High borrowings provide takeover targets - Embedded.com

High borrowings provide takeover targets

London, UK — Encouraged by low interest rates and the need to gain a competitive edge, 44% of the top 1000 UK Electronics Manufacturers companies have spent the last 3 years gradually increasing their levels of debt according to the latest Portfolio Analysis from Plimsoll.

The researchers say that these companies are now faced with severe commercial disadvantage with debt threatening their survival in the industry and exposing them to their competitors as potential acquisition opportunities.

Plimsol says that while a company's financial health can appear misleadingly favourable on the surface, its research goes beneath the 'tip of the iceberg', exposing the facts that many of the top 1000 companies in the UK Electronics Manufacturers industry would rather we did not know.

Over the last 3 years, debt has risen to such an extent that it now accounts for almost 21% of total sales, severely compromising levels of profitability with 436 of the top 1000 companies in the UK Electronics Manufacturers industry seeing their total debt position increase by almost 71%.

Even with interest rates at their current low level, interest payments are consuming nearly all the profits and forcing 168 of these companies into loss.

According to Plimsoll any one of the debt laden companies could have a fantastic future under new management. By removing their interest payments, profitability would increase to 11.7%, well above the industry average margin of 1.8%.

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