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Emerald Group Publishing Limited
Copyright © 2000, MCB UP Limited
Chancers areKeywords: Business centres, Profitability, Borrowing
Almost a quarter of the business centres industry are successfully grabbing market share by borrowing heavily. This is the latest finding from the first edition 2000 of the Plimsoll Portfolio Analysis: Business Centres published this month.
Thirty-six companies described by Plimsoll as the chancers of the industry have managed a 28 per cent sales growth on average in their latest year. They have borrowed heavily to achieve success in expanding their sales and the heavy interest payments they have had to make erode their profitability.
In analysing the entire business centres industry of 466 companies, Plimsoll has put the industry into four distinct categories based on sales growth versus level of debt within a given company.
Other categories identified by Plimsoll include the winners, or companies with high sales growth yet low borrowings. Plimsoll found 30 companies like these, which, unlike their chancer counterparts, have steady profitability, as they are able to make better profits from their success in selling.
The losers and sleepers, who currently make up almost half of the industry, are falling behind in sales and market share. In fact, the losers have already borrowed heavily, but as yet have been unsuccessful in increasing their sales. The sleepers have not borrowed nor have they grown in sales over the last year. These companies, it seems, are heading towards the exit gate from the industry unless radical improvements happen soon.
Placing companies in tight categories is subjective. But perhaps the true meaning of this exercise is to demonstrate that many companies which have already borrowed heavily may have done so recklessly and therefore have put too much pressure on their management by this burden of debt. Indeed, the point of the 466-paged analysis by Plimsoll is to set into context the strengths and weaknesses of each individual company within the industry. The analysis gives those in the business new insights into the behaviour of their competitors.
Don Turkington, Managing Director of Plimsoll, says, "It looks as if the business centres industry can still reward risk taking but only if management is of a high calibre."
To obtain a copy of the Plimsoll Portfolio Analysis: Business Centres, 1st edition, 2000, for £305, call Jennifer Ovington on +44 (0) 1642 257800. Mention that you read this article and you will receive a free Competitive Strategy booklet naming all the companies in each individual risk-taking category.