Presentation is loading. Please wait.

Presentation is loading. Please wait.

© Copyright 2005. DP Information Group. All Rights Reserved. RESTRICTED SME DEVELOPMENT SURVEY 2005 Chen Yew Nah managing director DP Information Group.

Similar presentations


Presentation on theme: "© Copyright 2005. DP Information Group. All Rights Reserved. RESTRICTED SME DEVELOPMENT SURVEY 2005 Chen Yew Nah managing director DP Information Group."— Presentation transcript:

1 © Copyright DP Information Group. All Rights Reserved. RESTRICTED SME DEVELOPMENT SURVEY 2005 Chen Yew Nah managing director DP Information Group “SME – Beyond Financing; Taking the Next Steps”

2 © Copyright DP Information Group. All Rights Reserved. RESTRICTED OBJECTIVES 1.Explore growth strategies in the different development stages 2.Human Resource Issues faced by SMEs 3.Hurdles and Drivers of SMEs going overseas 4.Foreign Currency Impacts and Hedging Practices 5.Leveraging on FTAs 6.Perspectives of SMEs financial performance

3 © Copyright DP Information Group. All Rights Reserved. RESTRICTED SURVEY METHODOLOGY 2-prong approach a)Questionnaire to capture SMEs’ opinions/responses b)Submission of their financial statements Random sampling of 10,000 companies (no. of companies selected as reflected by sectors’ contributions to Singapore GDP 2004) 11 broad sectors covered All respondents are given phone-in hotline

4 © Copyright DP Information Group. All Rights Reserved. RESTRICTED 5 PRIMARY SECTIONS … 32 QUESTIONS 1.Development Stage & Growth Strategy 2.Human Resource Issues 3.Expanding Overseas 4.Hedging and FTAs 5.SMEs’ Profile, Headcounts & Business Outlook

5 © Copyright DP Information Group. All Rights Reserved. RESTRICTED PROFILE OF RESPONDENTS 1004 responded; 185 repeats (last year - 804) 684 financials were collated (last year - 395) 54% are exempt private companies (80% of 150k SMEs are exempt) 40% with >$1 mil paid-up capital 75% with <= 50 employees 13% with >=100 employees; more mid-sized SMEs are represented

6 © Copyright DP Information Group. All Rights Reserved. RESTRICTED PROFILE OF RESPONDENTS - continued 74% are older than 10 years 28% with > $1mil-$5mil turnover & 17% with >$5mil-$10mil turnover; largest 2 blocks 23% not-profitable, 51% generating up to $100k profit 31% does not have any form of overseas operations 69% have overseas operations; 74% of them having more than 5years doing so

7 © Copyright DP Information Group. All Rights Reserved. RESTRICTED TABLE OF INDUSTRY SECTORS Sectoral distribution consistent with last year; with slight increase representation from Commerce and Mfg sectors

8 © Copyright DP Information Group. All Rights Reserved. RESTRICTED Business Strategies

9 © Copyright DP Information Group. All Rights Reserved. RESTRICTED STAGE OF DEVELOPMENT & GROWTH STRATEGIES Stages of Development Accelerating Growth : >10% turnover growth rate Moderate Growth : > 0% - =< 10% turnover growth rate Mature : 0% turnover growth rate Decline: < 0% turnover growth rate One in three are mature 55% of the companies are experiencing growth

10 © Copyright DP Information Group. All Rights Reserved. RESTRICTED KEY BUSINESS STRATEGIES for NEXT 2 YRS 3 main strategies; New Overseas Market (33%) & Improving Cost Efficiency/Productivity (30%); New Products & Services (18%) New Overseas Markets opted mainly by younger companies ( 40yrs); also identified themselves being in growth stages Companies within 11-40yrs give equal importance to both 2 top key business strategies

11 © Copyright DP Information Group. All Rights Reserved. RESTRICTED TOP HINDRANCE to GROWTH BY SMEs Last year – Uncertain Economic Conditions; moved into 3 rd position This year – Increasing Local/Overseas Competition & Operating Cost taken up the top spots Cashflow moved to 6 th position

12 © Copyright DP Information Group. All Rights Reserved. RESTRICTED KEY HINDRANCE TO GROWTH IN DIFFERENT STAGE OF GROWTH Different stages raise different concerns Start-Ups to pay more attention to Increasing Operating Cost (47%) Companies in accelerating & moderate growth identifies Increasing Local/Overseas Competition a key concern

13 © Copyright DP Information Group. All Rights Reserved. RESTRICTED Access to Financing

14 © Copyright DP Information Group. All Rights Reserved. RESTRICTED Access to Financing by SMEs 48% of respondents access to Financing improved as compared to 2 years ago Only 9% find their access have worsened SME's Ability to Access Financing as compared to previous 2 years Has improved48% Is the same43% Has worsened9% Grand Total100%

15 © Copyright DP Information Group. All Rights Reserved. RESTRICTED Access to Financing by SMEs Government initiatives has helped to put focus to help SMEs in access to financing Banks responded well; Creating financing products specially targetted at the SMEs SMEs are now spoilt for choice: Previously, they are underserved

16 © Copyright DP Information Group. All Rights Reserved. RESTRICTED TYPES OF BANK FACILITIES USED BY SMEs

17 © Copyright DP Information Group. All Rights Reserved. RESTRICTED TYPES OF BANK FACILITIES USED BY SMEs Increase cash management & treasury services Banks focusing to cater to new term loans & trade financing Still strong reliance on Overdraft (44%); nevertheless downward trend Companies with no banking facilities dropped from 21% to 19%

18 © Copyright DP Information Group. All Rights Reserved. RESTRICTED Overseas Challenges

19 © Copyright DP Information Group. All Rights Reserved. RESTRICTED HOW MUCH REVENUE IS GENERATED FROM OVERSEAS?

20 © Copyright DP Information Group. All Rights Reserved. RESTRICTED OVERSEAS OPERATIONS TURNOVER

21 © Copyright DP Information Group. All Rights Reserved. RESTRICTED OVERSEAS OPERATIONS TURNOVER 73% of companies with >$50m turnover have more than 5 years in overseas operations; 1 in 10 with such turnover does not have any overseas operations 45% of companies with low turnover does not venture overseas; 31% have ventured for more than 5 years 2 main concentrations; stay domestic or having ventured overseas for some length in time 40% of companies in Decline Stage have never had any overseas operations; foreign revenue can be key in driving growth 36% of companies in Decline Stage have >5 years in overseas operations; need to stay innovative to remain competitive

22 © Copyright DP Information Group. All Rights Reserved. RESTRICTED POPULAR COUNTRIES FOR EXPORT & EXPANSION Improved ties with Malaysia Recovery of the Indonesian & Thai markets

23 © Copyright DP Information Group. All Rights Reserved. RESTRICTED OBSTACLES FACED GOING OVERSEAS Top 1 st and 3 rd concerns are external in nature IE & SPRING can help on the 2 nd top concern with Overseas Centres Business Matching Programmes Overseas Trips Pooling of MNCs / SMEs in joint ventures or ‘clusters’

24 © Copyright DP Information Group. All Rights Reserved. RESTRICTED SOURCES OF FUNDS FOR OVERSEAS OPERATIONS 62% experienced difficulty when seeking external sources of funds 69% of these companies expressed ‘Lack of Collateral’ as key reason for inability to access external funds 58% relied on retained earnings More are using Trade Credit and Trade Financing instead of Overdraft as compared with last year

25 © Copyright DP Information Group. All Rights Reserved. RESTRICTED FOREIGN CURRENCY IMPACT on SMEs 88% are affected by Exchange Rate Fluctuations; 43% of them to a great extent 71% traded with >50% in SGP dollar currency 13% are only affected due to volatility while 50% are affected by its exchange values Only 20% practice foreign currency hedging Key constraints for Practicing Hedging 42% due to lack of Information/Knowledge 27% due to Cost

26 © Copyright DP Information Group. All Rights Reserved. RESTRICTED FTA BENEFITS on SMEs 68% are aware but 50% of them do not know how to benefit from it Only 7% have enjoyed tariff savings More education help for competitiveness by SPRING & IE 72% are prepared to learn & inform their overseas trading partners

27 © Copyright DP Information Group. All Rights Reserved. RESTRICTED WHY SMEs ARE NOT ENGAGING in OVERSEAS OPERATIONS? 31% of the respondents no overseas operations Key reasons are No Requirement (45%) and No Network (35%) 4% of the respondents stopped previous overseas operations; 5% intend to start Key reasons are ‘Too Competitive’ (32%), Collections Problem (22%) and High Cost (19%) Some SMEs made inadequate preparations & lack understanding of these overseas markets

28 © Copyright DP Information Group. All Rights Reserved. RESTRICTED BUSINESS SECTORS BREAKDOWN WITH NO OVERSEAS OPERATIONS Construction & Services Sectors highest By development stages, more than half (58%) experience no growth In terms of business strategy, about half (48%) concentrates on internal processes to improve cost efficiency/productivity

29 © Copyright DP Information Group. All Rights Reserved. RESTRICTED Human Resource Challenges

30 © Copyright DP Information Group. All Rights Reserved. RESTRICTED WORKFORCE OF S’PORE SMEs 51% with 20 employees or less Top HR concerns are Recruitment (49%), Productivity (47%) and Employee Retention (45%) 32% faced > 10% employee turnover rate

31 © Copyright DP Information Group. All Rights Reserved. RESTRICTED HR CHALLENGES FOR SMEs Economy becomes more knowledge based & overseas orientated Employers require employees with the right skill sets the necessary regional exposure & experiences the adoption of industry best practices ‘Lack of Appeal’ of SMEs to job seekers; especially amongst the younger workforce Total Human Capital Management must be addressed by SMEs for Employee Retention

32 © Copyright DP Information Group. All Rights Reserved. RESTRICTED TOP 3 HR CONCERNS BY BUSINESS SECTORS FOR SMEs Key Concern – Recruitment (49%) Communications/Transport/Storage Finance Holding Property Services Key Concern – Productivity (48%) Wholesale Construction Key Concern – Retention (44%) Retail Hotel/Food Establishments

33 © Copyright DP Information Group. All Rights Reserved. RESTRICTED Financial Performance Perspectives

34 © Copyright DP Information Group. All Rights Reserved. RESTRICTED FINANCIAL PERFORMANCE OF OUR SMEs 684 vs last year’s 395 financials submitted DP contributes with our DP Credit Ratings, based on Moody’s KMV methodology DP Credit Rating utilises 3 key values to determine a firm’s probability of default 3 drivers are market value of assets, asset volatility and leverage DP1 – DP8 Investment Grades (DP1-DP4); <1% default probability High Yield Grades (DP5-DP6); 1%-8% default probability High Risk Grades (DP7-DP8); >8% default probability

35 © Copyright DP Information Group. All Rights Reserved. RESTRICTED DP CREDIT RATINGS

36 © Copyright DP Information Group. All Rights Reserved. RESTRICTED SMEs MANAGING CREDIT RISK WELL 1 in 5 are in Investment Grade; Signify Improved Credit Quality High Risk Grade companies increased marginally from 28% to 32% Higher gearing as loans/funds are made more available; Banks to take close monitoring Sectors with more than a third in High Risk Grades are Retail, Wholesale, Construction, Manufacturing and Property

37 © Copyright DP Information Group. All Rights Reserved. RESTRICTED SME DISTRIBUTION BY PROFIT MARGIN SMEs’ profit margin are thin; Slight improvement Only 30% with 5% or more in profit margin Possible concern in sustainability in adverse market conditions and rising oil prices Productivity & Economies of Scales for Higher Profit Margin

38 © Copyright DP Information Group. All Rights Reserved. RESTRICTED PROFIT MARGIN DISTRIBUTION BY SECTORS More than half in Retail make losses More than half in Construction has low profit margin About half in Hotel/Food Establishments has 10% or more in profit margin

39 © Copyright DP Information Group. All Rights Reserved. RESTRICTED KEY FINANCIAL RATIOS Liquidity (Current Ratio); ability to meet its obligations within the next one year Leverage (Debt to Worth Ratio); Extent that debt is applied with the company’s capital structure Efficiency (Asset Turnover); How much working capital is tied-up Debt Servicing Capability (Interest Coverage); Capacity to meet interest payments DP Financial Benchmark Indices for the top 4000 companies in Singapore by business sectors as computed as the Industry Norms THE RATIOS

40 © Copyright DP Information Group. All Rights Reserved. RESTRICTED SME DISTRIBUTION BY LIQUIDITY LEVEL (CURRENT RATIO) Improved distribution as compared to last year 70% of SMEs have current ratio which are within/above industry norm

41 © Copyright DP Information Group. All Rights Reserved. RESTRICTED SME DISTRIBUTION BY LEVERAGE RATIO Almost 50% are more highly leveraged than industry norms Financial Institutions are reaching out to more SMEs; Need close monitoring

42 © Copyright DP Information Group. All Rights Reserved. RESTRICTED SME DISTRIBUTION BY EFFICIENCY RATIO (ASSET TURNOVER) Ability to utilise assets by SMEs remaind same level as last year Above industry norm has dropped from 20% to 15%

43 © Copyright DP Information Group. All Rights Reserved. RESTRICTED SME DISTRIBUTION BY INTEREST COVERAGE A measure on its income and cost structure Decline pattern may be a sign of higher financial burden More than half are below industry norm

44 © Copyright DP Information Group. All Rights Reserved. RESTRICTED Our Recommendations

45 © Copyright DP Information Group. All Rights Reserved. RESTRICTED DP INFO’S RECOMMENDATIONS Managing Competitiveness Benchmarking Diagnostic kit SME Credit Rating Branding & IP Protection Internationalisation via Consortiums Focus Business Matching Privatisation/Commercialization

46 © Copyright DP Information Group. All Rights Reserved. RESTRICTED IMPROVING COST EFFICIENCY and PRODUCTIVITY Technology Adoption & Automation Focus Financial & Credit Management (Financial Consultants) Higher Leveraging of FTAs Innovation

47 © Copyright DP Information Group. All Rights Reserved. RESTRICTED Human Capital Management “Grow our SME Leaders” Scheme “The International Manager” Scheme Advisory & Mentoring Scheme

48 © Copyright DP Information Group. All Rights Reserved. RESTRICTED SME CREDIT RATING SMEs to obtain their annual credit rating for benchmarking To create platform to showcase SMEs with DP1-DP6 for their creditworthiness Give international partners stronger trust on our SMEs Government-to-Government arrangements to allow credible SMEs easier overseas access and market development SME Credit Rating could be the path-breaking mechanism to improve competitiveness overseas

49 © Copyright DP Information Group. All Rights Reserved. RESTRICTED THANK YOU


Download ppt "© Copyright 2005. DP Information Group. All Rights Reserved. RESTRICTED SME DEVELOPMENT SURVEY 2005 Chen Yew Nah managing director DP Information Group."

Similar presentations


Ads by Google