Manufacturing sell-offs set to increase - Embedded.com

Manufacturing sell-offs set to increase

LONDON — Over 200 of the U.K. electronics manufacturers industry's leading 1000 companies are losing the battle against rising costs and stagnant sales, according to the latest industry analysis from Plimsoll Publishing. And for the right buyers, these under-pressure companies represent highly attractive acquisition prospects.

The report also identifies 124 companies as aggressively chasing market share with the cash resources and the motive to capitalise on the failures of the 216 exposed companies.

David Pattison, senior analyst at Plimsoll Publishing, said, “Any company that is not increasing sales is always going to struggle as rising costs restrict margins. For these 216 companies, 'selling up' would represent a viable solution to their problems. By absorbing costs and eliminating inefficiencies, new owners could turn these struggling companies around.”

“Potential acquirers should be rubbing their hands together at the chance of buying one of these companies. Firstly, it is likely that any one of them could be bought cheaply. Secondly, acquiring companies can expect high returns. By reducing costs, new owners will be able to add the extra sales to their gross margin.”

Pattison believes that there are three key areas new owners must initiallyaddress to improve profitability. “The salary bill is an obvious place to start cutting costs, especially administration costs. Total salaries at these companies make up 29% of sales on average. This is far too high and new owners must quickly reduce this to 24% or less.”

Retained employees will also need to be considerably more productive. Sales per employee figures must be driven up from £59,449 per person to £88,185. Interest payments are a big opportunity to reduce costs. “New owners will have the chance to refinance the company and retain any created wealth for themselves rather than giving it to the banks,” said Pattison.

table

Gross
margins
Salaries as
% of sales
Interest payments
as % of sales
Sales
per employee

Industry

29%
24%
34%
£ 88,185

Exposed

26%
29%
95%
£ 59,449

Agressors

35%
19%
6%
£ 75,552

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