ACCC blocks Qantas-Alliance tie-up, Star Group reveals low earnings and Irish national to lead flailing EML Payments

The Australian Competition and Consumer Commission (ACCC) has stonewalled Qantas Airways’ (ASX: QAN) proposed acquisition of private charter flight service company Alliance Aviation Services (ASX: AQZ).

Qantas scooped up a 19.9% holding in Alliance in February 2019, and in May last year followed up with a bid acquire 100% of the airline for about $614 million.

Both Qantas and Alliance provide air transport services to mining and resource companies that require fly-in, fly-out workers in Western Australia and Queensland.

ACCC chair Gina Cass-Gottlieb said after a thorough investigation of the proposed deal, it was concluded “the transaction is likely to substantially lessen competition”.

“We consider Alliance to be an important competitor to Qantas, and the removal of Alliance is likely to substantially lessen competition threatening increased prices and reduced service quality for customers,” Ms Cass-Gottlieb said.

Qanta responded to the ACCC’s decision by requesting a meeting with the body – stating it is at “odds with the increasingly competitive nature of the segment”.

The airline also pointed out it was Alliance’s largest customer wet leasing 18 Embraer aircraft that are operated on the national carrier’s behalf. Qantas also has the option to wet lease a further 12 E190 aircraft from Alliance to provide increased capacity and connectivity in the Australian market.

Star Group plunges amid ‘unprecedented’ low earnings

Following a “rapid deterioration” in operating conditions, The Star Entertainment Group (ASX: SGR) has launched cost and restructuring initiatives including a workforce cull.

On Wednesday, the beleaguered group announced it is experiencing “a significant and rapid deterioration” in its operations – particularly at The Star Sydney and The Star Gold Coast.

The casino operator attributed the situation to a “compounding impact of regulatory operating restrictions and exclusions” along with an emerging weakness in consumer spending.

As a result, the group’s current earnings performance is at “unprecedented low levels”, with a new guideline for FY2023 earnings before interest, tax, depreciation and amortisation (EBITDA) of $280-310 million.

To combat the bleak outlook, the group has implemented a number of initiatives including cutting 500 full time positions.

Additionally, short term and other FY2023 incentives have been cancelled along with a salary freeze for employees not under enterprise bargaining agreements (EBAs).

Barrenjoey is assisting Star in a strategic review of its Sydney casino and consider any other structural alternatives to boost value and reduce costs.

The actions are in addition to $40 million of previously announced operational initiatives and are expected to curb operational expenditure by about $100 million in FY2024.

EML Payments appoints Irish national to weed through regulatory problems

Flailing business EML Payments (ASX: EML) has appointed an experienced payments and business turnaround executive to lead the company through a strategic review and in solving current challenges facing the entity, which includes the Central Bank of Ireland dogging its every move.

The Irish bank has directed a nil percent growth cap to EML’s Irish subsidiary PFS Card Services for the 12 months ending 31 March 2024. This is expected to see EML’s forecast revenue drop $3.5 million, with underlying EBITDA to fall $2 million between 1 April 2023 and 30 June 2023.

Irish national Kevin Murphy has joined EML as interim group chief executive officer to lead the company as it searches for a permanent replacement.

It is expected Mr Murphy will assist EML as it works through its regulatory issues in Ireland.

Meanwhile, Emma Shand has stepped down from the top role effective immediately after only nine months in the seat.

Mr Murphy’s appointment is expected to assist with repositioning EML, along with securing the services of Barrenjoey, which will undertake a strategic review.

The new engagements follow a board refresh in February that resulted in three new non-executive director appointments and the resignation of chair David Liddy, and Tony Adcock and Melanie Wilson as non-executive directors.

EML is a global payments company that operates in Australia, the United Kingdom, Europe and the United States and its customers include major banks, governments, retail brands and financial services companies.

Investors have backed the board changes with EML’s shares up around 40% over the first half of the week following the news.

However, they are a far cry from a high of $5.82 they were attracting in April 2021 prior to the Central Bank of Ireland raising “significant regulatory concerns”.

Michael Hill acquires Bevilles for $45 million

Michael Hill (ASX: MHJ) made headlines this week after it announced it was acquiring family-owned jeweller and watch retailer Bevilles for $45.1 million.

The net enterprise value of $45.1 million will consist of a cash upfront payment, after adjusting for liabilities and earn-outs over two years.

Michael Hill chief executive officer and managing director Daniel Bracken said Bevilles is a strategic fit and offers “meaningful growth potential” and EBITDA enhancement opportunities.

He said the transaction will immediately be earnings-per-share accretive and is due to be concluded in the current quarter.

Meanwhile, Michael Hill chair Robert Fyfe noted Bevilles’ network is “underpenetrated” and “ready for growth”.

“The Michael Hill team will partner with Bevilles to provide expertise to growth the store portfolio and unlock synergies,” he said.

Bevilles is forecast to bring in $60-65 million in sales revenue in FY2023, which will underpin expected adjusted underlying EBITDA of $7.5-8.5 million for the period.

Under the deal, Bevilles’ current chief executive officer Michelle Stanton has a two-year ambassadorial arrangement, and employees will be offered new contracts with Michael Hill.

BHP disappoints with lower production

Mining giant BHP’s (ASX: BHP) share price dipped almost 2.5% on Friday after it announced lower production was expected across some of its copper, coal and nickel operations for FY2023.

In its March quarterly report, the company’s copper output for its Escondida mine in Chile is forecast to come in at 1.05-1.08 billion tonnes, which is lower than the 1.08-1.18Bt previously expected.

Production was impacted by the company’s need to manage a “geotechnical risk” within the Escondida pit, which led to the mine plan being altered and lower volumes extracted.

Over at the BHP Mitsubishi Alliance coal operation, production is now anticipated to come in at the bottom end of the 58,000-64,000t guidance.

And the company’s Nickel West nickel output is now estimated to reach 75,000-85,000t – below the previous guidance of 80,000-90,000t.

Wet weather events were attributed to the lower production across the coal and nickel businesses.

Meanwhile, BHP’s WA iron ore business achieved record production of 188 million tonnes for the nine months ending March 2023. Output was impacted by three days stoppage following a fatality at its Port Hedland operations in February, but this is not expected to affect the full-year guidance.

Despite record production, iron ore sales for the nine months were down to 209,544t from 211,144t in the previous corresponding period as the Pilbara Port looks to build export capacity and alleviate bottlenecks.