More than three in four (77%) bosses in the UK consumer and leisure (C&L) sector expect to grow profits by 6% or more over the next 12 months, according to an upbeat survey from private equity firm ECI Partners.
ECI surveyed almost 250 small and medium businesses and found that the C&L sector is slightly more optimistic than businesses in general - overall, 76% of chief executives expect a rise in profits.
In addition, 76% of C&L chief executives expect turnover to rise more than 6%, with 33% estimating a rise of more than 20%. Across all the sectors, 79% of CEOs expect to grow turnover at 6% or more, with nearly a third forecasting growth of over 20%.
Seven out of 10 C&L company bosses predict they will grow employment, with 54% expecting staff numbers to rise more than 6%. For SMEs as a whole, the figure is 74% - up from 68% in the previous year.
Organic growth is seen as the key driver or expansion among C&L bosses, with 94% saying it will be “significant” or “very significant”; in contrasts, just 33% believe this about growth by acquisition.
The top two drivers for turnover growth among C&L bosses are seen to be increasing market share (20%) and entry into new geographical markets (18%). Continental Europe (39%) and the US (22%) remain the dominant international markets for expansion, with China (14%) among others becoming a more important market.
Easier access to finance among leisure firms appears to be discouraging them from seeking private equity cash. Nearly two thirds (73%) say they would be “unlikely” to or would “definitely not” consider it, down from 43% in 2010.
When it comes to accessing finance, more than half of C&L bosses believe it will be “easy” or “very easy” to raise finance over the next 12 months, with 48% saying it will be “difficult' or “very difficult” to do so - this compares with 60% overall (2010: 58%).
Nearly half (48%) of C&L CEOs consider the main barrier to raising finance is its lack of availability - and 96% of all companies plan to source all or part of their growth finance from their own cash flows.
Aside from private equity, other planned sources of finance for the year ahead are likely to include bank debt (50%) and just 6% public markets (6%).
Meanwhile, 40% of C&L bosses believe the changes implemented by the Coalition Government are “very positive” or “positive”. One in three companies overall believe future rises in interest rates will not be a concern for them, “perhaps due to their low level of existing debt and strong cash balances”.
Chris Watt, director of ECI Partners and head of ECI’s Consumer and Leisure sector, said: “This survey shows that despite the tough economic conditions, many companies in the Consumer and Leisure sector continue to thrive.”
Business minister Mark Prisk said: “It’s good news that despite a tough few months, nearly three quarters of the SMEs surveyed by
ECI are looking to recruit over the next year and half expect to see substantial profit growth in that period. Up and down the country, it is Britain’s SMEs that are driving our economic recovery.
“This Government is absolutely committed to supporting the private sector as it creates jobs and sustainable economic growth. That’s why we’re cutting business taxes, backing start-ups and tackling burdensome red tape.”
