Strong business confidence & growth expectations for New Zealand SME market

17 Sep 2013

  • SME economic and revenue expectations increasingly positive
  • Local SMEs outperforming Australian counterparts
  • Christchurch continues to drive growth

New research released today by MYOB, New Zealand’s largest accounting software provider, reveals a significant improvement over the past six months in the confidence and financial expectations of local small and medium business (SME) operators.

The MYOB Business Monitor Report found SMEs are increasingly optimistic about the state of the economy as well as their own performance. This was evidenced through an improvement in economic health expectations, a slight uptick in revenue results over the 12 months to August and a positive work pipeline.

The Monitor, a national survey of 1,000+ business owners and managers commissioned to market research firm Colmar Brunton, has run since 2009. It explores their business performance, attitudes, plans, pressures and more.

In the latest study, 28% of operators expected the economy to improve within 12 months – up on 24% in the March 2013 report and 18% in the June 2012 report. 59% expected it to take more than a year, down from 66% and 73% respectively. Further good news was the 30% of SMEs reporting a revenue rise over the last year and 43% reporting stable revenue. Just 24% saw a fall – an improvement on 27% and 30% in March 2013 and June 2012.

MYOB NZ General Manager, Business Division, James Scollay, says the Monitor is painting a positive picture for the New Zealand business community.

“Over the last year, we have seen the health of the small and medium business sector transformed from a stop-start recovery to a far more dependable, consistent level of growth,” he says.

“This is fantastic news for those New Zealanders who have worked so hard over the post-recession period to invest in growth and consolidate gains. It validates their determined resilience through one of the most challenging periods of our economic history.

“Over the next 12 months, the revenue picture is even brighter. 43% of local SMEs expect their results to improve in the coming year, while a further 41% expect steady revenue. Only 10% are forecasting a fall – the lowest proportion we have seen since March 2010.”

Contrasts across the ditch

New Zealand’s performance is in stark contrast with Australia, where MYOB runs a parallel Monitor survey.

Mr Scollay observes, “The SME sector in Australia is facing a much tougher time, as its economy hits headwinds such as falling international demand in the minerals sector. The performance of our major trading partner is certainly something we need to be aware of as we look ahead to 2014.”

“Only 18% of Australian operators saw revenue growth in the last year and 25% expected it to improve in the year ahead – almost half that of New Zealand. 23% expected to see their local economy improve within 12 months.”

Prices on the way up, interest rates a concern

One quarter of local SMEs plan to increase their prices by the end of 2013, according to the survey, while 19% will increase employee pay rates, in a sign that inflationary pressures may increase in the later half of the year.

Interest rates are still a concern, with almost one quarter (22%) of all businesses surveyed expecting pressure here in the coming year. However, the top four pressures were fuel prices (35%), attracting new customers (27%), cashflow (26%) and price margins and profitability (23%).

Christchurch rebuild powers ahead

Christchurch has remained ahead of the other main centres in the key metrics measured by the Monitor, as the rebuild increases pace and extends further into the New Zealand economy.

Christchurch business operators were the most positive about the economy, with 37% expecting an improvement there in the next 12 months. Auckland also tracked ahead of the rest of the country, at 30%. Wellington business operators remained less certain, with 22% expecting improvement within 12 months.

Christchurch business operators were also more likely to report an annual revenue rise in the previous 12 months and to anticipate a revenue rise in the following 12 months. Auckland followed, and was more likely to report and anticipate stability than the other centres. Wellington was least likely to report and anticipate a rise.

CENTRE RESULT: PAST 12 MONTHS REVENUE UP RESULT: PAST 12 MONTHS REVENUE RESULT DOWN EXPECTED: NEXT 12 MONTHS REVENUE UP EXPECTED: NEXT 12 MONTHS REVENUE DOWN
Christchurch 41% 24% 55% 9%
Auckland 31% 19% 44% 8%
Wellington 29% 24% 34% 15%

Mr Scollay says, “Christchurch is getting a roll on now, with some very strong growth and solid expectations. Despite the delays and challenges of the rebuild, there’s little doubt now that it is driving significant improvements across the health of local businesses – with potential for the whole country.”

The impact of the rebuild is particularly evident in pipeline work booked for August through to October in the city. 42% of Christchurch SMEs have more work on than usual and only 14% have less. Auckland is also strong, with 40% of businesses there reporting more work than usual, and only 15% less. 35% of Wellington SMEs reported more pipeline work than usual (similar to the national average of 36%) while 20% have less (17% national average).

Manufacturing ‘crisis’ over, agribusiness sector struggles

Despite the general positivity in the economy, the survey highlighted some weakness in key sectors.

“Trading has become tighter for the retail and hospitality sector, which slipped further into negative territory as 27% reported revenue growth, down on 29% in March, and revenue falls remained high at 38%,” Mr Scollay says. “However, the sector is expecting to turn the corner next year, with almost half of local hospitality and retail businesses expecting revenue to grow, and few expecting falls.”

“It’s here in particular that we would encourage business operators (SMEs) to consider increasing their investment in an online presence and e-commerce tools. This will enable them to take advantage of improved efficiencies and wider audience reach, and enjoy the resulting revenue improvements.”

The proportion of primary sector - agriculture, forestry and fishing - businesses reporting revenue growth has also fallen, from 21% in March to just 15%. The proportion with revenue falls is relatively steady (from 38% to 39%).

“The rural sector has also struggled over recent months, perhaps as a result of some lingering effects of the drought, coupled with global uncertainty and the high Kiwi dollar,” says Mr Scollay.

CENTRE RESULT: REVENUE UP RESULT: REVENUE DOWN EXPECTED: REVENUE UP EXPECTED: REVENUE DOWN
Business, Professional & Property 33% 19% 42% 10%
Finance & Insurance 39% 13% 35% 7%
Construction & Trades 37% 28% 44% 13%
Transport, Postal & Warehousing 27% 17% 31% 16%
Retail & Hospitality 27% 38% 48% 14%
Manufacturing & Wholesale 36% 16% 59% 8%
Primary 15% 39% 37% 7%
Other industry 29% 22% 43% 10%

“There’s very good news in other sectors though, with any thought of a manufacturing ‘crisis’ now dispelled on the back of these results, and the construction sector still showing growth,” says Mr Scollay.

Revenue has improved dramatically for the manufacturing and wholesale sector, with 36% now reporting growth over the last 12 months, and just 16% a fall. In March 2013, this was 27% and 35%. The construction sector is also in positive territory, with revenue growth improving from 31% of operators in March to 37% in the latest survey.

“Although there are some constant pressures and some sectors in which some weakness remains, overall our local SME sector is looking pleasingly healthy in this latest MYOB Business Monitor,” Mr Scollay says.

“There are many major opportunities for businesses (SMEs) to solidify their growth potential, and with careful planning and advice, lock in those gains to invest in further development. It's a very positive time to be in business in New Zealand.”

For MYOB product information, research results, business tips, discussions, customer service and more visit the MYOB Business Monitor site, The Pulse blog, MYOB Twitter, MYOB Facebook or visit our recently updated MYOB New Zealand YouTube Channel.

-ENDS-

For further information or immediate comment, please contact:

Kristy Sheppard

MYOB

Tel: 09 925 3560

Mob: +61 407 450 860

Email: kristy.sheppard@myob.com

Gerard Blank

The Agency Communications Limited

Tel: 03 341 5841

Mob: 0275 243 629

Email: gerard@theagencynz.co.nz

About MYOB New Zealand

Established in 1991, MYOB is New Zealand's largest business management solutions provider. It makes life easier for approx. 1.2 million businesses across New Zealand and Australia, by simplifying accounting, payroll, tax, practice management, CRM, websites, job costing, inventory and more. MYOB provides ongoing support via many client service channels including a network of over 40,000 accountants, bookkeepers and other consultants. It is committed to ongoing innovation, particularly in cloud computing solutions, and now spends more than NZ$35 million annually on research and development. In 2013, MYOB expanded its offerings with the acquisition of accounting solutions provider BankLink. For more information, visit myob.co.nz.