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Do Czech and Slovak companies feel an economic recovery?

There has been a moderate increase in production demand since the turn of the year; revenue may be higher this year, but it doesn’t make sense to include investment in new capacities or taking on new staff in your plans for 2010... this is how the results of the research carried out by TACOMA in March and April can best be summarised.

The aim of the inquiry was to ascertain whether the much-discussed market recovery has actually made a tangible positive difference to companies, or whether it is purely a matter of statistical observation. We conducted the research by looking at 130 major Czech companies.

The results showed that 62% of the respondents have observed signs of a recovery so far this year. However, it is also clear from the answers that this ‘recovery’ primarily consists of either a very moderate increase in demand, or an end to the decreased demand of last year. Ten per cent of all respondents reported that their situation was now worse than in the previous period, and another tenth stated that the recession had had no impact on their business, resulting in an unchanged current situation.

Almost half of the respondents who expect the situation to improve in 2010 believe the shift will come in the shape of increased demand, and 20% of the respondents anticipate increased revenue as a result of their marketing activities. The other most commonly-cited factor in anticipated revenue increases in 2010 was that a company’s clients should by now have used up their reserves in stock, and started returning to their normal level of production purchasing. A tenth of the respondents expecting growth in 2010 intend to achieve it through acquisition.

Adaptation of costs
In the 2009 business results, almost half of all respondents observed a decline in their company’s profitability (measured at the EBITDA/Revenues ratio level). Only one fifth of the respondents suffering from reduced production was able to react to the resulting decrease in revenue by making efficient cost reductions, and managed to keep the relative profitability of their company at a similar level.

Personnel area
This is confirmed by the fact that almost 60% of the respondents are not planning any major changes in personnel or technological capacity, in spite of the anticipated growth. In 2009, companies dealt with the decrease in demand by making sporadic redundancies; thereby maintaining a certain reserve - mainly in terms of key employees - in readiness, for the recovery period. “Managers have probably not forgotten what cost and effort they had to invest to acquire their key professionals in the period of unflagging growth. If we throw in dismissal costs as well, one can understand this behaviour,” adds Jan Chromý, Head of TACOMA Valuation.

Financing
Almost half of the companies owned by a transnational concern said that their parent company’s strong capital background had made their situation last year much easier; one fifth of them even stating that without its support, they would probably not have survived. Conversely, over 20% of the respondents falling under a transnational group reported that their parent company had significantly limited their potential further growth.

If you are interested in more details, do not hesitate to contact us.



Jan Chromý, Manager - Head of TACOMA Valuation
Tel.: +420 226 219 054
Mobil: +420 731 412 740
E-mail: jan.chromy@tacoma.eu  
www.tacoma.eu  


About TACOMA
TACOMA is a leading Czech full-service advisory firm, providing integrated services in respect of mergers & acquisitions, corporate finance, valuations, tax, trust services, audit, and accounting & payroll. Active since 1993, the company has successfully completed restructuring processes for more than 160 major companies with its team of more than 90 professionals. More detailed information is available at www.tacoma.eu.