Business & Investing: The big four trading banks will be allowed to resume limited dividends to shareholders, Plus an April’s Fool joke backfires on global auto giant Volkswagen

The Reserve Bank will allow banks to resume paying dividends but only up to a maximum of 50 percent of their earnings through to July 1 next year.

In its role as the prudential regulator, the Reserve Bank banned banks paying dividends in April last year after the onset of the Covid-19 pandemic.

It said the ban had been successful in supporting financial stability and the provision of credit.

“The New Zealand economy has rebounded to a stronger position than anticipated at the outset of the Covid-19 pandemic and, as such, the complete restriction on dividends is no longer needed,” said deputy governor and general manager of financial stability Geoff Bascand.

However, Bascand said the road ahead remained uncertain which was likely to constrain business investment and household spending.

Once the new capital rules kick in, the big four will have seven years to increase their tier 1 capital to a minimum of 16 percent from 8.5 percent currently.

Bascand said banks should be prudent in determining how much they pay in dividends and keep in mind the looming higher capital requirements.

NZ King Salmon reports $7.1 million loss 

Marlborough based New Zealand King Salmon yesterday reported a $7.1 million net loss in the seven months ended January, blaming the result on excess inventory as a result of the Covid-19 pandemic.

The loss compared with a $18m net profit for the year ended June 2020.

The salmon exporter announced recently that it had decided to change its balance date to January 31 to better align its financial reporting with the seasonality of its activities.

On a pro-forma basis, the seven-month result shows net profit fell 77 percent to $2.3m.

Chair John Ryder said he remained confident its average price would return to pre-Covid levels, however he warned margins would still be affected by higher freight and distribution costs.

“We are seeking to increase prices globally around the middle of the calendar year, with a view to recovering some of these ongoing costs,” he said.

The company said air freight costs rose by an additional $2.1m due to the pandemic, taking total freight costs to $11.6m during the period. Promotion costs also increased by $2.4m.

While not providing specific guidance, it said it expected to regain its pre-Covid momentum in the current year and would provide a more specific outlook later in the year.

NZ King Salmon shares closed down 1.3 percent at $1.50.

Mainzeal directors breached duties in new twist to long running legal case

In a highly anticipated decision, the Court of Appeal has ruled former Mainzeal directors, including Richard Yan and former prime minister Jenny Shipley, were liable for reckless trading ahead of the construction company’s collapse in 2013.

However, the judges said that as no actual loss had occurred as a result of the breach creditors will not be compensated for this.

But in a further twist to the long running legal case the judges found a breach of another section of the Companies Act relating to directors’ obligations and said the High Court must now determine the basis for how much should be paid for by the directors for this breach.

In February 2019 the High Court ruled Yan and Shipley, with two other former directors had breached their duties as directors and should pay $36 million between them.

On appeal in July 2020, the directors argued they couldn’t be held liable, while Mainzeal’s liquidators said the penalty should be increased to $73m.

The Court of Appeal found the directors should not have entered into four significant construction contracts after January 2011 and have sent the case back to the High Court to quantify the compensation involved.

The court’s decision is expected to have an impact on how company directors interpret their duties in the future, particularly when they become aware the business may be facing financial issues.

Mainzeal collapsed in 2013, leaving $110m owing to creditors.

Deliveroo shares tank on first day of conditional trading in London

Shares of British food delivery start-up Deliveroo plunged in its London stock market debut yesterday as the company faced pressure from top investors and trade unions over workers’ rights.

Deliveroo, which is backed by Amazon, saw its shares sink around 30 percent in early trades compared to its issue price, before trimming some losses.

The company priced its shares at £3.90 (NZ$7.65) this week, giving it an expected market valuation of £7.6 billion (NZ$15 billion) which was at the bottom end of its IPO target range.

The shares fell to around £2.73 (NZ$5.40) on its first day of conditional trading yesterday on the London Stock Exchange, wiping approximately £2 billion off the company’s valuation in the first hour of trading.

Under conditional trading rules, the company has the option to cancel the IPO and void any trades made until unconditional trading starts on April 7.

The Deliveroo offer size is approximately £1.5 billion. Of that, £1 billion will go to the company itself and £500 million will go to existing shareholders, with Amazon and Will Shu, the company’s CEO and co-founder, among those set to gain the most.

Analysts point out the flexible employee model of Deliveroo’s riders is a key pillar of the group’s plans for success and any regulation of worker rights would be very damaging for the company’s future.

In terms of market cap, Deliveroo is the biggest IPO to take place in London since commodities trader Glencore went public nearly a decade ago. It’s also Britain’s largest-ever tech listing by value, surpassing that of The Hut Group and Worldpay which debuted in 2015 before delisting.

New Apple products set for release in coming months

Apple has confirmed June 7 as the date for the start of this year’s annual developers’ conference which, like last year, will be online-only due to the ongoing Covid-19 pandemic restrictions.

Apple typically unveils its new iPhone, iPad, Apple Watch, Apple TV and Mac software on the first day of the event while it has previously used it to introduce new hardware products, particularly those that will take advantage of new software features.

Reports have recently surfaced suggesting Apple will announce new hardware products before this year’s developers’ conference. New iPads are expected to be announced later this month, but the company is also due to refresh its iMacs and other computers with its new processor.

April Fool’s joke backfires on Volkswagen

April Fool’s Day can be hazardous at the best of times, but leading German automaker Volkswagen looks set to join a long list of previous company pranks that have gone badly wrong.

In a move originally intended to reflect its new push into electric vehicles, Volkswagen’s US arm announced on Tuesday it was changing its name to “Voltswagen.”

The news appeared in a seemingly unfinished media release that was prematurely released two days before April Fool’s Day in a gaffe that caused mass confusion amongst media outlets.

But less than 12 hours after making the announcement the company admitted that the whole thing was a tongue-in-cheek deception that had backfired and turned into a PR disaster.

“The renaming was designed to be an announcement in the spirit of April Fool’s Day, highlighting the launch of the all-electric ID.4 SUV and signalling our commitment to bringing electric mobility to all” the company said in a statement.

However, it pointed out that the company would not be changing its name to Voltswagen and said any confusion over the apparent name change was regretted.

Andrew Patterson is Newsroom's Markets Editor and has worked for decades as a financial journalist, radio presenter and editor with Australia's ABC, Radio Live and NBR.

Leave a comment