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Emerald Group Publishing Limited
Copyright © 2000, MCB UP Limited
Metal treatments companies mainly inefficient, improving but with a long way to go
Keywords Plimsoll Publishing, Metal treatments, Company performance
Of the 666 companies studied in the latest Plimsoll Portfolio Analysis - Metal Treatments, 26 per cent were grossly inefficient in their use of capital.
On average, metal treatments companies for each £1 invested in their businesses only sell £1.6 of (goods) services. This is better than four years ago when the figure was £1.56 per £1 invested.
Despite this improvement Plimsoll located a band of 128 companies, or 26 per cent of the industry that suffered a serious decline in their sales performance relative to their assets, and it has fallen to such a low level that their capital return is no longer competitive. These companies are only generating around £1.03 in sales for every £1 spent on investment. If this band of companies were to fully exploit their capital base, they would need to raise sales by 56 per cent.
If you only sell £1.6 per pound invested what chance have you of making a profit? Profits are slim at 7.2 pence per pound invested, up almost a penny from four years ago. Only 40 per cent of the industry made an acceptable 10 pence or 10 per cent return on their investment.
Again Plimsoll also identified a band of 154 companies, or 26 per cent of the industry, that perhaps should be more concerned. They have suffered a serious decline in their profit efficiency to a level where they are now no longer profitable. These companies are squandering their assets because they are losing part of every pound invested. Don Turkington, managing director of Plimsoll Publishing Limited, said, "These companies have some tough and immediate decisions to make."
Clearly these factors need constant surveillance. Of the 23 per cent of companies in the metal treatments industry that suffered a decline in sales over the last four years, 70 per cent of these companies took some steps to reduce their asset base to reflect this reduction in capacity. Unfortunately, though, many of these companies did not "cut" deep enough.
The Plimsoll Portfolio Analysis - Metal Treatments, Autumn edition, 1999 looks critically at the performance of 666 companies over the latest four years. Companies that are improving in the industry are identified; also those that are set to lose their place in the industry unless they can make radical changes.
Have you ever thought you were in the wrong industry? Perhaps not surprisingly in the employment agencies industry, for every £1 spent on investment they generate £3.28 of sales and 14 pence in profit. Although amazing, it seems one metal treatments company also achieved this level of performance!
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