April 2013

Growth to headline

Australasian Capital Confidence Barometer

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What is your organisations focus over the next 12 months?

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My organisation is focused on growth (yes)

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Focused on growth

A change in sentiment has Australasian and global organisations shifting their focus away from cost reduction and operational efficiency, towards planning for more top line growth. Growth is now the priority with 51% and 52% of Australasian and global respondents respectively saying it was their primary objective over the next 12 months.

As expected, the improved conditions have also led to a reduction in the number of organisations focusing on maintaining stability or survival this Barometer, from 36% in October to 23% today.

Australasian organisations still grappling with challenging conditions are likely to be smaller or mid cap companies that are experiencing liquidity issues or from challenging parts of the manufacturing, automotive and retail sectors.

What is your organisations focus over the next 12 months?

Honing in on capital allocation

The extended period of slower economic growth, here in Australasia and more broadly across the globe, has increased the importance on capital allocation and the need for more strategic transformational transactions to meet stakeholder’s growth expectations.

Capital allocation is now the top boardroom issue, with 63% of Australasian respondents saying it has received increased focus by directors, up from 49% last October. This trend is apparent across regions and sectors as business leaders look for more profitable ways to deploy capital in a climate of more modest global growth.

My organisation is focused on growth (yes)

Once burnt, twice shy

Many Australasian organisations are still looking to lower risk and return options, with 38% focusing on organic growth investments in products, capex, talent retention and R&D.

Some are still very cautious around spending surplus cash, with 24% paying down debt further, although is already at very low levels. 51% of Australasian respondents have a debt to capital ratio of less than 25% and a further 33% have a ratio less than 50%.

Perhaps driven by yield hungry investors, other cashed-up organisations are paying higher dividends, with 19% saying that’s the plan for surplus capital.

These types of capital allocation tactics show that we are still at the early stages of the next growth cycle, with more caution still evident among organisations.