Some 30% of established small and medium-sized UK firms expect to see their profits increase over the next 12 months, according to new research published on Tuesday.
The survey, commissioned by MBH Corporation Plc (FRA:M8H) found a further 10% of companies expect profits to remain roughly the same.
Looking further ahead, 46% of the companies surveyed predicted their profitability will increase between now and 2023, rising to 52% when looking at the next five years.
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“Coronavirus has had a devastating impact on businesses around the world. However, SMEs can often be nimbler and more innovative than larger companies when responding to challenges, and our research reveals that despite the current crisis there are many SMEs that are still performing well and who are optimistic about their future,” said Callum Laing, MBH’s chief executive officer.
“As an investor, there are still many very well-run smaller companies that represent strong value opportunities and exciting growth prospects.”
The survey, which was carried out among 50 successful and established SMEs from around the UK, found 96% of companies intend to cut staff numbers over the next two years, with 48% of firms predicting a headcount reduction of at least 20%.
More research commissioned by MBH found that out of all 108 small-cap companies that listed in Europe last year, 42 operated at a financial loss last year, compared to 38 in 2018.
This research, by Germany’s Kirchhoff Consult, found that only 57 of the companies saw their revenue increase between 2018 and 2019 and just 30 produced an improvement in operating income (EBITDA).
Out of the 108 newly listed small caps, only five paid a dividend to investors for the last financial year.
MBH was one of the few companies to increase sales, profits and pay a dividend, with results in May unveiling a maiden dividend of 0.5 euro cents as EBITDA increased by 215% to £5.2mln.
Said Laing: “This research clearly shows that an IPO doesn’t always lead to stronger performance and increased revenue. In the two years since we listed, we’ve managed to sustain our growth by executing a proactive programme of finding highly successful, profitable and well-established businesses to add to our portfolio.”
MBH acquires companies using a strategy dubbed Agglomeration by Laing, where profitable companies convert their private shares into public shares in MBH at an agreed multiple.
Company owners are then incentivised to accelerate their growth trajectory using the resources of the PLC, Laing says, including sharing expertise, best practices, cross-selling and sometimes zero cost funding for new growth projects.