Conditions for Australian SMEs continued to deteriorate in the final quarter of 2008, but smaller companies are still fairing better than larger companies.
NAB’s SME business conditions index for the December 2008 quarter decreased three points to -4, the lowest point since the survey commenced in June 2006. Only 23% of SMEs reported good or very good conditions, while 27% reported poor or very poor conditions.
Still, the -4 index reading for SMEs was better than that for large companies, which fell to -11.
The smaller you are, the harder it gets. Small SMEs with annual turnover between $2 million and $3 million are the worst performing segment at -10 index points, while business conditions for companies with revenue between $3 million and $5 million were the second worst at -6 points.
Larger SMEs with earnings between $5 million and $10 million were the best performing at -1 index points.
Geoff Greer, regional general manager of business banking at NAB, said some SMEs are coping better than others. The best performing sector among SMEs was accommodation, followed by health, business services and transport.
“Business directly affected by the downturn in consumer spending are finding it hard going. Property services, residential construction and motor vehicle retail industries have been hit hard by the slump in spending.”
Shares rise
The Australian sharemarket has opened slightly lower today, dragged down by disappointing results from companies including AMP as well as Network Ten’s failed capital raising.
But the benchmark S&P/ASX200 index rallied and was at 34.7 points or 1.02% to 3447.9 at 12.15 AESDT. The dollar also lost ground to US63 cents.
Commonwealth Bank shares have gained 1.9% to $29.72, Westpac also rose 1.9% to $16.80 while NAB gained 0.2% to $18.17.
AMP shares have lifted 3.3% to $5.08 despite the company announcing a 41% drop in annual profit and has cut dividends.
The nation’s third-largest retail funds manager says net profit for 2008 dropped to $580 million and chief executive Craig Dunn says there will be challenges ahead.
“While economic and market conditions mean that delivering growth in the short term will remain challenging, AMP is a resilient business that is well placed to take advantage of future opportunities, and we remain very confident in the medium to long term outlook for the company.”
Network Ten’s shares have plummeted more than 20% after it announced its planned capital raising will be scrapped. The company’s shares are now down around 14.5% to 79 cents.
“While there was interest in the proposal, today’s difficult market conditions led to terms that Ten Holdings did not find acceptable,” the company said in a statement to the ASX.
Obama’s housing plan
Wall Street suffered early losses after new data showed new housing permits dropped to record lows in January, but President Barack Obama’s plan to stablise the housing market helped lift the market.
The Dow Jones Industrial Average gained 0.04% while oil slipped to $US34 a barrel.
Obama’s plan includes a $US75 billion fund to subsidise the mortgages of struggling homeowners, investing nearly $US100 billion to create new lending and up to $US100 billion to protect mortgage groups against losses.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
