Huawei chief James Zhao opens company up to scrutiny

The Chinese company will double its marketing budget to boost smartphones sales. Photo: Lluis GeneThe new Australian chief executive of Chinese communications company Huawei says it will become less secretive and double its marketing budget to boost sales of smartphones and tablets, despite being banned from the national broadband network over spying fears.
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In his first public appearance since taking the job in December, James Zhao said he would make himself and the company more open to public scrutiny and the media.

Mr Zhao is a career Huawei executive who joined the company in 2000 and headed its Indonesia arm from 2004 until 2011. He then ran Huawei’s Bharti Airtel Global account in India and Africa until his rotation into the Australian position.

His predecessor, Guo Fulin, has been moved back to a role in the company’s Chinese operations. “Gradually we can get to know each other better,” he said in an interview at the Mobile World Congress in Barcelona. “I’m paying attention to the end user and the subscribers. Because end users are the people and if the people like you then you can have more business.”

Prime Minister Tony Abbott confirmed the Labor government’s ban on Huawei products on the national broadband network over concerns the equipment could be used by the Chinese government to spy.

Huawei’s reclusive founder and co-chief executive Ren Zhengfei was an officer in the People’s Liberation Army and rarely conducts interviews with Western journalists.

The new chief executive said the NBN issue was not on his radar.

“When I come here I don’t talk about this [issue] and also I do not have interest in this [issue],” he said.

Huawei chairman John Lord said most Australian governments and businesses had moved on from the NBN ban and the issue was now “dead and buried”.

“There’s always going to be a group that will continue on about the security aspect but … I think people trust Huawei now.”

Mr Lord said he was set to approve the company’s local budget in March and there would be a doubling of the company’s consumer marketing spending. The company declined to state how much the marketing budget was worth in 2013.

Mr Lord said the next annual report, in March, would show Huawei’s 2013 revenue grew 10 per cent from the $368 million reported in 2012 and the board forecasts a 10 to 12 per cent increase in 2014.

David Ramli travelled to Barcelona as a guest of Huawei.

Financial planners free to flout advice rules due for repeal

Financial planners are free to flout parts of the new Future of Financial Advice Act while the Coalition prepares to dismantle them.
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The admission from the Australian Securities and Investments Commission at a Senate hearing on Wednesday gives planners a green light not to present to clients the annual statements regarding ongoing fee arrangements entered into before July 1, 2013, required under section 962S of the Corporations Act.

ASIC deputy chair Peter Kell said the commission had taken the decision to ”avoid uncertainty” while the government prepared to remove the provision.

However, the repeal of the rules is uncertain because Labor and the Greens, who hold the balance of power in the Senate until July, have vowed to block the move.

”There is no value at this point in time, no value for the industry, in going out and initiating enforcement action in relation to matters that are currently being considered before the Parliament,” Mr Kell told Labor senator Sam Dastyari.

Assistant treasurer Arthur Sinodinos announced plans to wind back parts of the reforms on December 20. The changes will not be enacted until regulations are introduced backed up by legislation after the Senate changes hands in July.

Senator Dastyari asked ASIC chairman Greg Medcraft why he was proposing not to apply a law which had been in place since July.

Mr Medcraft said ASIC had already announced a decision to adopt ”a facilitative approach to compliance with the law in the first 12 months”.

”Basically again you could argue the same way, that we did not strictly enforce the law in that first period to allow industry to adapt to the law,” he said. ”So it is not dissimilar.”

Mr Medcraft said if he saw a ”major breach” he would enforce it.

Senator Sinodinos said the situation was little different to that faced by businesses wondering how to react to the tax measures announced by Labor but not enacted by the time it lost office.

”When with a law like this which has only been in effect for 12 months and a new government comes along which has clearly signalled an intent to amend the law … what ASIC has done is try to provide some certainty to people, and I think in that sense it is a reasonable thing to do,” he said.

The regulation would ”come into place when the government signs them,” which could be ”earlier than May”.

Crunch time for Qantas chief Alan Joyce on airline job cuts

Qantas chief executive Alan Joyce. Photo: Nic WalkerAir New Zealand profit leaves Qantas in the shade
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Qantas chief Alan Joyce faces one of the biggest tests of his career on Thursday when he is expected to reveal more than 3000 job cuts, the early retirement of planes and airport terminal sales.

With the airline set to notch up its biggest first-half loss since it was floated in 1995, Qantas management will reveal how it intends to rip $2 billion in costs out of the business over the next three years.

The carrier has warned it will post a pre-tax loss of between $250 million and $300 million in the first half, a period during which Australian airlines typically make the lion’s share of their earnings.

At the same time the federal government is set to provide Qantas with a debt guarantee, meaning the taxpayer would foot the bill should the airline default.

The government has made clear it will attempt to relax regulations which prevent the airline from majority foreign ownership.

Flight Centre managing director Graham Turner also weighed in on the debate about the government extending help to the airline, saying Qantas needed to be freed from the restrictions of the Qantas Sale Act and its heavily unionised workforce.

But Mr Turner said the removal of the foreign ownership restrictions was preferable to the government extending assistance in the form of standby debt facility.

”You can’t keep things in Australia just to protect local industry when you have international competition which will inevitably go to the places where things are more efficient,” he said.

”With international airlines, you are working in a competitive international market, and you have to be competitive in the long-term or there is not going to be a viable future for the business.”

Still, Australia’s largest regional airline has launched a scathing attack on Qantas’ attempts to have the Abbott government stand behind its debt.

Regional Express deputy chairman John Sharp – a former Howard government transport minister – said the move would distort the industry.

“If the Australian government backs Qantas, Qantas will then be a government-backed airline, and so Rex will be confronted with two government-backed airline operations that we will be competing with, and that I think is unfair, that I think is a significant distortion of the marketplace,” Mr Sharp said.

Virgin Australia’s key shareholders include United Arab Emirates-backed Etihad. It also counts Singapore Airlines and Air New Zealand as investors – airlines that also count on state support.

Mr Sharp said if the government decided to guarantee Qantas’ debt, it should guarantee the debt of the whole airline industry in Australia.

”We all agree with a level playing field, but if you don’t guarantee the other airlines, and only guarantee Qantas, you will be creating an unlevel playing field, and we’ll be on the unlevel part of it,” Mr Sharp said.

The attack on Qantas comes after Rex reported a 60 per cent fall in first-half profit, down to $3.6 million. Passenger numbers fell 5.1 per cent compared to 2012 to just under 550,000. Rex will not pay an interim dividend.

During the global financial crisis, the Australia government provided a debt backing for the country’s banks. Mr Sharp said the same principals should be applied to not create an uncompetitive environment.

Meanwhile, brokerage CLSA questioned Qantas’ strategy of maintaining a 65 per cent share of the domestic market. ”What we don’t understand is why Qantas appears to have focused on growing capacity to protect market share, particularly with slowing market growth.”

Qantas has left observers to speculate it will axe thousands of jobs from its 33,000-strong workforce.

Peter Lowy happy to sing but puts off swan song

Who says the Lowy family aren’t a colourful bunch. Peter Lowy, who plans to step back from executive duties sometime after the latest Westfield restructure, was asked by Maxim Asset Management’s Winston Sammut if Wednesday’s annual result was possibly his ”Australian result presentation swansong”.
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Lowy admitted that he hadn’t given it much thought.

”Do I get to sing, Winston?” he asked. ”I think all of the guys around the table might be a bit happy.”

He could always call in elder brother David Lowy and his hard rock outfit, The Dead Daisies, as back-up.

But Lowy insisted he won’t be hanging up his boots just yet.

He listed the mountain of work the company had to get through before he relinquished any executive duties and, ”after that, I just want to remind everyone I will be a non-executive director, so I’m not exactly going away”.

He should at least get another crack at topping the pay tables at Westfield. Peter has been pipped by brother Steven Lowy two years in a row, despite them sharing CEO duties.

In a typically straightforward manner, Westfield reported that, Peter’s ”total remuneration based on the amortised fair value of all awards at grant date” was $8.15 million, down from $8.92 million the previous year.

Steven topped the pay list with $8.66 million, down from $9.4 million the year before.Rex misses targets

A 60 per cent fall in first half earnings at Regional Express played second fiddle to the regional airline’s attempt to jump on the entitlement bandwagon with undeserving rival, Qantas.

Rex’s deputy chairman – and former Howard government transport minister – John Sharp said he planned to visit Canberra after the results announcement with the clear message that any deal on offer to Qantas has to be extended to its rivals. Otherwise it risks creating a competitor that will ”try and knock us off”, he said.

”Qantas can be a very strong competitor, whether that’s bullying or not, I don’t know, but we certainly feel the very substantial size difference,” Sharp told reporters.

The Singapore-backed Rex knows how to open doors in Canberra. Last year the airline’s board held its nose and handed $250,000 to Labor and only $70,000 to the out-of-power Libs. We are sure Sharp will ensure the balance is corrected this year.Gift for taxman

Has Sydney Airport lost the Macquarie magic?

The airport operator’s full-year results on Wednesday revealed that the company paid tax for the first time since the 2005 financial year.

The Max ”The Axe” Moore-Wilton-chaired company coughed up $51.9 million for the taxman after banking a $67.2 million tax benefit the year before.

Investors need not fret that Macquarie’s exit from the share register last year – via a distribution to its investors – has seen Sydney Airport turn over a new leaf.

A $69 million ”settlement payment” with the Tax Office was to blame for this aberrant behaviour and normal service is expected to resume next year.

The key ingredient is a private equity level of debt, which means its interest payments of $432 million last year, came close to matching the rest of its operating expenses combined at $497 million.Costly Dubai

Property developer Sunland Group is still counting the cost of the Dubai debacle, which led to Australian executives, Matthew Joyce and Marcus Lee, spending years in detention. The company’s interim results updated the legal cost of claims the group was duped into paying a $14 million ”introductory fee” to secure land on the Dubai waterfront in 2007.

Sunland reported that its operational costs included $8 million of legal expenses ”primarily relating to Sunland’s costs of the Victorian Supreme Court trial and appeal, and payment of $6.5 million cost order awarded against Sunland in relation to the trial”.

Those are hefty sums for a group that has forecast a net profit of $12 million this year.

Joyce and Lee have only just returned home from Dubai after being exonerated following years of detention over the allegations.

Sunland’s costs relate to a civil case against Joyce and Lee, which collapsed last year.

The company is still up for costs over the appeal, which were also awarded against it.

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Flight Centre posts record $111 million profit

Flight Centre has broken another record by posting a 22 per cent rise in first-half net profit to $111 million as a weaker dollar failed to dampen Australians’ love affair with overseas travel.
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Australia’s largest travel agency will pay a 55¢ interim dividend on April 17, up from 46¢ in the prior half.

The latest payout delivers $8.4 million into the hip-pocket of Graham Turner, Flight Centre’s managing director and the company’s largest shareholder.

Despite it breaking records, Flight Centre has stuck to its guidance for this financial year of pre-tax profit of between $370 million and $385 million.

Mr Turner said demand for leisure and corporate travel remained ”reasonably good”, although the company had noticed slowdown in travel by the mining industry due to a greater focus on reducing costs.

Flight Centre reported a 20 per cent rise in profit before tax to $155 million for the six months to December, which included a $9 million one-off gain from its wholesale business. Revenue rose 15 per cent to $1.1 billion for the half.

Mr Turner said fluctuations in the value of the dollar had not stopped Australians from travelling overseas en masse. ”There are no indications that people are going to stop travelling or slow it down,” he said.

Flight Centre, which has been keen to press the point with investors, highlighted government data showing that growth in outbound travel had accelerated during the first half despite a fall in the Australian dollar.

Mr Turner said baby boomers were still spending on overseas travel, and fares were at record lows due to intense competition between Middle Eastern and Asian airlines.

”The airlines have to be on the ball if they want to fill up the big planes. The consumer has never had it so good, which helps us,” he said. ”We go for volume.”

The key driver of its latest earnings was again its Australian business, which posted a 20 per cent rise in pre-tax earnings to $124 million for the half. Its three largest businesses – in Australia, the UK and the US – generated almost 80 per cent of its total transaction value, or the price at which goods and services are sold, in the first half.

But its businesses in the US, which posted a loss, and Canada, failed to meet expectations.

Moelis analyst Todd Guyot said Flight Centre was positioned for ”sustainable low double-digit growth”, emphasising the ”quality of the business model and management”.

Shares in Flight Centre closed up 3 per cent at $1.59 on Wednesday.