much stock in the system, while at the same time Bellamy’s was obliged to continue paying New Zealand dairy giant Fonterra to produce more infant formula whether it was required or not.

This was part of the now-infamous “take or pay contract”.

If it had not been renegotiated, then Bellamy’s was liable for another $8 million to $10 million a year in “shortfall payments” to Fonterra, a commitment the company would have struggled to meet.

At that point the “war room” at Freehills in Melbourne expanded into two rooms.

There was the “Bellamy’s room” and the “Fonterra room” as the company and its advisers scrambled to renegotiate the contracts and rescue the company.

Even with the changed contract terms, Bellamy’s expects to pay at least $22 million over the next two years in shortfall payments and has given Fonterra “second ranking” security over its assets.

In return, the dairy giant pushed out the minimum production requirement under the contracts from five to eight years.

As is often the case, the crisis at Bellamy’s unfolded in slow motion. When the board assembled for a scheduled meeting via phone at 8am on December 2, there was no sense of what was to come.

“At that point we were not thinking there is something seriously wrong,” says one source.

“There was nothing dramatic about the call. We were just saying sales were not as good as expected.”

When the meeting concluded at 9:09am, the Australian Securities Exchange was informed that Bellamy’s sales would be flat at $110 million in the second half of 2017.

For a company which had consistently posted annual revenue growth above 60 per cent, it was a big comedown and the market was not forgiving.

Just after the opening bell, the stock dropped 42 per cent and continued falling all day, finishing the session down $5.28 at $6.85.

On a call with analysts shortly after the market opened, McBain attempted to spin the slowing growth as a “transition year”.

Under pressure, she stumbled, handballed tough questions to her CFO, Shona Ollington, and generally failed to provide any clarity.

Most pointedly, however, she refused to give figures on Bellamy’s market share in China, saying only that the company was “happy” with the numbers and it was difficult to get a “lens” on China.

That reeked of obfuscation.

In a follow-up question, CLSA analyst Shaun Weick pointed out rival infant formula maker A2 provided such figures and he wanted to know if Bellamy’s market share was falling.

But the question was shut down by both McBain and Ollington.

“We haven’t disclosed market share, Shaun, so I think I probably need to leave the questioning at that.”

In a phone interview last week, Weick said: “They were clearly sidestepping the question.”

Either they didn’t know, he said, or they deliberately didn’t answer.

No sooner had McBain ended the analyst call, phone lines across the Melbourne and Sydney CBDs lit up.

“That was one of the top five worst investor calls I have been on,” one fund manager told an analyst.

“What is going on at Bellamy’s?”

The directors also started getting calls.

Along with the usual offers of help, came warnings to be careful and to ensure the problems at Bellamy’s didn’t spill over to the other boards on which they sat.

A year earlier, McBain, rather than dodging questions, would have happily bragged about the company’s market share. Under her stewardship, Bellamy’s had grown from a small family company in Launceston selling baby cereals and snack foods into the biggest infant formula player in the country, commanding nearly 25 per cent market share at the start of 2016.

After being appointed general manager in 2006, McBain focused Bellamy’s efforts on infant formula and the China market. It was a strategy that paid off, but a large part of the success was due to an army of personal shoppers, known as “daigou”, who bought up tins of the organic formula in Australia and sold them to clients in China.

They were, and still are, a trusted distribution source for Chinese mothers fearful of buying tainted products – demand from daigou resulted in Australian infant formula sales tripling in just three years.

But it was always a “grey channel” and exposed to any tightening of import regulations in China, while also making it hard for companies to assess real demand.

As one source close to Bellamy’s confessed, three years ago the company thought 20 per cent of their domestic sales were going to China, when it was actually 80 per cent.

That’s why when McBain made a crucial, and ultimately ill-timed, decision to reduce Bellamy’s reliance on this powerful distribution channel, it backfired.

The new strategy was about going direct to consumers in China via e-commerce sites T-Mall, JD南京夜网, Kaola, NetEase and VIP.

But when these sites began discounting, as they were holding too much stock, the daigou came under pressure.

Suddenly they couldn’t compete with the online platforms in China and so switched to other products such as A2 Platinum.

That led to Bellamy’s market share dropping from 22.3 per cent in the quarter ended April 16 last year, to 13.9 per cent in the three months to October 16, according to data from Aztec, which looks at the number of tins scanned in supermarkets and pharmacies across Australia.

At the start of the year, this figure had stabilised, down slightly at 13.8 per cent for the three months ended January 15, according to figures obtained by the Financial Review.

About the same time as Bellamy’s market share was falling in Australia, hedge funds sensed the company might also be facing an inventory glut in China.

At an investor conference, it was suggested they should fund an informal stocktake at baby stores, supermarkets and other retailers across China.

The plan was to look at the expiry dates on Bellamy’s tins and therefore work out how much stock was in the system.

It’s unclear whether the survey ever went ahead, but by mid-year Bellamy’s was a heavily shorted stock as many bet on looming problems in China.

For the Bellamy’s board, the issue was not so much the shorts as why the company itself didn’t have the information the hedge funds were chasing.

“They hadn’t done the work on their supply chain and distribution channels,” says CLSA’s Weick. “They had lost control over inventory levels and pricing.”

The issue facing the Bellamy’s board is why these inventory problems were not mentioned earlier, most notably in the December 2 “business update”.

The contrast between this statement and the company’s second announcement on January 11 is telling.

The earlier update appeared to dismiss the problems as a “temporary volume dislocation,” and talked about the number of followers Bellamy’s had on Facebook, while hardly even mentioning inventory.

The January 11 update focused on the need to “reduce production and better manage inventory levels” while revealing the company’s thin cash position and that it was sitting on the equivalent of a year’s worth of stock.

As many in the market had suspected, Bellamy’s problems were not so much regulatory but operational.

It was these type of growing pains that chairman Rob Woolley had in mind when he strengthened the board after Bellamy’s August 2014 listing.

He ticked all the right corporate governance boxes. Between February 2015 and March last year, three independent non-executive directors – Inman, Mann and Sitch, joined the board, in addition to Wadley, who had been there since the float.

They were professional directors, which inevitably led to tension with Woolley and McBain, who were close personally and saw themselves like the creators of Bellamy’s success.

It made for a sometimes uncomfortable board dynamic, but up until the December 2 “business update”, these strains were normal for a company that had gone from a micro cap to be worth $1.4 billion in just two years.

But those tensions would spill into the open as ever greater problems emerged.

The close relationship between the chairman and chief executive became a problem.

While Woolley was seemingly the dominant party in the relationship, having hired McBain and also appointed her husband Roger to the board of his other company, TasFoods, in reality it was the other way around.

“He [Woolley] didn’t realise it, but Laura was the boss,” says one insider.

“Under pressure that really showed.”

One issue concerning the board was McBain travelling at least two weeks each month, either seeing suppliers in Europe, the sales force in China or speaking at investor conferences.

“The board wanted her to be at home running the business,” says the source.

But when this was communicated through Woolley, the message was not received and McBain kept travelling.

“On the one hand, she [McBain] loved being at the centre of the dealings, which was a good thing, but she was a micro manager and delegated nothing.”

McBain declined to be interviewed by The Australian Financial Review, saying only she wanted the best for Bellamy’s.

“I am proud of what I achieved over 10 years,” she said via phone.

The former CEO was not so shy on November 14 when she and CFO Ollington sat down for an interview with the Financial Review’s BOSS magazine.

The comments she gave in the interview, initiated by Bellamy’s public relations firm, read like a victory lap.

There was no hint of caution in the interview, which was done three days after the annual Singles Day shopping festival had concluded in China.

Disappointing sales during that 24-hour event, which actually runs for three weeks, was the trigger for Bellamy’s to issue its now infamous December 2 “business update”.

Insiders insist the full numbers from Singles Day took a few weeks to calibrate, but going ahead with the BOSS interview when so much was riding on that one event, demonstrated a lack of judgment.

“There were a lot of raised eyebrows in the company when that appeared. She should never have done it,” says one source.

Questioned during the interview on why Bellamy’s would not experience the same slowing growth that had hit vitamin maker Blackmores, McBain insisted changes in China were not so hard to pick for those who could “read the tea leaves” and had their “ear to the ground”.

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Ballarat auctions numbers on the rise

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More Ballarat sellersare choosing to put their homes up for auctionas the city’s real estate market moves towards a Melbourne model, realtors said.
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Last year saw a spike in auctions in Ballarat, with Ray White Ballarat conductinga record 40 auctions for 2016 –more than twice any other realtor.

A total 113 auctions were held in Ballarat.

Ray White Ballarat will auction 11 Brawn Avenue, Lake Wendouree at an in-room auction on Monday.

“Ballarat’s has probably been a more conservative market in the past but particularly last year we started doing more auctions and other agents started doing more auctions,” Ray White Ballarat director Phillip Lee said.

“There’s a perception that auctions don’t work in Ballarat but they do,there’s an art to it.”

Ray White Ballarat’s three in-room nighttime auctions last year saw a turn out of between 60 and 150attend each auction, Mr Lee said.

Mr Lee said the influence of Melbourne –the “auction capital” –was spurring competition at Ballarat auctions.

The in-roomauctions had a clearance rate of 50 per cent, with other properties selling shortly after.

On average auctioned properties sold up to twice as fast as homes sold by private treaty, he said.

13 Waller Avenue, Newington will be auctioned on Monday.

“We’ve found people are bidding on properties they didn’t come to buy, we’ve had investors bidding on multiple properties on the night.

“Melbourne buyers have been very strong at our in room auctions and bidding for them is second nature.”

Ballarat sellers are coming aroundto the transparency of an auction over the privacy of a traditional sale, Harcourts Ballarat general managerPeter Ludbrook said.

“I think we’ve seen an increasing acceptance of the auction process as a viable alternative to the traditional private treaty sale that Ballarat has normally had inflicted upon it,” Mr Ludbrook said.

“It’s up to us as an industry to educate the benefits of the auction process, partly Ballarat being a smaller town there’s perhaps some resistance to auctions to buyers because of the lack of privacy it affords.”

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Illawarra homes could have power cut for one or two hours

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Beach-goers cool down at City Beach on Friday. Photo: Robert PeetStatewide total fire ban issuedCricket cancelled due to extreme heatKembla Grange to go aheadHeat can be a killer this weekend​Endeavour Energy customers could be without power for several hours this afternoon if it is ordered to cut supply.
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Over the coming days, the temperature is expected to climb into the 30s –reaching as high as36 degrees in Wollongong and 39 degrees in Albion Park on Saturday.

There are concerns over whether the electricity network across the state will be able to cope with the increased demand from people running airconditioners and fans.

State Minister for Energy and Utilities Don Harwinsaid the Australian Energy Market Operator (AEMO) informed him the networks would be able to cope over the weekend.

However, there was a two-hour window on Friday afternoon where demand for power in NSW will hit a record high.

It is possible that load shedding –where power is switched off to some areas – may be needed manage overall demand.

“If load shedding is needed, Endeavour Energy must follow the direction of the AEMOas they are responsible for the overall stability of the electricity grid across the eastern seaboard,” an Endeavour Energy spokeswoman said.

“At this stage, Endeavour Energy does not know if load shedding will be required later today when energy consumption is expected to peak.

“It depends on several factors including temperatures, the amount of supply and how much electricity is being consumed.”

The spokeswoman said that, if Endeavour Energy was directed to load shed,supply to some customers would be interruptedat short notice, possibly for up to one or two hours.

Areas may be rotated to minimise interruption times and the spokeswoman said these areas wouldbe published on the Endeavour Energy website and tweeted.

“Affected areas will be spread across the network to minimise the impact on the public,” she said.

“We try to avoid interrupting supply to areas where there are major hospitals or where the loss of electricity represents a serious risk to public safety.”

To help save electricity and help avoid load shedding, Endeavour Energy is encouraging customers to reduce electricity use where it is safe to do so by the following methods:

Turning up the thermostat on air conditioning units to 23- 26 degreesshifting the operation of pool pumps to after 8pm.Using fans to circulate cool air within homes; and,Switching off unused electrical appliances.The NSW Food Authority advises freezers will usually not defrost and allow food to spoil for at least 24 hours, provided the door is kept shut.

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