New data from Dun & Bradstreet could pose a threat to Australia’s solid economy, with a new survey suggesting business payment terms have fallen for a third consecutive quarter despite actual business conditions improving over that same period.
The survey, which was compiled by examining more than nine million accounts receivable, found payment terms in the March 2010 quarter rose to 54.1 days – more than two weeks above the standard 30-day term.
D&B pointed out this comes as 27% of companies are facing difficulty accessing credit. All but one group, (those business with one to five employees), recorded a deterioration in payment terms compared to the previous quarter.
The biggest increase in terms was from business with over 500 employees, with their terms increasing by 2.1 days. Those businesses were the slowest to pay at 58.9 days, three days slower than any other group.
D&B chief executive Christine Christian said in a statement that Australian businesses are at risk of derailing the economic recovery if payment terms continue to be delayed and cashflow is not made a priority.
“The outlook for Australia in 2010 is solid, particularly compared to other developed nations,” she said. “However, if we are to continue on a path to strong economic growth, executives need to maintain a vigilant focus on the business fundamentals of cashflow and credit risk which were deemed critical to survival during the crisis.”
“Cashflow and liquidity are vitally important during a period of economic recovery as firms require funds to take on new staff, increase their inventories and invest in their business to meet growing demand. In an environment where access to credit remains difficult for many firms, cashflow becomes even more critical.”
Super Cheap Auto Group has announced it will purchase outdoor leisure and equipment retailer Ray’s Outdoors for $54 million, funded with share placements to raise $86 million. SCAG said in a statement to the Australian Securities Exchange that the company was a strong brand.
“The company has the capital and systems to accelerate the growth of the business,” managing director Peter Birtles said in a statement. He added there is potential to grow the combined entity to 160 stores and $600 million in sales.
Meanwhile, another resources boom will increase the Government’s revenues, resulting in an earlier-than-expected peak in net debt, according to a new Access Economics report.
“By late 2010 and in 2011 Australia may find itself back where it was in mid-2008 – both a beneficiary and a victim of a fully fledged resources boom,” the report said.
The report states rising commodity prices will take pressure from the Government, with deficits and debt expected to peak at lower levels than official estimates have flagged. But Access said Government spending would see deficits remain high.
“However, renewed resources boom conditions will boost the tax take in 2010-11, and that effect will build in 2011-12.”
“Treasury’s next two updates – the budget and the pre-election statement – will boost revenue projections as a result, and so public debt will peak well shy of current official projections.”
Sharemarket opens slightly higher despite flat Wall Street
The Australian sharemarket has opened higher today despite flat results from Wall Street, where solid financial reports from high-end companies have been offset by poor performing stocks, but has since fallen during morning trade.
The benchmark S&P/ASX200 index was up 2 points or 0.05% to 4883.9 at 12.00 AEST, while the Australian dollar opened higher to US92c.
ANZ shares have gained 0.6% to $25.35, with Commonwealth Bank shares also gaining 0.2% to $58.34. NAB rose 0.4% to $28.36, as Westpac rose 0.1% to $27.32.
Bank of Queensland will acquire CIT Group’s Australian and New Zealand vendor financing unit, with CIT ANZ to represent about 15% of the group’s $3.4 billion finance portfolio.
“This purchase provides BOQ with access to a strategic specialised market and an ideal growth platform from which to grow new vendor relationships. We see significant growth in the vendor finance market,” BOQ managing director David Liddy said in a statement.
“We currently have a strong presence in both the direct channel (our branch network) and the broker network, and this purchase will round out our offering with a strong vendor finance presence.”
Lend Lease Group has appointed four regional chief executives, with Rod Leaver, Eng-Peng Ooi, Dan Labbad and Bob McNamara to report directly to chief executive Steve McCann.
“The regional structure aligns the business with the group’s integrated property solutions offering and demonstrates the depth and quality of the Lend Lease senior management team,” McCann said in a statement.
“This will enable us to achieve the best outcomes for Lend Lease, our customers, investors and partners.”
In the mining sector, BHP Billiton and joint venture partner Blackthorn Resources have contracted Boart Longyear to conduct drilling on the Mumbwa mining project in Zambia.
In a report released to the Australian Securities Exchange, BHP has said the company is now planning drilling tests and that a concept study to evaluate the potential of the project is now underway.
“BHP Billiton has selected Boart Longyear Drilling as the preferred contractor to conduct drilling for the Phase 4 exploration and Concept Study. Boart Longyear was selected as a reputable and experienced drilling company, that has an established presence in Zambia with offices and workshops located in Ndola,” BHP said.
Financial reform hits roadblock in US
In the United States, financial reform has hit a road block with the Republican Party blocking the proposed bill from being debated in the Senate. The Democrats need 60 votes to see debate begin and are three votes short.
However, it is understood an agreement could be reached within days that would see debate begin on the bill.
“All of us want to deliver a reform that will tighten the screws on Wall Street. But we’re not going to be rushed on another massive bill,” Senate Republican Leader Mitch McConnell told reporters.
The Dow Jones Industrial average gained just 0.01% to 11,205.03, while the S&P 500 fell 0.43% to 1,212.05 due to fears regarding the financial reform bill.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
