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Lateline Business -

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(generated from captions) hasn't complied with the visa

requirements, being the result

of three violent acts, I would

have thought it was an

exceptional case where

compassion should be exercised. Shivendra Singh

doesn't want to go home as a

failure. I'll be socially

outcast. Shivendra Singh has

already started this semester's

study at the University of SA,

but could be deported within

the week. Indonesian police

discovered a cache of

bomb-making chemicals in West

Java during investigations into

last month's hotel bombings in

Jakarta, the bodies of two

would-be suicide bombers linked would-be suicide bombers

to the man believed to be behind the behind the attacks, Noordin

Mohammad Top, were buried.

Among the mourners, radical

cleric and co-founder of Jemaah

Islamiah, Abu Bakar Bashir,

supporters car rid banner

encouraging jihad praising the

men as martyrs, the men who

planned to explode a truck bomb

to kill Susilo Bambang

Yudhoyono, were shot dead in a

house in Bekasi Saturday. In the US President Barack Obama

faces a blistering summer of

attacks over his plans to

overhaul the country's health

care system. Millions are spent

on scare campaigns, and the

President's approval rating is

taking a beating. Lisa Millar

reports. It's the summer of discontent. What do we discontent. What do we need.

ALL: Health care. Across

America the prospect of health

care reform is turning town

hall meetings into shouting

matches. I don't want that

country turning into Russia,

turning into a socialised

country, my question for you APPLAUSE is...

As a 74-year-old man, if you

develop cancer, we are pretty

much going to write you

off. That's a vicious,

malicious untrue rumour. I

did not want to pay on a health

care plan that includes a right

for a woman to kill her unborn

baby. Leave us alone, that's

what we ask, leave us

alone. With 46 million Americans uninsured Barack

Obama isn't going to leave it

alone. Even if he's been

accused of organising death

panels to determine who will get medical treatment and who

will miss ow. And I know this,

despite the hand wringing

pundits and best efforts of

those profiting from the status

quo, we are closer to achieving

health insurance reform than we

have ever been. Presidents

before him have been defeated

by the massive job of tackling

health care, it's at the core

of Barack Obama's agenda. Let's

disagree over things that are

real, not the mild

misrepresentations bearing no

resemblance to anything that's

been proposed. Republicans have

denied claims they are bussing

in the angry crowds to disrupt

the meetings. The cost of

health care in America is

startling, and it's putting

enormous pressure on the Budget deficit. President Barack

Obama's deadline for agreement

is sleeping by and the is sleeping by and the ferocity

of the public backlash isn't

make the the decisions make the the decisions easier.

There's an indication in the

opinion polls that it's having

an impact on his popularity,

but the President is promising

to keep separating fear from

fact, vowing not to let the

angry voices weaken his

determination. Now to the

weather - a cold front will

bring showers and squally winds

to Perth. Dry and sunny in the

other capitals, that's all from

us, Lateline Business coming up

in a moment. If you'd like to

look back at the discussion

with Bob Brown or Barnaby

Joyce, or review stories or

transcripts visit our web site at at abc.net.au/lateline. Now

Lateline Business with Ali

Moore. Tonight - Telstra

delivers double digit profit

growth but tones down

expectations about future

earnings. We have delivered

strong results. And it has been

in difficult times. Cash for

coal - the board of Felix

Resources recommends a $3.5

billion bid from China's

Yanzhou. The price is rather

extravagant if you look back

six months, bearing in mind

coal markets have changed

dramatically... And fraud and

fashion collide in the retail

sector. It was pretty well

close to the company's annual

profit, it was material,

surprising that it sort of actually occurred.

To the markets - the All Ords

gained 91 points for its

highest finish in 10 months,

the ASX up 93 points. In Japan,

the Nikkei edging higher, Hong

Kong's Hang Seng regained lost

ground from yesterday, the FTSE

up on confidence the US economy

stabilised.

Fullier numbers of Telstra

after the departure of Sol

Trujillo, earnings rising 10%

for a $4 billion profit beating

market spegzs, new CEO David

Thodey - expectations, new

David Thodey distanced himself Thodey - expectations, new CEO

from forecasters from his

predecessor, and they have to

deal with old problems -

strained Government relations and the National Broadband

Network. He's been in the job

three months but David Thodey

has already sounded like most

other chief executives who have

successfully navigated the successfully navigated

global financial crisis . We

have delivered strong results,

and it has been in difficult

times. It was a strong result,

with net profit up 10% to 4.1

billion, despite revenue growth

of 3%. It's contributing

significantly to the bottom

line was very good cost

control, and a fall of about

$186 million in net interest

expense, driving the bottom

line up 10%. Looking through

the numbers, mobile revenue

grew 10%, for the first time

has overtaken fixed-line

revenue to be the biggest

earner. Falling overall the

fixed-line business had an unexpectedly strong second

half The rate of decline in PST in revenues surprised the scep

ticks, down 4.9% for the - scep

ticks, down 4.9 for the year,

no deterioration, there's a

scoll id revenue line of 6.3

bill yob -- solid revenue line

of 6.3 billion. That's where

the margins are high. Other

divisions, broadband, data and

the directories business Sensis. There's other evidence

out there, apart from the

Sensis numbers that suggest

that there's still plenty of

demand for use of print-based

materials, and that the

Internet is still to a large

extent adjunct to these

traditional products. Telstra

revealed former Chief Executive revealed former Chief

Sol Trujillo was paid $9

million on departure, one million on departure, one of

David Thodey's jobs has been to

restore relations with the Government that were damaged Government that were damaged by

Sol Trujillo's combative style,

he's nevertheless warned

Telstra will be no Bush over on

key issues facing the company, its role in its role in the National

Broadband Network. We - share

the view of the Government that

we have to engage, they are

willing to engage, so are we,

we engage based on one premise,

driving shareholder value,

protecting shareholder value.

As part of the discussion

about the Nand r Telstra estimated the cost of the estimated the cost of the -

National Broadband Network,

Telstra estimated the cost of

separating it's network

infrastructure from the rest of

the country, an indication

according to Mark McDonnell

that it accepted the inevitable. One thing the

Government made clear is status

quo is not acceptable. There'll

be change, it's not clear how

much. Which is partly why David

Thodey is less bullish than Sol

Trujillo about future earnings

predicting low single digit

growth, he was adamant Telstra

would lift its cash flow by a

third to $6 billion, wiping

back expenditure on new IT

platforms prompting calls for

higher dividends. They have the

cash flow to offer a couple of

cent per share, probably 2 cent

and contribute some cash to the

NBN in the right commercial

deal with the NBN. Also

reporting was Singapore Telecommunications, owning

Optus in Australia. While the

parent company's first quarter

property was up 10% Optus

managed a 2% increase in

pre-tax averages, margins

declining amid a campaign to

boost market share. It's

telling us something about an

expectation of increased

competition, I point to the

merger of Vodafone and Huchison

as an important factor only

this week the CEO of Huchison

indicated that he really wanted

to dislodge Optus as the number

2 mobile phone provider. Today's reports from both Singapore

Telecommunications and Telstra

highlight challenges for both

companies, which is why shares

were marked down despite the

broader market moving strongly

ahead. China's Yanzhou

confirmed its bid $3.5 billion

in an all-cash offer for

coalminer Felix Resources, at

$16.95 Felix directors are

recommending the offer be

accepted. Analysts say it's

likely other bidders would

emerge. I spoke to Tim

Schroeders of Pengana Capital a

short time ago for his short time ago for his analysis

of the deal. At this price, is

this deal fair value given, of

course, Felix shares nearly

doubled this year. Where we

sit at the moment the price is

rather extravagant, if you look

back six months, bearing in

mind coal markets changed

dramatically as have asset

markets where we have seen

financing ease markedly in the

last six months and as a

consequence, we are starting to

see consolidation and corporate

activity re-emerge. As such,

this is probably the first this is probably the first shot

over the bow, I don't expect it

to be the last. Indeed, you

still call it extravagant to

start with, how much more do

you think they'd have to put on

the table? Possibly looking at

benchmarks of similar-type

deals, we could see prices go

up another $2 per share from

this point. What about

potential for a rival bidder,

potential for this to turn into

an auction, are they the only

players. Not at all. I think

that's the real thing that is

going to come out of this, is

this is the first shot and

really it is a starting point

in probably what I see as an

ongoing process, where a number

of significant international

players will be alerted to the

fraction there's probably not a

lot of similar-type size deals

in Australia with the sovereign

risk elements that are going to

come up in the short term, as a

consequence, you know,

companies such as strat, Varley

and Indian companies will be

strut nicing the deal

closely. In - scrutinising the deal deal closely.

In terms of foreign investment.

This deal will This deal will neat Foreign Investment Review Board

approval, do you see a problem

with that, given there's a high

degree of foreign ownership of

coal, you mentioned Xstrata and

Felix has a mine in NSW. I

think foreign investment review

is uncertain, and we have seen

that most recently with the Oz

Minerals deal and it's an

unknown unquantifiable factor

that you have to deal when

foreign companies try to do

business in Australia. It may

or may not be complicated by

recent events with respect to what is going on with Rio

Tinto. Do you think it could

have a bearing, is it not

interesting on the one hand

China is jaw boning about what

is happening with iron ore, on

the other they are putting $3.5

billion on the table It's an

extremely interesting dynamic,

more to the point, I think

investors are probably looking

at this with great interest.

And are going to be reticent to

handover shares offer the first

bid. In terms of implications

for the Felix mines, mine

management and staff, if

Yanzhou is successful have they

exited to keeping on and being

business as usual. It's very

important from Yanzhou's

perspective that they do

business the right way in

Australia, or ostensibly anyone

that tries to do business from

China in Australia in the

future, the gates

future, the gates will be

them fairly rapidly, no-one

will serious entertain bids

from Chinese companies in the

future. We have seen a press ep

dent. Things like the Oz

Minerals when China Minmetals

stumped up $100 million for no

reason, to engender good will

and keep investors and stab on

side for the future. Your gut

reaction to this, far from a

done deal, just the first

ball. I think it will be a

protracted process, we won't

see it this side of see it this side of Christmas.

I think at least one other

party will enter before the

game is over at this stage. Tim

Schroeders, thanks for your

thagsz. To the major movers -

analysis, to the major movers,

the banks lead the way on

optimism of economic recovery,

the big four climbing, Virgin

Blue up 20%, OneSteel jumping 10%, Fortescue Metals up 10

cent before requesting a

trading halt ahead of an

announcement speculation on a

$1 billion investment from a

Chinese sovereign wealth fund.

The Australian dollar more than

recovered yesterday's fall.

Well, if it's possible to

have such a thing as a good

recession, Australia's biggest

soft drink bottler appears to

be having that. Coca Cola

Amatil announced a first-half

property up over 10% to $190

mill improper, the company

forecasting high single digit

profit growth in the second

half. The company is cautious

with unemployment its biggest

concern. CCA's CEO Terry Davis

joined me earlier today. Terry

Davis welcome to Lateline

Business. Thank you. In your

own words, no business is

recession proof. Are you close

to it? Well, we'd like to to it? Well, we'd like to think

we are, but, you know, at the

end of the day you have to work

harder in times like this when

consumers are changing their

consumption patterns and

looking for more value out of

the products they buy. What

change have you seen to

consumption patterns, you made

the point in your results

presentation that you haven't

seen customers trading seen customers trading down No,

we are not. As we got the

leading brands in the

marketplace consumers revert to

favourite brands, they can't

afford to buy cheap, that's

something we take advantage of.

But we have certainly seen

changes in the marketplace,

more people are eating at more people are eating at home,

they are entertaining at home,

less going out to fancy

restaurants, more eating at

quick service restaurants, quick service restaurants, and,

of course, that change in

demand has actually led for us

to have strong consumption growth in the first

half. Indeed, more than just

recession proof, is recession

good for you. Well, I wouldn't

go that far, but certainly we

have a team of people and our

customers, retailers, know they

have to work harder to extract

the retail shopping dollar,

there's been a concerted

activity across our business to

make the best of what had make the best of what had been

difficult times. So what is

your sense then of where this

economy is at, and with when,

and I guess where unemployment

will peak. I never believed the

Budget night estimates of 8.5%,

and I think they've been

subsequently revised downwards,

each month you see different

sets of numbers, I don't think

we can say we are out of this

until unemployment goes down.

We may see another half to 1%

increase in unemployment from

current levels. How much longer

do you think it will be until

we reach that peaking we reach that peaking period. I

am not sure, you know, the

commentators say some time

towards the end of this year,

next year, I think there'll be

other variables impacting on

that, particularly what happens

in the share market. You see

unemployment continuing to

rise, but we haven't seen

unemployment go up to the

extent many expected, largely

because of what happened with

part-time jobs, people have

been cutting back hours, taking

holidays, they've been keeping

their jobs, you raised an

interesting question, what

happens when you come to the

end of that line and there's

nothing left. What did you mean

by that? Well, I think

organisations like us - we

started a program saying, "Keep

your mates in the job, there's

been no retrenchments as a result of the external

environment. You can do it for

so long. Unless you see

material change, we are

fortunate, we are the market

leader in the category, what

about the businesses that

aren't, that are struggling,

don't have the cash flow, pay

higher costs for the interest

rates. We haven't started to

see that, the Australian

economy is quite resilient. You

only need a couple of hiccups

in China, the demand and

changes in consumption patterns

across the board. Consumer

sentiment seems to have ticked

up, this is a fragile

thing. Even though you don't

believe the Budget forecast of

unemployment hitting 8-8.5%,

you wouldn't rule it out if

conditions don't improve and

companies exhaust their options

for keeping people on No, I

think that's way at the top

end. I would suspect that end. I would suspect that what

we are seeing here now is an

economy that's going along at

the bottom, and again, the fraj

irty of it, we have - irty of it, we have - fragility

of it we have to wait for the

next critical sales period, the

November-December period. All

of that said you are confident

to predict profit growth in the

second half, the current second half, the current half

in the high single digits.

Yes, we are, the reason we

Yes, we are, the reason we are

able to do that is we have had

good success with good

products, Glaco Vitamin water,

drinks, there's a number of

arms tracking well. The other

major benefit for the major benefit for the business,

of course is the continued

increase in earnings out of the

Indonesian business. Despite

the new products and growth at

what point do you anibalise

your own market share? You -

cannibal ise your own market

share. You do that, I'd rather

do that myself than have

someone do it for us. We

innovate in the marketplace,

it's good for customers and consumers, we'll let them

decide when enough is

enough. What about cost in the

second half, especially sugar,

running at its highest levels

in three decades, you had a

price increase in January, are

you set for another round to

recover costs. We don't think

we need to take further price

increases in the marketplace in

2009. Sugar is less than 10% of

our cost of the goods. To the

extent there's an increase in

US dollar terms, it's mitigated

a little by the rise in the

Australian dollar, and also the

increasingly in our business we

are using less sugar, coke

zero, water products don't have

any sugar at all. We are not as

impacted today as we would have

been 5-10 years ago. Other

commodity prices. Aluminium

prices came off significantly

from the highs, PT Resin came

off its highs, we faced a 5%

increase in cost to goods for

the half. We expect to end up

around for the full year those

levels, at this stage, it's too

early to absolutely commit to

2010, we wouldn't expect to see

too much of a change in 2009

increases in 2010. In other

words between 5-6% cost of

goods increase next year.

There's been a lot of

consolidation in your industry,

the latest the Asarhi Schweppes

deal, is there more to deal, is there more to come. I don't think there's don't think there's much more

to come, there's not much left.

All the major competitors have

been sold over the last 2-3

years from Dairy years from Dairy Farmers,

National Foods, Schweppes, of

course, so I don't think

there's too much consolidation

to occur now. Where does that

leave you given Coca Cola

Amatil hasn't played in the

consolidation. It's been

beneficial over the last 3-4

years, we refused to pay the

high prices for some of the

trade assets that have been

sold. I note not too many of

those have borne fruit for the

new owners, I'm comfortable

about the organic growth

strategy, I'm happy to continue

that way. Terry Davis, thanks

for talking to Lateline Business. Thanks.

Big write-offs are standard

for many this reporting season,

but there are two companies

ruing multi-million losses, retailers Clive Peeters retailers Clive Peeters and

Specialty Fashion have been the

victims of frauds totalling

nearly $40 million each. The

companies are trying to recover

the money through the courts,

but experts say the losses

shouldn't have happened. Neal

Woolrich reports. It's a memorable advertising slogan

that may haunt the company for

the wrong reasons. Clive

Peeters e-e-easy For

38-year-old Sonya Causer,

taking nearly 20 million taking nearly 20 million from

Clive Peeters was all too Clive Peeters was all too easy,

Sonya Causer was employed as a

senior accountant at the

electrical retailer from March 2006, she started transferring

company money into her own bank

accounts in July 2007 using the

funds to buy 43 properties in

Victoria, Queensland and

Tasmania, and this car in a

charity auction. Unfortunately

it happens. I suppose in the

example of Peters r it was the

extend, $20 million, it was extend, $20 million, it was -

Clive Peeters, it was the

extent. $20 million, close to

the annual profit. It was

material, surprising that it

occurred. Clive Peeters occurred. Clive Peeters is

taking civil action to recover

the property from Sonya Causer,

and says the question of

criminal charges is a matter

for police. Managing director

Greg Smith says the matter is

the subject of an internal

review but refused to be drawn

on whether the problem on whether the problem should

have been detected earlier. The

firm's forensic accountant firm's forensic accountant says

Sonya Causer's deception was

highly sophisticated. Equity Trust Shaun Manuell says manage should accept

responsibility. There'll be a

lot of soul-searching lot of soul-searching within

Clive Peeters and amongst the

auditors, look at the size

relative to the business, you would have thought it would have thought it would have been picked up

earlier. Specialty Fashion,

owning several chains,

including Katies and Millers is

another company grappling with

a multi-million fraud. In May

the group revealed $16 million

was falsely charged over four

or five years. Specialty

Fashion former head of Fashion former head of property

Simon Feldman has been ordered

by the NSW Supreme Court to

repay the money, forensic

accountant Darryl Swindells

says deceptions like these are

uncovered by chance and uncovered by chance and could

have been prevented. Most of

the frauds are not

sophisticated, they are simple,

it's a matter of someone

falsifying an invoice, most

organisations know that you

should have controls over such

things as how you make a

payment. He says companies must

closely scrutinise costs and

ask questions if expenses seem

to be going up by more than

what is reasonable. If

companies are in a growth

phase, and the principals in

the business are looking at the

growth than making sure they

are counting what is happening

behind them that leaves it open

for people to take money out of

the business and it not be

found. Corporate govern ance

adviser maith says governance

issues are ignored by investors

and companies. 4%, one in 25

companies actually provide

evidence that those aspects of

ethisation that they have

policies on - ethics that they

have policies on tie into

remuneration practices, remuneration practices, and

Erik Mather says studies shows

a good news culture, bad news

swept under the carpet is

counterproductive. Over time

it's impossible to hide pore

governance of ethics, that's

what we see. As boring as it

may be ethics is a 24/7

consideration, in the same way

as we take tout insurance for

our prompt. It's unclear how

much money Simon Feldman can

repay to Specialty Fashion.

However, if there is a silver

like for Clive Peeters, it's

that their money was invested

in property, so most, if not

all, should be recovered. As

Neal made clear the frauds from

$20 million each not 40 as I

said earlier. Pay TV proves to

be more resilient during the

downturn than traditional

media, CEO Kim Williams says

conditions across the sector

are difficult, profits at

Foxtel down 14% on last year,

and conditions will get tougher

for Foxtel with the free-to-air

networks launching a number of

new digital channels before

Christmas. Aimed squarely at

the youth market Go is the new

kid on the block in the world

of digital TV. Viewers get more

choice, but it's putting the

industry under strain. Well,

the commercial free-to-air broadcasters are under

financial pressure, and they

are spending more money to

deliver more channels, in the

capital cities advertising

revenue is in the doldrums,

down 12% across the country: Commercial networks

are dinosaurs, they don't

realise it, they are fighting

to see who will become to see who will become extinct.

They are not keeping up with

the way people watch television

or what people want. Instead of

can ib illising their can ib illising their income,

they are looking for fresh ways

of drumming up report. The

former Queensland Premier says

broadcasting sport could be the

answer, his Victorian

counterpart, Pay TV spokesman

says tough antisyphoning rules

give the commercial networks

unfair advantages. It's nothing

to be proud of to have 70% of

what is bid for by free to airs shown. I don't think

Australians should have to pay

to watch their favourite sport. Steve Bracks says change

is inevitable. If you look at

the US 80-90% of what people

say is on subscription TV. say is on subscription TV. In

United Kingdom it's 60%.

People vote with their feet.

They want joys and

diversity. Diversity it keen to

making the new channels viable

giving advertisers a cheap

point. A lot of advertisers

that can't afford TV will get

on. On that assumptions multichannelling will be a

success. As the battle for the

airwaves continues taxpayers

foot the bill. By 2013 foot the bill. By 2013 the Federal Government would have

spent $66 million on

advertising for the switch to

digital. Looking at the

business diary the glv nor of

the Reserve Bank Glenn Stevens appears before appears before the House of Representative Economics Committee. Bernie Brooks speaks

at a business lunch and at a business lunch and ANZ Chief Executive Mike Smith. A

look at what is making news in

the business section of the

papers, Herald Sun - Telstra's

profit report. profit report. Australian The

Financial Review looking at the

same story, Australian -

administrators report administrators report into

Babcock & Brown alleges the

directors may have continued

trading while insolvent. The

Sydney Morning Herald - up to

20,000 customers joined the

class action against Visy and

Amcor. That's all for tonight.

The FTSE trading up 44 points,

0.9 of 1% Dow futures an

opening in a minute's time up

64 points or 0.7 of 1%, if you

want to review any part of the

program visit the web site abc.net.au/latelinebusiness,

where you can watch the entire

program on line or down load as

a vodcast. I'm Ali Moore,

goodnight.

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