Analysis exposes that the rich get richer

Facilities

ISSN: 0263-2772

Article publication date: 1 December 2000

51

Keywords

Citation

(2000), "Analysis exposes that the rich get richer", Facilities, Vol. 18 No. 13/14. https://doi.org/10.1108/f.2000.06918mab.002

Publisher

:

Emerald Group Publishing Limited

Copyright © 2000, MCB UP Limited


Analysis exposes that the rich get richer

Keywords Business centres, Profit

To achieve top performance in the Business Centres industry you must beat the best. With an enormous gap developing between the "best" and the "rest" in the industry, effectively 47 companies are reaping massive profits while the rest of the industry flounder in mediocrity (see Table I and Figure 1).

Figure 1 Performance in the Business Centres industry

These 47 best companies are revealed in the latest Plimsoll Portfolio Analysis: Business Centres covering 302 companies. On average, these outstanding businesses are delivering a 51.5 per cent pre-tax profit margin! Believe it or not, this is 18 times better than the dull industry average of 2.9 per cent.

Delivering these outstanding profits is not easy; these companies excel in many areas. Gross profit margins are as much as 62.9 per cent of sales compared to industry norms of 55.6 per cent. This alone gives them a big advantage. But perhaps their biggest trick is their ability to "hammer the assets" by getting their fixed assets to generate more sales. Their sales returns on fixed asset are almost 299.6 per cent compared to the industry average of 33.5 per cent.

Turning sales into profits is essential if you are going to create a future. Turning sales into dividends and retaining profits rewards the shareholders and also builds strength into the company. These companies are doing well by retaining over 48 per cent of sales on the balance sheet to strengthen and provide for the company's future.

Pitch these companies against the one-in-four companies in the industry that are currently loss makers and the comparison is frightening. These 75 loss-making companies are consuming almost 7.8 per cent of their sales. Essentially, they are drawing on reserves to fund their losses. Don Turkington, managing director of Plimsoll, comments: "Profits are essential to drive a company's ambitions and to not constrain the management. You lose money, somebody has to pick up the bill!".

These loss-makers have three choices for the future, as they cannot continue to make losses. One, they can try to improve their profitability, which for many will prove very difficult. Two, they will fail and three, and perhaps most likely, the more profitable companies will snap them up on "the cheap", taking a new approach to clearing overheads and interest payments. What else will they do with all that cash?

Ultimately these loss-making companies will drop out of the bottom of the pack. What cannot be ignored is the shift in position of the 180 companies in the mediocrity, with a slim 2.9 per cent on average margin, as these rich companies continue to get richer. The pressure of which will be to force many of these into losses next year. So who is next?

A copy of the report, the Plimsoll Portfolio Analysis: Business Centres is available for £305. To obtain more details and to obtain a free list of the Top 50 most profitable companies in the Business Centres industry, ring Plimsoll on 01642 257800. Readers of Facilities can receive a 5 per cent discount when mentioning this article on ordering.

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