Lost profit ‘costing UK companies millions’ say analysts

The British label industry is wasting 523 million worth of profit every year, according to a new study by business analysts Plimsoll Publishing.

The report finds that:

• 31 percent of companies are making a loss
• 10 percent are losing money for the second year running
• 3 percent of companies made less than 3 percent return on investment

The findings suggest that 354 of the 478 companies covered would make more profit under new ownership, resulting in 523m extra revenue in the industry as a whole. At the moment, that money is being simply thrown away because of companies’ failure to control their losses and manage their businesses more effectively.

The senior analyst on the project, David Pattison, said: ‘These results prove just why the labels industry is currently hot with takeover talk and speculation about future ownership. It’s certainly no surprise that trade buyers and private financiers are taking a close look at the industry – some of these labels businesses have huge potential that is not being realised at the moment. We’ve heard a lot about private equity firms recently, and this is one industry where they could reap rich rewards.’

The Plimsoll report highlights each firm’s hidden potential and demonstrates how simple changes can transform both the performance and overall value of a company. Some of the classic strategies which companies are failing to put in place include:

• Cutting out unprofitable sales. In some cases, a 10 percent drop in sales could actually improve profitability
• Looking again at unnecessary stock levels and keeping control of trade debtors to free up cash
• Reducing borrowing to improve profitability
• Reviewing productivity to the point where sales per staff member are at least 100,000. This is a key business measure that often goes unchecked.

The new Plimsoll analysis of the labels industry applies the same tests to each business that any corporate investor would, identifying a ‘profit plan’ for each one and outlining its strengths and weaknesses.