DP Information Group SME DEVELOPMENT SURVEY 2013 Press Conference

Transcription

1 DP Information Group SME DEVELOPMENT SURVEY 2013 Press Conference Restructuring SMEs Through Innovative Approaches To Capacity Enhancement DP and the marks used herein are service marks or registered trademarks of DP Information Network Pte Ltd. Other product and company names mentioned herein may be the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of DP Information Netw ork Pte Ltd. Restricted

2 SURVEY OBJECTIVES

3 Survey Objectives 1. Current status and outlook of Singapore SMEs 2. Impact of rising costs and the resulting measures taken to combat it 3. Access to funding, purpose of new financing and what they want from their banks 4. Challenges and assistance with regards to productivity 5. Overseas engagement by SMEs 6. SMEs investment and adoption of IT & Technology innovation

4 SURVEY METHODOLOGY

5 Survey Methodology Survey Respondent Random sampling of 10,000 companies from 7 broad sectors Companies must have : at least 30% local equity ownership (local SMEs) not more than S$100m in annual sales/ turnover Survey Method Questionnaire to capture feedback & general characteristics of SMEs Mail-out Posting on website at Financial statements to provide insight into SMEs financial performance Follow-up calls after mail-out of invitations

6 CHARACTERISTICS OF RESPONDENTS

7 Characteristics of Respondents Higher response rate of 27% (2,708 SMEs) 28% repeat respondents 99% confidence level at confidence interval of 2.51% More established; >20 years of operation (38% vs. 22%) Wholesale continues to dominate at 37% 5% increase from Services; up from 16% last year

8 Characteristics of Respondents More (7%) established SMEs (>30 years) shared views this year Construction, Manufacturing & Transport/ Storage registered largest increase (8% each) 3 to 10 year mark observed to be the make-or-break point These SMEs face more volatility; more susceptible to economic conditions; a transitional phase Transport/ Storage ( 20%) Due to its larger overseas exposure Services & Manufacturing better geared to weather global market conditions.

9 Characteristics of Respondents Subdued economic climate resulting in lower Turnover 11% generating up to S$5m Inability to maintain turnover likely attributed to slow market growth and rising costs Fewer in Retail ( 21%), Construction ( 20%) and Wholesale ( 12%) chalking up more than S$5m in turnover.

10 Characteristics of Respondents Better management of costs led to fewer making losses in FY2012 Gains from previous productivity investments has helped Managing costs to maintain profit only a short term solution 3% in SMEs generating >S$500,000 Of the loss making, 78% are smaller (up to S$5m turnover) Lack ability to benefit from economies of scale; More susceptible to external shock & future cost hikes

11 Characteristics of Respondents Fewer expecting significant growth in turnover performance 44% facing stagnancy SMEs with double digit growth lowest in 10 years history at (7%) Companies reporting negative growth dropped to 9% this year Varying conditions amongst sectors Manufacturing & Information & Communications reported largest increase (24%) in SMEs with zero growth Retail see significant change with 16% experiencing negative growth Start-up: First 3 years of operation Accelerating growth: Turnover growth of more than 10% per annum Moderate growth: Turnover growth of up to 10% per annum Mature: Zero growth in Turnover Decline: Negative growth in Turnover

12 SURVEY FINDINGS

13 SMEs Strategies and Challenges

14 SME Business Strategies Fewer set to have concrete strategic plans for the next 12 months A quarter without business strategy SMEs seems more preoccupied with operating challenges Challenges distracting SMEs from planning ahead Lacklustre economic growth High inflation Tight labour situation

15 SME Business Strategies Top 5 business strategies in 2013 Top 5 business strategies in 2012 Top 5 business strategies in 2011 Enhance products and services offered (35%) Cost Reduction (Staff & Expenditure) (34%) Expand existing range of products and services (33%) Invest in staff training and development (28%) Improve customer service (20%) Enhance products and services offered (29%) Invest in staff training and development (24%) Expand existing range of products and services (23%) Improve customer service (20%) Focus on expanding local market presence (16%) Expand existing range of products and services (61%) Enhance products and services offered (54%) Focus on expanding local market presence (45%) Freeze new hire (44%) Increase new hire (33%) Looking for opportunities to drive turnover growth Reflects severity of rising business costs

16 Cost Competitiveness SMEs most affected by Manpower costs Construction (95%), Manufacturing (90%), InfoComm (88%), Retail (87%),Transports/Storage (86%) Material costs impact more in Construction (73%) & Manufacturing (69%) Persistently high rents affecting more SMEs 2 in 5 affected by higher rental ( 3%) Transportation is showing up as the next high cost factor

17 SME Business Strategies (Managing Costs) By raising productivity More in InfoComm & Services look to improve their productivity Through cheaper alternatives Construction, Manufacturing, Retail & Wholesale seek to manage material costs Reduction in overheads Much has been done in previous year

18 Information Technology & Innovation

19 Information Technology & Innovation Benefits involving business model change take more time (>12 months) Benefits from ICT investment Timeframe in which benefit was realised Within 6 months >6 to 12 months >1 to 2 yrs >2 yrs Improve productivity/ efficiency 94% 3% 3% 0% Produce goods or deliver services with less manpower 54% 37% 7% 2% Deeper customer engagement 49% 36% 14% 1% Gain more customers 41% 35% 19% 5% Reduce operating costs 39% 50% 9% 2% Increase revenue 37% 44% 16% 3% Enable change of business model 36% 29% 29% 5% Overall 48% 38% 12% 2% Majority realised gain within first 2 years; 48% within 6 months Top benefits derived quickly: Productivity/efficiency improvement (94%) Using less manpower for production/ delivery (54%) Deeper customer engagement (49%) Top mid-term benefits: Cost reduction (50%) Increase revenue (44%)

20 Information Technology & Innovation Costs is still a key hindrance 70% cited high costs involved as a concern Lack of Funding Support (18%) likely due to unawareness of available funding support and/or suitability of government funding schemes Degree of challenges differ across sectors 81% in Transport/ Storage affected by high adoption cost Information & Communications seek more funding Construction cite lack of staff capabilities

21 Information Technology & Innovation Reasons for Not Using Cloud Computing No requirement 89% 87% Do not know how to use but interested to know more 5% 9% Too costly 2% 4% More (+5%) using cloud computing For 76% that have no intention to use cloud computing, most cited the lack of requirement

22 Manpower

23 Manpower Number with foreign workers expected to drop Downward trend in SMEs with foreign workers for the next 3 years Smaller SMEs will have fewer foreign staff in next few years Key concerns: Fewer local talent want to work for SMEs Demand for local talent driving up staff cost Lack of staff limits ability to sustain/grow business

24 Manpower More SMEs having a lower proportion of staff strength that are foreigners Those employing >10% to 75% drop by 21% Stark contrast to 2012: 81% & 2011: 77% Those reliant more reliant on foreign workers (>75%) have a more difficult time reducing proportion of foreigners

25 Manpower Response to changes to foreign worker quota and levies No impact Employ more local staff No solution at the moment Focus on productivity Outsource/ look for shared services Downsizing Step up automation Construction 18% 27% 33% 29% 9% 9% 6% Information & Communications 49% 18% 18% 15% 8% 3% 5% Manufacturing 33% 24% 22% 24% 7% 9% 7% Retail 42% 28% 19% 15% 4% 4% 5% Services 48% 22% 23% 16% 2% 2% 2% Transport/Storage 39% 27% 23% 23% 5% 4% 7% Wholesale 56% 19% 19% 11% 2% 2% 1% Overall 45% 22% 22% 17% 4% 4% 3% 55% affected by changes in government policies on foreign workers SMEs in Construction most affected Top 3 responses No solution at the moment (22%) Employ more locals (22%) Focus on productivity (17%) More in Construction (29%), Manufacturing (24%) & Transport/ Storage (23%) looking to productivity Some in construction (9%) & Manufacturing (9%) may plan to downsize

26 Overseas Expansion

27 Overseas Expansion Singapore based SMEs generating lower % of Turnover from Overseas 8% in SMEs with Overseas Revenue Most generating a smaller proportion ( 11% in >50%)

28 Overseas Expansion Business Sector % with Overseas Revenue Construction 21% 21% 27% Information & Communications 46% 49% 44% Manufacturing 50% 61% 51% Retail 19% 41% 32% Services 26% 36% 32% Transport/Storage 55% 53% 41% Wholesale 67% 71% 56% Overall 46% 54% 44% Wholesale, Transportation / Storage and Manufacturing have higher stake overseas SMEs in Retail, Construction and Services are more focused on the domestic market. The drop in the proportion of SMEs in Retail & Services that have overseas revenue could also be due to the size of the SMEs.

29 Overseas Expansion SMEs stay affixed on South East Asia s continued growth and resiliency Malaysia (58%), Greater China (52%) & Indonesia (43%) continued to reign as the top 3 Malaysia due to its proximity and relative similarity in business culture is the most convenient overseas market for companies to expand into. Cambodia displaced from the top 10 this year, taken over by Japan (12%)

30 Overseas Expansion More looking to set up overseas branches/ offices/ subsidiaries 6% of SMEs exporting goods/ services 3% setting up branches/ offices/ subsidiaries overseas 3% engaging in overseas alliances Also pushed by keener competition for bigger US and European (be closer to customers)

31 Overseas Expansion Top 5 key challenges faced in % face challenges when venturing abroad 53% cited Strong overseas competition as a key challenge 9% drop in SMEs that have cited Currency/ exchange rate fluctuations 4% cited the Lack of manpower to drive overseas sales Lack of overseas support and infrastructure (6%) Currency/ exchange rate fluctuations (8%) Lack of overseas business knowledge (10%) Strong overseas competition (53%) Lack of overseas support and infrastructure (6%) * Responses to similar question from SMEDS 2010

32 Funding / Financing

33 Funding / Financing Financial Challenges % % % % Financing Issues Experiencing cash flow problems 62% 71% 75% Difficulties in obtaining bank financing 34% 25% 26% Lack of funds to build internal competencies 21% 16% 16% Do not meet criteria for Government Schemes 17% 9% 9% More (+4%) are facing financing challenges Attributed to slower turnover performance in FY2012 Main challenge: Cash flow problems ( 3%). Top reason cited over the past few years, followed by Difficulty in obtaining bank financing ( 9%). More stringent assessment criteria for such SMEs with lower turnover figures

34 Funding / Financing Types of Funding/ Financing Facilities Debt Financing 50% 53% 76% - Term Loan 27% 32% 47% - Overdraft 15% 16% 27% - Hire Purchase/Leasing 14% 10% 22% - Trade Financing 11% 16% 24% - Factoring 2% 2% 2% Equity Financing 68% 71% 82% - Shareholder s Funds/ Retained Earnings 62% 69% 79% - Funds from friends or relatives 4% 2% 2% Government Funding Schemes 34% 26% 50% Fewer SMEs looking towards Debt & Equity financing Debt Financing (2012: 23%; 2013: 3%) Equity Financing (2012: 11%; 2013: 3%) Reasons: Lack of new business opportunities More Mature SMEs in the mix Weaker financial health Top Debt facilities: Term Loans (32%), Overdraft (15%) & Hire Purchase/ Leasing (14%) Term Loans most widely used by all industry sectors (especially from Manufacturing, Services & Transport / Storage) 4% increase in SMEs using Hire Purchase/ Leasing: More acquiring new equipment Of the 68% using Equity financing, 62% use Shareholder s Funds/ Retain Earnings (-7% from 2012) More friends with funds are available (4%) More ( 8%) accessing Government Funding Schemes

35 Government Funding Schemes Manpower related schemes most widely used (27%) Productivity & Technology Related (10%) and Capital Related (8%) the next most used Less (-3%) access financing government schemes Less SMEs taking up financing loans as compared to previous 2 years. Technology related schemes ( 5%) seeing higher take up More looking to improve productivity & enlarge range of products and services Type of Government Scheme Manpower Related 27% 10% 29% Workfare Training Scheme (WTS) 17% 7% 16% Workfare Income Supplement (WIS) Scheme 10% 3% 13% Trade Related 5% 8% 8% Double Tax Deduction for Market Development Scheme (DTD) 5% 7% 4% Trade Credit Insurance Scheme (TCIS) 0% 1% 1% Loan Insurance Scheme 0% -* 3% Internationalisation Finance Scheme 0% -* 0% Political Risk Insurance Scheme 0% -* - Capital Related 8% 11% 10% Micro Loan Programme (MLP) 4% 6% 5% Local Enterprise Finance Scheme (LEFS) 4% 5% 5% Productivity & Technology Related 10% 5% 1% Innovation and Capability Voucher (ICV) 4% 1% - Technology Innovation Programme 3% 2% - isprint Scheme 2% 1% - Inclusive Growth Programme 1% 1% - Technology Enterprise Commercialization Scheme (TECS) 0% 0% 1% Start-up Related 1% 0% 0% Start-up Enterprise Development Scheme (SEEDS) 1% 0% 0% Business Angels Schemes (BAS) 0% 0% 0% * Not asked in 2012 survey Not asked in 2011 survey

36 Funding / Financing Stage of Development Seeking New/ Additional Financing Start-up 41% 33% 20% Accelerating 49% 24% 14% Moderate 26% 17% 13% Mature 21% 14% 10% Declining 42% 27% 24% Overall 27% 19% 12% More seeking new / additional funds for expansion 8% in SMEs seeking new/additional financing for asset acquisition & enhancement/ expansion of product/ services purposes 2/5 in growth stages looking for more funds Require more financing to develop or further enhance their product/ service offerings 15% in Declining Stages trying to reinvent themselves by enhancing/ expanding products/ services

37 Funding / Financing Reasons for new/ additional financing Refinancing/ Repayment of existing loans (9%) Technology innovation (11%) More SMEs are managing their finances well and looking to reinvent themselves 20% in SMEs getting more financing for working capital needs down from 57% in 2012 Overseas expansion (14%) Asset acquisition (27%) Expansion on range of products/services (36%) Other than working capital needs, SMEs utilising funds for: Expand existing range of products/ services (36%) Acquiring assets (27%) Working Capital (37%)

38 DP Credit Rating DP Credit Rating Investment Grade (DP1 - DP4) 22% 21% 18% 23% 22% 17% High Yield (DP5 - DP6) 35% 40% 44% 47% 49% 58% High Risk (DP7 - DP8) 43% 39% 38% 30% 29% 25% Total 100% 100% 100% 100% 100% 100% Greater divide between the stronger & weaker SMEs Over 6 years, there is a 5% of that are in the investment grade Continued sluggish economy & worsening of financial performance see higher number of High Risk SMEs for 2013

39 DP Credit Rating DP Credit Rating Business Sector Investment Grade High Yield High Risk (FY2012) (FY2011) (FY2012) (FY2011) (FY2012) (FY2011) Construction 22% 22% 44% 41% 34% 37% Information & Communications 5% 17% 28% 23% 67% 60% Manufacturing 30% 21% 38% 49% 32% 30% Retail 13% 23% 19% 31% 68% 46% Services 16% 17% 28% 36% 56% 46% Transport/ Storage 25% 12% 29% 38% 46% 50% Wholesale 26% 23% 40% 44% 34% 33% Overall 22% 21% 35% 40% 43% 39% SMEs with better ratings Transport/ Storage & Manufacturing doing better ( 13% & 9% respectively) Concerns over an increase in lower ratings Two thirds in Retail & Information & Communications are in High Risk 56% in Services in High Risk range, possibly due to lower average cash reserves

40 Productivity

41 SMEs Productivity More are tracking their productivity Positive correlation between turnover and tracking productivity More in Mature (52%) & Declining (48%) tracking productivity; government message of productivity sinking in Stage of Development Measure Productivity Start up 79% 25% 47% 78% Accelerating 64% 52% 59% 80% Moderate 54% 51% 54% 72% Mature 52% 41% 41% 74% Declining 48% 37% 45% 59% Overall 54% 46% 51% 72% As with previous surveys, SMEs with higher turnovers are more likely to track productivity 16% of smaller SMEs (<S$5m) tracking productivity Increase could be due to prevalence & accessibility of the importance of productivity Turnover Track and Measure Productivity Up to $1m 40% 33% 38% >$1m to $5m 51% 42% 50% >$5m to $10m 56% 48% 56% >$10m to $20m 63% 52% 60% >$20m to $80m 66% 60% 66% >$80m 67% 73% 59% Overall 54% 46% 50%

42 SMEs Productivity Business Sector Optimising the use of manpower Improving productivity this year by: Fine-tuning business processes Implementing more ICT Introducing automation Outsource/ Shared services Construction 71% 29% 22% 22% 12% Information & Communications 58% 37% 28% 20% 10% Manufacturing 59% 34% 19% 36% 7% Retail 70% 29% 23% 25% 4% Services 73% 40% 26% 14% 3% Transport/Storag e 69% 43% 32% 26% 11% Wholesale 49% 26% 26% 18% 10% Overall 62% 33% 25% 21% 8% Reasons for not improving productivity this year % Do not see the need 78% Do not know how to implement 14% Lack of resources 6% Others 2% Of the 58% that are looking to improve productivity in 2013, 62% indicated to optimize the use of manpower A third of SMEs will be finetuning their business processes Less feasible for SMEs in Retail & Services to engage in outsourcing/ engaging in shared services so lower proportion have citied it (4% & 3% respectively) Main reason for not improving productivity is the lack of the need to do so

43 SMEs Productivity Main obstacles faced in promoting productivity % Lack of manpower with the right attitude and mind-set 29% Lack of manpower with the right skills 22% Lack of relevant knowledge and skill 15% Lack of money 12% Lack of time to manage productivity 11% Others 11% 88% of SMEs had encounter challenges promoting productivity Main obstacle: Manpower issues; SPRING or MOM could further assist in this 12% cited the lack of money; 15% lack relevant knowledge Areas of consultancy assistance needed to improve productivity Improve the productivity of my staff Review operations and processes for areas of improvement Develop a roadmap of actions to take Implemen t ICT solutions Automate Implement the identified productivity measure Construction 65% 32% 21% 9% 14% 13% Information & Communications 54% 35% 15% 19% 15% 6% Manufacturing 52% 36% 19% 20% 24% 12% Retail 47% 53% 18% 11% 13% 3% Services 59% 33% 18% 14% 11% 7% Transport/Storage 49% 42% 23% 31% 23% 17% Wholesale 45% 45% 12% 12% 6% 6% Overall 53% 39% 17% 15% 13% 9% 86% of SMEs have indicated that they require some form of consultancy assistance to aid in their company s productivity drive

44 SMEs Productivity Training Programmes (40%) & Incentive Schemes to Improve Productivity (26%) deemed most useful Across all sectors, Training Programmes listed as the most useful Aid SMEs in addressing problems of the lack of manpower with the right attitude & mindset/skills

45 Productivity FY2012 had SMEs in the Construction ( 16%) and Transport/ Storage ( 9%) sectors have seeing an increase in Sales per Employee. Increased pressure of having to continuously improve capacity and productivity due to the manpower shortage has allowed SMEs in Construction & Transport/ Storage to buck the trend and see an increase in sales per employee numbers.

46 Productivity Business Sector Profit per Employee (S$) FY2012 FY2011 % Change FY2010 Construction 8,000 9,000-11% 11,000 Information & Communications 6,000 3, % 5,000 Manufacturing 10,000 11,000-9% 12,000 Retail 4,000 14,000-71% - Services 6,000 6,000 0% 3,000 Transport/ Storage 8,000 3, % 6,000 Wholesale 18,000 16,000 13% - Higher operating cost & slower growth offset productivity gains in some sectors Retail more significantly affected by slower consumer spending and higher business cost has taken a greater toll on profitability ( S$10,000) Higher productivity investment in Transport/ Storage has led to S$5,000 increase Similarly in Information & Communications ( to S$6,000)

47 Productivity Staff Cost per Employee getting higher Increases of staff cost per employee was observed in FY2012. Largest increases were seen in Manufacturing ( 37%) followed by Retail ( 29%) & Transport/ Storage ( 22%). DRCs compelled more SMEs to hire local talent which are costlier or to pay their foreign workers more to hit the Employment Pass instead of the S Pass.

48 KEY OBSERVATIONS

49 Key Observation # 1 Productivity Messaging Needs to Reach Out to Workforce Workforce is an integral part of the national productivity strategy SMEs leaders are responding to productivity call. Workforce to contribute as a team 58% plan to improve productivity this year and 62% will achieve via manpower optimisation 2 main obstacles faced in promoting productivity : 29% manpower without right attitude 27% manpower without right skills Main consulting assistance called for Improve the productivity of my staff (53%) Suggestions: Mass media publicity, productivity campaigns and strong above the line communication messaging to win hearts and minds of workforce Healthy competition and incentives to encourage/reward employees with the right attitude NTUC to drive the national movement for mind-set change at the worker level Encourage company loyalty and reduce job hopping to realise investments in T&D

50 Key Observation # 2 Strong Positive Growth Critical for SMEs Economic slowdown over the recent years has taken its toll on SMEs SMEs need to focus on revenue growth Only 7% in accelerating stage of growth lowest in 11 year history of SME Development Survey Quantum of revenue generated in FY2012 has reduced with 56% (compared to 45%) with up to $5 million Drop in overseas revenue from 54% to 46% compared to 2012 and 10% drop in SMEs generating more than 50% of revenue from overseas Suggestions: With current improvements in global macroeconomics - SMEs should position themselves to pursue aggressive growth TACs to provide appropriate support such as seminars and workshops aimed at helping SMEs identify growth opportunities IE Singapore s role in helping SMEs internationalise remains critical Investment in ICT can help SMEs reduce costs through productivity gains

51 Key Observation # 3 Financing Channels for SMEs Need to be Monitored Access to financing is critical for SMEs viability and long term growth More SMEs expressing challenges and requiring additional financing 17% (4% increase) of SMEs citing financing challenges 27% (8% increase) requiring new/additional financing Reduction in debt financing (76% in 2011, 53% in 2012 and 50% in 2013) 9% drop in term loan quantum for SMEs with access to amounts greater than $500,000 (from 50% to 41%) More SMEs in high risk rating with 43% in DP7-DP8; 23% with negative margin and drop of 27% in cash reserves Suggestions: SMEs to continue focus on maintaining healthy financial position Supporting agencies to track the trend of SME lending by commercial banks To give greater confidence to financial institutions to extend longer loan sizes especially for growth needs

52 Key Observation # 4 Targeted Support for the Retail Sector Retail Sector needs to improve performance Weaker performance by SMEs in Retail Sector 20% drop (57% to 37%) in SMEs with more than $5 million in revenue 29% drop in SMEs that are growing (in accelerating and moderate stages of development) 22% more affected by costs relating to manpower Government committed to assist Thru initiatives such as Retail Productivity Roadmap, isprint, PIC and Singapore Productivity Centre Retail Productivity Roadmap, is a 5 year initiative focused on process, people and service excellence SPRING also plans to work with partners on e-commerce and e-retailing initiatives Suggestions: Retail SMEs need to identify strategies to spur revenue growth Extensive funding support for retail sector to improve productivity should also be aligned to increasing revenue Greater expansion into overseas markets with specific assistance from TACs and IE Singapore Retailers to leverage on growing trend for online shopping Retail Hub at heartlands can provide SMEs with shared support services such as attractive rental rates, joint marketing support to drive business and on site consultants

53 Strategic Partners Supporting Organisations

54 QUESTIONS?

55 THANK YOU