There analysis identifies three distinct types of company behaviour now prevalent in the industry. According to Plimsoll, 68 of the companies featured in the report are losing money. Typically they are delivering -3.8% margins, yet their average sales growth is healthy. The report questions whether their strategy of capturing market share at the expense of profit sustainable. A further 84 companies hardly break even, typically existing on tight and declining margins, while another 84 are as yet unaffected. Typically these companies have remained very profitable, delivering 8.1% margins - although there is the possibility of further damage to the performance of both these latter groups from the effects of those overtrading.
David Pattison, senior analyst at Plimsoll, maintains: "Worryingly, almost two thirds of the 236 companies assessed have seen their profits slump. In an attempt to retain sales, 68 companies have already started to blatantly overtrade, selling at a loss. As these companies continue to overtrade, I see two potential outcomes. Firstly, prices could fall across the industry as competition increases. Alternatively, the 'overtraders' will simply run out of money."
This latest publication lays bare the true financial performance of all 236 companies, separating the 68 overtrading and 84 where profits are too low, from the 84 as yet unaffected. The most up to date accounts have been included for each of the companies analysed. Readers of LSI Online will receive a 5% discount.
(Lee Baldock)
