Pwc Queries Reality Of Tempo Profit
Sydney Morning Herald
Friday February 27, 2004
Poor Tempo just can't seem to scrub up well. Investors are giving it the brush-off.
Tempo chief executive John Schaeffer seems unable to shake off a stack of accounts-related issues that are dragging on the share price of his cleaning and security empire.
The latest price plunge the stock has lost another 10c, to $1.13, since the group's interim results were released on Wednesday is the result of yet more interference from the auditors, PricewaterhouseCoopers.
As flagged, Tempo reported a net profit of $1.8 million, well down from the $6.3 million the year before.
But PwC thinks the company should not be including forecast earnings of $2.5 million from an outstanding facilities management contract, as it is looks increasingly unlikely the money will ever materialise.
Tempo vehemently disagrees but that hasn't stopped the auditors from suggesting the group's net profit for the period is really closer to $42,000.
``We believe that the revenue recognised in excess of the costs incurred in relation to this component of the contract should be reversed," PwC said on Wednesday.
At least one analyst was more than a little alarmed at this second accounting issue in six months for Tempo.
``The warning bells for us just got louder," said Moira Daw from Credit Suisse First Boston. ``The company is engaging in profitless growth, giving its customers generous credit terms, focusing on revenue growth and promising, although never delivering, improved performance."
JP Morgan is worried about the balance sheet. By the broker's calculations the net debt to equity ratio will end the current financial year at 140 per cent.
On Wednesday, Tempo said that it was confident it would recover monies owed and a full year net profit of about $7 million was achievable.
But in the back of Schaeffer's mind must be the continuing damage to his margin loan, and his art collection, not to mention how long it's going to be before the ``sold" sign goes up on his $30 million Rona mansion.
ACCC warns Telstra
There would have been few surprises when the competition watchdog issued an advisory notice to Telstra on Wednesday evening, in relation to its aggressive broadband price cuts which come into effect today.
When Telstra introduced the new packages earlier this month, competitors immediately began complaining that some of the packages, like the $29.95 entry level option, undercut the wholesale rates Telstra was offering them for the same service.
The Australian Competition and Consumer Commission said it responded after receiving a large number of complaints.
The advisory notice itself can not force Telstra to lower its wholesale prices but it is a necessary pre-condition for the ACCC to be able to bring penalties to bear. The ACCC also expressed concern over the limited service offered by Telstra's $29.95 package, which could see costs quickly rise once the download limits are reached.
``Consumers should be aware of the substantial additional costs they could face for usage of their broadband service," the ACCC said.
Don't rush
The lack of clarity by newly installed Brambles boss David Turner during his run-through on Wednesday of the poor first half earnings, made it easier for analysts to cut their full-year net profit forecast to $300 million.
Most agree that the long awaited earnings turnaround is under way but that the timing and quality remain in doubt.
As Macquarie Equities told its clients: implementation risk in the changes remains as it takes longer than expected for cost savings to flow through.
``As with Orica, the major re-rating will come with evidence of the earnings improvement," it stated. ``As this is 12 months away, investors can be patient."
Bad bananas
Brambles was not the only surprise, with Chiquita Brands' shares also slammed on its extended downturn which caught not only the market, but big private investors such as Victoria's Pratt family, the owners of Visyboard, on the hop.
The Pratts have 12 per cent, with small cap fund managers such as Paradice Cooper and MMC also large holders.
A litany of woes, from the surprise sale of the Angas Park dried fruits operation, to poor earnings from the Blueberry Farms of Australia unit, hit by hailstorms, hurt earnings. As a result, write-downs and provisions of $23 million were brought to account for the second year in a row.
© 2004 Sydney Morning Herald