Impact of the financial crisis on long-term

financing of Austrian companies

Content
• Austrian Economy
• Long-term financing structure in Austrian before
the financial crisis
• Impact of the financial crisis on the long-term
financing structure of austrian corporates
• Prospects
How to finance a company?

Financing

External Internal
Divestments
Financing Financing

Bank Cashflow Value of

Equity depreciation
borrowings financing
financing and provisions
(loans)
Austrian Economy
• Austrian Economy is dominated by SMEs
• Companies with 250+ employees represent with 1,701
companies only 0.4% of all companies and employ 39.1%
of all Austrian employees

Size by
Number of Companies Employees
Headcount
0 148.012 49,5% 0 0,0%
1-9 119.898 40,1% 356.590 16,0%
10-49 25.300 8,5% 503.549 22,6%
50-249 4.914 1,6% 494.600 22,2%
SME 298.124 99,6% 1.354.739 60,9%
250+ 1.071 0,4% 870.472 39,1%
In Total 299.195 100,0% 2.225.211 100,0%
Austrian companies by sector
100,000

80,000

60,000

40,000

20,000

-
craft and services trade tourism information and transport and industry banks and
consulting traffic assurances
Employees by sector
600,000

500,000

400,000

300,000

200,000

100,000

-
craft and services trade tourism information and transport and industry banks and
consulting traffic assurances
Average Return on Sales
Return on Sales
4,0

2,4 2,3 2,3

1,6

Micro Enterprises Small Enterprises Middle Enterprises SMEs Big Enterprises

Capital Structure
• Corporates show a higher equity ratio than SMEs
• Long-term bank borriwings are the most important financing
resource for SMEs
Small and Middle Sized Enterprises
Micro Small Middle
Enterprises Enterprises Enterprises SMEs Corporates
Equity 9,17 19,90 28,97 23,54 34,26
Social Capital 1,80 2,94 3,67 3,20 4,26
Long-term bank liabilities 32,41 22,72 12,34 18,24 8,04
Other long-term debts 3,64 3,50 3,23 3,36 4,32
Long-term liabilities 36,05 26,22 15,57 21,60 12,36
Short-term bank liabilities 19,63 16,22 14,20 15,54 8,41
Deposits received 3,60 4,90 5,99 5,33 6,16
Accounts payable 14,61 13,00 10,66 11,92 9,91
Other short-term liabilities 15,03 16,60 20,49 18,53 23,79
Short-term liabilities 52,87 50,72 51,34 51,32 48,27
Liabilities 88,92 76,94 66,91 72,92 60,63
Deferred Income 0,11 0,22 0,45 0,34 0,85
TOTAL CAPITAL 100,00 100,00 100,00 100,00 100,00
Equity Ratio of Autrian SMEs

Equity of SMEs
41
36

12 11

More than 20% 10 till 20% 0 till 10% Negative

Equity Ratio of Autrian SMEs per sector

Equity per sector

35,1
32,8 31,5
28,1
23,9

13,4

industry infrastructure transport and trade craft and tourism

and consulting traffic services
Changes due to the financial crisis
• Bank borrowings are difficult to get
▫ Temporary credit crunch
▫ Increasing requirements on coporates (financial covenants)
▫ More stringent capital adequacy requirements for banks

• Collapse of equity market

▫ Decrease of external financing by Wiener Börse (stock market) from 10.8 billion €
to 3.9 billion €
▫ 2009 cash drain at Wiener Börse
▫ No IPOs for 2.5 years and no IPOs scheduled for 2010

• Decrease in demand for products and services

• Volatile environment
Changes due to the financial crisis
• Internal financing becoming more important
▫ Build up and ensure liquidity  stock and receivables disposal
(to the disadvantage of ROI)
• Adjustment of the financing portfolio
▫ Make new financial resources accessible  equity financing
more attractive than bank borrowings
• Planning and controlling getting more difficult
• Risk reduction
• Adjustment of portfolio
 equities, projects, investments
• Adjustment of internal structures
 value added, core- and support activities, outsourcing vs. insourcing
Changes due to the financial crisis
• Focus on liquidity (instead of ROI/ROE)
▫ Adjustment of targets and incentive systems
▫ Assessement of projects with regard to their liquidity contribution
• Increase of Free Cashflows
• Revaluation of balance and risk positions
▫ Decline of the initial euphoria in matters of IFRS and the fair value
evaluation
▫ The prudence principle and creditor protection are important again
▫ Decrease of financial risks in the balance sheets
• Change of focus: from income statement to balance sheet
▫ Working Capital
▫ Less Debts
 Attractivity of long-term
financing instruments
• For many corporates, particulary larger companies, equity
and bond issuance has proven to be a more attractive way to
financing their business than bank borrowings.
Free Cashflow becoming more important

• 45% of CFOs expect their

free cahflows to increase by
0-10%
• The percentage of CFOs
expacting their free
cashflows to decline
dropped from 37% at the
beginning of 2009 to 14% in
the 4th quarter 2009