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Gap between large firms and SMEs continues to widen: study

Bigger companies post record earnings while SMEs suffer double-digit fall in profits and turnover

The gap between Singapore's small and medium-sized enterprises and bigger firms widened further as SMEs continued to struggle while earnings at their more established counterparts reached for the stars.


THE gap between Singapore's small and medium-sized enterprises and bigger firms widened further as SMEs continued to struggle while earnings at their more established counterparts reached for the stars.

This was among the findings of a study by DP Information Group (DP Info) and EY unveiled on Thursday at the launch of the Singapore 1000 (S1000) and Singapore SME 1000 (SME 1000) rankings.

The former ranks the largest 1,000 firms in Singapore by revenue, while the latter ranks the top 1,000 SMEs with revenues of less than S$100 million for 1 June 2016 to 31 May 2017.

During this period, SMEs' turnover and profits tumbled, while Singapore's largest companies celebrated their most profitable year yet, with double-digit increases that took their combined profits to a record high.

The 1,000 top companies saw a 10.5 per cent jump in combined profits to S$182.8 billion compared to a year ago. Profit margins improved markedly as turnover over the same period was up only 1.1 per cent to S$2.79 trillion. "In other words, the companies were more efficient and productive in their operations or were disciplined enough to reduce costs," said James Gothard, general manager, Credit Services & Strategy SEA, Experian - parent company of DP Info.

The electricity-water-gas sector saw the largest increase in average profits per company, jumping 30.2 per cent to an average of S$198.8 million per company this year. The commerce/wholesale sector came in a close second place, with an increase of 29.4 per cent improvement to S$106.4 million.

In contrast to the record-breaking year for Singapore's largest businesses, those in the SME 1000 ranking suffered both deteriorating turnover and profits.

Combined revenues for the smaller companies fell 11.8 per cent to S$26.7 billion, while profits declined from a combined S$3.5 billion to S$2.9 billion - a drop of 17.1 per cent.

The transport/storage sector saw the biggest plunge in combined profits, with a 53.8 per cent dive to S$261.7 million. It was followed by SMEs in the finance sector, with a decline of 30.1 per cent to S$150 million.

Mr Gothard pointed out that SMEs here faced challenges in the operating environment over the period covered by the study. "Singapore had weaker GDP growth and global trade was slow, with China having had one of the slowest growth periods in 25 years at that point. SMEs also invested in technology and productivity improvements in response to tighter manpower policies at the same time," he said.

DP Info and EY also published the Singapore International 100 ranking for the top 100 firms based on overseas revenue, and the Singapore International Top 50 SMEs ranking.

For the latest period, the total overseas revenue of the top 100 firms in Singapore that went international fell 11 per cent to S$165.4 billion.

China was the largest source market for Singapore's largest corporations doing business overseas, accounting for 42.9 per cent of offshore revenue.

The total overseas revenue of the top 50 internationalised SMEs, however, went up by 3.3 per cent to S$1.6 billion.

Southeast Asia was the most important market for the 50 SMEs ranked, with 41.8 per cent of SMEs' revenue coming from the Asean region - more than three times the revenue generated in China.

"We expect Southeast Asia to grow in prominence for SMEs as Singapore uses its position as Asean chair to strengthen economic ties and to boost regional business opportunities," said Mr Gothard.

A gala dinner to celebrate the award winners will take place on Friday evening at The Ritz-Carlton Millenia Singapore.

One SME that will be receiving an award is Equvo, a lease financing and equipment advisory services firm that mainly serves the semiconductor manufacturing and aviation sectors.

When asked how the company scored the win, CEO Melvin Low said that it was about focusing on their "core competency, great customer and bank relationships, executing well globally, and working as a team".

Currently, he has further plans to grow the business and has his sights set on China as a market.

His advice for other SMEs? "Watch your burn rate (or your operating costs), stay relevant to your customers and ahead of your competitors, admit your mistakes and make the necessary changes in your business," Mr Low said.

DP Info and EY analysed the financial returns of more than 70,000 firms to come up with the rankings.