Medium size enterprises

Transcription

1 Medium size enterprises Defeating large companies, challenging conventional beliefs GABRIELE BARBARESCO Milan, 15 March 2013

2 Summary 1. Problems of definition and their consequences 2. Relationship between size and performance 3. MSEs geography 4. MSEs vs multinationals 5. The case of Italy: does doing business create or destroy value? 6. What the aggregate data hide: heterogeneity 7. Tax burden and financial soundness 2

3 Problems of definition and their consequences Section 1

4 What we and others are looking at: defining MSEs Problems of definition and their consequences Section 1 Parameters This survey European Commission - Eurostat Staff headcount employees employees AND EITHER Annual turnover m 10-50m Total assets None 10-43m OR AND AND Independence Controlling stakes held neither by larger Italian companies nor foreign entities Holdings of less than 25% of the capital in one or more other enterprises; and/or to be held by an outsider by less than 25% of the capital NB SME no more than an anagram of MSE (different phenomena) Independence is not mirrored in official statistics at all Source: compiled by R&S 4

5 Only if MSEs are properly addressed can their true performance be revealed Problems of definition and their consequences Section 1 MSEs (DE, FR, IT, SP) (this survey definition) MSEs (DE, FR, IT, SP) (EC turnover definition) Average number of employees (units) Average turnover ( m) Net value added per employee ( ' 000) (a) Labour cost per employee ( ' 000) (b) Unit labour cost (b/a in %) Borrowings / net tangible worth (%) GOM / interest and financial charges ROE ROI NOM / VA VA / CI Interest and dividends / CI Source: compiled by R&S based on own data and ECCBSO figures; 6,339 and 17,852 MSEs respectively; only parent company accounts; MSEs from ECCBSO database are compliant with EC turnover limits only 5

6 Relationship between size and performance Section 2

7 MSEs: the growth options (see: F. Coltorti, R. Resciniti, A. Tunisini and R.Varaldo (eds): Mid-sized Manufacturing Companies: the New Driver for Italian Competitiveness, Springer 2013) Relationship between size and performance Section 2 Size growth Through investments or via M&A, it is still an option and we don t want to dismiss it, but it needs to be pursued cautiously, as getting bigger means becoming riskier; targets are: contiguous market niches, leveraging on brand awarness and techological affinities, or new geographical markets Relationship growth Access and use of external resources through the networks of relationships, both national and international, which MSEs are genetically able to develop and manage; the networks extend vertically with upstream and downstream parners as well horizontally Capability growth Refers to the development of MSEs knowledge through continuous R&D investments, learning-by-doing processes, ongoing evaluation of clients needs, and market requests. Capability growth is boosted by business relationships, producing exchanges and combinations of complementary knowledge, business ideas, techological solutions and client need-tuning Beware MSEs are larger than can be gauged by their physical boundaries, having access to a wide range of resources and competences through relationship networks Source: compiled by R&S 7

8 The unexpected crossing: size, productivity and unit labour cost (size increasing from left to right; ULC= labour cost as a % of net value added; medians on rolling samples of 200 units) Relationship between size and performance Section 2 Net value added per employee ULC Net value added per employee ULC Net value added per employee ULC Net value added per employee ULC Source: compiled by R&S 8

9 We do not appear to be looking at Trilussa s average (simple averages for labour productivity for size classes and 95% confidence levels) Relationship between size and performance Section Source: compiled by R&S 9

10 A bit less unexpected now: industrial margins decreasing too (size increasing from left to right; net operating margin as a % of value added; medians on rolling samples of 200 units) Relationship between size and performance Section 2 Source: compiled by R&S 10

11 High-tech and high-medium-tech MSEs bysize classes (% of total per size class) Relationship between size and performance Section Source: compiled by R&S France Germany Italy Spain 11

12 Growth may be evil or a godsend, but it is not a one-fits-all rule (Italian companies, ROE) Relationship between size and performance Section Italian MSEs Italian mid-large companies Italian larger companies Source: compiled by R&S based on own data 12

13 MSEs geography Section 3

14 MSEs in Europe: agglomeration and diffusion MSEs geography Section 3 Regions % of MSEs % of VA % of GDP Île de France Rhône-Alpes P. de la Loyre Brittany Leading 4 FR Nordrhein-W Baden- Württemberg Bavaria Niedersachen & B Leading 4 DE Lombardy Veneto Emilia-Romagna Piedmont and A.V Leading 4 IT Catalonia Valencia Madrid Basque Country Leading 4 ES Source: Unioncamere and R&S 14

15 MSEs vs multinationals Section 4

16 MSEs: a financial structure reliant on filière relationships (% of tangible capital invested, manufacturing only) MSEs vs multinationals Section Fixed and financial tangible assets, net Current assets, net Cash and marketable securities MSEs Tangible net worth Euro Area Multinationals Short term borrowings Long term borrowings Source: compiled by R&S based on own data; 6,339 MSEs and 100 manufacturing Euro-area multinationals 16

17 Even compared with multinationals, MSEs still one step ahead (index numebr for European MSEs and Eurozone multinationals; multinationals=100) MSEs vs multinationals Section Net value added per employee Labour cost per employee Unit labour cost ROE ROI Intangibles as % of capital invested Source: compiled by R&S based on own data; 6,339 MSEs and 100 manufacturing Euro-area multinationals 17

18 The case of Italy: does doing business create or destroy value? Section 5

19 Value creation: a sad picture, at a first glance (index numbers; 2002=100 of ROI less WACC; ERP=3.5%; risk free rate=10y DE Bund; Italy) The case of Italy: does doing business create or destroy value? Section Italian MSEs Italian LEs Source: compiled by R&S based on own data 19

20 which would change profoundly without IRAP (index numbers; 2002=100 of ROI less WACC; ERP=3.5%; risk free rate=10y DE Bund; no IRAP levied; Italy) The case of Italy: does doing business create or destroy value? Section Italian MSEs Italian LEs Source: compiled by R&S based on own data 20

21 ... becomening even more favourable to MSEs were they taxed as LEs (index numbers; 2002=100 of ROI less WACC; ERP=3.5%; risk free rate=10y DE Bund; SMEs taxed as LEs; no IRAP levied; Italy) The case of Italy: does doing business create or destroy value? Section Italian MSEs Italian LEs Source: compiled by R&S based on own data 21

22 And all happened with MSEs increasing their employment (index numbers; 2002=100 of total staff) The case of Italy: does doing business create or destroy value? Section Italian MSEs Italian LEs Source: compiled by R&S based on own data 22

23 The reason for running a LE is not to have a fair return on equity (% differences between ROE and cost of equity) The case of Italy: does doing business create or destroy value? Section Italian MSEs Italian LEs Source: compiled by R&S based on own data 23

24 What the aggregate data hide: heterogeneity Section 6

25 Risky gets riskier, sound gets sounder, and both persistent (Shares in % and index number of PD for three main scoring buckets, Italy) What the aggregate data hide: heterogeneity Section E 2011E Inv. Grade (% share, left axis) Intermediate (% share, left axis) Distressed (% share, right axis) E 2011E Inv. Grade (PD) Intermediate (PD) Distressed (PD) Source: compiled by R&S based on R&S-Unioncamere scoring model 25

26 Tax burden and financial soundness Section 7

27 Hypothetical tax burdens, following savings (cumulated tax savings under different tax burdens for italian MSEs; bn) Tax burden and financial soundness Section Italian LEs tax rate German MSEs tax rate French MSEs tax rate Spanish MSEs tax rate Source: compiled by R&S based on own data 27

28 and their consequences on financial soundness (% of companies in scoring buckets and average PD as a number index, Germany=100) Tax burden and financial soundness Section Germany France Spain Italy Italy Investment grade Intermediate Distressed Source: compiled by R&S based on R&S-Unioncamere scoring model 28

29 Ricerche e Studi S.p.A.