Mid-market CFOs expect financing to improve – survey
CHIEF executives and CFOs of UK mid-market firms expect that it will become easier to finance their activities in the coming 12 months, a new survey suggests.
But the Grant Thornton UK study said that almost one third don’t expect to see any improvement until the second half of 2012 or later.
The survey of 200 CEOs and CFOs showed that 55% are expecting the financing environment to improve, while 31% think it will remain static and only 14% expect it to deteriorate.
“Many mid-market firms in the UK are still very defensive when it comes to pursuing growth opportunities. This is partly due to their lenders being so cautious, leaving businesses reliant on internal cash to stagger on,” said Ian Marwood, partner and head of lead sdvisory at Grant Thornton in Yorkshire.
The study, called The Finance Flow, showed that of the 45% of respondents that did not expect to see an improving financing environment this year, 37% expected to see an improvement in the second half of 2012 and 33% did not expect conditions to improve before 2013.
In other words, 31% of all respondents don’t expect to see any improvement before the second half of 2012.
The number of respondents planning an initial public offering on the stock market has jumped to almost 9% compared to only 1% a year earlier, the survey also revealed.
“The very significant rise in appetite to pursue an IPO from 1% to 9% tracks wider market sentiment where measured levels of confidence have supported greater levels of new IPO activity and equally importantly, strong levels of secondary fundraisings for existing public companies.
“Whilst pressure on valuation remains acute, public markets are once again open to those companies that are able to demonstrate strong fundamentals,” said Marwood.
Seventy-six per cent of decision makers in technology, media and telecommunications expect to see an improving financing environment, only 5% expect it to deteriorate and 19% expect it to remain static.
“Healthcare firms also have a positive outlook because their cash flow is relatively predictable. By contrast, retailers are most despondent about their financial outlook as the number of peers going into administration remains high,” said Marwood.
Only 47% of respondents in the retail sector expect the financing environment to improve in the next 12 months compared to the past 12 to 18 months.
“The renewal of basic debt facilities is a core focus of our clients. We expect a large number of UK mid-market firms to refinance their debt in the next 12 to 18 months. To successfully raise funding in this market, these firms will need to rigorously examine their strategy and business plans and to demonstrate that they are thoroughly managing risks.
“They will also need to test the market for alternative sources of funding,” added Marwood.
