Police drop probe on Rudd curse video leak

THE federal police have abandoned their pursuit of the damaging leak of a video in the run-up to this year’s leadership confrontation that showed Kevin Rudd in a fit of rage.
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In the video, which dated from September 2009 when he was prime minister, Mr Rudd was heard swearing and banging a table. The video was a message for a Chinese Communist Party anniversary prepared at the request of the Australian embassy in Beijing.

The 10-minute message was in complex Chinese and Mr Rudd later said he was swearing at his own inability to get it right.

The video was leaked before Mr Rudd issued his leadership challenge, and fed into the Gillard supporters’ narrative that he had been out of control and tyrannical as leader. Mr Rudd, who was still foreign minister when the leak occurred, said in a hastily arranged TV interview: ”I’ve never pretended not to swear from time to time.”

The leak was referred to the federal police, who said on Wednesday its investigation ”did not identify sufficient material or evidence to substantiate charging of any person for theft or unauthorised disclosure”.

Mr Rudd later tweeted: ”Recording congratulatory video messages today. The only F word I used was … fantastic effort.”

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Redundancy scheme boosted

THE cost of a federal government scheme that pays workers their entitlements when companies go broke is set to soar, after new laws passed the lower house.
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On Tuesday night, the Gillard government’s Fair Entitlements Guarantee Bill was passed in the House of Representatives.

Workers who lose their job when a business is liquidated or goes bankrupt will be paid all of their entitlements – with no limit on how much taxpayers will have to spend picking up the tab.

The government views the change as a way to protect workers who lose their job through no fault of their own.

The move has been attacked by the federal opposition, which voted against it on Tuesday. Labor said this was proof the Coalition had ”returned to their anti-worker ways”.

But opposition workplace relations spokesman Eric Abetz said the change meant that, when businesses went broke, instead of the government just covering 16 weeks of redundancy entitlements, it would now pay for an unlimited amount.

”It sets a standard way beyond most enterprise agreements,” said Senator Abetz, who pointed out that the Coalition established the scheme in 2001. ”It’s a good scheme – but making it open ended [is not good]. This is just going over the top.”

Senator Abetz said that Labor had pushed through the law ”at the behest of trade union bosses, who will use it … to create a new employment standard”.

”Once you start saying that [workers made redundant get] four weeks of pay for every year of service, you are saying to somebody of 30 years’ service ‘You are entitled to 120 weeks of redundancy pay’. The standard it sets … will mean union bosses can say ‘Well, that’s what even the Parliament decided’.

”This is pushing a good thing too far. It’s this sort of mentality and approach that started off Greece, Spain, Portugal, Ireland,” Senator Abetz said.

Since it was established in 2001, the federal government has spent about $1 billion on the General Employee Entitlements and Redundancy Scheme (GEERS).

GEERS – which will be renamed the Fair Entitlements Guarantee – is designed to pay the wages, annual leave and redundancy entitlements of workers that are left unmet when liquidators are called in.

Previously, only 16 weeks of redundancy entitlements were paid under the scheme.

Workplace Relations Minister Bill Shorten said the bill delivered on the government’s 2010 election promise to provide greater certainty for Australian workers if their employer could not pay them the employment entitlements they were owed.

”Australian workers, who have loyally worked for companies for years, will continue to get the protections they deserve now under a statutory scheme,” he said.

”Employees are often given little to no warning when a company goes under and this is our way of trying to ensure they are not disadvantaged through situations they have no control over,” Mr Shorten said.

GEERS was established by Tony Abbott, the then minister for employment, after the collapse of airline Ansett and National Textiles, a business run by Stan Howard, brother of then prime minister John Howard.

The scheme has the support of both sides of politics, industry, unions and insolvency practitioners who administer payments to workers.

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Q&A with Simon Marshall

NEXT Tuesday Simon Marshall, former jockey and racing personality, will co-host the Melbourne Cup coverage on Channel Seven.
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You rode 15 group 1 winners as a jockey. How did you get into the media?

I was about 18 when I realised my career as a jockey could be short-lived, and some wise heads said I should start looking for something else and develop some other skill sets. I won the Australian Cup and I was interviewed by Bruce McAvaney, and from that I thought there hadn’t really been a presenter who had come out of the saddle and taken up the microphone as such, so I got elocution lessons, did some radio work and picked up a gig in 1996 at Channel Nine as a guest reporter, working with Tony Jones and Lou Richards. I ended up getting a contract with Channel Nine in 1997.

You rode in three Melbourne Cups. How many have you covered?


Is the excitement of covering it anything like riding in it?

You still get excited. It places you back when you rode and what the jockeys are going through when they get introduced in the mounting yard before you get on the horse.

The race has become much more international as more countries are represented by various horses. How do the jockeys feel about that?

It was intriguing to us that they could come from the other side of the world and compete with our horses. The 24-hour flight for a horse is very demanding. I had respect that they had a crack at it. Anybody can get a horse fit to ride. Only great people can get them there mentally to be a champion.

What do you try to bring to the telecast?

Racing is different. It has its own pulse, especially the four days at Flemington. You get 400,000 people there over those days. It’s our opportunity to talk a bit of racing to those who [wouldn’t usually watch]. Most people are fascinated with how fast and far a 500-kilogram thoroughbred can run and how hard it is for a jockey to stir it and get it going. You try to break all that down. It’s a lot of fun but quite challenging.

Bruce McAvaney is a doyen of Australian sport. What’s it like working with him?

He has become a doyen through study and passion of sport. Racing is in his blood and through his family. He gets wrapped up in the storyline and the history of it. His No.1 passion is the 100-metre [sprints at the] Olympics, but very close would be the Cup.

Are you allowed to bet in your role?

I am now I’m not a registered rider. I like a quaddie with my mates. I’ll also support my own horses with the company I am involved in, DC3 Riders.

As a jockey, did you find the crowd’s focus on the social element of Cup day a distraction?

If you’re new at it, you become a rubberneck and walk away gobsmacked at what actually goes on and how many people get there. But when you get on a beast that you’ve been getting up at 4am every day to [work with], the adrenalin kicks in and your mind focuses on winning that race. You flick the switch and concentrate on what you have to do.

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Capital management adds value if well executed

CAPITAL management is much talked about among Australian companies but rarely executed with much panache. Properly used, capital management can create tremendous value for shareholders.CSL Limited (CSL)
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THE joys of a big health company being able to borrow at 4 per cent have created a beneficial cycle for CSL. The company recently announced a $900 million buyback of its stock, making it the fifth buyback the company has undertaken in recent years.

At the end of last year, CSL organised about $1.5 billion in debt with the combination of a private issue in the US and a new facility with its bankers. Analysts assume the money has been borrowed at an average of about 4 per cent. If this is the case, the company, in theory, can buy its own stock up to a price-earnings multiple (P/E) of about 25 times. It sounds incredible, but that is the case.

At $46.60 a share, CSL is trading on a historical P/E of about 25 times and a prospective P/E on 2013 earnings of closer to 21 times. If the company buys the whole $900 million worth of stock in the next 12 months, it will purchase about 6 per cent of all shares traded. If we assume it will need to pay $50 a share over the year, it will buy 18 million shares at an average P/E of about 23 times. This is pushing the limit, but analysts point out that with earnings projected to grow strongly in 2014, it will be earnings-per-share accretive in that year – two years from now.

While CSL’s buyback announcements support the share price, there is a strong argument the company should ditch its buyback and issue shares for an acquisition or give the excess cash back to shareholders, even though dividends would be unfranked. For investors, they should be concerned if CSL continued to buy shares above the $50 market, because it requires earnings to grow strongly into the medium term. That is always a dangerous assumption.Devine Limited (DVN)

AT THE other end of the scale to CSL is Queensland-based property group Devine. Like most companies that rely on property for its earnings, Devine has fallen on hard times. More recently, though, the company’s share price has spiked from a low of 53¢ in August to 71¢ this week, with investors a little more excited about the story in a lower interest rate environment.

Devine’s earnings were clobbered in 2012 because of the benign activity in all forms of property in the Queensland and Victorian markets, and the share price has fallen to about 35 per cent of the group’s stated asset backing. Ideally, Devine would jump in and start buying its own shares, just like fellow Queensland group Sunland has done recently. Every share Devine would buy at this level would increase its net asset backing.

Unfortunately for Devine, its balance sheet, with gearing sitting around 30 per cent, is not in a position to buy back its shares and pay a dividend at the same time. If, however, the board believes the carrying value of its assets, the company should seriously consider putting the company up for sale to realise the value. Another approach is to sell some of its assets for near book value and use the funds raised to buy back shares.

If there are no buyers for the overall company, Devine, with 14,500 land lots, is a great leveraged play into a recovery of the Queensland and Victorian property markets in 2014. Over the fullness of time the share price could easily double even if asset value is written down 20 per cent from current levels.Bendigo and Adelaide Bank (BEN)

HISTORY tells us that it is dangerous to own banks in the November to February period because they generally underperform the broader market. However, for those obsessed with franked dividends, it might pay to have a closer look at Bendigo Bank. The company had its annual meeting earlier this week and despite talking about a tough environment there was no downgrade forthcoming.

There is a lot to dislike about Bendigo, with its paltry 9 per cent return on equity and a hefty cost-to-income ratio of 59 per cent topping the list. If you can overcome these sickly numbers, it might be worth switching into the stock once Westpac, NAB and ANZ go ex-dividend in November.

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The Age does not accept responsibility for stock tips.

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Telstra reveals Defence deal win, growth strategy

TELSTRA has won a communications contract worth about $150 million a year with the Department of Defence, and outlined a growth strategy for the next year at its annual investor day.
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Shares reached a three-year high of $4.14 during the briefing, the highest price since the government announced it was building a national broadband network and ending Telstra’s monopoly over fixed communications in Australia.

Shares went up even though Telstra will no longer guarantee a fully franked 28¢ dividend. It would instead announce dividends at financial results every six months, chief financial officer Andrew Penn said.

Management would focus on growing the business so it could ”increase the dividend over the long term”, he said. ”We recognise very much that what our shareholders want is good returns from Telstra. One of the ways we can deliver that return is through a dividend.”

But Mr Penn would not commit to a dividend payout ratio, which would ensure Telstra shareholders get a set amount of the annual profit.

Meanwhile, Telstra would enter negotiations this week to supply all of Defence’s terrestrial communications after being named as preferred tenderer, chief operations officer Brendon Riley said.

While Telstra would not say how much the contract was worth, Defence told bidders that it spent $156 million on terrestrial communications in 2008-09, according to a briefing document.

The contract is to upgrade, replace, standardise and rationalise Defence’s existing network, which contains about 70,000 desk computers, 15,000 laptops and 600 BlackBerries and is spread across 330 locations in Australia.

Chief executive David Thodey outlined five strategies for Telstra in 2013-14 including: maintaining its lead in the mobile market, winning fixed-broadband customers, taking out more costs, growing the business and creating a ”customer service culture”.

He told investors that Telstra had ”no god-given right that it will be successful” and that its success would depend on executing plans to grow the business while the NBN is built.

”NBN [deal] is done. I have moved on. Yep, there are some fights ahead of us, but I think we are more about positioning ourselves for those fights and how to be really a good competitor in the market and do well,” Mr Thodey said.

These include a push to exploit Telstra’s undersea international cable network to provide managed services to global companies. Mr Riley said Telstra would focus on selling a full telecommunications service to Australian and other companies setting up in Asia.

Mr Thodey also announced Telstra would trial NBN Co’s fixed wireless NBN services with a view to launching them in mid-2013 and was ”considering our options for satellite services”.

And asked whether Telstra would oppose Foxtel selling broadband services – a strategy that has helped pay TV operators grow customer numbers overseas – Mr Thodey said there was ”nothing in the relationship between Telstra and Foxtel that prevents them from reselling telecommunications services”.

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