Satchelnomics: Reporting season frivolity tamed by reality

George Clooney and Shailene Woodley in The Descendants
While the fashion pack descend on New York, it's that time of year where the major corporates post their profits for the first half of the financial year. Financial journalists rub their hands with glee ("so much material!") while overworked analysts stare bleary-eyed into TV cameras and CEOs try not to act too proud of themselves as they tell the public of their enormous gains or meekly explain away their losses as if returning home after curfew.

"News Corp earnings rise 65 per cent!", "Telstra profits up 23 per cent!", "Macquarie Bank slashes jobs and profit forecasts", read the roller-coaster of headlines.

Business is antsy. Given the RBA is expecting the economic outlook to be sluggish, lowering its inflation and growth forecasts for the first half of 2012 in light of Europe's ongoing fiscal trials and structural uncertainty in our own economy (mining is holding the whole thing up as building, manufacturing, education and tourism show signs of serious fatigue), shareholders (notably, not just mum and dad on the quarter-acre block but big institutions) are unlikely to get too comfortable in their chairs.

Telstra's net profit of $1.47 billion is reportedly below expectations with sales within its Sensis/Yellow Pages (hello, Google!) and fixed-line divisions (hello, iPhone!) falling. Chief Executive David Thodey was circumspect. "We added another 958,000 new domestic mobile customers, and that translated into growth of 10.9 per cent in our mobile business," he said.

Meanwhile, Bodey's hands are busy as the ink dries on the NBN Co deal (last year Telstra made a $11 billion deal with the Australian Government to hand over its fixed-line assets, which form the basis of the National Broadband Network – timely given the nosedive in its fixed-line business) and negotiations are made over wireless spectrum licenses, which is likely to see that the telco maintains its virtual monopoly, with Optus playing second fiddle.

Macquarie Bank's chief executive Nicholas Moore had the humbling task of informing investors that the bank's 2012 full-year profit result would be as much as 25 per cent under the $956 million bottom line reached last year. "Europe has had a big impact on our market over the last 12 months and certainly over the past quarter," he said. "We don't know whether 2011 is the bottom."

Given the bank's somewhat notorious reputation for exorbitant executive salaries (it was once known as "The Millionaire's Factory"), it's likely the culture change will continue.

The Big Four banks have been crying foul over media-bashing, but have themselves to blame as they mostly failed to pass on the full interest rate cuts made by the RBA to gain ground on profit margins. The NAB is planning to save face with its ongoing commitment to provide the lowest standard homeloan rate after announcing an 8 per cent profit increase (cash earnings of $1.4 billion in the three months to December 31), while the ANZ is lifting its interest rate on its standard variable loan.

"While we recognise our decision may leave some people frustrated and even angry, we believe Australia needs safe, well-run commercial banks that aren’t a burden on taxpayers and that can continue to lend," said ANZ CEO Australia Philip Chronican.

Another organisational target for the ire of the public, News Corporation this week announced a quarterly $1 billion profit, a 65 per cent profit increase on the previous quarter. The result was bolstered by its pay TV and Fox film divisions and undermined by the publishing division (profits down 43 percent to $218 million).

The News of the World phone hacking scandal is estimated to have cost the business $US87 million in legal fees, investigative costs and lawsuit payouts. But the scandal, and the closure of the News of the World, is a sideshow compared to the significance of the changing media landscape, which has necessitated structural changes and investment in digital operations. 

One of the films backed by News Corp last year was The Descendants, the drama starring George Clooney. The Golden Globe winning movie sees a man face the imminent death of his wife, the reality of raising two daughters, the devastation of infidelity and the burden of family wealth. In the end, he chooses to protect his family's heritage over selling off the assets.

As an era of corporate responsibility, austerity measures and financial caution emerges against a backdrop of global unrest, there's value to be found in keeping short, neat accounts and not pinning one's hopes on a large financial windfall.

Girl With a Satchel