04/09/2007 - 22:00

Seeking common ground in the city

04/09/2007 - 22:00


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I’ve had quite a bit of correspondence in recent weeks with City of Perth councillors regarding the various developments in the central business district.

Those with whom I have had discussions are adamant that things are happening behind the scenes and progress is being made on a number of fronts.

This is reassuring and I’m sure the business community will be pleased to know that the city is making efforts to modernise itself and become more people friendly.

But even during the course of these discussions I keep getting reminded of just how much of a difference there is between the City of Perth and the state government.

Firstly, the council is pressing on with plans to develop the land in front of the Concert Hall with a landscaping project it hopes will become home to a fully-fledged arts precinct.

Meanwhile, the state government is building its new theatre in Northbridge, near the cultural hub that contains the Art Gallery of WA, among other things.

Both these arrangements have merit, in my view, so it’s a pity that both governments can’t find some common ground.

Then we look at the much bigger foreshore development.

The state has, thankfully, embarked on the first stage of a development proposal – going to the trouble of communicating with various interested parties such as architects, the council and business.

But already things are coming unstuck.

The so-called peer review of the original concept has, I believe, moved much of the development back to the Esplanade between Barrack Street and the convention centre, where Cirque de Soleil currently is showing.

There are various arguments about whether this land is more suited for large construction and that it better marries the existing infrastructure with the Swan River.

Some in the council, though, are unhappy. They feel the goalposts have moved again.

Again, both arguments have merit, but compromise will have to be reached if something is going to happen.


There are a few special times that a financial journalist has to be extra watchful, just in case someone is trying to sneak through some bad news or do something funny without anyone noticing.

Christmas is one time of year when all sorts of odd stuff is released to an uncaring, unobservant or unavailable public – including the financial press.

Another is the last day of reporting season, generally after the market closes two months after June 30. That is a classic time to see the worse results come dripping through, blood-red, especially when that day is a Friday – offering an even better opportunity to get news out unnoticed.

To be fair, though, this may not be as deliberate as it seems and you have to give the benefit of the doubt in many cases. Loss-making companies are quite likely to be struggling with their own management as well, so perhaps it’s not surprising that many just get over the line.

Whatever the case, it never bodes well when a listed company issues such important news as a loss at a time such as after market close last Friday, right on knocker for the two-month deadline.

The one that jumped out at me was South Perth-based Australian Renewable Fuels Ltd, which recorded a net loss of $33.6 million, a 959 per cent increase on the loss recorded in the previous year.
It released that information just as we were sending our daily email, missing the deadline by minutes.
Another interesting note that arrived late in the piece was from Intellect Holdings Ltd, which also recorded a loss.

Buried deeply in the accounts was news of a $4 million loan facility from an unnamed lender. Connected to this was the possibility a rights issue of either shares or convertible notes up to $20 million, which would allow the lender to be the lead underwriter to that issue or be granted an option to acquire up to 65 per cent of the business of Intellect International NV, its main terminal operations.

All this is intended to occur around the time of the company’s AGM.

For those, like me, who are not tuned into Intellect (once a darling of the stock market after listing in 1994 but now capped at just $5.8 million) it looked like far-from-positive news to be snuck through under the radar.

But Intellect may have been doing itself a disservice in the timing and nature of its announcements. Peter Fogarty, an adviser to the company on restructuring through his and Max Fowles’ Pendulum Capital Pty Ltd, reckons things are on track for a positive outcome for shareholders.

Mr Fogarty, who knows a bit about this payments technology from his days at ERG Ltd, said the stalled merger between the European-based Intellect International terminal operations and CADMUS Technology Ltd was still on as the New Zealand company went through its own restructuring.

In the meantime, the financiers – European private equity players – are willing to step in if that fails and take up a major stake in the terminals business.

Whatever, the case, he believes it will all be known by Christmas.

Mr Fogarty reckons the CADMUS/Intellect International merger would help these small companies gain some scale in a market where the big players keep getting bigger and engaging in price cutting to stymie rivals.

In the meantime, Intellect has been rationalising its business to something he says better reflects its turnover and position in the market, cutting costs from around $25 million to more like $7 million and upping margins from 5 per cent to somewhere between 30 per cent and 40 per cent.

“The numbers are starting to get back into line,” Mr Fogarty said.

In the interim, Intellect has been working hard to maintain its 26 per cent shareholding in Victorian TAFMO Ltd by taking up its entitlement in a rights issue in March 2007, at a cost of $2 million.

Mr Fogarty reckons TAFMO, which is on the software side of the payments business, is kicking goals and worth Intellect keeping its stake intact.

I’ll be watching this one with interest over the next few months.


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