UK Mid-Caps See Growth Ahead, According Edison Investment Research Survey
A recent Edison business confidence survey of more than 200 mid-cap UK listed companies of up to c £2bn in market value reveals that, despite a grim domestic outlook, most are confident about the outlook for their own businesses and are looking to make an acquisition over the coming year.
However, the survey notes that some are concerned about the state of the UK equity markets to facilitate ambitions. Confidence in raising finance from the public equity markets remains fragile at best, just as most businesses are adjusting to operating in a global low growth environment.
Most businesses expect flat growth or even a retraction in the UK, with just 30% of companies expecting growth. The prospects in Europe look even gloomier where just 26% expect growth. Expectations for Asia remain comparatively stronger, with 42% confident of growth, ahead of the next-best regional performer, the US, with 32%.
The survey’s key findings for the next 12 months are:
- 65% hope to make, or are highly confident of making, an acquisition.
- 66% are positive or very positive about the outlook for their business.
- Only 20% expect to carry out an equity fund raising.
- 72% expect to, or are highly likely to, increase both capital expenditure and headcount.
- Asia is the region where most growth is expected amid a global slowdown.
- Post the Davis report into gender diversity at UK board level: o 36% state gender is not an issue to take into consideration;
- 26% have yet to make any changes board level;
- 26% already have female representation so it is not an issue; and
- 12% have either hired a female board member or are taking steps to hire.
Fraser Thorne, Managing Director at Edison Investment Research commented: “Despite the gloom about global growth prospects, UK plc seems remarkably sanguine about its own prospects for growth. After three years of balance sheet rebuilding companies are looking to go back on the acquisition trail and we are already seeing evidence of that, particularly in the mid-cap market of £100m-2bn, and with M&A activity already higher in sectors such as pharmaceuticals and industrials.
Of particular interest for boards is the finding that most companies look set to continue to shun the public markets for accessing finance. There is renewed confidence in restarting investment for growth – either by upping capital expenditure or by general staffing increases – but company boards are increasingly turning to alternative forms of finance for funding. Conversations we have with directors indicate that, while corporate bonds may for some larger companies be making a comeback, small- and mid-cap quoted companies are prepared to look for alternative sources including private client family offices, while some are considering crowd funding, a route currently in vogue only for start-ups.
While the debate rages in public circles about increasing gender diversity at board level for the FTSE 100, we are just beginning to see some grass-roots changes to reform board representation. But with economic uncertainties remaining a primary focus, we do not foresee this issue moving high up the corporate agenda for many mid-caps in the short term.”
The survey was carried out between the end of June and beginning of July 2012 and most businesses surveyed had market values between £100m an £500m.