Private companies have become more pessimistic about their short term prospects than they were 12 months ago and more than 30 percent have reported negative profit growth, according to KPMG’s annual Private Companies Survey.

 

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

 

Peter Siebels, Head of KPMG’s Private Enterprise practice, said the last 12 months has proved very challenging for private companies. 

 

"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,” said Mr Siebels.

 

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 said.

 

"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,” explained Mr Siebels.

 

One positive all States agree on is the opportunities arising from the digital economy. The survey found that despite 45 percent of respondents reporting an increase in online business transactions this year, fewer than five percent 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 percent 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," said Mr 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 percent have major investment plans for the next 12 months," said Mr Siebels.

 

Despite the short term decline in confidence and multiple challenges, 72 percent 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," added Mr Siebels.

 

State Breakdown

 

New South Wales

  • 54 percent did not meet revenue targets in the past 12 months.
  • The majority were most worried about the continued global uncertainty.
  • 46 percent expect to increase their headcount in the coming year.

 

Victoria

  • 40 of Victorian respondents did not meet targets in the last 12 months.
  • The majority were most worried about competitor activity and consumer confidence.
  • 56 percent expect to increase their headcount in the coming year.

 

Queensland

  • 51 percent did not meet revenue targets in the past 12 months.
  • The majority were most worried about consumer confidence and skills shortages.
  • 44 percent expect to increase their headcount in the coming year.

 

South Australia

  • 53 percent did not meet revenue targets in the past 12 months. 
  • The majority were most worried about business confidence and competitor activity.
  • 33 percent expect to increase their headcount in the coming year.
  • More than 33 percent feel the economy is at the bottom of the economic cycle, and 27 percent believe we are on a downward cycle.

 

Western Australia

  • Respondents from Western Australia remain the most optimistic about Australia’s prosperity.
  • More than 70 percent said they believed the economy was on the upward curve of the cycle.
  • 25 percent of respondents did not meet revenue targets in the past 12 months.
  • West Australian respondents were far more worried about skills shortages than other states.
  • 73 percent expected to increase their headcount in the coming year.