The latest Alleasing Equipment Demand Index for New Zealand shows businesses expect to substantially grow their asset base this year - and they are increasingly likely to consider leasing as a funding option.
In a first for the quarterly Index, which launched in August 2015, more than half (51.2%) of the 250 businesses surveyed indicated they have plans to increase their asset base. For the first quarter of 2017, the average growth is expected to be 8.9%.
This is the first time the quarterly increase has exceeded 8%. Just 3% cent of businesses have plans to lower their asset base, by an average of only 3.4%.
This is also the first time the Index has included responses from executives in larger corporate businesses, which are defined as those turning over between NZ$100 million and NZ$250 million annually.
This was the most positive group of all surveyed for the Index, with over half (56.9%) indicating they want to add to their asset base in the first part of the year.
SMEs are also bullish about their plans to expand their asset base. A majority (55.2%) of businesses with an annual turnover of between NZ$5 million and NZ$20 million intend to bump up their asset base in the first quarter.
Lower corporates (those with revenue of NZ$20 million to NZ$100 million) are the least positive, with 41.5% planning to boost their assets in the first quarter.
The survey shows that businesses lease a relatively small proportion (16% or NZ$128 billion) of their assets. Moreover, 14.3% of businesses say unproductive assets hamper their growth.
Alleasing says this indicates there is a substantial opportunity for New Zealand businesses to leverage their balance sheets to invest in new plant and equipment.
The survey indicated there is considerable appetite among businesses to change their capital structure, with 13.1% stating they would like to refinance their existing assets through new capital structures.
However, nearly 20% of the businesses surveyed said capital constraints were restricting growth. Both small and large businesses are affected by constrained access to capital, with more than one-fifth of both groups naming lack of capital as a concern, compared to just over 17% of mid-market businesses.
The highest anticipated demand for new assets came from the agricultural sector where nearly two-thirds (62.5%) of businesses aim to invest in assets. More than half (51.4%) of businesses in the manufacturing sector are also looking to buy assets.
| An Asset Finance release | March 06, 2017 ||