Many Australian businesses are not protecting themselves against the risk their customers might go insolvent, according to a joint survey by the Institute of Internal Auditors – Australia (IIA) and credit insurer, Atradius.

A survey issued to more than 400 Chief Audit Executives found that despite almost one in five businesses experiencing a significant financial loss due to debt defaults in the last year, almost 20 percent did not take action to mitigate the risk of non-paying customers.

In addition, the survey found that 70 percent of businesses do not insure against customer insolvency, a surprising result given the number of high profile corporate collapses in the wake of the Global Financial Crisis.

These results coupled with the latest Dun and Bradstreet business-to-business payment figures which found that lagging payments are hurting half of Australian companies, send a very clear message.

David Huey, managing director of Atradius Australia and New Zealand warns businesses to “Keep a close eye on your creditors’ ability to pay their bills.

“While local economic indicators point to recovery, cash flow is still a concern and we’re continuing to see a spate of corporate insolvencies.”

Not only do businesses need to know who their clients are but also their client’s clients as one major insolvency can have a crippling affect throughout a supply chain,” added Mr Huey.

The IIA/Atradius survey also identified some of the risk mitigation strategies used by the respondents included implementing a credit management policy (79 percent), reducing reliance on a single buyer (37 percent), requesting up-front payment (32 percent) and credit insurance (11 percent).

Despite a large number having a credit management policy, alarmingly less than half (45 percent) undertake credit checks on would be buyers and for those who do credit check, 95 percent relied only on credit agency rating.

According to IIA chief executive Chris McRostie, even though the threat of recession has receded, organisations must not repeat the mistakes of the past.  “As we found out, one of the big lessons from the GFC is that low probability, high impact risk can indeed crystallize and precipitate catastrophe for the unprepared.

“The upshot is that organisations cannot afford to be complacent and the risk of a major customer being unable to pay their bills is a major risk in anyone’s language.

“We strongly encourage companies to vet all possible solutions on a cost-benefit basis to work out what’s right for them.  In some cases, credit insurance will make sense, in others it won’t – but companies will never know unless they do a proper risk analysis in the first place,” added Mr McRostie.

Microsoft and PBL yesterday launched Cudo.com.au, yet another Groupon clone in an already crowded Australian market filled with the likes of JumpOnit, Ouffer, Spreets, OurDeal and Scoupon run by Catchoftheday.

Groupon clones like Cudo.com.au have sprung up like weeds in Australia since the start of the year, we have already covered JumpOnIt’s launch in July as well as OurDeal’s launch into new territories and Catchoftheday spinoff Scoupon.

Until now all of these Groupon clones have been run by small nimble start-up businesses or in the case of Catchoftheday as a spin off of an already successful daily deals business model, this is the first time a big corporate has decided to muscle in on this growing market.

Cudo is a joint venture between Microsoft, PBL Media and ninemsn and hopes to leverage the size and marketing resources of the three companies to carve out a profitable niche in an overcrowded market.

Initially Cudo.com.au will launch in Sydney and Melbourne with daily deals, in addition to national weekly deals, with Cudo to launch in Brisbane in October followed by other capital cities and key regional hubs such as Newcastle and the Gold Coast. Existing Groupon clones in Australia face an all out assault from Cudo.com.au with Cudo launching a major multi-channel advertising campaign, including TV, print and online media nationwide, with the majority appearing across the PBL Media properties of Channel Nine, ACP and ninemsn.

Billy Tucker, CEO, said Cudo.com.au and its parent organisations provide a unique competitive advantage for the new site, giving it significant reach at launch thanks to integration across the PBL Media network:

“This reach and the continued commitment we have from our partners puts us in an enviable position and at a competitive advantage when it comes to securing the best value and lowest price offers for our customers.”

Retail spending increased by 0.7% in July, following revised increases of 0.4% in both June and May, according to the latest figures from the Australian Bureau of Statistics. The biggest increase was in cafes, restaurants and takeaway food services, which recorded a 1.5% increase in sales, followed by food retailing at 0.4%, clothing, footwear and personal accessory retailing at 0.4% and other retailing at 0.4%. Department store retail turnover decreased by 0.4% during July. Victoria and New South Wales recorded the highest increases at 0.8% and 0.6% respectively, while Western Australian, Tasmania and the Australian Capital Territory all recorded declines.

Meanwhile, the ABS also reported a seasonally adjusted current account deficit of $5.64 billion in the June quarter, down from a revised deficit of $16.457 billion in the March quarter. The ABS said the decrease of $1.26 billion in the deficit in chain volume terms would contribute 0.4 percentage points to growth. It also said net foreign debt increased by 2% to $671.8 billion in the June quarter, while It was at $624.2 billion in the same period during 2009. The Bureau also said building approvals increased by a seasonally adjusted 2.3% in July, with a total of 13,732 buildings given approval, the first increase in three months.  The result comes after a Reuters poll indicated economists predicted a 0.7% decline in building approvals.

“Both (retail and building) are potential indications that some of the dead weight from rapid-fire rate rises earlier this year is starting to ease up,” Commonwealth Banking Group chief economist Micheal Blythe told Reuters.

“I think we are a long way from that (rate cut) nor is there enough here to say (that there will be) imminent rate rises either. There is plenty of information to come tomorrow, and the next month or two will be more important for that interest-rate story.” Centro Properties Group has recorded a loss of $652.7 million during the year to 30 June, but notes this is an improvement from the $3.54 billion loss recorded during the previous corresponding period.

The company said the improvement was due to lower property valuations and the impact of the strong Australian dollar. Chief executive Robert Tsenin said the company at $18.6 billion in investment properties and $18.4 billion debt.  “This is clearly an unsustainable capital structure,” he said in a statement. “Any restructure will be complex and must be critically linked to reducing the leverage and financial risks confronting us.”

“Subject to market conditions, it is expected that any restructure could take through to the end of 2011 to implement.”

Senior Reserve Bank official Guy Debelle has warned there remains a risk of a double-dip recession, although quantifying just how likely it is remains difficult. The RBA deputy governor gave the warning following a speech this morning, said the situation was difficult for government and policy makers to read. “I think it’s a risk, but it’s a somewhat unquantifiable risk,” Debelle said in response to a journalist’s question about the potential for another recession. “It’s difficult to take into account risk and uncertainty in structure in balance sheets and the like, it’s difficult to take risk and uncertainty into account when conducting policy.”
“In policy you have to take account of the modal events rather than the tail event, which means almost certainly you’re going to be wrong. You’re just not sure in which direction you’re going to be wrong.” Debelle was speaking just a day after US Federal Reserve chairman Ben Bernanke said that the US central bank remained ready to provide the struggling US economy with further stimulus is required. Fears that the US could crash into a fresh recession have weighed heavily on share-markets in recent months, and appear to be acting as another drag on consumer and business confidence.

Debelle also gave a speech focussing on risk and uncertainty in the financial world after the GFC, and called for regulators to look to restrain the level of debt in the global financial system.

“Leverage played the major role in translating events which would have been somewhat damaging, but survivable, into events which were fatal.”

He also argued banks and other financial institutions may have misread the potentially disastrous problems that debt can cause as strong economic growth continued through the 1990s and 2000s.

“The decline in volatility led many to conclude that a new, more stable, regime had been established.”

At the time of writing the profit-reporting season was drawing to an end. So prepare to be inundated with post-mortems of the results by analysts, investor websites and the media over the coming week. In aggregate, profits lifted by almost 87% over the year to $40 billion. Clearly this result is significantly affected by bell-whether companies like BHP Billiton and News Corp. But stripping out those companies still reveals a 30% lift in aggregate earnings. And averaging the results reveals a similarly impressive 45% lift in earnings. In the smaller sample of 34 ASX 200 companies reporting half-yearly results, earnings have lifted on average by 78% compared with a year ago.
Interestingly, the lift in profitability wasn’t driven by consistent gains in sales (revenue). In fact average revenue growth was just under 5%. But neither were businesses slashing expenses to boost profitability. On average across the major companies, expenses fell by 5% over the year. But unlike last year write downs certainly weren’t an influence on profit results. A year ago companies (especially in finance and property sectors) were forced to downwardly mark to market the value of assets but over the past year asset values stabilised and there were rare upward revisions.

One other stand-out feature of the profit-reporting season has been the sharp lift in cash holdings. As at June 30, the 138 ASX 200 companies that have reported results had cash holdings of almost $100 billion, up 13% on a year ago. Not only are companies back in the black but they are cashed up for expansion. Retained earnings are even healthier at $136 billion, up 15% on a year ago.

Bloomberg has also compared the latest profit results with analyst expectations. Of the companies that reported full-year earnings, 45% were above consensus earnings per share estimates while 55% fell short of estimates. (Bloomberg assigns results to either positive or negative surprises and doesn’t have an “in line” category). Most positive surprises were in the basic materials sector (58%) while only 32% of results in the financial sector beat expectations.

While there was some disappointment on earnings from an analyst perspective, the lack of guidance from companies has also been a concern. Overall, analysts and investors alike should be happy with the health of company balance sheets, but as always it is the uncertain future that dominates. And that suggests that the sharemarket will continue to move sideways until better signs emerge on the US economy.

The week ahead

In the coming week not only does the calendar flip over from August to September but winter comes to an end. And as is usual with a change in seasons, there will be barrage of economic data to usher in the transition to spring. In fact there are no fewer than a dozen key indicators to be released over the week with GDP (economic growth) figures one of the stand-outs on Wednesday.

On Monday the Bureau of Statistics releases data on profits, sales and inventories. On Tuesday (”terrific Tuesday”) retail trade, building approvals, government finance, private sector credit and the current account are issued with a speech by Reserve Bank Assistant Governor Guy Debelle thrown in for good measure. The Performance of Manufacturing index is released on Wednesday alongside the GDP figures while international trade is issued on Thursday and the Performance of Services index and tourism data are slated for Friday.

At this early stage of data collection, we expect that the Australian economy grew by 1.1% with household spending and dwelling construction both higher and the trade sector likely to add a small 0.1 percentage point contribution to growth. Overall the result will signify that Australia is well on its way to notching up 20 consecutive years of economic growth, but it will mask the weakening in economic momentum over the past two months.

This loss of momentum has clearly shown up in consumer spending, up just 0.5% over the past five months. But the longer that the Reserve Bank stays on the interest rate sidelines, the better the outlook for retailers will be. We expect that retail trade lifted 0.4% in July after a 0.2% gain in June.

Dwelling approvals probably rose by 1.5% in July, for the simple fact that recent declines appear over-done. In fact approvals have fallen in five of the past six months and fell by 3.3% in June.

Of the other data, expect another solid trade surplus, flat readings for manufacturing and services activity and further weakness in tourism flows.

If the US is to avoid a ‘double-dip’ recession it all boils down to whether there is a pickup in job growth. If jobs aren’t created, consumers don’t spend and businesses don’t receive income, causing them to constrain investment and employment. Certainly businesses have been making money but they have been more focussed on cutting debt rather than growing.

Unfortunately economists don’t believe that the start of the jobs recovery began in August with predictions that only 44,000 private sector jobs were created in the month. And unemployment is tipped to have lifted modestly from 9.5% to 9.6 cent with no change in the average number of hours worked.

The other economic indicators are expected to provide mixed readings. Personal income and spending may have both lifted by 0.3% (Monday). And consumer confidence may have also edged higher in the latest month (Tuesday). But economists believe that the ISM manufacturing index eased from 55.5 to 53.3 in August (Wednesday) while the ISM services index may have also softened in the month (Friday).

Other indicators to watch over the week include house prices (Tuesday); construction spending, auto sales and the ADP employment index (Wednesday); and pending home sales (Thursday).

Sharemarket

If the conventional wisdom is to be believed, the Australian economy will continue to be protected from any gloom in the US and Europe by virtue of its strong links to Asia, especially China. But that rationale certainly hasn’t played out on the sharemarket – for this year at least. Two-thirds of the year is almost over and the Australian sharemarket has fallen by just over 10%. By contrast the US Dow Jones is holding up far better, even with an economy at risk of a double-dip recession. The Dow Jones has only fallen 3.5% over the year with the Nasdaq down 5.6%. Even in Europe the German Dax has only fallen 1% this year while the UK FTSE is down by 5.6%.

We haven’t changed our projection for the end of the year, but it is looking more challenging by the day. CommSec continues to tip the All Ordinaries/ASX 200 at 4,800 points by end year. While company balance sheets are healthy and the outlook for the Australian economy remains promising, our sharemarket continues to track offshore markets closely, especially the US Dow Jones.

Interest rates, currencies & commodities

The gap between fixed and variable mortgage rates has narrowed markedly in recent months and the process may have further to go. The Reserve Bank reports that 3-year fixed rates are around 7.50% currently, compared with 7.40% for the standard variable rate. Earlier this year, fixed rates were just over one percentage point higher than variable rates. In large part the gap has narrowed because variable rates have risen. But fixed rates have also eased 30 basis points between April and July. And with market rates down around 25 basis points over the past fortnight, fixed housing rates could fall even further, dropping below the variable rate. Just goes to show that you always need to keep your eye on the ball.

The Australian dollar is on track for a very average year. Over the past 25 years, the Aussie dollar has fluctuated on average by US13.5 cents a year. So far this year the Aussie dollar has moved US13.2 cents.

The Australian Taxation Office might be cracking down on high-profile tax evasion cases, but experts say SMEs are still being treated leniently and that approach will continue until the economy hits full speed. A number of high-profile names have hit out at apparently aggressive tactics used by the ATO, including actor Paul Hogan, who was banned from leaving the country last week and faces a $37.6 million tax bill, which he has disputed. This morning in The Australian, property developer Craig Gore has also lashed out at the ATO, with whom he is currently engaged in a number of disputes. He says he has received $70 million in tax bills, but has described most as “”fictitious tax liabilities”.

But experts say more attention is being given to long-term tax fights rather than SMEs, who still have significant facilities available to them for assistance. Tax Institute senior counsel Robert Jeremenko says the ATO is cracking down on high-profile cases, but there is still leniency available for SMEs and the office has taken a softer approach to smaller, struggling companies. “The tax commissioner has been quite clear about this, in public messages to small businesses over the past couple of years, that he will be taking a lenient approach to small business in these economic circumstances. That was a welcome approach.”

Sue Prestney, MGI Australia chairperson and SME spokesperson for the Institute of Chartered Accountants, says SMEs are still being approached quite leniently. “We did see during the GFC the ATO has been quite lenient, in arranging payment terms and reducing the general interest charge. They have shown leniency in difficult times, and that has been a good approach.”

“Really that leniency is welcomed, because what’s the point of sending a business to the wall if it can actually continue to trade by arranging some payment options?” Earlier this year, ATO commissioner Michael D’Ascenzo extended the small business assistance package until June 30, 2011, with companies under $2 million in revenue able to access 12-month interest free payment arrangements and deferrals for activity statement payments.

Last year, D’Ascenzo said in a speech it was more important for the ATO to “”differentiate between businesses likely to remain viable, if given reasonable latitude, and those that show little prospect of surviving the present downturn”.

A report in The Australian today claim small business debt has increased over the past 18 months, with the small business share of overall tax debt hitting $8 billion at June 30, well over the usual amount of between $2-2.7 billion. However, the more lenient approach won’t last forever. There are growing concerns about how small businesses are managing their finances and debt, especially considering the extension of the interest-free payment program.

The ATO has also said this year it is cracking down on a number of specific tax evasion issues, including phoenix arrangements, offshore financing and DIY super funds. It also set aside several million over the next four years to target GST evasion in small business.

Jeremenko says while the leniency program has been extended until June 30, 2011, the softer approach will disappear as the economy improves. “I imagine the tax office will soon enough be moving to a business-as-usual approach, now that the treat of an Australian recession has passed to some degree. I believe the ATO is being very economically-minded in taking that approach.”

He points to the ongoing Wickenby investigation, which received an extra $122 million earlier this year, and says SMEs will still need to watch their compliance even though the ATO is giving smaller companies some breathing room. “The ATO’s aim is simply to make sure people are complying with the tax laws, and that applies from the small end of town to the big end of town. The Tax Institute supports that project.”

Prestney also believes the attitude of the ATO will change as the economy recovers and more businesses start delivering better results. “I think this approach is changing. It won’t last forever, and my recollection is that they’ve said it won’t last forever. The approach will change as the overall economic situation improves.”

CPA Australia spokesman Paul Drum says the ATO will be “raising the stakes” in its audit program. “Leniency in payments are being maintained, but we expect the compliance program in 2011 will have a bigger emphasis on SMEs.”

The National Employment Standards (referred to as “NES”) were provided by Government in the Fair Work Act 2009 to all employees in Australia. This act came into affect on 1 January, 2010. It establishes the rights of employees in Australia and the rights and responsibilities of employers. Significantly all employers must provide to all new employees, a copy of the specific entitlements noted within the NES. You can obtain a copy of this from B B Whitehouse or the government web page- www.fairwork.gov.au. The rules have changed and it is important that as an employer you consider what is required carefully in the future and as an employee, you understand your rights.

National Employment Standards for Year 2010: All You Need To Know  

All employers and employees in the national workplace system are covered by the new National Employment Standards (NES) from 1 January, 2010. Under the NES, employees have certain minimum conditions. NES ensures minimum wage orders and pay rates in modern awards (Which also take effect from 1 January, 2010) for employees.

You come in the national workplace system if you are –

1.      Employed by a constitutional corporation ( these are corporations that are trading or financial, usually Pty Ltd or Ltd companies),

2.      Employed in Victoria, Northern Territory, Australian Capital Territory,

3.      Employed by the Commonwealth or a Commonwealth authority,

4.      A waterside employee, maritime employee or flight crew officer employed in connection with interstate or overseas trade or commerce,

5.      Queensland, South Wales, South Australia and Tasmania, Sole traders, Partnerships, Unincorporated entities and Non-trading corporations have joined National Workplace System, from 1 January 2010.

Minimum conditions to be fulfilled by employers under NES 2010 –

1.      Maximum hours of work – 38 hours per week plus reasonable additional hours.

2.      Requests for flexible working arrangements- if you are a parent or guardian of a child under school age or of a child under 18 with a disability, you can request for a change in working arrangements to assist with the child care.

3.      Parental leave and related entitlements- up to 12 months unpaid leave for every employee, plus a right to request an additional 12 months unpaid leave, and other forms of maternity, paternity and adoption related leave.

4.      Annual leave – 4 weeks paid leave per year and an additional week for certain shift workers.

5.      Personal/carer’s leave and compassionate leave – 10 days paid personal/carer’s leave, two days unpaid carer’s leave as required and two days compassionate leave (unpaid for casuals).

6.      Community service leave - unpaid leave for voluntary emergency activities and leave for jury service, with an entitlement to be paid for up to 10 days for jury service.

7.      Long service leave - a transitional entitlement for certain employees who had certain LSL entitlements before 1/1/10 pending the development of a uniform national long service leave standard.

8.      Public holidays – a paid day off on a public holiday, except where reasonably requested to work.

9.      Notice of termination and redundancy pay – up to 4 weeks notice of termination ( 5 weeks if employee is over 45 years and with 2 plus years of continuous service) and up to 16 weeks redundancy pay, both based on length of service.

As a part time employee, (who may or may not be in the national workplace system) you are entitled to -

1.      Parental leave and related entitlements (this also applies to casual employees who have been employed for at least 12 months by an employer on a regular and systematic basis and with an expectation of ongoing employment).

      2.   Notice of termination.

As a casual employee, you will be entitled to-

1.      Two days unpaid carer’s leave and two days unpaid compassionate leave per occasion.

2.      Maximum weekly hours.

3.      Community service-leave (except aid jury service).

4.      To have a day off on a public holiday, unless reasonably requested to work by the employer.

5.      Provision of the Fair Work Information Statement.

6.      Make request for flexible working arrangements and parental leave (if you are a casual employee who have been employed for at least 12 months on a regular and systematic basis).

If you are not covered by awards or employment agreement, as an employee you are entitled to – 

        1.   Averaging of hours of work, subject to conditions such as a maximum of 26 weeks,

        2.   Extra annual leave in exchange for foregoing an equal amount of pay.

  (Note: employees in this category may make agreements about the provisions        mentioned above).

If you are an employee, covered by awards and agreements, you are entitled to –

Awards, agreements and award and agreement based transitional instruments may supplement the NES by providing entitlements that do not disadvantage employees in comparison with the NES. A certain amount of flexibility is also allowed in the operation of the NES. For example, awards and agreements may specify terms that are flexible in relation to-

       1.    Averaging an employee’s ordinary hours of work,

 2.    The cashing out of and taking paid annual leave,

 3.    The cashing out of paid personal / carer’s leave,

       4.    The cashing out of or taking paid annual leave,

       5.    The substitution of public holidays,

       6.    Situations in which redundancy pay entitlements do not apply.

IMPORTANT - Terms in awards, agreements, transitional awards and agreements and employment contracts cannot exclude, or provide for an entitlement less than the NES.

Regional employees are more engaged with their employers and less likely to seek employment elsewhere than those in metropolitan areas of Australia, according to new data. This higher job satisfaction and engagement has a direct impact on the tendency for employees to seek alternative employment, with job seeking activity in regional areas significantly lower than metropolitan Australia.

In regional areas 51 percent of employees have considered looking for a new job in the last six months versus 57 percent in metropolitan areas, with 25 percent of regional employees verses 32 per cent in metropolitan areas acting on this and actively looking for alternate employment.
This translated into actual job applications with 17 percent of regional employees versus 24 percent actually applying for jobs with other employers in the last six months. Leadership Management Australasia’s Leadership, Employment, and Direction (L.E.A.D.) Survey looking into the regional-metropolitan divide in Australia found that 68 percent of regional employees rate their job enjoyment as very high/high compared to 63 percent in metropolitan areas or cities, with 66 percent in regional areas feeling very highly engaged with their employer and its goals, compared to 62 percent in metropolitan areas.

This higher job satisfaction and engagement has a direct impact on the tendency for employees to seek alternative employment, with job seeking activity in regional areas significantly lower than metropolitan Australia. In regional areas 51 percent of employees have considered looking for a new job in the last six months versus 57 percent in metropolitan areas, with 25 percent of regional employees verses 32 per cent in metropolitan areas acting on this and actively looking for alternate employment. This translated into actual job applications with 17 percent of regional employees versus 24 percent actually applying for jobs with other employers in the last six months.

General Manager of Leadership Management Australasia (LMA), Andrew Henderson attributes these differences to a number of factors. He says the improving workplace issues, greater pay / job security,  better understanding of the aging workforce, and trust in management of regional centres all lead to a happier workforce, and as a result, happier employees enjoy their jobs more, are more engaged, and therefore less inclined to look elsewhere.

Henderson also says that much of this is attributed to the very nature of regional organisations being more people focussed than larger metropolitan organisations.

“People in regional areas, having developed their sense of community from having to deal with adversity and volatility over the years, have become more adept than capital metro areas in looking after the human side of human resources,” he said.

American clothing chain Gap is keeping an eye on the rampant discounting currently plaguing the Australian retail industry, saying while its products are competitively priced in comparison to local retailers, it will not engage in any type of price war.

With the chain opening its first Australian store in Melbourne’s Chadstone Shopping Centre today, the first of several over the next few years, Gap’s strategic alliances chief Stefan Laban says the company is concerned about prices. “Our concern is that the market will become even more value driven,” he says.

“There is a lot of pressure on pricing, and with sales such an important part of our structure here it’s important. We aren’t worried, but we can see that happening.”

“There are two methods to follow in retail. One is to just compete on price and compete that way, and the other method is to just try and keep prices up. We’re going with that latter method, and trying to keep quality high.”

Laban says the company’s flagship denim jeans will sell for about $100, which he says is in line with similar comparable products in the fashion-saturated Melbourne market. However, he says Gap will offer more of a stable product range, rather than following the latest fashion trends.

“We’re not trying to find a fashion niche here, we are confident in bringing our denim products here. Melbourne is very fashionable, but I also think they have a good sense of quality and they have a good sense of casual wear as well. We are confident we’ll do well.”

The company hopes to open up to 15 stores over the next three to four years in Australia, a slow rollout due to the difficulty in finding the appropriate available retail space. The Chadstone store is 1,200 square metres, with the Sydney store opening next month to cover 800 squares.

“When we enter international markets, we want to do it right. Brand recognition for Gap is high here, but we also have to make sure we find the right real estate. We are looking for big stores, and our attitude is that we should wait to find the right size store.”

“The Chadstone store is rather on the big size. The average retail store in the Australian market is about 300-400 square metres, but our stores will be a little bigger. We want to show the full assortment.”

The new Chadstone store is actually a combination of Gap’s flagship denim products and its baby/young child wear stores, with the latter taking up about 40% of the store. Laban says this approach provides the company with a key point of difference to other child wear retailers.

“We think there are some strong child brands out here, but we think our assortment is strong. We stand for colour, quality and good value for money, and we think we bring something that isn’t here just yet.” Although Gap has continued to struggle in the US, with same-store sales down 6% in July, Laban says the international push has been developed over the past two years and isn’t a specific strategy designed to pull the company out of trouble.

“The Australian opening has nothing to do with the US. Gap is a global brand, we’re opening in China this year as well, and Australia is just part of that international expansion. We think we bring something new to the market here.”

“When you enter a new market you want to make sure you have the right partner. That has taken some time as well.” Laban points to international retailers entering Australia, including Zara or the rumoured expansion of H&M, saying this will deliver more competition and attract other retailers here.

“Personally, I think this is great for the consumer here. With Zara coming and others I think in a year from now, consumers will have a better off and more value for money.” Laban says Gap has no immediate plans to bring the company’s other popular brands, Old Navy and Banana Republic, to Australia, saying the Gap brand will be its main focus for now.

“We’re looking at 10-15 stores in the next three to four years, and eventually we could do as many as 25 stores. We want to present in the great malls here, and be part of the offering to the Australian consumer.”

Rapidly-growing education provider RedHill Education will brave the tough market conditions to launch a $27 million float that it says will help it grab a bigger slice of Australia’s $49 billion education market. The company, which was established in 2006, has two key businesses: in English language and teacher training institution Greenwich College and Go Study Australia, which provides agency services primarily in Europe and South America.

Part of the proceeds from the float will be used to acquire two more educational institutions: IT trainer the Academy of Information Technology, and the International School of Colour and Design. Chief executive Paul Tobin says talks with institutional investors are progressing well, with the company it has at least one cornerstone investor on board.

While market conditions remain choppy, Tobin says he is confident investors will see the strength of RedHill’s underlying business. “You can’t control the day-to-day stuff. The US housing data overnight was just one of those things that happens.”

RedHill says it is profitable and operating cashflow positive. It posted earnings before interest, tax, depreciation and amortisation of $3.7 million in 2009-10, and plans to increase this by over 30% to $4.9 million in 2010-11.

While Australia’s export education market has taken a battering in the last 12 months, with a number of education providers collapsing and the Federal Government changing the rules regarding student visas, Tobin says RedHill has weathered that storm.

“No one is immune but what the government is really trying to do is move from migration outcomes to a more quality-based outcome. That suits us, because we are focussed on that sector. We are not exposed to the sub-continent and that’s where the impact has been most felt.”

He says the company will also remain on the hunt for acquisitions after its IPO – providing he can find the right target.

“It’s a very fragmented market. There are more than 4,000 companies just in the vocational learning space, but the number of businesses that have high-quality management teams and terrific courses is low.”