SMEs brace profit squeeze in next six months

Turnover expectations have diminished.

SME are gearing up for smaller profits in the second and third quarters of the year, a poll by the Singapore Business Federation and DP Information Group revealed.

The SBF-DP SME Index for Q2 and Q3 of 2015 showed that profit expectations are also less optimistic as a result of the diminished turnover expectations for the next two quarters

Profit expectations declined to 5.47 from 5.54 last quarter, while turnover expectations have fallen from an Index Score of 5.74 to 5.57.

Business Services recorded the biggest drop in turnover expectations from an Index score of 5.97 to 5.63. This means Business Services leaders expect a slowdown across the entire SME sector which forms the bulk of their customer base.

The slowdown is partly seasonal and reflects lower volumes in contrast to the festive activities in Q4 and Q1.

For the Commerce/Trading and Retail/F&B sectors, the lower post-festive period spending has contributed to the drop in turnover expectations. For the Construction/Engineering companies, a softening private property market has resulted in a lower turnover outlook for the sector.

The labour-intensive Manufacturing sector is facing strong competition internationally and companies are adjusting their business models to accommodate a higher labour cost, thus lowering their outlook for the next six months.