SMEs and the Crisis: 47,000 Survivors Have Shown Growth of 26%
€120m in proceeds up in smoke, 405,317 jobs lost, 8,841 companies gone. This is the tragic reckoning of blows inflicted on the system of Italian small and medium enterprises by the crisis, according to the first survey from the Observatory on SME Competition at SDA Bocconi, presented last week in Milan.
The Observatory, which analyzes the entire universe of Italian companies with proceeds between 5 and 50 million euros, revealed that out of the 55,709 companies of that size operating at the beginning of 2007, 15.9% (8,841) had ceased to exist by 2013. Though making up only 6.1% of Italian enterprises, these companies produce 39% of the GDP and employ 2,291,000 people.
On one hand, the data from the Observatory demonstrate that surviving companies recorded gratifying growth rates: +26% between 2007 and the end of 2012, or the equivalent of an average growth of 4.8% per year, and only one negative year in 2009 (-5.3%), but with a rather weak 2012, characterized by an average growth of 1.6% and half of the population with negative growth.
On the other hand, the results draw attention to the growing signs of financial tension. The analysis of the relationship between net financial position and EBITDA demonstrates that companies with an excellent ability to repay debt (a ratio below 1.5) changed from 26.7% to 21.3%, while those in clear financial difficulty (a ratio above 7.5) increased from 17.1% to 26.3%. The period for pay-back of debt grew by approximately one and a half years and after a significant decrease in the debt/net assets ratio of half a point (from 2.9 to 2.5) between 2007 and 2008, the indicator did not change significantly again, remaining dangerously high. In 2012, for the first time, SMEs reduced investments, in an attempt to reduce bank debt. By contrast, the incidence of financial charges progressively decreased with the reduction of interest rates. "But if the interest rates return to 2008 levels," warns Federico Visconti, head of the Observatory, "the cost in terms of greater charges on debt would increase by approximately €3.7 billion."In the context of good overall profitability (average ROI of 7.6% per year during the period), SMEs that understood how to best withstand the crisis were those with a more concentrated owner structure, while smaller companies (between 5 and 10 million euros in proceeds) proved to be more profitable, but reveal a capital structure to strengthen.Lastly, research identified 1,165 SMEs (2.5% of the population) stronger than their competitors. These are the successful companies that recorded a positive growth rate and ROI that was always higher than the average during the 2007-2012 period. These companies were mostly located in Veneto, Emilia-Romagna, Piedmont and Liguria, are larger than average and have a longer history behind them. The sectors most represented among the successful SMEs were wholesale retail and manufacturing (machinery, food and beverage and chemicals-pharmaceuticals leading). Their average rate of growth during the period was 12.4% (approximately 2.5 times that of the others) and operational profitability was twice that of the other SMEs.