Business winners and losers for 2013 - 27th December 2013

Coles' Ian McLeod took home $19 million in 2013. Photo: Paul Jones

Profiles

Business ASX Australia

The year in business has had takeover bids that succeeded and failed, record profits and shock losses, dazzling debuts and humbling exits.

No one set of factors determined the business winners and losers of 2013: some made the list because extraordinary things happened, others are there simply for continuing to do what they have done before.

WINNERS:
Terry Richardson: The chairman of Warrnambool Cheese and Butter has held firm as the bidding war for his company escalates to startling levels.

Warrnambool's share price was at $4.51 in September when Bega Cheese lobbed a takeover bid valuing the target at $319 million.

Canada's Saputo and the unlisted Australian cooperative Murray Goulburn followed with alternative bids and the ensuing war has more than doubled the price of Warrnambool shares, with the maximum bid - from Saputo - now standing at $9.60.

Ian McLeod: The Coles managing director took home $19 million in 2013, his $10 million salary boosted by the final payment of a $34.5 million cash package paid over five years as his incentive for turning around Coles.

Mr McLeod has succeeded with the turnaround and also wraps up the year having defused two potentially dangerous regulatory issues: a code of conduct for dealing with supermarket suppliers, and a curtailing of the fuel dockets discounting program that had raised the ire of the competition watchdog.

Mike Smith: The ANZ boss remains Australia's highest-paid banker and the best paid CEO of the nation's top listed companies with a remuneration package totalling $10.45 million.

In a year when the big four banks all posted record annual cash profits, coming to a combined $27.4 billion, ANZ achieved an 11 per cent increase in net profit to $6.3 billion as its Asia-oriented business strategy started to pay dividends.

ANZ chairman John Morschel defended his CEO's generous pay packet, saying Mr Smith was doing a huge task.

"Most shareholders and members of the public don't have any comprehension of what is involved in running an organisation which, in the case of ANZ, has a market capitalisation in excess of $70 billion," Mr Morschel said.

Alison Watkins: The outgoing Graincorp managing director and chief executive oversaw a tortuously long takeover attempt by US firm Archer Daniels Midland, only to have the $3.4 billion deal rejected by the federal treasurer after 13 months.

Within days however Ms Watkins announced she would leave the grains handler and emerged as the new CEO-in-waiting of drinks business Coca-Cola Amatil, taking over from retiring Coke boss Terry Davis in March 2014.

Matt Barrie: The Freelancer founder enjoyed one of the year's most successful IPOs when shares in his online jobs group shot as high as $2.60 on their first day.

Coming off a 50 cent issue price, the Freelancer frenzy briefly made the company a billion-dollar concern.

Mr Barrie holds 46 per cent of the company and, even with Freelancer shares now trading around $1.30, his stake is still worth a healthy $260 million or so.

LOSERS:
Alan Joyce: The Qantas chief executive oversaw the descent of the airline's share price to a record low of 96.5¢ in December after he announced an expected $300 million half-year loss and plans to sack 1,000 workers in a bid to cut costs.

The shock announcement rounded out a string of job cuts at Qantas and a total grounding of the fleet in 2011, leading to a call for Mr Joyce's resignation from federal MP Nick Xenophon, who likened the CEO to the captain of the ill-fated Costa Concordia cruise ship, which was wrecked off the coast of Italy in 2012.

Paul Zahra: After three years of labouring to turn around the fortunes of David Jones, Mr Zahra surprised everyone by announcing he would quit the CEO role, just as the department store's results were starting to look positive, particularly in the challenged online space.

David Jones chairman Peter Mason insisted there was no rift between the CEO and the board and said Mr Zahra had made a significant contribution to the company.

Mr Zahra, who took up his job in extraordinary circumstances with the forced resignation of his predecessor Mark McInnes over a sexual harassment scandal, said he needed a break after three-and-a-half years in the demanding role.

Nathan Tinkler: The media shy one-time coal baron had a difficult year, starting with the sale of his jet and helicopter and a very public courtroom examination of his financial affairs by liquidators of his company, Mulsanne Resources.

He put his horse racing operations up for sale and then sold his key asset - a 19 per cent stake in Whitehaven Coal - to help meet debts reported to be as high as $700 million.

Unsurprisingly Mr Tinkler did not feature in the BRW Young Rich List for 2013 - the list of Australia's wealthiest young businessfolk he had topped only two years earlier.

Barry Irvin: The Bega Cheese executive chairman fired the first shot in the takeover battle for Warrnambool Cheese and Butter.

Cashed-up Canadian giant Saputo bought into the fight, followed by big Australian co-op Murray Goulburn, both with higher bids for Warrnambool.

Three months after launching its bid to create a giant, Australian-owned dairy company poised to capitalise on Asia's booming consumption, Bega announced it would close its bid on December 20 with just one per cent of Warrnambool shareholders accepting is offer, leaving Saputo and Murray Goulburn to fight on.

John Redmond: The Echo Entertainment Group managing director lost a drawn out, bitter and very public battle to cancel or at least curtail James Packer's incursion into the monopolised Sydney casino market.

Mr Packer's Crown won NSW government approval to build a high-rollers' casino at Sydney's Barangaroo, putting significant pressure on Echo which had held the sole casino licence for NSW with its The Star casino in Sydney's Pyrmont.

Echo has announced it will now focus on Queensland, where Crown is also seeking to develop a casino.

Echo's shares have fallen from $3.44 to a record low of $2.28 this year.

MARKETS
Bad news about a slow Australian economy, the high Australian dollar and endless will they-won’t they fretting about the US taper have obscured a surprising truth this year - investors did pretty well on the stock market.

The Australian share market is finishing the year well into positive territory, up almost 15 per cent after riding the coat-tails of a US market that is up almost 26 per cent.

Things still look sunny for 2014 too, although analysts warn it will be a year for the stock-pickers, requiring a bit of agility.

AMP head of investment strategy Shane Oliver says 2013 was notable for a lot of things that didn’t happen: Australia didn’t slide into recession, the United States didn’t fall off a fiscal cliff and China didn’t suffer an economic hard landing.

“Because all these disasters that had been feared didn’t happen it enabled markets to continue to rise,” Dr Oliver said.

“The gains this year have been quite spectacular.”

One of the surprise local performers of 2013 was the consumer discretionary sector - stocks such as Harvey Norman, REA Group, Crown and Super Retail Group - that do best when people are splashing some cash around.

Credit Suisse chief investment strategist for Australia, David McDonald, said it was a great year for everything except the Aussie dollar.

“We started the year telling people to be in equities and not bonds and we’ve always had a preference for offshore over domestic,” Mr McDonald said.

“That certainly played out - I think the one thing that surprised us was that bonds didn’t have that bad a year.”

Small resource stocks had, in Mr McDonald’s words, “a shocking year” - losing 44 per cent of their value between January and November.

“Materials and resources generally didn’t have that great a year,” Mr McDonald said.

Telcos and banks had a good year as investors seeking yield continued to favour the income stocks.

“What maybe surprised people was how strong consumer discretionary was, given all the talk about retail sales, people not spending money and retailers complaining about the GST on imports,” Mr McDonald said.

“Their share price has had a big bounce.”

Heading into 2014, Mr McDonald urged caution in equities, with a pullback likely due when the US winds back its stimulus program.

“We still think equities will do okay, probably not as strong as this year,” he said.

Offshore remains the preferred investment choice, with the outlook for Australia described as “fairly flat and boring”.

Mr McDonald said Australian equities are expensive compared to offshore choices and expressed concern about the earnings outlook for local companies.

Credit Suisse sees European equities as a good option, with improvements in business activity, falling house prices and reduced current account deficits pointing to better conditions on the continent.

China, where reforms are lifting growth and services have now eclipsed the industrial sector as the biggest contributor to GDP, remains an investment favourite.

“China is one of our top ideas for next year,” Mr McDonald said.

AMP’s Dr Oliver expects equity returns to remain positive in 2014 but thinks they will slow down, with Europe also the favoured investment destination.

Dr Oliver said Australian shares are no longer cheap.

“The easy gains are behind us so you have to be a lot more careful when undertaking asset allocation.

“Some markets are still quite cheap - Europe for example stands out,” he said.(Fairfax Media)