A SNAPSHOT OF THE MALTESE MIDDLE MARKET · A SNAPSHOT OF THE MALTESE MIDDLE MARKET. CONTENTS EXECUTIVE SUMMARY 5 WHAT MAKES UP THE MIDDLE MARKET SECTOR? 6 ... THis is a very strong

RSM CHAMBER MEDIUM-SIZED ENTERPRISE SURVEY2018 Interim Report

A SNAPSHOT OF THE MALTESE MIDDLE MARKET

CONTENTS

EXECUTIVE SUMMARY 5

WHAT MAKES UP THE MIDDLE MARKET SECTOR? 6

STRUCTURE OF SAMPLE 8

Revenue 8Net Assets 8Number Of Years In Operation 9Family Owned & Non-Family Owned Businesses 9

THE MALTESE ECONOMY 10

Performance Of THe General Economy (Actual Vs Expectations January–June 2017) 10Expected Performance Of THe Economy (January–June 2018) 10

FINANCIAL OVERVIEW 11

Revenue (Reporting Period January–June 2017 Compared With January–June 2016) 11Expected Revenue (Reporting Period January–June 2018) 11Pipeline Or Purchases Order Book (Reporting Period January–June 2017 Compared With January–June 2016) 12Cost Of Materials And Services (Reporting Period January–June 2017 Compared With January–June 2016) 12Planned Investment (Reporting Period January–June 2017 Compared With January–June 2018) 13Capital Expenditure (Reporting Period January–June 2017 Compared With January–June 2016) 13Areas Of Capital Expenditure 14Profitability (Reporting Period January–June 2017 Compared With January–June 2016) 15Expected Profitability (Reporting Period January – June 2018) 15

HUMAN RESOURCES OVERVIEW 16

Total Workforce: Percentage Of Female Employees 16Total Workforce: Proportion Of Foreign Employees 16Skilled & Unskilled Employees 17Profile Of Employees’ Engagement 17Employment (Reporting Period January–June 2017 Compared With January–June 2016) 18Expected Employment (Reporting Period January–June 2018) 18Employee Compensation (Reporting Period January–June 2017) 19Companies’ Success Rate In Attracting Employees With THe Right Set Of Skills 19

2

RSM CHAMBER MEDIUM SIZED ENTERPRISE SURVEYINTERIM SURVEY REPORT 2018

Employee Motivation 20Employee Retention 20Companies’ Success Rate In Retaining Key / Talented Employees 21Companies’ Success Rate In Recruiting Top Managerial Talent 21Companies’ Success Rate In Employing Trained Managerial Employees 22Companies’ Success Rate In Recruiting Qualified Employees 22Companies’ Success Rate In Recruiting Skilled Employees 23Companies’ Success Rate In Recruiting Unskilled Employees 23

EU FUNDING 24

Beneficiaries Of Eu Funding 24

EXPORTING 25

Exporting Companies 25Destination Of Exports 25

GROWTH STRATEGIES 26

General Companies’ Prospects Expectations For January–June 2018 26Companies With A Growth Strategy 26How Companies Plan To Grow 27Finance For Growth 27Significant Barriers To Growth (Reporting Period: January–June 2017) 28Expected Significant Barriers To Growth (Reporting Period: January–June 2018) 29Significant Contributors To Competitive Advantage (Reporting Period: January–June 2017) 30Significant THreats To Competitive Advantage (Reporting Period: January–June 2018) 31Expected Significant Initiatives For Growth (Reporting Period January–June 2018) 32

TECHNICAL NOTE 33


EXECUTIVE SUMMARY

THe Survey is targeted towards middle market entities that typically include those employing between 50 and 250 members of staff. Such organisations are an important sector of our economy. Economic data indicates that the middle market segment accounts for around 24% of the local workforce in Malta making them one of the larger employer sectors in the country.

THe survey conducted by the Chamber of Commerce and RSM is designed to achieve a better understanding of the economic, financial and employment factors affecting the medium sized enterprises and the effect on their performance.

THe response to the survey was very encouraging and as such enables effective representation of the different sectors of medium-sized enterprises. THe survey analysis is broken down at sectorial level using the identical classifications used by the Chamber to categorise its membership namely the Importers, Distributors and Retailers Economic Group, the Manufacturers and Other Industries Economic Group, and the Service Providers Economic Group. THe survey was carried in the first half of this year.

THe survey provides insights which help understanding better what impacts the performance of the medium-sized enterprises and how they gauge their operation and their outlook.

Amongst the key findings we see that:

Entrepreneurs consider long-standing relationships with clients, established market presence, service excellence, price comepetitiveness and expertise to be the main contributors towards a significant competitive advantage for Maltese mid-tier businesses.

THe majority of those interviewed do not export their services or products. In fact only 39% of respondents stated that they export. However further analysis show that there is a marked distinction between the three Economic Groups.

Some key data results from this survey include the following:

• Asignificantmajorityofcompanieshavebeentrading for more than twenty years.

• 56% of respondents described themselves as a family owned operations or family owned subsidiaries.

• 51% of the total workforce is male. • 94% of the companies surveyed said that less than

50% of their workers is made of foreign nationals. • 62% of those who participated in this survey

said that the unskilled workforce is less than 50% of their entire complement.

• ThemajorityofparticpantsinallEconomicgroups have stated that they have experienced an increase in employment.

• Lessthan50% of respondents (48%) said that they are very successful or fairly successful in attracting talent in the manufacturing sector. THis is indicative of the shortage of technical skills being experienced in general.

• Ontheissueofemployee retention, 77% of respondents stated that they are very effective or fairly effective in retaining employees. Effectiveness in employee retention appears to be higher among the Service Providers Economic Group.

We would like to express our appreciation and gratitude to all online participants to the survey allowing us to capture the perception and trends of this important market.

We strongly encourage medium-sized enterprises to continue to participate in these surveys as no other research method can provide this broad capability to gather results objectively from which to draw conclusions and make important decisions.

We look forward to working with more of you in the years to come.

Kevin BorgDirector General THe Malta Chamber of Commerce, Enterprise and Industry

Maria MicallefManaging Partner RSM Malta

RSM Malta and THe Malta Chamber of Commerce, Enterprise and Industry are pleased to present the results of the first biannual survey on Medium-sized enterprises in Malta.

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Medium-sized enterprises are defined as all entities engaged in an economic activity, with 50 to 249 employees and which have an annual turnover not exceeding €50 million, and/or an annual balance sheet total not exceeding €43 million.

According to the Small Business Act for Europe (SBA), Fact Sheet for Malta 2016, there are 318 medium-sized companies in Malta, which is 1.2% share of the whole number of local enterprises. THese companies employ 32,476 persons (24.8% of employment population) and create a value added of €800 million (19.7% share).

THe main sectors covered by the medium-sized companies range from:

WHAT MAKES UP THE MIDDLE MARKET SECTOR?

• Fishing & Aquaculture• Support services for Petroleum

& natural gas extraction• Manufacturing• Repair and Installation of

machinery and equipment• Waste collection, treatment and

disposal activities, materials recovery• Construction of buildings• Civil engineering and Specialised

construction activities• Wholesale & retail trade and repair

of motor vehicles and motorcycles• Retail trade• Land transport and

transport via pipelines• Water transport• Air transport• Warehousing and support

activities for transportation

• Postal and courier activities• Accommodation• Food and beverage service activities• Publishing activities• Programming and

broadcasting activities• Computer programming,

consultancy and related activities• Financial service activities• Insurance, reinsurance

and pension funding• Activities auxiliary to financial

services and insurances activities• Legal and accounting activities• Activities of head office and

management consultancy• Architectural and

engineering activities• technical testing and analysis• Advertising and market research

• Rental and leasing activities• Employment activities• Travel agency, tour operator,

reservation service and related activities

• Security and investigation activities• Services to buildings and

landscape activities• Office administrative, office support

and other business support activities• Education• Human health activities• Residential care activities• Creative, arts and

entertainment activities• Gambling and betting activities• Sports activities, amusement and

recreation activities and other personal service activities.


THE MEDIUM-SIZED ENTERPRISE REPORT

Sample average Service Providers Economic Group

Respondents with turnover less than €10 million

79%

44%

Less than €10 million Between €10 and €20 million Between €20 and €30 million More than €30 million

31%

12%

13%

44%

Sample average Service Providers Economic Group

Respondents with net assets less than €10 million

75%

64%

Less than €10 million Between €10 and €20 million Between €20 and €30 million More than €30 million

16%

11%

9%

64%

STRUCTURE OF SAMPLE

REVENUE

NET ASSETS

44% of respondents stated that their total revenue was less than €10 million. Another 31% stated that their total revenue is between €10 million and € 20 million, while 13% stated that their turnover is between €20 million and €30 million. THe remaining 12% stated that their turnover is in excess of €30 million.

Respondents in the Service Providers Economic Group tend to have a lower turnover than manufacturers and companies in the distributive trades, as 79% of respondents in this category stated that their turnover is lower than €10 million, compared to an average of 44% for the whole sample.

In terms of asset base, 64% of respondents stated they have an asset base of less than €10 million, while 16% stated that their asset base is between €10 million and €20 million. Another 9% stated that their asset base is between €20 million and €30 million and 11% stated that it is in excess of €30 million.

Respondents in the Service Providers Economic Group tend to have a lower asset base than the sample average as 75% of respondents in this group stated that their asset base is below €10 million.

Respondents were initially asked three questions to determine the structure of the sample.


NUMBER OF YEARS IN OPERATION

FAMILY OWNED & NON-FAMILY OWNED BUSINESSES

More than 20 years

15—20 years

8—14 years

0 10% 30%20% 40% 50% 60% 70% 100%90%80%

Less than 8 years

81%

5%

13%

2%

THe results show that a significant majority of companies (81%) have been trading for more than twenty years. 5% of the remaining respondents said that they have been established for 15 – 20 years, 13% for 8 – 14 years, and 2% for less than 8 years.

THis is a very strong indication that medium sized enterprises tend to have longevity and are not short term operations.

56% of respondents described themselves as a family owned operations or family owned subsidiaries.

Among the Importers, Distributors and Retailers Economic Group, the incidence of family owned operations and family owned subsidiaries is higher than the sample average as it stands at 63%, while among the Service Providers Economic Group the incidence is of 46% and among Manufacturers and Other Industries Economic Group it is at 52%.

88% of family owned business and which are in the Service Providers Economic Group are still owned by the first generation, while 55% of respondents which are family owned in the Importers, Distributors and Retailers Economic Group are owned by the third or fourth generation. In the Manufacturers and Other Industries Economic Group, 57% of respondents who said that they are family owned, are owned by the first and second generation.

THese results reflect very much the development of the Maltese economy over the decades. Service activities in Malta are relatively a much more recently developed activity than importation and distribution activities.

FAMILY OWNED

56%

NON-FAMILY OWNED

44%

Importers, Distributors and Retailers Economic Group Manufacturers and Other Industries Economic Group Service Providers Economic Group

Family-owned operations by economic group

63%

52%46%

9


3%

THE MALTESE ECONOMY

PERFORMANCE OF THE GENERAL ECONOMY (ACTUAL VS EXPECTATIONS JANUARY – JUNE 2017)

EXPECTED PERFORMANCE OF THE ECONOMY (JANUARY – JUNE 2018)

WORSE THAN EXPECTED

3%

BETTER THAN EXPECTED

30%

AS EXPECTED

67%

THe respondents’ opinions about the economy are very positive, with 30% stating that it performed better than expected during the period January – June 2017 and 67% stating that it performed as expected. Only 3% stated that it performed worse than expected.

Expectations about the future are also very positive with one third of respondents (33%) stating that they expect the economy to improve in the period January – June 2018, 64% expecting it to remain the same and just 3% expecting it to perform worse.

THe Service Providers Economic Group is the Group that is least positive about the economic prospects of the country with only 25% of respondents expecting the Maltese economy to improve, while the Manufacturers and Other Industries Economic Group is the Group that is most positive, with 52% of respondents expecting he Maltese economy to improve.

ECONOMY WILL IMPROVE

ECONOMY WILL WORSEN

33%

ECONOMY WILL STAY THE SAME

64%


26%33%

Respondents with positive expectations

25%

52%


FINANCIAL OVERVIEW

REVENUE (REPORTING PERIOD JANUARY – JUNE 2017 COMPARED WITH JANUARY – JUNE 2016)

Respondents were asked a set of questions related to financial results.

DECREASED

2%

INCREASED

69%

NO CHANGE

19%

When comparing to the period January – June 2016, 69% of respondents said that their revenue increased during the sixth months January – June 2017, 19% said that it remained the same and 2% said that it decreased.

THe Manufacturers and Other Industries Economic Group is the Group with the highest incidence of respondents that have experienced a decrease in revenue, while the Importers, Distributors and Retailers Economic Group is the Group with the highest incidence of respondents that have experienced an increase in turnover. THere is a convergence between these results and the results registered for employment trends.

8%

EXPECTED REVENUE (REPORTING PERIOD JANUARY – JUNE 2018)

Two out of three respondents (66%) expect their revenues to grow in the period January – June 2018, 26% expect their revenues to remain the same and 8% expect their revenues to decrease.

THe Service Providers Economic Group is the Group that is least optimistic about an increase in revenue with 50% of respondents expecting their revenues to grow, indicating an increased level of completion or a flattening out in demand. THe Importers, Distributors and Retailers Economic Group is the Group which is most optimistic about revenue growth with 79% of respondents expecting an increase in revenues.

INCREASE DECREASE

66%

STAY THE SAME

26%


79%

33%

Respondents with positive expectations

50%

71%

11


9%

PIPELINE OR PURCHASES ORDER BOOK (REPORTING PERIOD JANUARY–JUNE 2017 COMPARED WITH JANUARY–JUNE 2016)

COST OF MATERIALS AND SERVICES (REPORTING PERIOD JANUARY–JUNE 2017 COMPARED WITH JANUARY–JUNE 2016)

52% of respondents reported that, when compared to the previous reporting period (January – June 2016) their pipeline / order book / purchases increased in the current reporting period (January – June 2017). 39% said that it remained the same while 9% said that it decreased.

THe Importers, Distributors and Retailers Economic Group is again the Group reporting the most positive outlook with 63% reporting an increase, compared to 48% for the Manufacturers and Other Industries Economic Group and 46% for the Service Providers Economic Group.

72% of respondents stated that their cost of materials and services increased on average during January – June 2017 when compared to the previous twelve months and 28% said that they remained the same.

THere were no significant differences between the three Economic Groups in this area

INCREASED DECREASED

52%

STAYED THE SAME

39%


63%

33%

Most positive outlooks

46%48%

COSTS INCREASED

72%

COSTS STAYED THE SAME

28%


PLANNED INVESTMENT (REPORTING PERIOD JANUARY–JUNE 2017 COMPARED WITH JANUARY–JUNE 2018)

70% of respondents stated that they are planning to increase their investment during the period January – June 2018 when compared to the reporting period January – June 2017, while 30% replied negatively to this question.

Respondents in the Manufacturers and Other Industries Economic Group are the ones more likely to increase their investment with 76% replying affirmatively to this question. Even so the other two Economic Groups were not significantly less likely to increase their investment.

INCREASE IN INVESTMENT

70%

NO INCREASE IN INVESTMENT

30%

6%

CAPITAL EXPENDITURE (REPORTING PERIOD JANUARY–JUNE 2017 COMPARED WITH JANUARY–JUNE 2016)

42% stated that their capital expenditure increased during the period January – June 2017, when compared to the twelve months before that, 52% stated that it remained the same and 6% stated that it has decreased.

THe percentage of respondents in the Importers, Distributors and Retailers Economic Group and the Service Providers Economic Group reporting an increase in capital expenditure is higher than average, with 46% and 53% respectively. 29% of the respondents in the Manufacturers and Other Industries Economic Group and other Industries report an increase.

INCREASED DECREASED

42%

STAYED THE SAME

52%

Sample average Importers, Distributors and Retailers Economic Group Service Providers Economic Group

33%

Respondents reporting increase in capital expenditure

42%

29%

53%

46%

13


AREAS OF CAPITAL EXPENDITURE

THe main areas where capital expenditure has taken place are IT and technology (70%). Refurbishment of fixtures and fittings (59%) and plant and machinery (42%). Other areas include immovable property (23%), product and service development and innovation (20%) and research and innovation (8%).

THe three different Economic Groups have placed a different emphasis on the main areas of capital expenditure. In fact for the Manufacturers and Other Industries Economic Group, the main area of investment was plant and machinery (81%) followed by IT and technology (57%) and refurbishment of fixture and fittings (52%). On the other hand, the main area of capital expenditure for the Service Providers Economic Group was IT and technology (79%), followed by refurbishment of fixtures and fittings (58%) and plant and machinery (33%). For the Importers, Distributors and Retailers Economic Group, the main area of investment was IT and technology (74%), refurbishment of fixtures and fittings (68%) and a distant third was immovable property (32%). Multiple answers were allowed.


Main areas of capital expenditure for each economic group

81%

Pla

nd a

nd m

achi

nery

57%

IT a

nd te

chno

logy

52%

Fixt

ures

/fitt

ings

re

furb

ishm

ent

79%

IT a

nd te

chno

logy

58%

Fixt

ures

/fitt

ings

re

furb

ishm

ent

33%

Pla

nd a

nd

mac

hine

ry

74%

IT a

nd te

chno

logy

68%

Fixt

ures

/fitt

ings

refu

rbis

hmen

t

32%

Imm

ovab

le

prop

erty

IT and technology

Product and service development and innovation

Refurbishment of fixtures and fittings

Plant and machinery

Immovable property

Research and innovation

0 10% 20% 30% 40% 50% 60% 80%70%

70%

59%

42%

23%

20%

8%


17%

PROFITABILITY (REPORTING PERIOD JANUARY–JUNE 2017 COMPARED WITH JANUARY–JUNE 2016)

Half the respondents (50%) reported an increase in profitability in the period January – June 2017 when compared to the previous twelve months, while a third (33%) reported that it remained the same, and 17% stated that it has decreased.

THe Importers, Distributors and Retailers Economic Group reported a level of profitability higher than average (58%), while the Manufacturers and Other Industries Economic Group and the Service Providers Economic Group reported a level of profitability lower than average, with 48% and 46% respectively.

INCREASED DECREASED

50%

STAYED THE SAME

33%


58%

33%

Respondents reporting increased profitability

46%48%

EXPECTED PROFITABILITY (REPORTING PERIOD JANUARY – JUNE 2018)

EXPECTED TO DECREASE

8%

EXPECTED TO INCREASE

50%

NO CHANGE EXPECTED

42%

Expectations about future profitability are fairly neutral as, again half the respondents said that they expect it to increase, 42% expect it to remain the same and 8% expect it to decrease.

THe Group which is least bullish about future profitability is the Service Providers Economic Group, with 42% expecting it to increase. THis reflects an increased level of competition.

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HUMAN RESOURCES OVERVIEW

TOTAL WORKFORCE: PERCENTAGE OF FEMALE EMPLOYEES

In terms of gender, respondents are fairly split with 49% of respondents having 50% or more of their employees being women. THe data by Economic Group shows that 54% of companies in the Service Providers Economic Group having 50% or more of their workforce being women, compared to 33% in the Manufacturers and Other Industries Economic Group and 58% in the Importers, Distributors and Retailers Economic Group.

THe survey asked a number of questions to establish demographic aspects of employees in medium sized enterprises.

>50% MALE WORKERS

51%

>50% FEMALE WORKERS

49%


>50% female employees

58%

33%

54%

TOTAL WORKFORCE: PROPORTION OF FOREIGN EMPLOYEES

>50% LOCAL WORKERS

94%

>50% FOREIGN WORKERS

6%

94% of respondents said that less than 50% of its workforce is made of foreign nationals.

None of the respondents in the Importers, Distributors and Retailers Economic Group reported that the non-Maltese component makes up more than 50% of their workforce. On the other hand, 13% of respondents in the Service Providers Economic Group and 5% of the Manufacturers and Other Industries Economic Group reported that 50% of their workforce is made up of non-Maltese nationals.


>50% SKILLED WORKERS

62%

NO CONTRACT WORKERS

66%

>50% UNSKILLED WORKERS

38%

CONTRACT WORKERS

34%

SKILLED & UNSKILLED EMPLOYEES

38% of respondents said that less than 50% of their employees are skilled and 62% of respondents said than less than 50% of their employees are unskilled.

PROFILE OF EMPLOYEES’ ENGAGEMENT

Two out of three respondents (66%) stated that none of their employees are contract workers.

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64% of respondents stated that compared to the previous reporting period, January – June 2016, employment in their enterprise has increased, 25% stated that it has remained the same, and 11% stated that it has decreased.

Although a majority in all Economic groups have stated that they have experienced an increase in employment, there has been a larger than average percentage of respondents among the Importers, Distributors and Retailers Economic Group (74%) who claimed that their employment has increased, and a lower than average percentage of respondents among Manufacturers and Other Industries Economic Group (52%) who reported an increase in employment. Among the Service Providers Economic Group, 67% reported an increase in employment during January – June 2017, when compared to January – June 2016.

EMPLOYMENT (REPORTING PERIOD JANUARY–JUNE 2017 COMPARED WITH JANUARY–JUNE 2016)

DECREASED

11%

INCREASED

64%

NO CHANGE

25%


74%

33%

Increase in employment

67%

52%

48% of respondents stated that they expect employment to increase during the next reporting period January – June 2018. THe other 52% stated that they expect employment in their enterprise to remain the same.

None of the respondents reported that they expect their employment to decrease. Among the Service Providers Economic Group (54%) and the Manufacturers and Other Industries Economic Group (54%), the expectation of an increase in employment is higher than in the Importers, Distributors and Retailers Economic Group (32%).

EXPECTED EMPLOYMENT (REPORTING PERIOD JANUARY–JUNE 2018)

DECREASE

0

INCREASE

48%

NO CHANGE

52%


32% 33%

Expected increase in employment

54%54%


EMPLOYEE COMPENSATION (REPORTING PERIOD JANUARY–JUNE 2017)

COMPANIES’ SUCCESS RATE IN ATTRACTING EMPLOYEES WITH THE RIGHT SET OF SKILLS

For 87% of respondents the average cost of labour has increased. 13% said it remained the same.

All respondents in the Importers, Distributors and Retailers Economic Group reported an increase, compared to 75% among the Manufacturers and Other Industries Economic Group and 88% among the Service Providers Economic Group.

When asked how effective is their company in attracting employees with the right set of skills, 64% of respondents said that they are either very effective or fairly effective in attracting the right set of skills. 31% said that they are neither effective nor ineffective, while the remaining 5% said that they are ineffective.

71% of respondents in the Service Providers Economic Group said that they are either very effective or fairly effective in attracting the right set of skills, compared to 63% in the Importers, Distributors and Retailers Economic Group and 57% in the Manufacturers and Other Industries Economic Group.

DECREASED

0

INCREASED

87%

NO CHANGE

13%

5%

31%

64%

Very effective or fairly effective Neither effective nor ineffective Ineffective


63%

33%

Effective or fairly effective in attracting the right set of sklills

71%

57%


100%

33%

Increase in employee compensation

88%

75%

19


EMPLOYEE MOTIVATION

EMPLOYEE RETENTION

83% of respondents said that they are very effective or fairly effective in motivating their employees, while the remaining 16% of respondents said that they are neither effective nor ineffective.

Respondents in the Service Providers Economic Group are more effective in motivating their employees as 92% of respondents in this Group said that they are very effective or fairly effective in this regard. Incidence of motivation is lower among employees in the Importers, Distributors and Retailers Economic Group (74%) and the Manufacturers and Other Industries Economic Group (81%).

On the issue of employee retention, 77% of respondents stated that they are very effective or fairly effective in retaining employees. 19% of respondents said that are neither effective nor ineffective while 5% said that they are ineffective.

Effectiveness in employee retention appears to be higher among the Service Providers Economic Group (88%), compared to the Importers, Distributors and Retailers Economic Group (74%) and the Manufacturers and Other Industries Economic Group (67%).

92%

88%



74%

Effectiveness in motivating employees

81%

1%

16%

83%



Effectiveness in retaining employees

67%

5%

19%

77%

74%


COMPANIES’ SUCCESS RATE IN RETAINING KEY / TALENTED EMPLOYEES

COMPANIES’ SUCCESS RATE IN RECRUITING TOP MANAGERIAL TALENT

Interestingly enough, respondents’ efforts at retaining key/talented employees appear to be more successful. 87% of respondents stated that they are very successful or fairly successful in retaining key/talented employees, 11% said that they are neither successful nor unsuccessful and 2% said that they are unsuccessful.

THe Manufacturers and Other Industries Economic Group appears to be the Group with the lower incidence of success in this area with 81%, compared to the Importers, Distributors and Retailers Economic Group at 95% and the Service Providers Economic Group at 88%.

77% of respondents said that they are very successful or fairly successful in recruiting top managerial talent, while the other 23% said that they are neither successful nor unsuccessful.

THe level of satisfaction with attracting top managerial talent is lower among the Manufacturers and Other Industries Economic Group with 67% and higher among the Importers, Distributors and Retailers Economic Group at 90% and at around the average for the Service Providers Economic Group (75%).



95%

Success retaining key/talented employees

88%81%

2%

11%

87%

Very successful or fairly successful Neither successful nor unsuccessful


Success recruiting top managerial talent

75%

67%23%

77%

90%

21


COMPANIES’ SUCCESS RATE IN EMPLOYING TRAINED MANAGERIAL EMPLOYEES

Just over two out of three respondents (67%) said that they are very successful or fairly successful in employing trained managerial employees. 28% said that they are neither successful nor unsuccessful and 5% said that they are unsuccessful.

THe Manufacturers and Other Industries Economic Group is the Group that appears to have the least success in employing trained managerial employees at 57%, compared to the Importers, Distributors and Retailers Economic Group at 74% and the Service Providers Economic Group at 71%.



74%

Success employing trained managerial employees

71%

57%

5%

28%

67%

COMPANIES’ SUCCESS RATE IN RECRUITING QUALIFIED EMPLOYEES

In reply to the question as to how successful respondents are in recruiting qualified employees, 67% said that they are very successful or fairly successful, while 27% said that they are neither successful nor unsuccessful and 6% said that they are unsuccessful.

THe least successful Economic Group is the Manufacturers and Other Industries Economic Group with 57%, compared to the Importers, Distributors and Retailers Economic Group at 74% and the Service Providers Economic Group at 71%.

Very successful or fairly successful Neither successful nor unsuccessful Unsuccessful


Success recruiting qualified employees

57%27%

67%

6%74%

71%


COMPANIES’ SUCCESS RATE IN RECRUITING SKILLED EMPLOYEES

Attracting skilled workers is more of an issue. Less than 50% of respondents (48%) said that they are very successful or fairly successful in this area.

THis is indicative of the shortage of technical skills being experienced in general. 39% said that they are neither successful nor unsuccessful and 13% said that they are unsuccessful. THe incidence of success is higher among the Service Providers Economic Group (58%) and less so among the Manufacturers and Other Industries Economic Group (43%) and the Importers, Distributors and Retailers Economic Group (42%).

Very successful or fairly successful Neither successful nor unsuccessful Not successful


42%

Success employing trained managerial employees

58%

43%

13%

39%

48%

COMPANIES’ SUCCESS RATE IN RECRUITING UNSKILLED EMPLOYEES

THe level of success in employing unskilled workers is even less, with 47% saying that that they have been very successful or fairly successful in employing skilled workers, 42% saying that they have been neither successful nor unsuccessful and the remaining 11% saying they have been unsuccessful.

THe incidence of success is lower among the Manufacturers and Other Industries Economic Group at 38%, compared to the Importers, Distributors and Retailers Economic Group (63%) and the Service Providers Economic Group (42%). THis result and other results would seem to indicate that the manufacturing sector is less attractive than other sectors for the purposes of employment.

Training is expected to feature more prominently in the budgets of respondents as 92% stated that their investment in training is expected to increase in the coming twelve months.

Very successful or fairly successful Neither successful nor unsuccessful Not successful


Success recruiting qualified employees

42%38%

42%

47%

11%63%

23


EU FUNDING

BENEFICIARIES OF EU FUNDING

RECEIVED EU FUNDING

47%

DID NOT RECEIVE EU FUNDING

53%

47% of respondents replied in the affirmative to the question whether they have received EU funding, while 53% replied in the negative.

THe incidence of respondents among Manufacturers and Other Industries Economic Group who have received EU funding is higher at 71%. THe incidence of respondents in the Importers, Distributors and Retailers Economic Group that have received EU funding is much lower at 26%, while that among the Service Providers Economic Group is at 42%.

Most respondents (77%) have received ERDF funds. 23% of respondents mentioned national schemes, 3% mentioned Horizon 2020, while 20% mentioned other schemes. Multiple answers were allowed.


26%

Business that received EU funding

42%

71%

ERDF funds National schemes Horizon 2020 Other schemes

23%

20%

3%

77%


EXPORTING

THere is a marked distinction between the three Economic Groups. Whereas 79% of the Importers, Distributors and Retailers Economic Group and 79% of the Service Providers Economic Group said that they do not export their goods and services, only 24% of the Manufacturers and Other Industries Economic Group said that they do not export.

Among those enterprises that do not export, 95% stated that they do not intend to start exporting in the coming twelve months.


79%

Businesses that do not export goods/services

79%

24%

Do not plan to start exporting in next 12 months

Plan to start exporting in next 12 months

5%

95%

EXPORTING COMPANIES

BUSINESSES THAT EXPORT

39%

BUSINESSES THAT DO NOT EXPORT

61%

61% of respondents stated that they do not export and 39% said they do export.

DESTINATION OF EXPORTS

Among respondents that export, 60% stated that they export to both the EU and non-EU countries, while 28% said that they export only to EU countries and the remained 12% said that they export only to countries outside the EU.

NON-EU ONLY

12% 28%EU ONLY BOTH EU AND NON-EU

60%

25


GROWTH STRATEGIES

GENERAL COMPANIES’ PROSPECTS EXPECTATIONS FOR JANUARY–JUNE 2018

COMPANIES WITH A GROWTH STRATEGY

THe future prospects for the respondent companies and how they view their competitiveness were also covered in this survey.

Respondents were fairly positive about their company’s future prospects. Half the respondents (50%) viewed their future prospects positively and 3% viewed them negatively. THe remaining 47% stated that they expect them to remain the same as they are now.

67% of the Manufacturers and Other Industries Economic Group said that they expect their company’s general prospects shall improve during the next reporting period (January – June 2018), compared to 42% for both the Service Providers Economic Group and the Importers, Distributors and Retailers Economic Group.

In reply to the question as to whether the company has a strategy for growth, 80% of respondents replied in the affirmative.

NEGATIVE

3%

POSITIVE

50%

NO CHANGE

47%


42%33%

Increase in employment

42%

67%

STRATEGY FOR GROWTH

80%

NO STRATEGY FOR GROWTH

20%


HOW COMPANIES PLAN TO GROW

Organic or demand driven growth

Mergers and acquisitions

Joint ventures and strategic alliances

Diversification into new markets

Diversification into new products and services

0 10% 20% 30% 40% 50% 60% 80%70%

Internationalisation

FINANCE FOR GROWTH

Internal sources

Banks

Other sources

0 10% 20% 30% 40% 50% 60% 80%70%

Among this group, 76% stated that this growth will be organic growth and demand driven. 37% stated this growth will come from market diversification and 20% stated that it will come from internationalisation. 22% of respondents said that growth will come from diversification into new services and products, 12% said that it will come from mergers and acquisitions and 10% said that it will come from joint ventures and strategic alliances.

Organic growth and demand driven growth is the main source of growth for all three Groups. However, market diversification and internationalisation appear to be a more important source of growth for the Manufacturers and Other Industries Economic Group and the Importers, Distributors and Retailers Economic Group than for the Service Providers Economic Group. Multiple answers were allowed.

73% of respondents said that they will finance this growth from internal sources and 47% said that they would also consider bank financing. Other sources of financing were mentioned by 18% of respondents.

Bank financing appears to be more important for the Importers, Distributors and Retailers Economic Group than for other sectors. Multiple answers were allowed.

76%

37%

22%

20%

12%

10%

73%

47%

18%

27


SIGNIFICANT BARRIERS TO GROWTH (REPORTING PERIOD: JANUARY–JUNE 2017)

Competition in the market

THe economic environment

Excessive regulation

Bureaucracy and red tape

Government policies

Retaining staff

Non-level playing field

Cash flow constraints

Illicit trading

Obtaining finance

0 10% 20% 30% 40% 50% 60%

Difficulty in recruiting managerial talent

Taxation and government-induced costs

Lack of demand

Respondents were asked to name the three most significant barriers to your company's growth during the period January - June 2017. THe main barrier to growth is competition in the market mentioned by 53% of respondents. THe following are the responses received for each barrier mentioned:

Different Economic Groups face different barriers. For the Importers, Distributors and Retailers Economic Group, the three main barriers are competition in the market (63%), a non level playing field (47%) and retaining staff (37%). For the Service Providers Economic Group the main barriers are competition in the market (38%), retaining staff (38%), and a non level playing field, bureaucracy and red tape and obtaining finance all at 29%. For the Manufacturers and Other Industries Economic Group the main barriers to growth are competition in the market (62%), retaining staff (47%), and cash flow constraints and the economic environment, both at 29%. Multiple answers were allowed.


Top barriers for growth for each economic group

62%

Com

peti

tion

47%

Ret

aini

ng s

taff

29%

Cas

h flo

w

cons

trai

nts

29%

Econ

omic

en

viro

nmen

t

38%

Com

peti

tion

38%

Ret

aini

ng s

taff

29%

Non

-lev

el

play

ing

field

29% 29%

Bur

eauc

racy

Obt

aini

ng fi

nanc

e

63%

Com

peti

tion

47%

Non

-lev

el p

layi

ng fi

eld

37%

Ret

aini

ng s

taff

53%

44%

33%

25%

25%

24%

20%

19%

16%

14%

14%

8%

6%


EXPECTED SIGNIFICANT BARRIERS TO GROWTH (REPORTING PERIOD: JANUARY–JUNE 2018)

Competition in the market

THe economic environment

Excessive regulation

Bureaucracy and red tape

Government policies

Retaining staff


Cash flow constraints

Illicit trading

Obtaining finance

0 10% 20% 30% 40% 50% 60%

Difficulty in recruiting managerial talent

Taxation and government-induced costs

Lack of demand

THe list below lists the most significant barriers to growth in future.

For the Importers, Distributors and Retailers Economic Group, the three main barriers are competition in the market (74%), a non level playing field (53%) and cash flow constraints (32%). For the Service Providers Economic Group the main barriers are bureaucracy and red tape (38%), retaining staff (33%) and excessive regulation (33%). For the Manufacturers and Other Industries Economic Group the main barriers to growth are competition in the market (57%), retaining staff (57%), and cash flow constraints and the economic environment, both at 29%. Multiple answers were allowed.


Expected top barriers for growth for each economic group

57%

Com

peti

tion

57%

Ret

aini

ng s

taff

29%

Cas

h flo

w

cons

trai

nts

29%

Econ

omic

en

viro

nmen

t

38%

Bur

eauc

racy

33%

Ret

aini

ng s

taff

33%

Exce

ssiv

e

regu

lati

on74%

Com

peti

tion

53%

Non

-lev

el p

layi

ng fi

eld

32%

Cas

h flo

w

cons

trai

nts

52%

39%

31%

27%

25%

22%

22%

20%

17%

14%

13%

11%

8%

29


SIGNIFICANT CONTRIBUTORS TO COMPETITIVE ADVANTAGE (REPORTING PERIOD: JANUARY–JUNE 2017)

0 10% 20% 30% 40% 50% 60%

Respondents were asked to name the three most significant barriers to your company's growth during the period January - June 2017. THe main barrier to growth is competition in the market mentioned by 53% of respondents. THe following are the responses received for each barrier mentioned:

For the Service Providers Economic Group, the main contributors to competitive advantage are a long standing relationship with their clients (58%), service excellence (50%), and expertise in industry / sector (46%). For the Manufacturers and Other Industries Economic Group, the main contributors are expertise in industry / sector (71%), a long standing relationship with their clients (62%), and an established market presence (43%). For the Importers, Distributors and Retailers Economic Group, the three main contributors are dominant international brands (63%), and a long standing relationship with their clients, an established market presence and price competitiveness all at 47%. Multiple answers were allowed.


Top contributors to competitive advantage for each economic group

71%

Expe

rtis

e

62%

Clie

nt re

lati

onsh

ip

43%

Mar

ket p

rese

nce

58%

Clie

nt re

lati

onsh

ip

50%

Ser

vice

exc

elle

nce

46%

Expe

rtis

e

63%

Dom

inan

t int

erna

tion

al b

rand

s 47%

Clie

nt re

lati

onsh

ip

47% 47%

Mar

ket p

rese

nce

Pri

ce c

ompe

titi

vene

ss

Long-standing relationship with clients

Price competitiveness

Service excellence

Absence of direct competitors

Expertise in the industry/sector

Established market presence

Dominant international brands

Corporate social responsibility initiatives

Reputation in the market

Quality and expertise of staff

Prime location of business outlets

56%

44%

44%

34%

28%

27%

27%

23%

11%

5%

2%

30


SIGNIFICANT THREATS TO COMPETITIVE ADVANTAGE (REPORTING PERIOD: JANUARY–JUNE 2018)

Low cost competition

Margin degradation

Industry decline

New entrants into the market

Parallel trading

Regulation

Lack of training/losing experienced staff

Competitive brands


Changing consumer trends

Industry disruptors

THe internet

0 10% 20% 30% 40% 50% 60%

THe list below lists the significant threats to competitive advantage of respondent companies:

For the Service Providers Economic Group, the main threats to competitive advantage are low cost competition (54%), and new entrants into the market and lack of training or losing experienced staff to competitors both at 38%. For the Manufacturers and Other Industries Economic Group, the main threats are low cost competition (52%), and margin degradation and industry disruptors both at 38%. For the Importers, Distributors and Retailers Economic Group, the three main threats are margin degradation (63%), parallel trading (58%), and low cost competition (42%). Multiple answers were allowed.


Top threats to competitive advantage for each economic group

52%

Low

cos

t com

peti

tion

38%

Mar

gin

degr

adat

ion

38%

Indu

stry

dis

rupt

ors

54%

Low

cos

t com

peti

tion

38%

New

ent

rant

s in

to m

arke

t

38%

Lack

of t

rain

ing/

lo

sing

sta

ff63%

Mar

gin

degr

adat

ion

58%

Para

llel t

radi

ng

42%

Low

cos

t com

peti

tion

50%

44%

31%

27%

27%

23%

22%

22%

19%

14%

11%

11%

31


EXPECTED SIGNIFICANT INITIATIVES FOR GROWTH (REPORTING PERIOD JANUARY–JUNE 2018)

0 10% 20% 30% 40% 50% 60%

Respondents were asked to name the three most significant initiatives that your company shall be prioritizing in the period January – June 2018. THe following is the list with the percentage received by each mention.

For the Service Providers Economic Group, the three main initiatives are staff development (67%), growth in market share (50%), and consolidation and stability (46%). For the Manufacturers and Other Industries Economic Group the main initiatives are consolidation and stability (57%), staff development (57%), and growth in market share and investment in new property/facilities/plant both at 38%. For the Importers, Distributors and Retailers Economic Group, the three main initiatives are growth in market share (68%), consolidation and stability (47%), and marketing / branding (42%). Multiple answers were allowed.


Expected top significant initiatives for growth for each economic group

57%

Con

solid

atio

n &

sta

bilit

y

57%

Staff

dev

elop

men

t

38%

Mar

ket s

hare

gro

wth

38%

Inve

stm

ent

67%

Staff

dev

elop

men

t

50%

Mar

ket s

hare

grw

oth

46%

Con

solid

atio

n &

sta

bilit

y68%

Gro

wth

in m

arke

t sha

re

47%

Con

solid

atio

n &

sts

tabi

lity 42%

Mar

keti

ng/b

rand

ing

Grow market share

Staff development

Internationalisation

Divestment

Marketing/Branding

Investment in new property/facilities/plant

Consolidation and stability

Business succession

Corporate social responsibility

Grow brand portfolio

Diversification/New projects

Mergers/Acquisitions

52%

50%

50%

39%

34%

25%

14%

13%

11%

8%

3%

2%


METHODOLOGY DESCRIPTION

THe Chi-Square test is used to determine whether there exists an association between two categorical variables. One of these variables specifies the classification adopted by THe Malta Chamber of Commerce, Enterprise and Industry (Service providers, Manufacturers and other industries, and Importers, distributors and retailers). THe other variable describes the perception of medium-sized enterprises towards a financial or economic outlook.

THe null hypothesis specifies that the three economic groups have similar perceptions and is accepted if the p-value exceeds the 0.05 level of significance. THe alternative hypothesis specifies that the groups have contrasting sentiments and is accepted if the p-value is less than the 0.05 criterion.

THe Difference of two proportions z-test compares two population proportions and determine whether they are equal or not. THese population proportions could represent the proportion of enterprises exhibiting a positive sentiment to a financial or economic outlook against those enterprises displaying a negative sentiment. THey could also represent the proportion of enterprises exhibiting a particular sentiment in the current reporting period against their forecasted sentiment in the next reporting period.

THe null hypothesis specifies that the two population proportions are equal and is accepted if the p-value exceeds the 0.05 level of significance. THe alternative hypothesis specifies that the two population proportions differ significantly and is accepted if the p-value is less than the 0.05 criterion.

Information related to scientific testing as provided by Prof. Liberato Camilleri https://www.um.edu.mt/profile/liberatocamilleri

Statistical inference is intended to make generalizations about the population of medium-sized enterprises based on information elicited from the selected sample of 46 enterprises. THis is carried out by either using the Chi-Square test or by using the Difference of Two Proportions z-test. For both tests a 0.05 level of significance is adopted.

33


RSM Malta is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network.

Each member of the RSM network is an independent accounting and consulting firm, each of which practises in its own right. THe RSM network is not itself a separate legal entity of any description in any jurisdiction.

THe RSM network is administered by RSM International Limited, a company registered in England and Wales (company number 4040598) whose registered office is at 11 Old Jewry, London EC2R 8DU.

THe brand and trademark RSM and other intellectual property rights used by members of the network are owned by RSM International Association, an association governed by article 60 et seq of the Civil Code of Switzerland whose seat is in Zug.

© RSM International Association, 2018

Documents

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