Security guarding concerns are faced with a stark choice: hold on to sales at reduced margins or opt to reduce in both size and scale. To put this into context, 88 of the 325 firms analysed are losing money – a direct consequence, claims Plimsoll, of rising costs and price reductions set against a slowing market.
Of perhaps most significance is the sheer numbers of security companies using an overdraft as a permanent means of finance – a dangerous position for any organisation. With the credit crunch at its height, the banks are taking a critical look at all unsecured finance and reassessing their exposure to small businesses. This could leave these firms in a position where their overdraft would need to be paid back on demand. Many of these firms simply couldn’t afford to do so.
Dangerously high chance of failure
At least 57 companies identified in the Plimsoll analysis are running a dangerously high chance of failure unless their problems are immediately addressed.
Plimsoll have analysed previously failed companies, and noticed two characteristics in particular of failing or failed businesses. The financial performance of the company is allowed to slide. Costs are not brought under immediate control. As a knock-on effect, debts increase and interest payments then further deplete profitability.
The final blow is that an outside factor hits the company, such as the loss of a large contract, a bad debt or a slowdown in business. The failing company simply doesn’t have the financial resources to adjust in time and the inevitable then happens. When analysing previously failed business, Plimsoll found that 8 out of 10 of them showed these features.
All that said, the latest report is not entirely doom and gloom. There is a smattering of good news. Proving their resilience, 51 of the 325 firms prove what can be done to improve performance. These companies have reported a return to profit after having previously reported losses as a result of tighter cost control and reductions in overheads.
Towards year end
Looking towards the end of the year, the analysis predicts increased acquisition activity driven by two clear objectives. Plimsoll predicts two distinct types of acquisition:
the classic distress sales as predators are able to profit from other’s misfortunes, snapping up essentially sound businesses at bargain prices
larger players in the market could use the opportunity to snap up smaller players who add value to their core business – these companies will be prepared to pay well for these niche operations as they offer a clear and easy route to new markets
The full updated Plimsoll analysis allows you to see how the UK’s top 325 Manned Security companies will cope with this unkind market. The reality is, even under normal trading conditions, businesses fail, and with this comes opportunity for others. The analysis is ideal for anyone looking to see which of their competitors are most exposed to the downturn, those in pole position to prosper and perhaps most interestingly, those where the combination of poor performance and slowing economy has exposed them as a cheap acquisition.
Gain the most or retreat and sell
This special edition of the Plimsoll Analysis exposes all the names, details and financial performance of the UK’s leading security guarding firms. It also includes a future ‘snapshot’ on each company, demonstrating how each might survive this period of consolidation. It names those companies that are set up to gain the most and those that need to retreat or sell up.
Copies of the security guarding market analysis are available (price GB pound 350) by calling Clair Sherwood on 01642 626422. For further information send an e-mail to: [email protected]
