19/10/2009 - 13:27

WA private firms top profit growth

19/10/2009 - 13:27

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The time lag with New South Wales and Victoria has served private businesses in Western Australia well with the state topping the nation in terms of profit growth, a new survey has found.

WA private firms top profit growth

The time lag with New South Wales and Victoria has served private businesses in Western Australia well with the state topping the nation in terms of profit growth, a new survey has found.

In the latest private business barometer, PricewaterhouseCoopers found private entities in WA reported an average of 12.8 per cent profit growth in the months from March to September this year.

While the growth is smaller than the previous survey's 14.4 per cent growth and a far cry from the average profit growth of 26.2 per cent from a year ago, PwC partner Billy Meston said it was a good performance.

"Private businesses in Western Australia were well warned the economic downturn was coming because they saw Victoria and New South Wales impacted well before the West," he said.

"This time lag allowed businesses to plan ahead and to brace for the impact. By taking heed of the warnings, they battened down the hatches ahead of time and as a result performed comparatively well.

"Western Australia and Queensland continue to be the 'engine rooms' of the nation."

Queensland's profit growth was 12.7 per cent.

"Some businesses in Western Australia are now starting to plan for growth through acquisition," Mr Meston said.

"Many are seeing that the market is close to bottoming out and those who have managed to free up cash in the downturn are looking at making acquisitions while prices are at a relatively low level."

Sales growth in WA was 15.5 per cent from March to September 2009 and there were more hits than misses in terms of achieving revenue targets in the past year.

About 60 per cent of private businesses in WA exceeded revenue targets, down from 71.4 per cent in the previous survey, while 31.8 per cent missed targets.

Nationally, sales growth was 6.8 per cent while profits rose by 5.8 per cent.

In its report, PwC said the rate of decline in sales and profit growth eased in the last six months as the economy showed tentative signs of recovery.

Looking ahead, private businesses across the country increased their sales and progit growth targets from 5.9 per cent to 6.6 per cent and 6.6 per cent to 7.3 per cent in the next year, respectively.

Almost every owner said funding was a challenge with respondents favouring internally generated funding and existing shareholders as their primary sources of finance.

During the survey period, lenders reviewed the debt facility for more than 61 per cet of businesses, while 45.4 per cent of respondents had their loan repriced.

"Half of businesses said banks had been stricter in enforcing debt contract covenants, while 29.3 per cent said their lender had demanded they put up additional security to back up existing debt," PwC said in the report.

"Just over 87 per cent of private businesses reported CAPEX constraints, up from 71.8 per cent one year ago. More than half were restricted by the price and availability of debt.

"Thirty-nine per cent of respondents said the cost of debt was their main difficulty in raising capital. A further 23.9 per cent said availability of credit was their biggest capital-raising challenge."

Meantime, 15.3 per cent of businesses across the country had firm plans to hire additional employees, a substantial drop from 46.1 per cent recorded two years ago, as respondents did not rate becoming an 'employer of choice' a current priority.

About 53 per cent of businesses identified high wage costs as their number one hiring constraint and businesses were divided over the wages outlook for the next year, with 53 per cent predicting a decline and 30 per cent tip a rise.

The survey is done in conjunction with East & Partners and canvassed 758 private business owners with an annual turnover of between $10 to $100 million.

 

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