Finance

Business money saver… New billionaire… Market heads upmarket… Water bad news… Rein back in the spotlight… Do Not Call rush… Economy roundup…

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Business owner money saver

Business owners could save thousands of dollars, investor relations costs plus a few trees with new legislation introduced this morning into Federal Parliament.

Key measures in the wide ranging legislative package include:

  • Allowing companies to provide electronic annual reports unless shareholders request a hard copy.
  • Removing the requirement for many SMEs to lodge public accounts with ASIC by lifting the size threshold at which reporting is required.
  • Reducing transaction costs of ongoing lodgement of annual review fees by allowing discounts for up-front payment.
  • Streamlining of ASIC reporting requirements for change of address or company office bearers.
  • The amount of money that can be raised using an Offer Information Statement when combined with funds previously raised will be increased to $10 million.

The move to allow online annual reporting has the potential to allow significant cost and environmental savings, according to Monika Lancucki, a senior associate with investor relations firm Value Enhancement Management.

Lancucki says the cost of producing glossy annual reports can be huge, especially for companies with a big retail shareholder base.

“The added focus on governance and international accounting standards has increased the mandatory size of annual reports but our research shows the vast majority of that material isn’t read at all, so even just being able to post that information online could allow huge savings,” Lancucki says.

The reforms will also mean cost savings of up to $5000 a year for about 1600 proprietary companies that will no longer need to submit audited financial accounts to ASIC.

At present, businesses that satisfy the “large proprietary company” test, of $10 million in revenue, $5 million in assets or 50 employees, are required to lodge accounts with ASIC. Under the new regime the revenue and assets thresholds are lifted to $25 million and $12.5 million respectively, although the 50 employee threshold remains unchanged.

The revenue and asset thresholds for financial reporting of large proprietary companies will be increased. The revenue and assets thresholds that determine a large proprietary company will be increased by 150% from $10 million in revenue to $25 million in revenue and from $5 million in assets to $12.5 million in assets. The threshold regarding the number of employees will remain at 50 employees.

MGI Boyd principal and Institute of Chartered Accountants national SME spokeswoman, Sue Prestney, says it generally costs businesses $4000–5000 to have the accounts prepared for lodgement.

She says that although the change in thresholds is welcome, it will still needlessly catch many SMEs.

“This will help a lot of SMEs at the lower and medium end of the SME market, but it would have been nice if the thresholds could have been lifted little bit higher because it will still get a lot of companies but of these, those that benefit will be happy to be free of what has been an onerous obligation that costs a lot of money for absolutely no benefit,” Prestney says.

Assistant Treasurer Chris Pearce says he hopes to have the legislation passed through both houses so that it can take effect for the 2006-07 financial reporting year.

– Mike Preston

Meet Australia’s new billionaire entrepreneur

The founder of Platinum Asset Management, Kerr Neilson, has just enjoyed a sudden leap in his personal wealth, to about $3.3 billion, since floating Platinum yesterday.

They opened at a $3.50 premium to their $5 issue price, making Neilson the fourth-richest person in Australia.

– Amanda Gome 

The market heads upmarket

Since March 2003 the Australian sharemarket has delivered a phenomenal performance. Its total return (including dividends) has not dipped below 20% in any year, and in three out of the four years it exceeded 25%. Based on its performance since January, and assuming it can sustain the current rate of increase, the market is on track to deliver over 30% in calendar 2007. The overall capital gain since March 2003 has been 136%.

Now some of the more sober heads around town are calling the market expensive or verging on expensive. In mid-May Michael Knox, a strategist at ABN-Amro Morgan, described the Australian market as 500 points overvalued. He described it as “the most overvalued”, according to his model, since May 2002.

Last week Michael was joined by two other highly regarded strategists. JP Morgan’s Martin Duncan divided the market into five sub sectors: resources, banks, non-bank financials, property and other industrials (basically everything else). His conclusion was that only resources look cheap both relatively and absolutely. He found the banks fair value based on their historic price/earnings (P/E) relationship with the market; and that non-bank financials provided relative value; that is they are cheap in an expensive market.

Veteran strategist Neale Goldston-Morris says: “Valuations are now very stretched across most of the Australian market. P/Es for virtually every sector except resources are at all-time highs or nudging the late 1990s’ tech boom highs. At the same time, average earnings growth is slowing and is now at a 15-year low of just under 11%.”

Neale has traced the industrial market one-year forecast P/E back to 1961. The average since 1961 is about 10.5 times. Since the low inflation era (from 1990 on) it is 14 times. Today, he says, it is 17 times or just a smidgin below the all time “dotcom” high of 17.7 times.

The remedy is a good, old-fashioned 10% correction, just like the one we saw in early March. This market needs the excesses removed, and soon. Otherwise the end of the party could leave quite a hangover for some time to come, in my view.

– Mike Mangan, principal of 2MG Asset Management, an Australian equities asset manager. A longer version of this article first appeared in the Eureka Report, www.eurekareport.com.au.

Water bad news

The Federal Government’s Murray-Darling water plan is collapsing with Victoria refusing to sign. And another report has been released showing that the nation’s water shortage is much worse than initially feared.

All water users face significant restrictions, and a major buyback of licences will be required to deal with a crisis from the over-use of ground water, according to report from the Australian Financial Review. The Federal Government report warns that the worst effects of overuse might take years to eventuate.

– Jacqui Walker

Entrepreneur Rein back in the spotlight

Entrepreneur Therese Rein, wife of Opposition Leader Kevin Rudd, is embroiled in fresh controversy with the Herald-Sun reporting this morning that a company she owned put workers on individual contracts that took away some rights.

Rein’s company, Ingeus, is a highly successful business in recruitment and employment industry with revenue edging towards $200 million. Last year the company took over a small Melbourne business, Your Employment Solutions. The company admitted that workers had been underpaid but says that entitlements had been reinstated. The company blamed former management and says since a review by KPMG terms and conditions of staff now mirror or exceed the minimum terms and conditions of the award.

It will be interesting to see how the Coalition deals with this. The word is that Therese Rein was declared out of bounds. The feeling was that Howard’s positioning as the leader of Enterprise Australia would be conflicted if his henchman attacked such a prominent, successful entrepreneur.

– Amanda Gome

Do Not Call rush

By Friday, the Do Not Call Register will have more than one million registrations from people who do not want to be contacted on their home phones or mobiles. The spike this week has been caused by the ACMA opening phone lines in all the states so people without internet addresses can register.

And businesses still confused by the grey areas in the new regulations will be able to go to a Do Not Call portal for information on the scheme.

– Amanda Gome

Economy round up

Respected former US federal reserve chairman Alan Greenspan says he believes Chinese stocks will undergo a “dramatic contraction at some point”, Bloomberg reports today. Unfortunately for pundits, he would not nominate when.

China’s benchmark CSI 300 Index has jumped more than 90% this year. “It is clearly unsustainable,” Greenspan told a conference in Madrid today by satellite.

At midday the ASX/S&P 200 has dropped 0.9% to 6299.6, while the Australian dollar was trading at US82.27¢, bouncing back from yesterday’s US82.12¢ close.

– Mike Preston

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