THE DISTILLERY: Earnings bounce

It's back to basics for the market, the fripperies of a slumping, surging sharemarket and all the attendant fears and tribulations put to one side (helped by a very strong 2.6 per cent rise in the market yesterday and another solid opening expected this morning). The June 30 reporting season is well and truly upon us and yesterday's results were a bit better than expected. There were lots of positive statements even from loss-maker, Leighton, about the next year, backed by dividend lifts and the odd share buyback.

The Australian's John Durie wrote this morning: "Some company chief executives are learning the benefits of putting a positive face on their results amid a decidedly gloomy global economic outlook. Leighton's David Stewart had every reason to be positive after the dismal time he and his company have had, as reflected by the dismal profit numbers reported yesterday. On the other side of the country, Perth based iiNet's Michael Malone was bullish for different reasons as he outlined continued growth for the internet service provider, with cashflow increasing from $62.5 million in the 2010 year to $96 million last year, a 12 per cent increase in net profit to $39 million. He even rewarded his shareholders with a 5 per cent buyback." And Ansell was another company to reveal a buyback, on top of a higher dividend.

The Australian Financial Review's Chanticleer columnist said this morning: "The 2011 profit reporting season is starting to fit the federal government's description of the overall economy with a patchwork of results." And the paper also pointed out: "Australian companies are buying back their own shares and increasing dividends in the best sign yet that boardrooms are confident about the future."

News Ltd's Terry McCrann ignored the losses and other problems at Leighton and looked at the general commentary and was shocked: "Leighton sits at a number of critical intersections in not just Australia's economy but the broader life of the nation. So what it says bears very serious listening. Yesterday it spoke loud and clear with its results and through its new CEO David Stewart. What it 'said' was highly disturbing. First, that we face major problems building the critical infrastructure we need to service both the resources boom and the broader economy. Because the public-private model was broken. Secondly, that we face a wages blowout that could force the higher interest rates that would obviously hurt those with mortgages. But could also drive the final nail in the coffin of the non-resources side of the economy, while also seriously hampering the resources boom itself."

Fairfax's Adele Ferguson wrote yesterday on company websites: "Shares in Leighton Holdings rocketed as much as 7.6 per cent higher today as investors were encouraged to focus on the group's $46 billion work in hand and its 2011-12 profit outlook rather than today's massive full-year loss and absence of a final dividend. Investors seem to be getting the intended message with Leighton shares up more than 15 per cent in the past five days. Even with the turbulent trading of late, that performance is beaten by only four other stocks among the top 200 over that period. The pitch coming from Leighton boss David Stewart is the worst is well and truly behind Leighton and investors should focus on the year ahead."

Newcrest shares sank in yesterday's strong market, despite a big profit, dividend and confident talk about the gold price. The Australian's Matt Chambers says: "Newcrest Mining will curb production at its big Telfer goldmine and has slashed medium-term company production guidance, as rampant inflation and equipment shortages in Western Australia's Pilbara force the company to shift its growth focus to other mines. Presenting the company's full-year results yesterday, Newcrest chief executive Greg Robinson said rising costs in the Pilbara and Papua New Guinea meant Newcrest expected to produce between 3.4 million and 3.6 million ounces of gold in 2013-14, down from a May estimate of 3.75 million ounces. The revelation weighed on shares, despite the Melbourne-based company meeting $1 billion-plus profit expectations, declaring a special dividend, being unhedged amid surging gold prices and outlining strong production growth from other mines for at least the next eight years.”

The AFR and other papers report this morning that: "Retiring CBA chief executive Ralph Norris had his remuneration slashed in half last year due to a fall in customer satisfaction, but was still paid a handsome $8.6 million." The Fairfax broadsheets reported in a similar vein: "Commonwealth Bank of Australia customers have struck back over chief executive Ralph Norris's decision last November to push through a super-sized interest rate rise on mortgages. The controversial rate hike has resulted in a near-halving of Norris's pay packet last financial year with the nation's highest paid bank boss now in the middle of the pack when it comes to executive remuneration. CBA's latest annual report reveals the soon-to-retire Norris was paid $8.6 million, including incentives, in the year to end-June. This was well down from $16.1 million from a year earlier."

And Adele Ferguson tackled a completely different subject this morning: "Three months into the top job at the Australian Securities and Investments Commission, chairman Greg Medcraft, is making some big inroads into cleaning up the opaque world of contracts for difference, exposing the risks associated with Exchange Traded Funds, and improving disclosure in the superannuation and managed investments scheme industry. The announcements are part of a move to increase disclosure and transparency in the market and help investors better understand the risks they face when they are investing in CFDs, ETFs or superannuation."

John Durie wrote on The Australian's website yesterday: "Wednesday's confirmation Brambles boss Tom Gorman has appointed advisers to assess the $1.8 billion sale of his Recall business will mark the end of a $5.4 billion restructuring of the once-great 141-year old conglomerate. One could say the market has been trading uninformed, at least from official sources, for some time but then the thousands of acres of trees which have been felled to provide the paper to mount the campaign would suggest the story is well known. When Gorman releases his profit numbers on Wednesday, he will confirm UBS and Merrill Lynch will advise on the sale but is unlikely to provide details of just how any proceeds will be used."

The AFR reported: "Boral shares hit the deck last week but that hasn't stopped talk its chief Mark Selway has something more than just full-year results to announce on Wednesday."

And The Australian's Tim Boreham thought Ansell did well in the year to June 30: "For a manufacturer exposed to the struggling US and European economies and copping a heavy increase in its core input of latex prices, Ansell has enjoyed a remarkably buoyant year and is chipper enough to forecast a 6 per cent to 12 per cent earnings per share increase for this year. "Across the board all the categories are doing quite well,” remarks Magnus Nicolin, who took over from long-serving CEO Doug Tough only in March. Ansell shares soared 66 cents, or 5 per cent, this morning as management beat its EPS guidance (US91.6 cents against the envisaged US86-98 cents) and made all the right noises about this year."

Fairfax's Ian Verrender looked at the problems in one private equity deal: "CVC has a great deal riding on the outcome of Nine. Wiping out a substantial portion of its $1.8 billion in equity would be a catastrophic blow to the group, not just in terms of the pain it would inflict on its investors, but on its ability to raise funds. It is not alone in that regard. Most private-equity deals completed just before the markets melted in late 2007 were monumental stinkers, and the banks that financed them have a great deal to answer for. Just how CVC extracts itself from Nine will be fascinating. This time around it will be a tale of arse covering rather than chest thumping."

And the AFR reports that one of Nine's small investments is on the market: "Twelve months after it was launched with an initial investment of $800,000, the group buying website Cudo is on the market." Cudo is a joint venture between Nine and Microsoft.

And still in TV, the Herald Sun and other papers report: "The Ten Network will take a $46 million hit from its sweeping program to rein in costs and restructure its struggling TV business. The broadcaster revealed late yesterday it would fork out an extra $39 million in restructuring costs, including legal expenses for incoming chief James Warburton's battle with former employer, Seven Network. Ten had previously declared costs of $7 million. The revised bill - tabled after months of speculation about the extent of job cuts in the group's news and sales divisions - will cover up to 170 redundancies."

Finally, The Australian's Bryan Frith analyses the collapse of a well-connected small oil group: "Only weeks ago, the Asia-Pacific-focused oil exploration and development company AED Oil announced plans to raise $21.25 million through a share placement and rights issue to existing shareholders. On Friday, the company was placed in voluntary administration. In between those events, AED announced on August 4 that an arbitration panel had made an order for its subsidiary, AED Services, to make a "substantial payment" to Puffin FPSO, which is owned by Norwegian company Sea Production."