20/08/2009 - 00:00

Battle to stay on top of the news

20/08/2009 - 00:00


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The news cycle means that many stories do not get the scrutiny they deserve.

MOST professions are a mystery to people outside their field, and journalism is no exception. Arguably, it is more perplexing than most.

How do some seemingly innocuous stories get prominent coverage? And why do other significant developments get scant coverage?

I'm not going to try and explain the rationale applied to story selection, but I am going to share some of the constraints facing journalists and others who analyse the business and finance sectors.

Take Monday of this week, for example.

It was one of those days when there was a flurry of major news announcements.

Fortescue Metals Group chief Andrew Forrest announced yet another audacious deal with Chinese interests.

Well-known mid-cap mining services companies Ausdrill and Brandrill unveiled a friendly merger.

Prime Minister Kevin Rudd announced a critical indemnity deal that cleared one of the final hurdles for the Gorgon LNG project.

And late in the day, accounting firm KPMG and the corporate regulator ASIC announced they had negotiated an extraordinary agreement that will result in three Perth-based partners agreeing to step aside from their audit work for up to two years following their involvement with failed investment group Westpoint.

All of this was on top of the expected flow of profit announcements, from the likes of iiNet and Newcrest.

On a quiet news day, any of these would qualify as a lead story and therefore be subject to careful scrutiny.

The announcements would be pored over, the chief executives would be questioned, competitors would be contacted and analysts would be sought for comment.

But on a busy news day like Monday, it was a battle just to stay on top of the news that was pouring out.

To some degree, this outcome was nothing more than coincidence.

But there are also structural issues affecting news flow, particularly for companies listed on the Australian Securities Exchange.

Convention holds that companies' balance date is June 30, or in some cases December 31. Only a handful of companies depart from this convention.

Former BankWest owner, the Bank of Scotland, was one exception. With a history dating back hundreds of years, it stuck rigidly to its February balance date, which forced BankWest to change its balance date.

This made life more complicated for analysts, who like to compare peer-group companies over a like-for-like accounting period.

Listed companies also like to be able to track their performance against their peers, and that means having the same balance date.

The consequence is that the vast majority of listed companies report their results and release their annual financial statements over a short time-frame.

The problem is more acute for companies that post quarterly reports, particularly the junior explorers that flood the ASX, and newsrooms and broking desks and investment houses around the country.

There are hundreds of companies that need to post quarterly production, exploration and cash flow reports, and it is impossible for all of them to gain the careful or timely scrutiny that is needed in order for the market to remain fully informed.

This is not a new problem; it has been raised many times over the years by market watchers frustrated by the strange ritual.

It has even given rise to a few handy rules of thumb; such as, any company that posts its quarterly cash-flow report or profit results on the last possible day should be avoided like the plague.

The practice of lodging bad news at a time when journalists and brokers will struggle to notice has been refined to a fine art.

Late on a Friday, especially before a long weekend, is particularly popular.

It means that many people have already left the office when the announcement is lodged with the ASX, and will be too busy enjoying themselves on the long weekend to bother reading the news.

Scrutinising an announcement after the event is often the best that can be hoped for in the circumstances discussed above.

It's tough for investors who are chasing instant analysis of the latest news, but unless there is a more staggered delivery of financial news, it will be difficult to deliver anything better.



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