Zero growth, sliding profits and escalating debts means that many will have to consolidate, says the latest Plimsoll report.
It has produced a financial health check for each of the top 939 companies in the UK electronic security industry and reveals that consolidation is essential because supply is outstripping demand.
All companies are having a “difficult trade-off between protecting margins and appeasing price sensitive customers”.
Of the 939 companies rated, 472 are ‘Strong’ financially, 86 are rated as ‘Good’ and improving financial performance, 90 are ‘Mediocre’ and having a make or break year, 127 are in ‘Caution’, showing a weakening financial position, and 164 are in ‘Danger’ and needing to change in order to survive.
Plimsoll says the firms on the danger list “are being hit the hardest. The numbers are stark – profit margins falling to only -4 per cent of sales, and the majority of companies in this classification are making a loss. Most are taking on debt at an alarming rate simply to cover costs.”
Senior analyst, David Pattison said “I think these figures just prove the point that we have all been aware of, that a period of consolidation is long overdue. Bit by bit the weaker players will be removed from the market.
He said consolidation would include “obvious job losses and up to 228 companies might need to shed jobs. For some businesses, as many as 30 per cent of the payroll may have to go if the company is to survive.”
The companies rated in ‘Danger’ “must put immediate plans in place to start to trade their way out of their problems. Cutting costs, jobs and even turning unprofitable work away. Stringent measures must be put in place before it’s too late.
“Currently, the owners are sitting on an ‘unsellable’ asset and are woefully exposed to acquirers who are ready to snap them up for next to nothing.
Those companies rated as ‘Strong’ or ‘Good’ benefit from stronger business models and tighter financial management and are “ideally placed to benefit from the fall-out in the market”.
This edition of the regular Plimsoll Analysis includes a “future snapshot” on each company demonstrating how each might survive a period of consolidation.
Copies GB pound 350. Information: Clair Sherwood (01642 626400). Email [email protected]
