NZPA

Updated 10:15AM

The Court of Appeal has stopped supermarket giants Woolworths and Co-operative Foodstuffs from bidding for The Warehouse.

The Commerce Commission's appeal against a High Court decision allowing the two retailers to lodge takeover bids has been successful. In an announcement to the stock exchange, The Warehouse said it would not be making any comment on the court's decision until it had received the full judgement and "considered its implications."

New Zealand-owned Foodstuffs and Australia's Woolworths each have 10 per cent stakes in The Warehouse, and successfully went to the High Court to overturn the Commerce Commission decision to block any potential takeover. The commission has now won this appeal. It has just released a statement on the case, saying the decision was "a victory for supermarket consumers and competition in markets. The Commission's case has focussed on its concerns about competition in the supermarket sector where there is, in effect, a duopoly at present, except in the three regions where The Warehouse has opened a super centre."

Commerce Commission Chair Paula Rebstock says in the statement "New Zealand consumers know that more competition is needed in the supermarket sector. In coming to its decision to decline the acquisition the Commission considered that The Warehouse had already brought important new dimensions to supermarket competition, and potential competition, through its innovative super centre stores.

"The Commission was prepared to leave it to the market to decide whether The Warehouse super centres would be viable. We did not consider that the Commission could rule out The Warehouse as a significant supermarket competitor, either now or into the future. The Commission considered that the presence of an innovative third party - such as The Warehouse - had the potential to increase the level of competition in this important market," said Rebstock.

"New Zealand consumers and competition are the winners today," she said. "The Commission declined clearance in mid-2007 for acquisition by either Foodstuffs or Woolworths, because New Zealand's supermarket retail market is already highly concentrated. There are high barriers to entry in the industry, yet The Warehouse is uniquely placed to compete with the supermarkets because of its existing property portfolio, extensive distribution networks and established brand."

Woolworths and Foodstuffs argued that if either was successful with bids, grocery competition would remain strong.

Between them, Woolworths and Foodstuffs account for about 99 per cent of the grocery market, but despite the duopoly, margins have been described as slim and competition intense. Foodstuffs, a co-operative, runs the New World, Pak 'N Save and Four Square brands. Woolworths bought Progressive two years ago and runs the Foodtown, Countdown and Woolworths brands.

The Warehouse had planned to roll out 15 Warehouse Extra stores, which have a grocery component. Three were opened but further expansion was put on hold in September to allow the company to assess their performance.

Forsyth Barr analyst Guy Hallwright said that he had thought the Appeal Court's decision would be an "each-way call", and was not surprised by today's outcome. "If the decision had not gone this way then firstly it would have basically made the Commerce Commission into a toothless body," he said.

Most people would have thought that any ruling made by the Commerce Commission could be taken to court where it would be overturned. That would have put parties in a strong bargaining position with the commission. "Secondly it (a decision in favour of Woolworths and Foodstuffs) would open the way for duopolists in any area of business to overtake new entrants in the early days on the grounds that competition is not substantially diminished because there's not much competition there yet. So, you would basically entrench duopolies," Hallwright said.

There could be further appeals, but in the meantime The Warehouse was takeover-proof against the supermarket operators. The Warehouse's share price was already somewhat reflecting that position, but he expected it to fall a little further today. "If you look at the share price, it has fallen away very, very substantially and the longer it took for the decision to come out, the more it fell away, which means people have been thinking `it doesn't look good for a clearance for the takeover'."

The Appeal Court hearing was held three months ago, when the company's share price topped $6. The price was $3.82 when the market closed yesterday. The Court of Appeal, along with setting aside the High Court decision, has also ordered the two supermarket chains to pay costs to the Commerce Commission.

National has confirmed if it is elected to power it will largely retain the Employment Relations Act (ERA).

National leader John Key told a business breakfast meeting in Wellington the basic principles of the ERA – such as that of good faith bargaining – would remain in place. "We are staying with the Employment Relations Act. We are not going back to the Employment Contracts Act," Mr Key said.

Mr Key said his party's industrial relations policy would keep the ERA in place, but introduce a 90 day trial period for firms with fewer than 20 staff.

"Good-faith provisions will still apply, as will rights to sick leave, holidays, and health and safety provisions. Rules of natural justice and human rights legislation will apply. Mediation will be available in disputes, and employers won't be able to hire and fire the same employee every 90 days," Mr Key said.

National did not see the 90 day trial period as making it easier for employers to fire people, but easier to hire them. Every OECD country, except Denmark, had a probationary period. National has dropped its 2005 policy of restricting union access to work places, but will allow workers to bargain collectively without having to belong to a union.

Mr Key said National would also keep four weeks annual leave, but allow employees to trade the fourth week for cash.

This could only be at the employee's request and could not be raised in negotiations for an agreement.

A National government would also:
* Retain the Mediation Service but ensure it was properly resourced with properly qualified mediators;
* Require the Employment Relations Authority to act judicially in accordance with the principles of natural justice, including the right to be heard, and the right to cross examine before an impartial referee;
* Allow injunctions and important legal questions to be heard in the first instance in the Employment Court, and allow a general right of appeal to the Court of Appeal; and
* Appoint a working party to review the Holidays Act, especially the issue of relevant daily pay.

The ambulance sector has welcomed a parliamentary inquiry into the service it provides but says patients will be at risk until changes are implemented.

An inquiry into ambulance services by the health select committee says cities should have ambulances with two crew on board within three years and all large towns over 15,000 people within four years. The MPs said single crew callouts should stop, but it would take time for more staff to be put in place.

The Order of St John, which is the largest ambulance service provider covering 86 percent of the population, estimated it would require $53 million more a year to double-crew all its callouts.

Health Minister David Cunliffe said the report seemed to be well reasoned and would be given "very serious consideration" by the Government. It had a policy of moving towards double crewing ambulances as priorities allowed. "It's not an inexpensive step ... it is definitely an additional resource and the health budget is pretty stretched," Mr Cunliffe said.

In a press release later, Mr Cunliffe said to implement the recommendations would mean a "rethink of health spending authorities". More money had been put into ambulance services and further work was being done on a national ambulance strategy.

St John chief executive Jaimes Wood said he was delighted with the report. "The St John position has always been that emergency ambulances should be fully crewed wherever possible," Mr Wood said. Eighty-two per cent of St John ambulance responses were double crewed and to increase this would have significant funding implications.

National Distribution Union ambulance co-ordinator Craig Page said the Government had been warned about the dangers posed by the current level of service. "The best way to deliver effective and consistent ambulance services is through one well resourced national ambulance service provider," Mr Page said. "Professionals told the committee of our concerns with a lack of regulation, multiple service providers, under-funding, poor quality assurance, inadequate network coverage and single crewing in rural centres. As long as these issues are glossed over patients remain at risk."

The inquiry followed calls by the Ambulance Association that coverage was inadequate, ad hoc and a large number of single crew callouts was putting people at risk.

There have been reports of families of people suffering from heart attacks or witnesses at scenes of accidents being asked to drive ambulances to hospital while a paramedic helps the patient.

MPs recommended the three and four-year targets be taken up by the Government. "We realise that the nature of the workforce will mean that there is a mixture of paid and volunteer officers achieving this goals."

The report called for clinical standards to be applied to ambulance services and paramedics to become registered medical practitioners under health laws. MPs said funding to ambulance services through the Ministry of Health and ACC was complicated and confusing. For instance, all callouts created costs, but ambulance services were only paid if a live person was transported to hospital for treatment after a traffic accident.

Some have called for a single national ambulance service, but the MPs stopped short of recommending that, saying there should be greater co-operation and collaboration. MPs said streamlining funding and setting up a national standards body would go some way to achieving this.

New Zealand's biggest retailer, the Warehouse Group has revised downwards expected annual after-tax earnings by about 10 per cent.

The key contributing factor was a marked downturn in consumer spending since the latter part of May, which had significantly reduced the company's sales and margin expectations for the remainder of this financial year, the company said today.

After-tax earnings for the year ending July 27 were now expected to be between $84 million and $88 million, including reversal of warranty provisions of $7.2 million. The previous range was $94 million to $98 million.

For The Warehouse stores, sales for the month of May were 4.8 per cent ahead of last year on a same store basis, reflecting an expected improvement in performance following a difficult third quarter. Customers responded well during the period to a strong seasonal offer in both apparel and home products, the company said. But consumer confidence and retail spending had deteriorated markedly in recent weeks in response to increasing inflationary pressures on fuel and cost of living.

The company's June and July sales were now forecast to fall well below previous expectations. At Warehouse Stationery sales for May and June month to date were 7.7 per cent below the same period last year.

The Warehouse downgrade comes one day after number two retailer Briscoe Group warned shareholders to expect up to an 80 per cent drop in half year net profit after tax.

In an update to the market yesterday, the operator of Briscoes Homeware, Living & Giving and Rebel Sport stores said it expected net profit after tax for the six months ended July 27 to be between $2 and $3 million. The group had posted a $10.5 million profit for the same period last year. Managing director Rod Duke said like other retailers, it has been experiencing extremely difficult trading conditions, with consumer confidence at its lowest in 17 years. Duke expected the challenging times to continue, with second half results expected to be lower than last year's. But the percentage decline would not be nearly as large as the first half's, he said. Briscoe shares ended yesterday down 11c at 99c.
***
As retail trouble spreads across the country, one big firm has announced expansion plans. Hardware retailer Bunnings Warehouse, owned by Australian conglomerate Wesfarmers, it has six new stores planned, which should mean 500 new jobs.

Company general manager Brad Cranston said the fifth of its Auckland stores will be built in Westgate, Waitakere City. "We are pleased to announce plans for this new store for West Auckland. Westgate and the wider West Auckland region is certainly an area of constant growth," Crantson said in a press release.

Bunnings Warehouse has recently unveiled development plans for four further stores in Wellington, Upper Hutt, Gisborne and Dunedin. "The New Zealand market is extremely competitive," said Cranston. "But we have a proven and robust business model that enables us to deliver value to customers. The success of recent new stores in Christchurch and Auckland's Mt Roskill is encouraging and fuelling our commitment to continue at least open three new stores per year," he said.

Cranston said that while plans and locations are not finalised, Bunnings see the Hawke's Bay, Taranaki, South Auckland and Auckland's North Shore as potential areas for further stores.

Two of the country's largest unions are in talks about a possible amalgamation.

Service and Food Workers Union (SFWU) national secretary John Ryall today said he had been in talks with the National Distribution Union (NDU) about a merger.

He said the talks were still at a preliminary stage, but a merger offered potential benefits to both unions.

Both were focused on lifting the pay of low income private sector workers and he said joining forces would boost the level of resources available for specific campaigns.

However, Mr Ryall said there were several hurdles to a merger - the first being whether the unions had a shared strategic vision.

If that was established then they would have to see if they could agree on structural and organisational issues.

Any subsequent agreement would be subject to a vote from both unions, which each have around 20,000 members.

Mr Ryall said t wo attempts to merge the unions in the 1990s had failed.

NDU secretary Laila Harre said the talks were a SFWU initiative.

She said NDU staff had the union's consent to engage in talks, but they were at too preliminary a stage to comment.

- NZPA

Former Telecom head Theresa Gattung left New Zealand's biggest publicly listed company with $5.125 million in cash and 12 weeks annual leave owing.  The company's latest annual report, issued yesterday, shows Ms Gattung received a leaving payment of $3.9 million on top of her $1.25 million salary.

It included a performance incentive scheme of $1,525,000, a long-term incentive of $550,000 and special payments of $1,800,000.  The $550,000 was awarded on condition she does not go to a rival company. She also received $287,516 holiday pay.  Ms Gattung left Telecom in June after 12 years - eight as its chief executive - to take a break horse riding in South America.

She is yet to announce her next move, but just before her departure she told the Herald she had had all sorts of employment offers from around the world - "some more surprising than others ... but it's going to take some time and I want to give it some time, too."  Telecom also paid outgoing chief financial officer Marko Bogoievski a bonus payment to ensure he did not leave the company during the search for Ms Gattung's replacement.

The Sydney Morning Herald reported today that Mr Bogoievski received a $819,700 bonus to ensure he stayed on until the induction of Scotsman Paul Reynolds, who is due to take over Ms Gattung's old job at the end of September.  Mr Bogoievski also received a salary of $2.36 million in the year to June 30, Telecom's annual report showed.  Last month Mr Bogoievski, 45, announced he would leave the company in January after seven years as chief financial officer.

Acting chief executive Simon Moutter was given a special payment of $250,000 for staying on during the search for a new chief executive, on top of his annual salary of $1.71 million.  The company said the two executives were paid the bonuses because they had "critical knowledge and expertise essential to retain through a period of significant change".

Mr Reynolds will be paid a base salary of $1.75 million, plus a $1.75 million performance incentive each year. This may be topped up with a long-term incentive of up to $1.75 million in performance share rights.

- Additional reporting NZPA

Carter Holt Harvey's head office in Manukau has been sold to Australia's Valad Property Group, which is buying A$277.3 million of property from Carter Holt.

The 8.5ha site, legendary for once having a nine-hole golf course used by Carter Holt executives, is the jewel in the collection of properties sold. It is the biggest of five development sites being purchased. Billionaire Graeme Hart, Carter Holt's owner, is not commenting on the transaction.

Mark Frinsdorf, Valad's head of capital transactions, said sale and leaseback agreements would operate on most of the properties but the head office property was earmarked for development by Valad. He said no decisions had been made on what to build on the site, but a high-tech business park or a bulky goods/office precinct were possibilities. Valad had looked at the Lion Nathan brewery site sold in Auckland last week but had decided on the deal announced yesterday. "We do think it is a very strategic site," Frinsdorf said.

The portfolio purchased includes 15 Carters building supplies sites, which are subject to nine-year sale and lease-back agreements with two six-year rights of renewal. Similar terms apply to 10 packaging plants in the deal, five of which are in Australia. Valad will earn a yield of 7.1 per cent on the properties. The company already owns buildings in New Zealand, including Maritime Towers in Wellington and West Plaza in Auckland.

Property speculators who are reaping millions of dollars from the super-heated housing market are about to feel the heat from a tough new tax crackdown.

Finance Minister Michael Cullen said Inland Revenue would get an extra $14.6 million over the next three years to strengthen property transaction audits. Speculative activity was driving up house prices and household debt levels, he said. So giving IRD more money would help it enforce the law.

Property auditing gathered $100 million between 2004 and 2006, he said and it was important for IRD to have the resources it needed.  Of the country's 1.4 million houses, around 400,000 are owned by investors. If a landlord buys with the intention of selling, tax must be paid on any financial windfalls.

Sharon Cuzens from Inland Revenue in Wellington yesterday welcomed the boost.  "It will enable us to pursue further, in-depth investigations and education on a risk area we have been actively targeting for some years," she said.

IRD would improve information so people were more aware of their liability, monitor major developments to ensure accurate return of sales or profits, boost research and analysis of risk areas and increase audit activity in areas of identified risk, she said.

One housing investment expert also welcomed the Budget package. Andrew King, Property Investors' Federation vice-president, said speculators who evaded tax were taking high risks. He encouraged those people who were eligible to come clean, declare their profits and pay tax.  "It's like playing Russian roulette if you don't," Mr King said. But he also criticised existing tax law, saying it had too many grey areas.

Matthew Gilligan, an Auckland chartered accountant and specialist tax and legal structures consultant, also welcomed the package, saying IRD was too poor to do its job properly and the money would help.  "They're grossly under-resourced," he said, citing long waiting lists for taxpayers seeking rulings and waiting for investigations to be concluded.

Mr Gilligan, whose firm has 4500 property clients investing in residential housing, called for clearer rules on housing investment tax liability. Many IRD staff were excellent but it was not uncommon for staff to change so fast that some taxpayers were dealing with three IRD staff members over one issue, he said.  "That's not uncommon on an audit." Nor was it unusual for a taxpayer to be given conflicting advice by various IRD staff members, Mr Gilligan said.

Greg Haddon, a Deloitte tax partner, said the $14.6 million was not nearly enough to tackle the issue.  "This extra money won't make a big impact," he said, and failed to address the reasons for so many people investing in housing, because they regarded it as a surer bet than other forms of investment.

IRD has already announced the success of previous crackdowns.  Two years ago, it netted just under $11 million from a campaign in the Queenstown/Otago region. Its concentrated audit blitz on developers and speculators started in March 2004 and by November 2005, it had 120 cases either under investigation or heading for prosecution.

Auckland was also a target two years ago, when IRD said it was increasing resources to hunt down speculators and developers who had kept their profits a secret.  Senior Auckland department official Richard Philp said in January 2005 that an extra $106.6 million was gathered nationally within two years on property transactions, including $52.9 million from Auckland.

The rules

• If you invest for the long term, there is no tax on money when you sell the rental property.
• But if you buy with the main aim of selling for a profit, any money you make is taxable.

First-home buyers wait for Government handout.

Prospective first-home buyers hoping for help through a Government-run shared-equity scheme will have to wait a little longer.  Housing Minister Chris Carter said $1.4 million had been allocated in the Budget for work on the potential design of a such a scheme, but a pilot would not be funded until at least next year.

Mr Carter has said the most likely location for a pilot scheme is Auckland and it could involve the Government paying for a 25 per cent or 30 per cent stake in a house, effectively reducing the purchase price of a $400,000 property to about $300,000.

If the house was sold, the Government would take back its percentage share. The scheme is expected to be aimed at the lowest quartile of the housing market.

Mr Carter said the Government was keen to explore how much demand there was for a shared-equity scheme.  If the scheme "flew", it would be introduced as part of a suite of new measures including a possible Housing Affordability Bill. "Shared equity will also be introduced at the same time as the Government seeks to increase the number of houses in the price bracket affordable to first-home buyers."

Mr Carter yesterday also announced $43.6 million over four years for other housing initiatives.  That included $23.8 million to increase the life of the Healthy Housing programme and extend it into the Wellington region for the first time.

The programme targets overcrowded households and assists them into more appropriate housing.  The Housing Innovation Fund, which provides government assistance to local authorities and community groups to develop affordable housing, would also receive a boost of $19.8 million.- NZPA

A parliamentary committee was today urged to tread carefully when making decisions to try and combat the spiralling problem of housing affordability.

Figures presented to the commerce select committee showed the gap between wage earnings and house prices in New Zealand continued to increase and was outstripping other western countries.

However, Westpac chief economist Brendan O'Donovan said he expected the heat to disappear from the market over the next few years and warned the Government against taking drastic measures to try and influence the situation itself.  "Essentially our housing correction is a matter of when, not if," he said.

Mr O'Donovan said he was aware the Government was anxious to ensure home ownership was within reach to all New Zealanders but urged caution in terms of introducing subsidies for new buyers or disincentives for investors.  For every potential solution there were always consequences further down the line, he said.

"Be wary of people coming in with solutions, because there is no one solution, there is no silver bullet."

Mr O'Donovan said the housing market was cyclical and information at hand pointed to prices flattening and wage growth continuing.  "Affordability will not be the issue it is now in four years time."

He said there was a multitude of reasons why house prices had been driven up, including favourable interest rates and tax rules and the growing ease of being able to obtain credit and the flexible terms that went with it.

Other suggestions were myths, including one that investors had been scrambling to buy property.

Mr O'Donovan said only about 8 per cent of home owners had extra properties that were purchased for investments.

Labour MP Shane Jones said it appeared part of issue was New Zealand's infatuation with owning a house and considering it to be a bullet-proof and high return investment.

• Figures sourced by Westpac show household debt in relation to disposable income rose steadily from about 50 per cent in 1990 to 180 per cent in 2006.
• Relative house prices in New Zealand have over the past several years outstripped Australia, Britain and the United States.
• Affordability is over 40 per cent lower now than the historic average.
• Since 2001 house prices in relation to income generated have increased by 45 per cent.
• While house values have increased dramatically around most of the country, it has led to a decline in comparable rental yields. Figures show rental yields on residential property have dropped from about 7 per cent per annum in 1998 to just over 3 per cent now.
• An international survey of home ownership rates shows New Zealand is about on a par with average rates in eight other western countries. New Zealand had a 68 per cent ownership rate between 2000 and 2003, compared to Ireland (80 per cent), Germany (40 per cent), Britain (68 per cent), Australia (71 per cent) and the United States (68 per cent).

- NZPA

Most employees prefer the money to other sorts of rewards, up sharply from a year ago partly because of rising household costs, according to a survey yesterday.

Sixty-nine per cent of employees surveyed by Hays preferred financial rewards, with 16 per cent favouring non-financial rewards and 15 per cent preferring internal recognition.  That was up from 42 per cent of employees preferring financial rewards a year earlier.

"Business activity has increased and people are generally busier in their jobs," said Jason Walker, regional director of Hays in New Zealand.

"Coupled with the knowledge that we are in a candidate short market, and given higher grocery, petrol and mortgage costs, employees' emphasis has moved to cash payments rather than non-cash benefits," he said.

Non-financial benefits such as gym memberships or movie vouchers were still important rewards.  "It's also not just about the obvious rewards, financial or otherwise.

"Rewards are just one element of a good retention strategy and acknowledgement of an employee's contribution, career opportunity, the provision of new challenges, the opportunity for training and development, salary reviews and the influences of strong management are all equally important elements," Mr Jason said.

The online survey was completed by 1881 people.