SINGAPORE'S small and medium-sized enterprises (SMEs) have improved profit margins by 38 per cent over the past five years, as they ride on booming economies at home and in the region.
Financial services firms, manufacturers and communication companies have seen their bottom lines improving the most, according to figures from business data company DP Information Group.
'The domestic economy has recovered well from the dot.com bust in 2001 and Sars in 2003,' said DP Info managing director Chen Yew Nah.
'At the same time, we've also seen SMEs successfully expanding to overseas markets.'
A recent DP Info poll of about 3,000 SMEs - with annual revenues of between $10 million and $80 million - showed that profit margins averaged 4.75 per cent last year, up from 3.43 per cent in 2001.
Much of the improvement occurred in 2004 and 2005, after the economy rebounded strongly from Sars, said Ms Chen. From 3.3 per cent in 2003, margins hit 4.2 per cent in 2004 and then 4.6 per cent in 2005.
But SMEs still have some way to catch up with their bigger corporate brethren. Margins for the top 1,000 most profitable companies were about 10 per cent last year.
'Bigger companies enjoy economies of scale and so have better profit margins,' said Ms Chen.
Services firms, excluding those in communications, logistics, retail and wholesale, clocked the biggest improvement, more than trebling from 2.1 per cent to 6.9 per cent.
Financial advisory and boutique investment firms flourished as they rode on the growth of wealthy people in Singapore and in the region, said Ms Chen.
The next best performers were in the industrial sector, where margins surged 74 per cent to 7.3 per cent.
'There was a good pickup and those in niche sectors like precision engineering, machinery and plastics did well,' she said.
She cited plastic parts maker Jin Li Mould Manufacturing, which produces some components found in Apple's iPod music player, as an example of a firm that has successfully tapped into overseas markets.
Mr Lawrence Leow, president of the Association of Small and Medium Enterprises, said small manufacturers have benefited from the Government's efforts to move into higher value-added manufacturing.
'SMEs which support those big manufacturers would have done well,' he said.
Communication, transport and storage companies also did well, as margins jumped 51 per cent to 7.1 per cent.
But construction, retail and wholesale firms were laggards. Margins at small shops fell 1.5 per cent, while those at building companies dipped 0.3 per cent.
Mr Leow said these firms should do much better this year, as Singapore gears up for upcoming mega projects such as the integrated resorts and next year's Formula 1 race.
'The next one to two years should be quite good for local SMEs.'
Larger firms, better performance
'Bigger companies enjoy economies of scale and so have better profit margins.'
- MS CHEN, on the top 1,000 most profitable firms having average profit margins of about 10 per cent
