Mid-market organisations with revenue between $10 and $250 million will enter 2012 expecting only weak growth, according to a new survey.
The GE Capital Australian Mid-Market report 2011, which is based on surveys with chief financial officers, found that CFOs’ future expectations for growth has been declining through 2011 and their confidence about the future is now at its lowest point since January 2010.
Mark Toohey, chief financial officer for financier GE Capital Australia and New Zealand, says it’s a worrying finding but could quickly turn around with a bumper Christmas and an Australian dollar remaining below parity with the US dollar.
“The CFOs [chief financial officers] at these businesses are usually the most optimistic and have constantly been that way,” Toohey says.
“When this groups starts to wane in confidence, we think that’s concerning.”
The report finds that the CFOs’ overall growth outlook – looking at current conditions and expectations for the future – fell during 2011 and is now at just 0.2, where a score above zero means growth.
Future growth expectation – covering revenues and staff growth – has also fallen, although remains above zero at +0.35.
Toohey says the mid-market is mainly concerned by the state of the economy, and access to capital and quality employees.
But on the positive side, he says the recent decline in the Australian dollar might well provide a fillip for the mid-market, which covers businesses that are publicly traded, privately owned, family owned, partnerships and sole proprietorships.
“Maybe the fall in the Australian dollar might be enough to turn it around for some businesses,” Toohey says, adding he didn’t expect it to rise to the $US1.10 level it was when the survey was conducted.
He added that the mid-market is feeling the heat of the “patchwork economy” with transport and storage and other industries (including mining, finance and insurance) the most positive about revenue growth.
This was followed by manufacturing, wholesale trade, business and property, and then retail trade. Construction trailed all other industries.
Official figures released yesterday showed that building approvals were down 30% year on year, whereas retail sales had eked out its third consecutive month of gains.
Toohey says mid-market organisations need certainty.
“What they like is certainty, trying to make sure there’s clarity in the economic and political position. It’s under that basis they do invest,” he says.
And he advises them to continue making inroads on costs, and focus on innovation and creating value for their customers.
“Certainly the CFOs that we speak to are very focused on their cashflow; they’re very prudent in how they spend their money.”
“They’ll be looking for good Christmas sales, steadiness in the Australian dollar, a settling of the European debt concerns and an improvement in the US economy.”
“They tend to move quicker than big business so they don’t need much of a trigger.”
GE says the mid-market is responsible for just over one-third of business revenues and employs more than one-third of Australia’s staff.
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