Steel & Tube mulls position as interim judgment finds in favour of Lewis Holdings

Steel & Tube Holdings is considering its legal position after an interim judgment found in favour of Lewis Holdings’ $1.75 million claim over a disputed lease contract.

In October, the Lower Hutt-based company denied any legal responsibility for losses relating to a contract lease between former subsidiary Stube Industries, which was liquidated last year, and Lewis Holdings. The interim judgment found in favour of the plaintiff, but didn’t award damages pending further evidence, Steel & Tube said in a brief statement.

Accounting firm McDonald Vague’s Boris van Delden and Peri Finnigan were appointed replacement liquidators of Stube in July last year after the resignation of Stephen Tietjens and Peter Chatfield of Accru Smith Chilcott and applied to the High Court to pool the assets of Steel & Tube as one entity, according to their latest report. Lewis Holdings filed an application for directions in September last year, which the liquidators later joined as second plaintiffs.

The June liquidators’ report said they had received creditor claims of $2.62 million relating to the lease obligation, including the present value of rental payments.

Shares of Steel & Tube were unchanged at $2.90 and have declined 6.4 percent since the start of the year.

Britannia takes down TV ads, working with FMA over UK pension ads

Britannia Financial Services, a UK pension transfer agency whose advertisements feature “financial motivator” Brendon Johnson, has tweaked its website and paused television advertising after the Financial Markets Authority raised concerns about people feeling “press ganged” into shifting retirement funds.

The markets watchdog has raised concerns about some advertising which emphasises the need to transfer UK pensions before April 2015 to avoid incoming tax and legislation changes, which may create either a loss of access to the pension fund or a lump sum tax charge to the incoming cash. Alun Rees-Williams, a director at Britannia, told BusinessDesk the company was working with the financial markets watchdog, and in the meantime had put its TV ads on hold until mid-January as well as making a number of changes to its website in October, with further changes implemented today.

“Everyone who advertises at all around the transfer of UK pensions funds to New Zealand comes under that warning,” he said. “We have been working with the FMA up to this point in relation to our advertising. We have been obviously working with them in conjunction with Chapman Tripp and Stategi in Auckland just to make sure we’re not doing anything that’s misleading or deceptive which is what the FMA are talking about.”

Yesterday, the FMA said it was concerned the sense of urgency will cause false alarm and has asked for some materials to be removed from publication, it said in a statement that did not single out any one provider.

“We are concerned that people are feeling press-ganged into transferring their pension scheme entitlements from the UK and being put under pressure to act now,” said Elaine Campbell, the FMA’s director of compliance said in a statement. “We are concerned that tax issues and a misleading sense of urgency are being exploited by some providers to scare people into transferring their money, without offering a balanced view of the potential pros and cons involved.”

One New Zealand-based UK pension transfer adviser, who didn’t want to be identified, said the culprits of deceptive advertising were mainly British companies based in Spain and that although the regulator may have concerns, their business was to inform people of the changes. They said their business had not been contacted by the FMA.

A spokesman for the FMA said a number of New Zealand-based business had been contacted, but declined to name them.

Rees-Williams didn’t think there was a problem with misleading advertising in the industry and that pension transfer companies were acting “in good faith” to let people know about changes in UK and New Zealand tax and legislation.

“I can’t speak for anyone else, I can speak for Britannia and we’ve always tried to remain factual with our advertising. We’ve never put anything deliberately misleading or deceptive in an advertisement at all,” Rees-Williams said. ”Is there a problem? Personally I don’t think there is but the FMA are just trying to make sure that everyone has a balanced approach. Yes, there are reasons to transfer your pension, and yes there is reason to leave them behind. ”

The FMA notes that ‘old age’ state pensions provided by the UK government at retirement are not transferrable, so this warning does not apply to these pensions.

Stuart McLean moves to Trade Me as Xero ditches chief revenue role

Stuart McLean will join the executive team at Trade Me Group, the online auction site, after Xero, the cloud-based accounting firm, ditched his former role as chief revenue officer.

The disestablishment of the chief revenue role comes after the Wellington-based software firm appointed Andrew Lark, former Commonwealth Bank of Australia executive as chief marketing officer, it said in a statement. Earlier this year, Xero’s North America chief executive Peter Karpas left the company suddenly, less than a year into the job, as the company reworked its US growth plans.

McLean had worked with the company since May last year, having previously been Google’s head of enterprise for Australia and New Zealand, according to his LinkedIn profile. McLean will join the Wellington-based auction site in February, leading its general items marketplace.

“We continue to shape our executive team and organisation to reflect the rapid growth of our business globally,” said Rod Drury, Xero’s chief executive. “Stuart has done an outstanding job as CRO, where he was responsible for both sales and marketing, contributing positively to our growth to over $US100 million annualised revenue and over 400,000 customers. We are delighted Stuart will be able to contribute to another great NZ technology company.”

Shares of Xero last traded at $15.50 and have plunged some 66 percent from its March peak of $45.99 Trade Me stock last traded at $3.52 and has fallen 13 percent since the start of the year.

ComCom pushes out final decision on Chorus copper line pricing

The Commerce Commission has pushed out the timeline for a final decision on what price Chorus can charge on its copper line network as it deals with a large amount of complex information, and said its initial view is that the regulated price should be backdated no further than the start of December this year.

The competition regulator expects to make a final decision on what Chorus can charge on the unbundled copper local loop (UCLL) and for unbundled bitstream access (UBA) in September next year, extending its initial target to have it settled in April, it said in a statement. The delay comes after the commission was asked for more time by interested parties, including Chorus, Spark New Zealand, Vodafone New Zealand and CallPlus, who wanted to make submissions. The draft determination increased the allowable regulated monthly price to $38.39 from the $34.44 level set by an earlier decision and which came into effect from Dec. 1.

“We appreciate that there is a large volume of complex information for submitters to review so we have agreed to a four-week extension to the consultation period,” Telecommunications Commission Stephen Gale said. A conference on the issues would  now be held in April 2015.

The commission also said its initial view is that the final price should be backdated to Dec. 1, 2014, but not earlier, and is seeking submissions on the issue.

The regulator considers that backdating the price to the cross-over from the price freeze that was put in place to let Chorus adjust from being part of the wider Spark, then Telecom Corp, best serves the legislation’s stated aim to encourage investment.

“One potential concern in the case, where backdating would favour Chorus, is that if the amounts involved are substantial enough, they could cause a firm to exit the market, which would likely be detrimental to competition,” the regulator said. “We intend to forecast the impact of potential backdating on retail service providers, and consider this when making our final decision on backdating and whether there are mechanisms that could mitigate those impacts.”

Spark, Chorus’s biggest customer, increased its retail prices in response to the draft price, saying it faces an extra $60 million annual bill to its input costs, and that backdating the new price means higher prices won’t fully cover the increased wholesale costs.

The combined UCLL and UBA services dictate the base cost for provision of broadband internet services over the copper network, which competes with fibre-optic cable-based services that are becoming available under a government-subsidised national roll-out, the majority of which is being installed under contract by Chorus.

Chorus had sought the commission’s reworking of regulated charges because it argued lower than anticipated monthly charges for copper-based broadband services would frustrate the government’s policy goal of rapid public uptake of UFB.

The new draft rate, which does not yet apply and is subject to further submissions from the industry, is still $6.49 per month lower than the $44.98 monthly rental for UCLL and UBA that had applied until the start of this month.

While you were sleeping: Global equities surge

Equities extended Wednesday’s rally on Federal Reserve Chair Janet Yellen’s promise to “be patient” with interest rates, bolstered by data showing the US economy continues to accelerate.

“Based on its current assessment, the committee judges that it can be patient in beginning to normalise the stance of monetary policy,” the Federal Open Market Committee said in a statement after a two-day meeting that ended on Wednesday. Yellen reiterated that point in her final news conference of the year.

In afternoon trading in New York, the Dow Jones Industrial Average rallied 1.69 percent, the Standard & Poor’s 500 Index jumped 1.71 percent, while the Nasdaq Composite Index advanced 1.73 percent. Technology shares, including Oracle, paced the advance.

A Reuters poll of Wall Street dealers puts expectations for the first interest-rate increase in June of 2015. Yellen signalled to reporters that it was unlikely that policy makers would lift rates in the first quarter of the new year.

The latest data underpinned the view the US economy keeps gathering steam. Initial claims for state unemployment benefits unexpectedly fell, down 6,000 to a seasonally adjusted 289,000 for the week ended December 13.

“We’re seeing sustained improvement in the US economy, and it’s now to the point where it’s feeding on itself,” Richard Moody, chief economist at Regions Financial in Birmingham, Alabama, told Bloomberg News. “Consumers are feeling better about the labour market.”

In other good news, shares of Rite Aid soared, last up 13.4 percent, after the company posted quarterly results that exceeded expectations and upgraded its 2015 outlook.

Gains in shares of Microsoft and those of Goldman Sachs, last up 3.1 percent and 2.7 percent respectively, propelled the Dow higher. Shares of IBM gained 2.6 percent. All 30 stocks in the Dow were trading higher from the previous day’s close.

Oracle advanced 8.5 percent after the company reported far better than expected quarterly profit and sales as it taps into the demand for cloud computing services.

In Europe, the Stoxx 600 Index ended the session with a 3 percent jump from the previous close. The UK’s FTSE 100 Index climbed 2 percent, Germany’s DAX Index rose 2.8 percent, while France’s CAC 40 Index added 3.4 percent.

“It appears investors have taken a stance to take advantage of the extended downside move of the market,” Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey, told Reuters. “All the money that has come out of oil needs to find a home. Money is systematically being forced into equities, for example, out of energy into technology.”

Indeed, oil continued its decline after a short spike higher early in New York trading, a move attributed to short covering.

“What we are facing now and what the world is facing is a temporary situation and will pass,” Saudi Arabia’s oil minister, Ali al-Naimi, told the Saudi press agency.

However, few believe the slide in oil prices has run its course.

“We’re continuing to search for a bottom and might even see another significant drop before the year-end,” Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut, told Reuters.

MARKET CLOSE: NZ shares rose on oil relief; Air NZ, OceanaGold gain

New Zealand shares rose, led by OceanaGold Corp and Air New Zealand following a global rally as a rebound in oil prices and positive statements from the US Federal Reserve gave investors hope for the international economy. Arvida Group was flat in its NZX debut.

The NZX 50 Index rose 21.891 points, or 0.4 percent, to 5518.476. Within the index, 31 stocks rose, 10 fell and nine were unchanged. Turnover was $133 million.

This morning, US Federal Reserve chair Janet Yellen indicated higher US interest rates are coming, and was more upbeat about the state of the world’s biggest economy. Meanwhile, overnight Wall Street rose as oil, which has halved in value since the start of the year, advanced 5 percent stoking optimism the plunge in prices has found a floor. Markets across Asia climbed. Japan’s Nikkei 225 Index jumped 2.6 percent in afternoon trading, Hong Kong’s Hang Seng Index advanced 1 percent and Australia’s S&P/ASX 200 increased 1.1 percent.

The triple-listed gold miner OceanaGold led the benchmark index higher advancing 5.7 percent to $2.21. Air NZ, the national carrier, climbed 2.8 percent to $2.58. Diligent Board Member Services, the governance app developer, gained 2.1 percent to $4.91.

“We’re very much following the offshore markets,” said Grant Williamson, director at Hamilton Hindin Greene. “It was very much on oil prices and some other positive announcements, including the Fed, all in all just flowed into a more healthy market.”

Outside the benchmark index, Arvida was unchanged at 95 cents in its debut on the NZX which saw the retirement village operator raise $80 million in capital. The company says its higher proportion of care beds makes it a different investment offer from its already listed rivals, Summerset Group Holdings, Metlifecare and Ryman Healthcare, delivering a stronger cash flows and less volatility in earnings than the retirement village side provides.

“This one is quite a bit different to the others. It is going to have a reasonable dividend yield and is not so much in expansion mode like the others,” Williamson said. “It is going to have to prove itself because it is a new company and it’s the amalgamation of quite a few villages together.”

Metlifecare advanced 3.2 percent to $4.51. Summerset was unchanged at $2.84. Ryman fell 0.6 percent to $8.20.

NZX rose 0.9 percent to $1.14. The stockmarket operator has had 16 initial public offers on its capital markets this year.

Spark New Zealand, formerly Telecom Corp, fell 0.2 percent to $3.11. The telecommunications provider announced it will spend US$32 million in US$70 million project with Vodafone New Zealand and Telstra to build a trans-Tasman submarine broadband cable. Separately, the company, which is diversifying into content, data and cloud-services in a bid to grow earnings, announced its online video on-demand service, Lightbox, had entered a joint venture with Coliseum Sports Media New Zealand as it looks to gain a foothold in the “crowded online TV marketplace”.

Sky Network Television, the dominant pay TV provider, rose 0.3 percent to $5.82. The company is launching an online video service of its own to keep viewers subscribed.

Outside the benchmark index, Finzsoft Solutions dropped 15 percent to $5 after its managing director Andrew Holliday said he intends to make a discounted takeover bid at $3 per share for the financial software developer in partnership with Silverlake Axis, the Bermuda-based IT company.

Tourism Holdings rose 1.1 percent to $1.77 after  the biggest campervan rental company in Australia and New Zealand lifted its forecast for first-half and annual earnings for a second time on favourable trading conditions.

Livestock Improvement Corp, which provides testing and artificial breeding services to the dairy industry, was unchanged at $6.10 after it said it has purchased a majority interest in its Brazilian genetics distributor, NZ Brasil Genetics Producao Animal for an undisclosed sum.

NZ dollar dips as economic growth revised down, Fed eyes rate hikes

The New Zealand dollar dipped after the country’s pace of economic growth was revised down, though continued to beat expectations, and as the Federal Reserve gets closer to making a call on whether to hike interest rates.

The kiwi fell to 77.13 US cents at 5pm in Wellington from 77.80 cents at 8.15am and 77.36 cents yesterday. The trade-weighted index increased to 77.80 from 77.68.

New Zealand’s economy grew 1 percent in the three months ended Sept. 30, beating economists’ expectations, though the track of annual expansion was revised down after Statistics New Zealand changed the way it measures certain industries. While the quarterly growth initially stoked a rally in the kiwi, the downward revisions weighed in investors’ appetite for the currency, which had already been dented by Fed chair Janet Yellen indicating rate hikes will be on the cards after the next two meetings.

“The fact that GDP was better than forecast, but revisions from the previous years meant it was a bit of a much of a muchness,” said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland. “The kiwi’s had a couple of goes at 77.50 US cents and failed, but is still largely in a range between 76.50 and 78.50.”

ASB’s Kelleher said markets were volatile and illiquid heading into the holiday period, and US data next week will largely drive the local currency’s direction.

The kiwi climbed to 91.45 yen from 90.44 yen yesterday ahead of tomorrow’s Bank of Japan policy review. Governor Haruhiko Kuroda boosted the central bank’s asset purchase programme on Oct. 31, and tomorrow’s policy review will be the first since Prime Minister Shinzo Abe’s Liberal Democratic Party won an increased mandate in last week’s election.

The kiwi was little changed at 94.71 Australian cents from 94.78 cents yesterday, and fell to 62.47 euro cents from 62.89 cents. It rose to 49.48 British pence from 49.18 pence yesterday, and gained to 4.7918 Chinese yuan from 4.7897.

Spark, Voda and Telstra to spend US$70 million on trans-Tasman cable

Spark New Zealand and Vodafone, New Zealand’s two dominant telecommunications providers, in partnership with Australian provider Telstra, will spend US$70 million building a trans-Tasman submarine cable to bolster broadband traffic between the neighbouring countries and the rest of the world.

The new Tasman Global Access Cable will boost broadband connections between the two countries, with Spark investing US$32 million in the project, due to start next year, the three telcos said in a joint statement. Alcatel-Lucent was chosen in the tender process to lay the cable, which is expected to be providing traffic data by mid-2016.

The new cable will bolster New Zealand’s connectivity to Australia, to accommodate growing internet traffic across the Tasman, which has grown to 40 percent of total international traffic, from just 10 percent in 2000. Meanwhile trans-Pacific traffic has declined to 60 percent of international traffic, from 90 percent in 2000, the companies said in the statement.

“As well as strengthened links into fast-growing Asian markets, the TGA Cable will enable New Zealand to better leverage the five main international cable systems currently serving Australia, and deliver important redundancy for New Zealand,” Simon Moutter, Spark managing director and Russell Stanners, Vodafone chief executive, said. “We are seeing increased data content being provided from Australia-based servers by global companies and being accessed by New Zealand internet users.

“An additional cable connection with Australia will strengthen the business case for international data servers to be located in New Zealand and improve access for Australian and other international businesses to New Zealand,” Moutter and Stanners said.

The cable will stretch from Raglan, on the West Coast of the North Island to Telstra’s landing station at Oxford Falls in Sydney.

Shares of Spark rose 0.3 percent to $3.125 and have gained 35 percent since the start of the year.

Shares of Arvida edge up 2 percent in debut on NZX

Shares of Arvida Group, the new retirement village operator, rose 2 percent on its NZX debut after its initial public offer raised $80 million in capital which will be used to reduce debt.

The stock first traded at 97 cents, before dropping back to its offer price of 95 cents, valuing the company at $215 million. The Christchurch-based company is integrating 17 retirement villages and aged care facilities. The IPO included a $5 million priority pool for existing residents, staff and investors to buy into the company. Existing shareholders hung onto about 63 percent of the business.

Arvida will use the funds to repay $70 million of debt, $4.35 million will be used to pay offer costs. After the IPO, Arvida expects to have debt of around $7.8 million and has a $40 million bank borrowing facility that would enable it to carry out planned brownfield developments and any new acquisitions. The brownfield developments in various stages of completion will see another 200 to 250 care beds and units or $9 million worth added to the portfolio by 2016.

Approximately 54 percent of Arvida’s 1,800 residents are in aged care facilities with a further 25 percent in serviced apartments. The company says its higher proportion of care beds makes it a different investment offer from its already listed rivals, Summerset Group Holdings, Metlifecare and Ryman Healthcare, delivering a stronger cash flows and less volatility in earnings than the retirement village side provides. That will allow Arvida to pay out between 60 to 80 percent of underlying profit.

The financial information in the prospectus shows the company is forecast to make a loss of $1.4 million in the 2015 financial year on revenue of $59 million. When the costs of the offer and aggregating the rest home portfolio are excluded, the prospectus says underlying profit for the 2015 financial year would be $4 million, rising to $13.3 million in the 2016 financial year.

The underlying profit figures exclude unrealised gains from property revaluations. No synergy benefits of merging the group of rest homes have been factored into the forecasts as Wilson said these will be incremental.

Based on current earnings forecasts, Arvida intends paying a first dividend of about $2.3 million in late May 2015 for the first financial quarter ending March 31.

UPDATE: NZ dollar tumbles after Fed’s Yellen indicates rate hikes are coming

The New Zealand dollar tumbled about 1 US cent after US Federal Reserve chair Janet Yellen indicated higher US interest rates are coming, and was more upbeat about the state of the world’s biggest economy.

The kiwi recently traded at 76.88 US cents, dropping from 77.90 cents before Yellen’s press conference after traders initially thought the Federal Open Market Committee implied rates would stay low for a considerable time. The kiwi spiked from 77.24 cents immediately before the Fed statement.

Yellen told reporters in Washington the central bank probably won’t hike interest rates in the next two meetings, but does want to move to a more normal monetary policy setting after running the federal funds interest rate in a range of between zero and 0.25 percent since the financial crisis in 2008. The Fed expects to lift rates provided the US retains its economic momentum and plunging oil prices don’t stifle inflation too much, though Yellen said she anticipates monetary policy will remain accommodative for some time.

“Pretty much all the FOMC members believe rate hikes will start next year,” said Michael Johnston, senior dealer at HiFX in Auckland. “The path of least resistance for the kiwi is certainly lower, and that’s probably going to continue. I wouldn’t be surprised in the next months if it goes under 70 cents.”

Before Yellen’s conference traders were confused by the FOMC’s tweaked statement, which dropped the expectation for rates to stay low for a “considerable time”, instead saying it will “be patient in beginning to normalise the stance of monetary policy”. The US dollar has been a favourite among traders since the middle of the year in the anticipation of higher interest rates.

Stuart Ive, senior dealer foreign exchange at OMF in Wellington, said the Fed is “clearly considering” raising rates, though it will be data-dependent, and was upbeat on the economic outlook for the US, particularly in the labour market.

Traders are also waiting for New Zealand’s third-quarter gross domestic product data, which is forecast to show the economy grew 0.7 percent in the three month period, an unchanged pace from the June quarter.

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