Seven's corporate strategy

Questions have been raised about the Seven Network's corporate strategy, as well as the communication of that strategy to investors. Nick Tabakoff has the details.

Key grafs:

KEY institutional shareholders, corporate governance specialists and analysts have questioned the Seven Network's investment strategy in the wake of its revelation on Monday it had incurred losses from its strategy to "park" hundreds of millions of dollars in listed securities.

The company revealed it was down a total of $57 million on paper on a portfolio of listed stocks it has refused to disclose to the market. The company has also crystallised a total of $14 million in "realised losses" on the portfolio, after selling out of about $200 million worth of stock in recent weeks.

Hmmm, seems a bit odd. I'd sooner make my investment decisions than have Seven management do it for me.

Macquarie Bank

Here's a nice piece on Mac Bank by Michael West with some financial policy analysis (level of debt), accounting analysis (write-down of assets) and management communication (disclosure about the level of write-downs, and questions about debt levels).

Got disclosure?

More continuous disclosure problems, this time from Hedley Leisure & Gaming (Bryan Frith in the Oz is all over these CDR breaches).

Here's the start of the article:

ONLY a week after telling the ASX that Hedley Leisure & Gaming property fund did not possess any undisclosed information that would explain a sharp fall in the price of the fund's securities, the directors have admitted that the fund is seeking to reduce debt through asset sales.

The directors yesterday obtained a trading halt of up to two days because the fund was finalising divestment transactions to reduce debt. The halt would end when the fund made an announcement on the divestments.

On March 5, the ASX queried HLG about a two-day slump of 44 per cent, from $1.49 to a low of 83.5c. HLG immediately obtained the halt to enable it to properly respond, which it did last Monday.

HLG replied that it wasn't aware of any information that hadn't been announced but which, if known, would explain the price movement.

Disclosure, accounting, debt, breaches

City Pacific has it all. And Bryan Frith of the Oz is all over it. Here.

It's good to be 3?

We're in reporting season at the moment, so lots of stories about companies' financial results. Here's one from 3 - note in particular how the company refers not only to various accounting measures: total loss, revenue, EBIT, but also non-financial numbers (like total customers and churn rate). It's how you analyse all of these factors that impact on your forecasts for such a company going forward.

A-IFRS / Westpac

Many companies are claiming that the move to A-IFRS accounting standards has made it harder to 'understand' their financial results. In my opinion, it is therefore incumbent upon these companies to explain their results to the market. Westpac has done a good job of this with their Accounting Workshop presentation back in April 2007. It nicely explains how their results are calculated and presented under A-IFRS, and how this has changed from previous standards. It maintains Westpac's good record on disclosure matters. Hopefully we will see more companies doing this sort of thing. Link to pdf file of the presenation here.

Why I love Telstra

Each semester when we discuss management communication, I keep saying that it would be dumb to announce record profits and at the same time sack thousands of workers. Or lower forecast profits and higher executive pay. Semester after semester, Telstra keeps doing something like that. This time around, it's offering "prudent" guidance about future earnings and at the same time fattening the wallets of the management team.

Reporting earnings - GAAP vs "cash earnings"

Ernst and Young have recently released a report (pdf file link here) on how companies communicate their earnings information. They look at the top 20 ASX listed firms, and find that 18 of them report a different earnings figure in their media release to their statutory (GAAP) profit and loss figure in their accounts. They find variation in both the number of adjustments from GAAP and the type of adjustments. The companies themselves seem to be suggesting that the adoption of the international accounting standards (AIFRS) has led to a decline in the 'usefulness' of GAAP earnings, and that the reporting of something closer to "cash earnings" (however defined) will provide more useful information.