Rein’s new reign… AWA test details… Carbon trading soft option not the answer… R&D concessions not utilised… Threat to CRCs… Red-tape scorecard…
Monday, May 28, 2007/
Rein’s new reign
Entrepreneur Therese Rein is set to reap at least $80 million from the sale of the Australian arm of her empire. It should also be a quick, straight forward sale with plenty of interested buyers, business brokers told SmartCompany this morning.
Rein announced yesterday that she would sell the Australian arm of job placement business Ingeus to resolve conflicts of interest if her husband Kevin Rudd wins the top job in government.
Rein holds 90% of the shares in the $175 million revenue company that operates in Britain, France and Germany. Her Australian subsidiary Work Directions Australia is the third biggest provider to the Federal Government’s Job Network, and it is believed Rein has locked in long-term contracts with 30 sites tied up until 2009.
Business brokers say that if there are roll over clauses in the contracts and if the conditions on renewal are being met, there are no reasons she would not keep the government contract regardless of who ends up in Canberra.
These long-term contracts also means the business will be easy to value and sell. “You have a reliable revenue stream and the costs are obviously managed,” says one Sydney broker.
Selling the Australian operations will not upset her global empire. Rein has set up separate operations in each country with presumably separate accounts, people and offices already operating.
Selling off the Australian subsidiary will be relatively straightforward because Rein has the perfect excuse to sell. Andrew Kent, who runs BizExchange, says one of the hardest things to do when selling a business is to come up with a compelling reason that the potential buyer will believe.
“She’s got the perfect reason,” he says. “She can say I want to stay with my magnificent business for ever but I must sell because of conflicts of interest.”
Quick back of the envelope summations show that if Australian revenue was over $100 million with margins of 20% then with an EBIT of $20 million and at four to six times price earnings, Rein could get more than $80 million for the sale.
Once cashed up, Rein no doubt will look overseas for acquisitions to expand her global empire. In hindsight, this might just be a blip in Rein’s reign.
– Amanda Gome
Long-awaited AWA test detail to be revealed today
Almost a month after being told of Federal Government plans to re-introduce a “no-disadvantage” style test on AWAs, business will finally discover details of the test’s operation when legislation is introduced this afternoon.
Business has been left in the lurch since being told earlier this month that all new AWAs have to comply with the test despite the fact that details of the test were still being formulated by the Government.
Workplace Relations Minister Joe Hockey has said the test will ensure that workers earning less than $75,000 receive “fair compensation” for the loss of penalty rates, leave loading or other protected conditions.
Speculation emerged today that the $75,000 cut-off will be calculated on the basis of an employee’s basic rate of pay. If correct, this will significantly broaden the number of new AWAs subject to the test.
Behind closed doors, business groups have had a mixed response to the AWA test, with one prominent industry group leader saying that his members are divided on the issue. Publicly, however, Australian Chamber of Commerce and Industry chief executive Peter Hendy has been the only business group leader to voice strong criticism, describing the Government’s decision as “unnecessary” and “disappointing”.
The Victorian Employers Chamber of Commerce and Industry director of workplace relations policy, David Gregory, says that while he believes the changes are not necessary, he accepts the Government had to respond to heated political debate around IR.
“The changes will take away some of the scope in regards to agreement making and will introduce some more steps into the process of putting agreements in place, but obviously it is a hotly politicised issue. That the Government feels the need to make the changes we accept,” Gregory says.
Gregory says that despite the extra cost to business involved with the administration of the test, VECCI will not be asking Labor or the minor parties to oppose the legislation in the Senate.
SmartCompany will update readers here on AWA test details as they are available.
– Mike Preston
Pay now or suffer later: carbon trading report
Any attempt to reduce short-term pain by introducing a soft carbon trading scheme will mean a doubling in electricity prices down the track, according to a new report by an independent climate change think-tank.
The report, commissioned by the Climate Institute, will help frame the debate in the lead up to the release of a much-anticipated report on Thursday on carbon trading by a joint industry taskforce established by the Prime Minister.
The Climate Institute’s report shows that under a moderate scheme that imposed a $10 surcharge on each tonne of carbon emitted, electricity prices would rise just 22% in the years to 2020. After 2020, however, power charges would have to increase rapidly to 90% of current prices by 2040 in order to achieve substantial carbon reductions.
However, by introducing energy efficiency measures and imposing a $30 per tonne price on carbon, the cost of achieving substantial carbon reductions could be cut by up to $12 billion, the report says.
Meanwhile the cost of dealing with Australia’s current drought conditions is stacking up, according to an Australian Financial Review report today. Compensation for the loss of irrigation water in the Murray-Darling basin could end up costing the Federal Government more than $1 billion, the report says, and even then may not be enough to ensure the long-term viability of many farms and orchards.
– Mike Preston
Businesses don’t make the most of R&D concessions
Most businesses do not take full advantage of tax concessions on research and development and use them mainly for short-term projects, according to a new Department of Industry, Tourism and Resources survey.
The survey of 353 firms shows that most companies spend erratically on R&D, which prevents them accessing the premium tax concession of 175%. R&D in most firms is not based on stable two to five year projects, the survey shows, instead being used for projects that call on a range of expertise for quick solutions to specific problems or opportunities.
The survey could force the Government to rethink how it defines innovation. After all, some of the world’s best innovations have come from entrepreneurs who have used their expertise to find a quick solution to a problem or opportunity.
CRCs under threat
A quarter of Australia’s cooperative research centres could be under threat if the Federal Government does not increase its involvement in the scheme. About 22 of the program’s 56 centres are seeking renewal of their seven year government contracts next year. The CRCs, which encourage links between research and industry, get 22% of their funding from government, reports The Australian Financial Review this morning.
The Cooperative Research Centres Association executive officer, Michael Hartmann, says government officials had indicated that the program could expect funding next year to be similar to this year’s commitments of $310 million. But for the CRCs to remain viable about $500 million is needed.
Victoria top of class on red-tape test
Victoria imposes the least red tape on business of any Australian state, according a new red-tape reform scorecard prepared by the Business Council of Australia.
While Victoria was the only state rated “good” across all aspects of the red-tape scorecard, Western Australia was the dunce of the class, achieving a “poor” rating because of its failure to put in place basic regulation-making and monitoring procedures.
The other states and territories all received a middle ranking of “adequate” except for NSW, which did not receive a rating because it is undertaking or has only recently completed reviews of business regulations.
BCA chief executive Katie Lahey says the scorecard shows that on the whole states have made “limited progress” in cutting red-tape. “Business continues to be shackled by a growing red-tape burden around the country, at a state level, which is holding the economy back.”
The uneven performance of different states is “impeding the creation of a national approach to fixing the problem”, Lahey says.
– Mike Preston
Private equity joint ventures with Publishing & Broadcasting and Seven Network were the second and third largest private deals in the Asia Pacific region, according to a new Thomson Financial report. A $3.78 billion acquisition of a stake in the Industrial & Commercial Bank of China by a private equity consortium headed the list.
At 11.55am, the S&P/ASX 200 is up 0.2% to 6266.4, while the Australian dollar is trading at US81.90c, just up on the most recent Sydney closing price of US81.87c.