PRIVATE COMPANY SLOG

Written on the 18 July 2011

PRIVATE COMPANY SLOG

MORE than half of the Queensland private companies surveyed in a KPMG annual Private Companies Survey indicated they had not met revenue targets in the past 12 months.

In fact most of Australia’s private company participants were found to be more pessimistic about their short-term prospects than they were 12 months ago and more than 30 per cent have reported negative profit growth.

The survey of about 300 private companies conducted in April and May 2011 also shows that 44 per cent of respondents did not meet their revenue targets in the past 12 months.

Head of KPMG’s private enterprise practice Peter Siebels, says the last 12 months has proved challenging for the private sector with Queensland companies most concerned about diminished consumer confidence.

“The environment has been more tumultuous than many businesses would have expected, especially when you consider the spate of natural disasters. This survey on the outlook of Australian private companies is highlighting what appears to be a very unique set of business challenges and a patchy business environment,” he says.

Skill shortages, softening consumer confidence and continuing global uncertainty are the key challenges facing businesses, which all lead to a multi-speed economy.

“The challenges vary between states. For example the resource sector is going along nicely but if you are a manufacturer in Victoria, times are very tough,” he says.

“While skill shortages are the biggest challenge to businesses in Western Australia, those in Queensland are more concerned with low consumer confidence which may reflect the recovery from the floods and cyclones. In South Australia and Victoria, respondents are more concerned about business confidence and competitor activity. New South Wales is most concerned about the impact of continuing global uncertainty.”

A positive to emanate from the survey are the opportunities arising from the digital economy. The survey found that despite 45 per cent of respondents reporting an increase in online business transactions this year, fewer than 5 per cent regard the growth of online business to be a major challenge.

“I don’t think Australian private companies are embracing the potential of the digital economy enough. Social media is a good example; only 31 per cent of respondents have leveraged this technology into their business strategies. What private companies should be doing is understanding how these new technologies can provide them with more efficient ways of reaching their markets, or even reaching markets they haven’t reached before,” says Siebels.

One third of respondents reported experiencing constraints to capital expenditure over the past 12 months, with the cost of debt and the availability of credit seen to be the biggest causes of that constraint.

“What is interesting is that even though there are constraints, private companies have not let these impact their investment activities and 55 per cent have major investment plans for the next 12 months,” says Siebels.

Despite the short term decline in confidence and multiple challenges, 72 per cent of private companies still see a return to brighter business prosperity in the long term.

“The longer-term optimism and ability of private companies to look on the bright side has shone through again this year,” says Siebels.


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