Revenue and profit plunges for one-third of private companies: Survey

Australia’s private companies are worried about a slowdown of the economy with around a third experiencing a fall in both revenue and profit over the previous 12 months, according to a survey by KPMG.

The survey of 546 respondents, conducted in April and May 2012, shows 46% of private companies feel that short-term business prospects are poor or very poor, compared to 24% in 2011.

Peter Siebels, head of KPMG’s private enterprise practice, told SmartCompany there was a sharp deterioration in sentiment from previous surveys, similar to what happened in 2008 when the financial crisis was unfolding.

“A fall in both revenue and profit is unique, this is the first year they have really said ‘It’s been so tough we have gone backwards’,” he says.

Siebels says gloomy news from Europe and domestic factors, like the consequences of a high Australian dollar for our manufacturing, tourism and some areas of agriculture, are the major influences.

When asked about the key challenges facing their businesses over the coming 12 months, businesses Australia-wide felt that continuing global uncertainty, impaired consumer confidence and skill shortages are their main obstacles to growth.

Siebels says the negative sentiment is in the context of the Australian market, but Australian private companies are still well placed in a global market.

“Private companies are noting a deterioration in their trading environment, but when you look bigger picture there is still a lot to be positive about,” he says.

“There is a negative trend but longer term there is a positive sentiment about where things are headed.”

Siebels says private companies are by their nature “nimble and innovative” and so they are also reasonably confident that they will adapt to the changed circumstances.

“The good thing about this survey is it does show they have already adapted. A year ago it was about taking market share, but now it is about developing new sources of revenue and keeping an eye on costs.”

He says the sentiment amongst private companies is similar to that for publicly listed companies.

“With listed companies, the ultimate benchmark is ASX performance, so I think it is consistent as people are very concerned about profitability across the board.”

Siebels attributes the “tough environment” to housing prices continuing to slide, soft construction approvals and flat retail spending.

Private companies are scaling back their growth plans in the face of these challenges and the major change drivers include the economic environment, changing customer behaviour and government policy initiatives.

“Companies will trim capital spending budgets, with only 45% intending to undertake major investments over the next 12 months, a significant reduction from the 2011 results,” says Siebels.

“In response to these current challenges, the highest priorities for businesses across the country are customer satisfaction, overhead management and alternative or additional revenue opportunities.”