Companies look forward to 2005 with caution - Embedded.com

Companies look forward to 2005 with caution

LONDON — A survey has found that over a third of the top 1000 companies in the UK Electronics Manufacturers industry are in entering 2005 in a cautious mood.

David Pattison, senior analyst at Plimsoll Publishing, which carried out the survey, maintained, “There is evidence that these concerns are justified, with 58% of this year's entrants suffering a fall in profit since last year's study. This supports the fact that margins are coming under increasing competitive pressure. With current market growth negative at -5% and next year's forecasted at a fall of 3%, perhaps a cautious approach is right.”

The 36% of companies in the industry which are cautious have has at best a satisfactory a recent financial performance. Their sales are falling by 11%, with margins averaging 2.7%. Most of these companies could be described as prudent as they hardly carry any debts. If 2005 proves unfavourable, their balance sheets should offer some protection, but they must keep a close eye on aggressive competitors says Plimsoll.

Meanwhile 24% of companies are upbeat regarding their prospects for 2005. These companies are not having any trouble achieving extra sales growth, with many having increased sales by 10.6%. They are also not seeing any reduction in margins – typically they reported margins as high as 7.9%.

Another 18% of companies included seem almost bullish about 2005. They appear determined to press on with their aggressive pursuit of market share. These companies shared most of the growth in the market last year and Plimsoll believes it is an exciting time to be at one of these companies as employment is up from last year. Most are selling at a loss, a trend currently popular in the industry but can they maintain this risky strategy?

The 23% of companies surveyed finding the market more competitive than ever all reported falling sales, some by as much as a 21%. Clearly this has affected their profitability as three quarters of these companies are selling at a loss. Their priority in 2005 should be to hang on to current sales, get on top of their costs, and reduce their levels of debt.

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