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News analysis: Family businesses return to profitability, but cautious on future

Times are better for family businesses.
 
Those reporting their first half results are notching up much-improved profits after the dark days of 2009, when many were losing money. But few think a return to profits mean the good times are here to stay.
 
Recovery for family-controlled businesses has touched most sectors. Businesses in the retail, manufacturing, media and food and drink sectors are seeing strong rebounds.
 
Highlights include a more than 50% year-on-year rise in net profits at LVMH, the French luxury group controlled by the Arnault family, a 30% rise in net profits at Luxottica, the world's biggest eyewear group, owned by the Del Vecchio family, and a return to healthy profits at News Corp, the media empire controlled by the Murdoch family.
 
"Things have certainly improved for family businesses," said Joachim Schwass, a professor and family business expert at the Swiss business school IMD.
 
"Many family businesses were under considerable strain during the credit crunch."
 
Schwass reckons that better profits at family businesses will relieve strains between family shareholders and non-family shareholders, as well as between non-family management and family shareholders.
 
But, he says, none are jumping up in joy as money becomes less tight.
 
"I would say there is an attitude of cautious optimism around – that said, many have their eye on the bigger economic picture, which still looks far from certain."
 
A survey released by the Entrepreneurs' Organisation and Standard Chartered Private Bank on entrepreneur sentiment in early August revealed that more than 70% of business owners predicted adding more staff in the next 12 months.
 
The survey might not have specifically asked family businesses about their intentions, but Schwass says their sentiments are likely to be the same.
 
"Most would be looking to hire," he said.
 
Nevertheless, many won't be using their bank to finance expansion.
 
Schwass says a much more frosty relationship has emerged between family businesses and their banks since the credit crisis.

"Family businesses weren't impressed with the lack of bank support during the credit crunch. Consequently, it will take some time before banks win back the trust of this very important business community," he said.
 
"They will have to work very hard."

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