FEDERAL Treasurer Wayne Swan’s delivery of his latest Budget has been labelled as his ‘swan song’ by Michael Knox, chief economist and director of strategy at RBS Morgans. Mr Knox blames the deficit on over-spending, not revenue declines, as Mr Swan painted in his Budget speech.

Michael Knox, RBS Morgans

“We balance the Budget by spending less than we earn,” Mr Knox said in his Budget review. “We all know that in a perfect world, income would rise so that we could afford whatever we wanted to spend.

“However, most of us have learnt that in the real world, we have to reduce our spending to no more than our income. That is how we balance our budget.

“The Treasurer has told us that incomes did not rise as rapidly as he hoped. He therefore blames incomes for the reason he could not balance his budget.” Mr Knox referred to a chart of Australian Government Sector spending as a percentage of gross domestic product (GDP).

“This is drawn from Table 1, page 10-6 of Budget Paper No.1,” Mr Know pointed out. “In the period of the previous government, payments fall from 25.1 percent of GDP in 2000/2001 to 23.1 percent of GDP in 2007/2008. This is the level of spending when Wayne Swan first strode to the Treasury benches.”

Mr Knox said spending would “never be as low again as it was in 2007/2008. Over two years to 2009/2010 it rose to 26.1 percent of GDP. Only then did it peak,” he said. “It then began to decline. In 2013/2014, it has declined to 24.5 percent of GDP. This is still 1.4 percent of GDP higher than it is when Wayne Swan took office in 2007/2008.

“The result is that in 2013/2014, Wayne Swan produces a deficit of 1.1% percent of GDP. If spending was the same as in 2007/2008, the result would instead be a surplus of 0.3 percent of GDP.”

Mr Knox said the concerning issue was that even in trying to claw back into surplus, The Labor Government’s Budget would not return to the inherited spending levels.

“It is important to note that even out in the distant year of 2016/2017, spending is still estimated to be 23.8 percent of GDP,” Mr Knoz said.

“This is still 0.7 percent higher than it was in 2007/2008.”

www.rbsmorgans.com

*RBS Morgans is an Industry Expert member of Queensland Leaders, the organisation mentoring business leaders and the next generation of leading companies based in Queensland.

ends

QUEENSLAND Leaders member InterFinanical has helped century-old Australian family timber business, Moxon Timbers, to successfully renegotiate debt facilities that were challenging the business.

InterFinancial led the company through a competitive process that achieved improved flexibility in facilities, pricing and an increase of debt facilities by over $7 million.

“Having InterFinancial along not only showed how serious and professional we were, we were able to talk to people with whom we had no relationship, got some competiton into the process and improved the day-to-day reporting requirements,” said Moxon Timbers managing director, Tony Moxon.

InterFinancial acted as an adviser to Moxon Timber to organise working capital finance to primarily fund stock and debtors.

They also utilised term debt to fund the distribution centre and head office at Stapylton in Queensland.

Then astute use of asset finance was utilised for specific plant and equipment. Moxon

Timber Moxon Timber is a privately owned company that was established in 1903 by the Moxon family.

The company’s Australian operations are based at Stapylton and additional offices are located at Melbourne and Sydney.

In the 1980s the company expanded overseas, establishing businesses in the United States and New Zealand.

Since this expansion, Moxon Timbers has continued to grow both domestically and overseas, opening businesses in France and Chile in 2006 and 2007 respectively.

The company currently employs moe than 120 people, operating globally, and supplying timber to customers including Bunnings, Mitre 10 and Bretts Hardware.

www.interfinancial.com.au

www.moxontimbers.com.au

ends

ACTIVITY and values in Australian mergers and acquisitions have ticked up slightly across the Engineering & Mining Services, Food & Agribusiness, and Information & Communication Technology industries, according to the latest research by InterFinancial Corporate Finance.

Mergers and acquisitions are on a light growth trajectory.

InterFinancial's industry dashboard reports revealed multiples in the Engineering & Mining Services (EMS) sector were improved from December. At the end of January, the EMS sector traded on a forward PE of 9.6-times, compared with the ASX200 on 15.0-times. 

Food & Agribusiness (F&A) multiples improved slightly from December, according to InterFinancial, a company listed on the Queensland Leaders Industry Expert panel. At the end of January, the F&A sector traded on a forward PE of 14.6-times, compared to the ASX200's 15. 

Multiples in the Information & Communication Technology (ICT) sector improved slightly from December in line with general market improvement, although the sector continues to trade below the market. InterFinancial research found, a the end of January, the ICT sector traded on a forward PE of 13.5-times, compared with the ASX200's 15.0. 

InterFinancial, a specialist corporate finance advisor to mid-market companies, has particular insights and expertise in the area, through providing independent commercial advice to both listed and unlisted companies concentrating on mergers and acquisitions and sourcing private capital and strategic advice.

While the measures are useful, some of the specific activity InterFinancial has tracked recently is of great strategic interest to business leaders. InterFinancial has provided a summary, by industry sectors:

ENGINEERING & MINING

FLSmidth has divested non-core Ludowici activities. The sales concern the Industrial and Infrastructure businesses, consisting of Water, Seals, Industrial Rubber and Engineered Rubber. No details were provided on the buyer or sale price.

EnerMech, the UK-based energy sector services company, acquired Valve Tech Engineering. The Melbourne based business provides servicing, engineering, modification, testing and supply of valves to the oil and gas, power generation, petrochemical and refining industries throughout Australia. EnerMech MD Doug Duguid said the company will invest £10m in its Australian business over the next two years and plans to open bases in Gladstone, Brisbane and Karratha to better service oil and gas, power industry and mining clients.

SKM is said to be in advanced talks with a US party for a buyout of the company, reported the Financial Review. SKM has been rumoured to be considering a sale for over two years, and has annual revenues of over $1b.

Hyder Consulting acquired BCH Engineering, a WA-based company which provides engineering services to the Oil, Gas, Mining, Resources, Marine, Civil Infrastructure, Land Development and Industrial sectors. Hyder acquired the company to develop relationships with clients in the Pilbara region. The deal size was not disclosed.

Clough acquired e2o, a provider of specialised commissioning, completions and hazardous area inspection services to the energy and resources sectors. The acquisition will cost $14m, with an up-front payment of $9m and an additional $5m in cash and shares paid over a three-year period, subject to performance criteria. For FY14, e2o is expected to contribute EBIT of over $5m.

Germany based DEKRA acquired Russell Consulting International (RCI) in Melbourne. RCI provides consulting services in safety, occupational health and safety, and sustainability, primarily to resource companies. It employs over 30 people and has annual revenues of over $15m.

Titan Energy Services has continued its expansion in the CSG sector with the acquisition of Hofco, a directional drilling equipment and down-hole tool rental provider. The business was acquired for $21.7m, and will be funded by an entitlement offer to existing shareholders and a placement to sophisticated investors. Hofco is expected to make EBIT of $5.1m for FY2013.

Scotland based Global Energy Group acquired Vertech Group, the Perth based offshore services business. Vertech provides a wide range of specialist services to offshore drilling, construction, maritime, production and repair and maintenance contractor customers. The size of the deal was not disclosed.

US based Jacobs Engineering is seeking international acquisitions, according to CEO Craig Martin. Mr Martin said the group is focused on China, Australia and Brazil, with a preference for the oil and gas, mining and some niche markets. Jacobs has a market capitalisation of over US$6b.

Fyfe is looking to expand through mergers and acquisitions, according to managing director Mark Dayman. In particular, the company is seeking to expand its offices into NSW and WA, where it is targeting work in the oil and gas industries. Management is also considering establishing an offshore work unit which would give it the ability to target work internationally, including in North America and Asia. For CY2012, Fyfe had revenue of $67m.

Macmahon Holdings Limited confirmed it has received a new proposal to acquire its construction projects from Sembawang Australia.

Wilson Transformer Company, the private Australian manufacturer of transformers, is eyeing international bolt on acquisitions of electronic monitoring and controlling devices manufacturers.

Bradken, the consumable products manufacturer and supplier to the resources, energy and freight rail industries, is actively scouting for targets in South America where it is underrepresented. This is to support its core mining products and processing units.

Coffey announced an interim EBITDA of $15.9m for the six months to December 2012, up from a loss in the prior corresponding period. Managing director John Douglas commented that the turnaround of the business remains on track, and that the result was positive in the context of a slower mining sector. No outlook was given for the full year period.

FOOD & AGRIBUSINESS

VO2 Partners and Arlon Group made an equity investment in The Chia Company, the world's largest producer of Chia, to support its growth and global expansion. Chia is the highest plant based source of Omega 3,  fibre and protein. The Chia Company has developed the only fully traceable global supply chain for Chia, with every product traceable back to the paddock on which it was grown. Terms of the deal were not disclosed.

Patties Foods has appointed advisors to help it acquire domestic frozen food brands, CEO Greg Bourke said. The Melbourne-based company has a market capitalisation of over $200m, and is looking to grow its brand portfolio through acquisitions. The target may be under-capitalised and does not need established supply chains, as Patties can bring the target onto its existing distribution channels. Bourke said an acquisition could be between $20m-$200m. Patties is also looking to enter the US, UK, and Asia markets.

The sale process for Elders Rural Services continues, with an information memorandum believed to have been sent to potential buyers during the month. Elders put its rural services business up for sale last year rather than enter merger talks with Ruralco. Ruralco is now believed to be among the parties considering an acquisition.

Little Lion Group, the private dairy farming business, has seen interest from a number of parties who will make site visits in January and February, according to a source. The company is running a process to sell its 13 dairy farms and 20 percent of its new 35,000 tonne milk dryer in Smithton. The asking price is around $75m.

 The administrator of Australian Sugar Cane Feeds (ASF), a privately held sugar cane-based animal feed developer, is seeking expressions of interested by 1 February. ASF collapsed during January with $13m in debt. The company is owned by 80 shareholders, along with China-based majority shareholder YinMore. A potential buyer could be a sugar mill company who could turn the plant into a juice mill, where the juice could then be supplied to food and beverage companies.

Agvantage, the animal health products business, has been sold to Landmark, the Australian Financial Review reported. The report said that the acquisition makes clear that Landmark, owned by Canada's Agrium, is eager to be involved in the manufacturing of generic animal health products. The deal size was not disclosed, but it is believed to have been small.

Nuseed, the Australia based firm engaged in producing and marketing canola varieties of seeds, and a subsidiary of Nufarm, has acquired a 51 percent stake in Atlantica Sementes, the Brazil based firm specialising in sorghum and sunflower seeds, for BRL 25m. Atlantica currently has a workforce of 45 employees and reported sales of BRL 11.5m in 2012.

Global natural health and beauty products company Comvita, has acquired the olive estate business of Organic Olives Company in Coominya, Queensland.

PrimeAg has agreed to the sale of the Crooble aggregation, the MacIntrye Downs, Mullala and Milchengowrie properties with an option to sell one of either the Lower Box or Warra properties to US-based TIAA-CREF Global Agriculture.

Rowena Foods, an Australia-based ice-cream manufacturer, has been put up for sale, the Australian Financial Review reported.

Namoi Cotton and Louis Dreyfus Commodities Group have formed a joint venture for cotton marketing and commodities packing services. The Joint Venture will hold Namoi's cotton marketing and commodities packing assets, for which Namoi will receive $30.4m. Namoi will also raise $3.7m from the issue of new shares to Louis Dreyfus. The joint venture is the outcome of Namoi's cornerstone investment strategic initiative which commenced in early 2012.

Australian Premium Dried Fruit (APDF), a private Australian dried fruit processor, is looking for a joint venture or strategic partner to enter into the fruit paste food category, managing director Alan Williamson said. The company has been approached by potential buyers in the last 12 months, but Williamson said shareholders will only begin exploring an exit in three to five years, and could even just transfer ownership to employees. In the meantime, APDF will focus on entering new food categories like fruit paste, cake mixes, diced peel and apricots. It is also poised to become a distributor to supermarkets in Australia. APDF has annual revenues of around $20m.

Copack Beverage, a beverage contract packer, has appointed an advisor to assist with a strategic review, said chairman Barry Upson. The current owners are exploring a trade sale or a stake sale to fund expansion, and were seeking to close a deal by the end of February. The company has an estimated value of around $25m. Copack currently only operates three packing lines, mainly for canned and bottled beverages such as energy drinks, carbonated soft drinks, juices, cider and canned wine.

Mobandilla Land Company, the Australian cotton aggregation, has entered receivership. The business has $27m in assets and owes around $18m to NAB and ANZ. The group's properties are intended to be sold under the stewardship of PPB.

Inghams, the Australian poultry group, is expected to ask advisers to pitch for a potential IPO of the business, following the failed trade sale in 2012.

ICT

Major shareholders in ASG Group believe ASG is still engaging with its unsolicited suitor. In December it was reported that ASG expected to draw a line around discussions with the suitor by the year end. One shareholder noted that the Christmas/New Year holiday period, the fact that the suitor is foreign and that ASG has complicated contracts adds to the complexity of diligence. Major shareholders said that despite further delays in reaching a conclusion with an unsolicited suitor, they still had no reason to doubt the sincerity of the unidentified bidder.

Hexagon AB, leading global provider of design, measurement and visualization solutions, has acquired Listech, a Melbourne-based software development company dedicated to increasing the efficiency, accuracy and productivity of professional surveyors and engineers. Listech was fully consolidated as of February 1, 2013. The acquisition will not have any visible impact on Hexagon's earnings in the short term.

Electronic payment software solutions and services company GFG Group has formed a strategic partnership with Australian specialist IT solutions and services delivery provider, Attra. The partnership boosts service delivery to existing and new clients and sharpens GFG Group's competitiveness in key emerging markets. Attra specialises in providing independent software testing, application management, portfolio migration, integration and consulting services to clients in the banking, finance and payments industry. Its clients include multinational banks, financial institutions and card processors in 19 countries across five continents.

Lexmark International has announced the acquisition of Acuo Technologies LLC, a recognised leader in high performance software and services for clinical content management, data migration and vendor neutral archives, for a cash purchase price of approximately $45 million. Acuo Technologies, when combined with Lexmark's Perceptive Software healthcare software solutions, will enable customers to deploy a single, enterprise-wide access platform for clinical content via any electronic medical record system.

Coventry Group Limited (CGL) through its wholly owned subsidiary Managed System Services (MSS) has acquired Multipro IT with effect from February 1, 2013. Multipro IT is a fully integrated IT and Communications company offering Managed Services, Projects, Consulting & Advisory and Business Solutions to small to medium sized enterprises predominantly in WA.

Experian Plc, the listed Ireland based company that provides data and analytical tools to organizations and consumers, has acquired Pacific Micromarketing Pty Ltd, Australia based company provider of marketing solutions through surveys, records, and analyses database, from PMP Limited, for a consideration of US$6.5m.

Sensis Pty Ltd., the Australia based provider of advertising, commercial search, information management, mapping, and information technology solutions has acquired Australian Local Search Pty. Ltd., the Australia based company engaged in operating online directory of Australian businesses, from News Limited, the Australia based company engaged in operating as an online newspaper publishing company, for undisclosed consideration.

Inabox Group, the Australian wholesale telecommunications company is aiming for a full IPO on the ASX in mid-2013. The company turns over about $50m in annual revenue and is hoping to raise around $2-3m through a full float, with the proceeds to be mostly used for working capital and to complete a "highly complementary acquisition", a source familiar with the situation said. Inabox is aiming to raise a relatively small amount of capital because it is essentially looking to complete a compliance listing, and will predominantly be targeting retail investors.

Technology One is looking to open a new office in Singapore. Executive chairman and CEO Adrian Di Marco said that over the next 12 months, the company is planning to penetrate Singapore, which is close to its existing Malaysia office and is a sizeable market to tap into. The company is also present in New Zealand and the UK, a market which the company plans to expand further by opening two extra offices over the next 12-24 months. Di Marco ruled out selling the UK division despite it reporting losses of A$1.3m in its 2012 annual report.

Madison Technologies, the Queensland, Australia-based manufacturer and distributor of communications hardware and wireless products, will kick off an acquisition hunt in six months time, CEO David Redfern said.  Based on past deals, it takes Redfern about a year to find the right target, and a couple of years to integrate the assets and staff into Madison, which recorded FY11-12 revenues of close to A$60m.

BuildingIQ, a private Australian energy management software company, could seek additional equity and strategic investors in late 2014, said founder and CEO Mike Zimmerman. The company, which recently secured US$9m from strategic investors to continue its US growth, could seek additional funds for further US growth and to enter other global markets, he said. The company has raised A$15m to date.

It was reported that Pronto Software could be the next Australian ERP software target for acquisitive offshore IT players. Managing director David Jackman said the Victoria-based company fields takeover approaches on a weekly basis, mostly from bankers representing offshore private equity firms.

Mahindra Satyam (formerly Satyam Computer Sevices) is now looking for acquisition targets in Australia and the EU, The Business Line reported. According to the paper, the Indian IT company is currently sitting on an INR33.11bn (US$621.44m) cash pile, which Satyam intends to use for making buys in engineering services, healthcare, and manufacturing verticals.

REA Group, the Australian online real estate classified group, is interested in buying Deutsche Telecom's digital classifieds business, Scout24. Last month various news organizations claimed Deutsche Telecom had begun talks with advisers and buyers about the Scout24.

http://www.interfinancial.com.au/

* About the researchers: InterFinancial was formed in 1987 and is the Australian firm of Clairfield International, an international corporate finance partnership that provides advisory services to clients ranging from family businesses to large multinational corporations and private equity funds.

Queensland Leaders inspires the next generation of leading companies.

It does this by sharing the experience and leadership of Industry Partners in conjunction with the knowledge and experience of Industry Experts.

Each year Queensland Leaders selects 25 private growth companies to become Members.

Each selected Member company undertakes a 12 month Executive Series where they receive the skills, knowledge and capital to become the next generation of leading companies headquartered in Queensland.

Queensland Leaders assists Member companies to achieve sustainable growth, manage succession planning and access debt and equity capital for future growth opportunities.

These Members undertake the Queensland Leaders Executive Series with a focus on skilling up the founder and senior executives of the organisation.

The Executive Series provides Members with exclusive access to strategic, investment and other market opportunities. Once the Member companies have completed the annual Executive Series, they become Alumni Members and stay engaged with the network for a further two years.

Queensland Leaders has launched a series of new initiatives in recent times, one being the Leaders Resource Centre.

The Leaders Resource Centre provides Queensland Leaders companies with access to the most relevant and timely knowledge, networks & information to utilise at any time.

This valuable resource includes digital presentations, ‘Leaders Insights’ interviews and full social networking opportunities with the broader network.

The Leaders Resource Centre is exclusively available for those associated with Queensland Leaders.

Queensland Leaders is pleased to unveil the Member companies for the 2013 series.

www.queenslandleaders.com.au

Queensland Leaders 2013 Member companies:

The Australian Drug Detection Agency (ADDA)

http://www.tadda.com.au/

Baseline Training

http://baselinetraining.com/

Corporate Protection Australia Group

http://cpagroup.com.au/

Digibox

http://digibox.pro/

EPIC Employment Service

http://www.epic.org.au/

Flinders Group

http://www.flindersgroup.com.au/

Foresters Community Finance

http://www.foresters.org.au/

HMG Hardchrome

http://www.hmghardchrome.com.au/

Hydrexia

http://www.hydrexia.com/

ImmersaView

http://www.immersaview.com/

JBM Projects

http://www.jbmprojects.com.au/

Market Savvy

http://www.marketsavvy.com.au/

Multicap

http://www.multicap.org.au/

Neil T Fallon Services

http://fallonservices.com/

Nordon Cylinders

http://www.nordoncyl.com.au/

O2 Environment + Engineering

http://www.o-2.com.au/

Power-Choice Energy

http://www.powerchoice.com.au/

Power Pumping

http://www.powerpumping.com.au/

Richard Jay Laundry Equipment

http://www.richardjay.com.au/

Technigro

http://www.technigro.com.au/

Thew & McCann

http://www.thew.com.au/

Travel Concepts + The Cruise Centre

http://www.travelconcepts.com.au/

Uniline Australia

http://www.uniline.com.au/

VAE Group

http://www.vaegroup.com.au/

ends