Maitland 60% rate rise possible

MAITLAND rates bills could jump by close to 60 per cent over the next seven years, options in a Maitland City Council report have revealed.

The council is seeking public feedback on potential rate rises in a campaign that has flagged increases that would eclipse Lake Macquarie’s 55per cent rate hike over seven years.

Maitland council’s general manager David Evans said the figures included in the report were only guides to how much maintaining, improving or reducing services would hit ratepayers and no final proposals were ready yet.

But all three scenarios, including a cut to services, would involve rates going up by some margin.

A 7.25per cent or $89 bump for the average ratepayer every year for seven years would allow services to stay at their existing levels, the report showed, while a $35 rise every year would require service cuts.

An 8.95per cent rise, adding $116 to the average annual rates bill, would allow for expanded services.

If that option was approved, the Maitland rate rise would eclipse Lake Macquarie’s controversial 55per cent rates jump over seven years, introduced in June last year.

Mr Evans emphasised the report’s figures were not firm plans.

He said the council would develop more detailed plans after gauging ratepayer sentiment.

‘‘These figures have no formal status,’’ Mr Evans said.

‘‘We are asking people to have a look at what [maintaining or growing services] means.’’

A Maitland City Council document on the potential rate application shows the city’s rates are the second-

lowest in the Lower Hunter at an average $986 this financial year.

This compares to Newcastle $1051, Lake Macquarie $1141 and Cessnock $1064. Only Port Stephens ($950) is cheaper.

Mayor Peter Blackmore said the consultation, which would be assessed in any bid to raise rates above the state-imposed cap, would clarify exactly what ratepayers wanted.

‘‘It’s a genuine attempt to reach out and ask the community and gauge their reaction,’’ he said.

Cr Blackmore said he expected most councils would be under pressure and seeking relief through rates in the next few years.

‘‘I have no doubt whatsoever that almost all local government areas are going to be making an application [for higher rate rises],’’ Cr Blackmore said.

The engagement program will assess residents’ sentiments about the council’s funding options, service levels and provide information on its financial state.

Deputy mayor Brian Burke said a 12-page Funding Our Future brochure would go to all residents detailing how each option would change the city and advising them how they could contribute their opinions.

Cr Burke said he believed it would give residents a clear insight into pressures on Maitland due to ongoing growth and cost-shifting.

‘‘All these costs associated with running the city are rising along with everyone’s household ones,’’ Cr Burke said.

‘‘It’s a bit of a reality check and what we’re saying is sit down, read it and tell us what you want.’’

Councillors will discuss the consultation at tonight’s meeting.

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Coalition to combine local environment programs with Landcare

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Local environment programs would be merged into a single National Landcare Network, with guaranteed funding, the Coalition announced on Monday.

The decision, which would roll the “Caring for Country” environment initiative into the Landcare program, would mean local volunteer groups would have easier access to funding for tree planting, restoring rundown land and rivers, and controlling pest animals and weeds.

“The Coalition will give Landcare significantly greater access to the Caring for Country pool of funds, as well as the current Landcare funding,” the Coalition’s environment spokesman, Greg Hunt, said in a statement.

“We have listened to local communities and we will put Landcare at the heart of our land conservation programs.”

There are about 2500 local Landcare groups in NSW. Their work is diverse but includes restoring degraded farmland, reviving pockets of bushland in suburban Sydney, sustainable farming, stopping erosion, and clearing polluted rivers of invasive species.

Mr Hunt also announced $1 million in new funding per year to support the operating costs of running the national network which co-ordinated local groups.

The chair of the national Landcare organisation, David Walker, warmly welcomed the announcement, and said it would have a material effect on enhancing local environment work.

“The commitment to no more funding cuts from the existing budget is a relief, and so I’m really pleased,” Mr Walker said.

“We are still hopeful we’ll get some good policy announcements from the federal government, but we haven’t heard anything yet.

“Likewise, the Greens have talked about the environment a lot, but we haven’t seen anything from them yet.”

The Coalition’s spokesman for agriculture and food security, John Cobb, said the policy change would mean there was more money available to volunteers, even though the total funding pool had not changed.

“Over the last six years, Landcare has increasingly been excluded from the decision-making processes in both Canberra and the regional bodies,” Mr Cobb said in a statement. “Volunteers spend hours filling in grant applications only to find they don’t meet the criteria set by bureaucrats or must reapply every 12 months.”

The Coalition also pledged $1.4 million in funding for local community heritage grants on Monday, part of a trickle of small policy announcements during the election campaign.

On the weekend it promised $9 million to the National Climate Change and Adaptation Research Facility, based on the Gold Coast, and on Friday it pledged $2 million for whale and dolphin protection, including a plan to develop a “national whale trail” along the east coast to encourage tourism.

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Specialty Fashion lifts web profile

Gary Perlstein is moving away from bricks and mortar to a stronger online presence. Photo: Dom LorrimerSpecialty Fashion Group, which owns a portfolio of women’s fashion banners such as Millers and Katies, is prepared to incur little or no immediate return on its investment in expanding its online presence to prepare for the once-in-a-generation revolution in retail.

Chief executive Gary Perlstein said the company was committed to closing up to 120 of its stores over the next three years – it closed 47 in 2012-13 – as it recalibrates its business away from expensive leases in shopping centres in favour of higher-margin online sales.

Specialty Fashion had made large investments in its IT infrastructure and staff over the past two years to build its omni-channel platform, he said, as well as employing in-house design and sourcing teams that would protect margins in the face of cut-throat competition in the discretionary retail sector. ”All the investments in IT and the online strategy, we won’t see all the benefits we want for now but it’s important to be made,” Mr Perlstein said.

”We have embraced digitisation, we are making the investment not just for today but the future. There is a cost to be borne for that but when you’re facing a change that is once-in-a-generation you have to ensure you don’t crawl into a hole, but make those investments even if you can’t see the return tomorrow.”

Specialty Fashion unveiled a full-year net profit of $13 million despite choppy conditions marked by low consumer confidence and industry-wide discounting.

The retailer’s burgeoning websites were again a standout performer within the group, with online sales up 50 per cent to $21.9 million, against $15 million the year before.

Its online sales now represent 3.8 per cent of total revenue. Stripping out its Millers chain, which appeals to an older demographic, its online sales made up 6 per cent of total group sales.

The retailer actually recorded a loss for the June half of $5 million, but strong momentum from the first half of fiscal 2013 helped push the company into profit territory. It posted a $2.8 million loss in 2011-12.

Revenue for the year was $569.5 million, down 0.5 per cent.

A final dividend of 2¢ per share was declared, taking the total payout for the year to 4¢ per share.

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No value in fuelling discount debate

Illustration: John Spooner.Surprise, surprise – the political combatants chose not to buy into the debate raised by independent grocers this week around the potential threat to competition stemming from the big supermarket chains’ use of discount shopper dockets on fuel.

Not a word from Coles, Woolworths, Tony Abbott or Kevin Rudd. Its a no-fly zone in the lead-up to an election.

Even a government with a clear majority and a full term ahead of it would be reticent to pop its head above the parapet on this issue.

The big supermarket chains are desperate to stay off the radar and for politicians there is nothing to be gained by telling consumers that they will inhibit the flow of cheap petrol.

The custodian of competition regulation, the Australian Competition and Consumer Commission, has already made it clear that this is an area within its purview but it won’t be releasing any determinations for another couple of months.

The use by big supermarkets of loyalty shopper dockets reared its head this week for two reasons. The first is that independent grocers instigated an advertising campaign in major newspapers in an attempt to force it on to the political agenda – a move that fell fairly flat.

The second was the release of Caltex’s half-year earnings. The company operates as a supplier to a slew of co-branded fuel outlets with Woolworths.

Caltex did not want to dwell on the shopper docket issue either – other than to point out Coles started the price war and that as a wholesaler it suffered some collateral market share damage until Woolworths stepped in to match its supermarket rival on discounts. In other words Caltex as a wholesale supplier to Woolworths shares none of the pain of discounting, but only suffers if Woolworths loses market share.

Fuel is one of those products economists like to call inelastic – consumers don’t really alter their volume of consumption in response to price. The issue for Coles, Woolworths, suppliers like Caltex and the independent grocers is that discounts move market shares.

The conundrum for the ACCC is that the shopper dockets have been embraced by consumers as a means of lowering their petrol spend, and so to limit them would be extremely unpopular. But to allow unfettered use of discount petrol shopper dockets is to potentially inhibit competition in the longer term from unaligned petrol outlets or independent grocery retailers that may go out of business because they can’t furnish the same discount offers.

The regulator’s determination will address the where-to for Labor. Abbott has already announced the Coalition will undertake a root-and-branch review of competition policy if it wins government. This presumably will include shopper dockets.

No one other than the independent grocers appears to want to give the debate too much air.

For Caltex this issue was a bit of an aside in a result that was influenced by other factors, the largest of which was the Australian dollar.

The sudden fall in the local currency had a bigger effect on what is still (in part) a manufacturer in Australia. It still refines crude oil into various products for industrial and retailer end-users.

A decision to exit part of the refining process (the transition of the Kurnell Refinery into a storage facility) is Caltex’s strategic move away from engaging in the risks associated with local manufacturing.

By the end of next year Kurnell won’t be operating as a refiner.

The effects of this will be, firstly, to increases its earnings dependence on marketing and distribution. The second will be to free up capital that will be either returned to shareholders or reinvested in distribution. Thus in future Caltex will rely more heavily on the market share in retail fuel distribution and its commercial customers.

There are plenty of mini-Caltex operators across the country that have distribution and storage facilities that can fill in some of the geographical gaps and provide opportunities for the company’s incremental growth.

Its success is now tied into broader refiner margins and increasingly on improving the margins on specialist and value-add product. Already the trend by consumers to move away from commoditised unleaded fuel and towards towards premium products is clear.

Sales of unleaded product and E10 fuel were down 5 per cent and 7 per cent respectively.

In the commercial space where price competition is also heating up, Caltex says delivering value-added product in partnership with its customers is the strategy for retaining or stealing market share.

Perhaps more importantly the health of the economic environment plays into future performance. Caltex says it does not feel the effects of the fall off in capital spend in mining – instead it gets the upside from the increased volume of commodities that are produced.

Perversely, the fall in the local currency that cost Caltex’s earnings dearly in the the half it just reported will be recouped in future earnings.

Bottom line, operating as a distributor is a far more reliable earnings future than manufacturing in Australia. And it poses the ultimate question of whether there is a future for refining crude oil in Australia.

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More jobs to go as Boart outlook worsens

The speed and depth of the downturn surprised Boart Longyear management.After axing more than 3500 jobs worldwide last year and another 2300 in the first six months of the year, drill contractor Boart Longyear has flagged further cuts amid the ongoing contraction in mining activity.

In the June half it posted a net loss of $US329 million, a reversal from the net profit of $US98 million earned a year earlier, largely due to heavy write-offs and provisions. Revenue slumped to $US719 million from $US1.1 billion.

Putting the restructuring provisions of $US315.5 million to one side, the company said second-half earnings were likely to be worse than the first half, amid declining drill utilisation.

Additionally, price declines across the industry are only now starting to be felt, which will put further pressure on earnings.

Earlier, Boart Longyear had guided analysts to a full-year net profit of between $US116 million and $US159 million, although it warned on Monday that even the lower end of this range could be optimistic. ”Significant industry volatility in the second half could materially impact performance,” it said, opening the door to even weaker results.

”Operating conditions and key performance indicators have continued to deteriorate early in the second half of the year.

”The company expects its second-half 2013 result to be lower than the adjusted result for the first half despite the benefit of restructuring initiatives.”

Investors may not be fully aware of the ”risk of price erosion in the second half and may assume larger benefits in 2013 from the company’s cost reduction efforts than are likely to be achieved”, it warned investors.

”Although I have 30-plus years in the commodity and mining markets, it has surprised me,” the company’s president and chief executive, Richard O’Brien, said of the speed and depth of the downturn.

”We’re fighting against a decline which is unprecedented in a lot of ways. The market will come back, I can’t predict when, but I can tell you it will.”

Boart told investors that it was battening down the hatches for a sustained downturn.

”We are not assuming that the market will come back in the near term, and we are prepared for a difficult rest of 2013 and 2014,” Alan Sides, the group’s drilling division head, told analysts.

The company has become embroiled in a tax dispute with the Canadian government, which alleges transfer pricing, with a claim of $C69 million ($73 million), which could rise further.

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