Foreign exchange impacts hurt Navitas overseas earnings and it suffered from falling international student enrolments in British and United States universities. Shares in education services provider, Navitas, fell 1. If it continues, the Australian dollars surprise rally to US7. Persistent global volatility and a rising Australian dollar are treacherous headwinds. Sentia as the reporting season unfolds this month. Sentia shares have fallen almost two thirds from their peak. The media monitoring firm joined a long list of Australian companies that disappointed overseas when it wrote off its content marketing acquisition, Content King, in August. The acquisition looks good on paper, but it reduces the companys return on capital and exposes it to greater cyclicality. Fidelitys Abela says most Australian companies fail overseas because they overpay for acquisitions, use too much debt and overestimate their capabilities. Investors, however, have good reason to be sceptical. But Im disappointed it never took that concept overseas and tried to take on global players, rather than now having to defend its market from the likes of Amazon. I admire JB Hi Fi and think it has an amazing business model in consumer electronics. Gil avoids companies that lack international ambition. Its important that companies focus offshore and arent swayed by market negativity towards this expansion.
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International operations can be a formidable source of growth for small companies. You hear a lot more about the train smashes than the companies that sustainably grow offshore. Gil says there is a misguided perception that most Australian companies struggle overseas.
#Australian personal finance software software
If you are a software company these days, you are contesting in international markets from the start. Thats a product of a flattening global economy and companies focusing on vertical rather than geographic markets. Theres been a marked increase in micro cap and small cap companies looking offshore, he says. 0 per cent of micro cap companies in his top rated fund are internationally focused. Equities Asset Management chief executive Carlos Gil says emerging Australian companies are internationalising much earlier these days. Flight Centre Travel Group has recovered this year as the market re rates its offshore growth prospects. Travel, a European business travel group, is rapidly building an international footprint, as is Corporate Travel Management, a stock that Fidelitys Abela favours. Microsoft has essentially conceded that theres no demand for the personal finance software product. Online travel group, Webjet, which this month acquired Jac. In logistics, Black nominates New Zealand based Mainfreight as an example of a company that is expanding overseas through organic growth strategies. Examples include IRESS, GBST Holdings, Praemium and Bravura Solutions.
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Our large pool of superannuation funds has nurtured many successful Australian fintech companies that are making good, early inroads overseas. Black says several Australian financial technology companies are growing overseas, particularly in Britain. A spike in software listings on ASX in the past three years has provided new choices for investors seeking globally focused small caps. Tech Global, Gentrack Group, Aconex and other ASX listed software companies are expanding offshore. The poor record of Australian companies overseas is slowly improving as a new breed take on global markets. But that does not necessarily make it the right decision. Directors are motivated to consider overseas expansion if growth in their home country is waning.
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Pengana Emerging Companies Fund co manager Steve Black says The small cap landscape is littered with disastrous overseas forays that start in the boardroom. Its an issue that investors must consider. But when they do make inroads, gains can be very substantial over a long period. Only one in five Australian companies that expands overseas succeeds on a sustainable basis, says James Abela, portfolio manager of Fidelity Future Leaders Fund. Finding companies with unique intellectual property and the management skill and balance sheet to win offshore is harder still. For investors, that means focusing on smaller companies in sectors with strong growth prospects in the digital economy. Australias small economy, challenged growth outlook and influx of foreign competition is encouraging more companies to look offshore. Yet investing in companies that can grow overseas has never been more important. For every Australian company that delivers rapid offshore growth, many landmines lurk. The latest corporate reporting season shows the risks and rewards of owning companies with an expanding international footprint.
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Australian companies expanding their wings offshore.