Payment experience over the past two years has been good in the ICT sector and the level of insolvencies is low, with no major change expected in 2018.
- The Australian ICT market is forecast to grow further in 2018 and 2019, with both state and federal governments remaining key investors in IT projects, accompanied by business and consumers ICT spending which is driven by economic growth and technological progress.
- The market is highly competitive in the distribution, retail and system integrators segments. However, in general, ICT is a profitable segment with steady margins. Across subsectors ICT retail margins are lower compared to margins earned by value added system integrators.
- Many ICT businesses are highly leveraged, either via debtor financing for working capital management or through term loans. Banks are quite open and willing to offer loans to the industry. It is important for ICT business to have healthy cash flow as a lot of companies earn extra margin by the early settlement of invoices, and therefore having working capital funding in place is quite important.
- Payments in the ICT sector generally take between 30 days and 60 days from invoice date or between 30 days and 45 days end of month (EOM). Payment experience over the past two years has been good so far and the level of insolvencies is low, with no major change expected in 2018.
- Our underwriting stance remains generally open for all ICT subsectors. The IT producers and service segment generally performs well with profitable businesses, and many companies in the telecommunication segment are financially strong. In contrast, we are more cautious with ICT retailers, as this subsector accounts for most credit insurance claims in the industry.
- For higher coverage we usually refer to Personal Property Security Register or other risk mitigating measures, including Directors Guarantee if needed.
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Market Monitor ICT June 2018
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