Companies outperform on digitization, prepare for further growth

While the pandemic struck businesses in such sectors as travel, tourism and entertainment particularly hard, a majority of businesses polled earlier this year had a positive earnings outlook and saw themselves poised for growth, aided by their outperformance on digital capabilities.

EY’s Global Capital Confidence Barometer, conducted from November 2020 to January 2021, found that 90% of Canadian executives surveyed said they experienced significant declines in revenue and profitability because of the pandemic; however, 77% expected revenues to return to pre-pandemic levels this year, and 87% anticipated profitability returning by 2022.

Despite the pandemic’s challenges, Canadian businesses also identified a silver lining: more than three-quarters (78%) said they outperformed on digital transformation in the past year.

“From remote working — which has enabled collaboration without business travel — to the rapid ramp-up of e-commerce capabilities, Canadian companies realized early that there were digital opportunities amid adversity,” the survey said.

Digital capabilities will remain a top priority for firms ahead, with 68% of Canadian companies planning to increase strategic focus and investment in their digital agendas.

“Investments in digital may have been a reactive trigger to the pandemic, but moving forward, executives are looking to drive opportunistic investments to create more flexible operating models and greater cost efficiencies,” said Doug Jenkinson, partner, strategy and transactions at EY Canada, in a release.

As a result of businesses’ resilience as well as low interest rates, 53% of Canadian companies plan to actively pursue mergers and acquisitions in the next 12 months, the survey said.

At the same time, 79% of Canadian executives said their companies either failed to complete or cancelled a planned acquisition in the past year, suggesting companies are taking a prudent approach to M&A. Jenkinson cautioned, however, against a wait-and-see approach.

“Target assets with the right competencies and synergistic qualities are hard to find,” he said. “Companies that actively pursue M&A to accelerate growth will increase their chances of outperforming their competitors as we look towards economic recovery.”

Canada hit an all-time high in M&A activity in the first quarter, investment bank Crosbie & Co. said on Wednesday.

The EY survey also uncovered an area in which firms need to improve to take advantage of the recovery ahead. About one-third of executives (32%) said their firms underperformed in workforce management. However, the majority (78%) said the pandemic has now increased their strategic focus and investment in employees.

“As Canadian executives examine lessons learned from the pandemic and prepare their path forward, they must put humans at the centre of their focus, apply technology with speed and innovate at scale in order to succeed,” Jenkinson said.

“Canadian companies that do can do more than prosper — they can make bold moves and create exponential value that lasts.”

About EY’s global survey: From November 2020 to January 2021, Thought Leadership Consulting surveyed on behalf of EY a panel of more than 2,400 executives in 52 countries; 82% were CEOs, CFOs and other C-suite-level executives. Financial services was among the sectors represented.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.