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Mid-market companies are battling but by no means beaten - Commonwealth Bank Future Business Index reveals

Media release

CommBank can

Media release

Mid-market companies are confident and staying steady - Commonwealth Bank Future Business Index reveals

  • Mid-market confidence back to highest levels recorded
  • Retail continues to surge through Christmas and beyond
  • Mining sector sentiment has declined significantly
  • Victoria and Tasmania are most confident states in Australia

17 December 2012: Commonwealth Bank’s Future Business Index Quarterly Update today announces a return in business confidence to the highest levels recorded by the Index.

The latest figures have seen the Index rise from 4.3 to 9.3, returning to levels last seen in March of this year when the Index recorded its highest ever score.

The Index is an analysis of the views of financial decision makers in companies with a turnover of $10m – $100m, measuring their outlook on business conditions, investment plans, business challenges, projected revenue and how prepared they are to navigate volatile conditions for the six months ahead.

Beyond the positive results from the overall Index, results from an industry perspective provide greater cause for optimism.

  • Heading into Christmas and beyond, the retail sector continues to surge to its highest levels recorded (17.8 up from 10.2).
  • Transport and Logistics recorded an all-time high of 36.2 and have claimed to be the most prepared for future business conditions.
  • Other sectors including Business Services (22.3), Information, Media and Telecommunication (-21.7) and Finance and Insurance (12.4) have seen steady increases in optimism as costs have fallen.

Symon Brewis-Weston, Commonwealth Bank’s Executive General Manager of Corporate Financial Services said that while the trend has been towards an optimistic outlook, most mid-market firms are adopting a restrained approach.

“Despite rising confidence, we’re finding that it’s something of a ‘wait-and-see’ period for the mid-market.  The feeling is that while companies expect a moderate decline in costs and they’re feeling more prepared for the future, there is little appetite for investment and major changes.

“The focus of this Index has been the common theme of cost management heading into 2013.  Companies are placing less emphasis on growth at the moment and ensuring they have the financial support required for any unforeseen challenges in the future.    

“Business confidence continues to fluctuate across a number of industries including transport and logistics. The levels of these fluctuations highlight how much can change in a quarter. That said, retail is one sector that continues to rise in confidence and the results from Christmas trading may improve sentiment even further,” said Mr Brewis-Weston.

While confidence in retail has remained strong, mining has seen a significant decline from 17.7 to -7.2 on the Index as a result of concern about increased international competition and a potential economic slowdown in China.
“The drop in confidence within the mining sector appears to be somewhat delayed, with the current challenges facing the industry expected to affect the previous Index when it actually rose seven points,” said Mr Brewis-Weston.

At a state level, the picture is positive overall.

  • Six states and territories have seen boost in optimism, with Victoria and Tasmania remaining as the only states to experience a consistent rise in confidence, scoring 14 on the Index (up from 6.2).
  • South Australia and Northern Territory continue to fluctuate with a huge jump in confidence scoring 10.9 up from the previous Index score of -10.1.
  • New South Wales and Australian Capital Territory are the only regions to see a decline on the Index, seeing a decrease from 10.4 earlier this year to six.

Looking ahead to the next six months, almost half of the companies claim to be well prepared for future business conditions, with Victoria, Tasmania and Western Australia being most likely to be well prepared. The majority of mid-market companies also report to have well controlled cost management and business strategies for the year ahead.

“Despite the positives that can be taken from the Index, the mid-market is playing it safe and avoiding any major changes or risks for the first half of 2013. Increases in domestic demand and consumer confidence are the biggest drivers for growth in the mid-market and as these factors continue to play a part, we will continue to see improvement across the sectors,” added Mr Brewis-Weston.

KEY FINDINGS FROM THE INDEX

  • Almost half (45 per cent) of organisations claim to be well prepared for continuing fluctuations in business conditions, the highest level recorded since September 2011.
  • 31 per cent of companies expect conditions to improve over the next six months.
  • Rising energy costs is considered the biggest domestic factor affecting future conditions.
  • Economic slowdown in Asia is the biggest international factor of concern to the mid-market.
  • Transport and Logistics, Business Services and Information, Media and Technology are the most confident sectors.
  • Mining, Manufacturing and Wholesale trade are the least confident sectors, with appetite for risk within the mining sector at an all-time low of 6 per cent.
  • Retail has continued to grow in confidence, up 25 points from September 2011.
  • International competition is of greater concern for those mid-market organisations with an annual turnover of $50 to $99 million.
  • Businesses in Transport and Logistics and Agriculture are the most likely to be well prepared.
  • Companies in Victoria and Tasmania are the most confident, continuing to rise on the Index for a third consecutive occasion.
  • Mid-market organisations based in New South Wales are the least prepared, declining to the lowest level seen in 2012.

 

ENDS

 

Media enquiries:
Sarah Gibbons
Commonwealth Bank
P: (02) 9118 1706 | M: 0403 681 515 
E: sarah.gibbons@cba.com.au

About the Future Business Index
The Commonwealth Bank Future Business Index is based on a detailed quantitative survey of 438 financial decision-makers in public and private companies throughout Australia with turnover between $10 to $100 million. Conducted by ACA Research, the Future Business Index is an indicator of what the business landscape will look like over the next six months, based on business confidence, predicted future activity and an organisation’s ability to manage fluctuating business conditions. The survey sample includes businesses from a range of sectors including Retail, Business Services, Construction, Health & Education, Information Media & Telecommunications, Manufacturing, Mining, Transport & Logistics and Wholesale Trade. The data has been weighted to reflect the latest Australian Bureau of Statistics Business Counts.

The Index seeks to identify:

  • The level of confidence in business conditions over the next six months
  • The challenges and threats businesses face over the next six months
  • How prepared businesses are to navigate volatile conditions
  • The use of financial facilities and risk planning
  • Expected sources of growth and opportunities.

How the Index is calculated
The Commonwealth Bank Future Business Index has been calculated by taking a net balance of future business conditions, net revenue and risk as indicated by businesses with an annual turnover of $10 to $100 million.

  • Net Business Conditions is a net balance of those that indicated that business conditions will improve minus those who predict business conditions will decline.
  • Net Revenue is calculated by taking those companies that see an increase in revenue over the next six months minus those that foresee a decline.
  • Net Well Preparedness is a net balance of those that are ‘well prepared’ minus those that are ‘somewhat’ and ‘not well prepared’.

About ACA Research
ACA Research is a full-service market research consultancy, with particular expertise in customised business-to-business thought leadership, executive research and syndicated multi-client studies throughout Australia, New Zealand and Asia. Through a high level of business and research experience, industry expertise and focus on high-quality outputs, ACA Research effectively supports business thought leaders in their decision-making activities.

 

Media contact:

Sarah Gibbons
Commonwealth Bank
P: (02) 9118 1706 | M: 0403 681 515 
E: sarah.gibbons@cba.com.au

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