How many companies would admit to running their business through debt? Perhaps not many, yet Plimsoll Publishing’s latest analysis reveals that 95% of the UK labels industry is using formal debt to run their company.
For 17% of the market the level of debt is dangerously high. The truth is we are usually the last to know about those that are ‘dancing with the devil’.
Borrowing is endemic. Only 12 companies in the industry do not carry any debt. The average company in the UK labels industry is financing around 30% of their assets. Based on an average margin of 2%, paying back this debt is a very unlikely scenario, given 33% of the industry is currently making a loss.
Trading has become hazardous at the 37 companies where the level of debt has risen to such a high level. “These companies are struggling. Their debts have increased nearly 23% in the last three years and their ability to pay these debts back is under great threat,” says Plimsoll senior analyst David Pattison.
An exit route for many of these 37 companies will come through a buy out from a stronger predator exploiting their adversity.
Seven of these are named in the analysis as acquisition prospects. They are good companies smothered by debt.
The analysis is available from Plimsoll Publishing, tel: 01642 626400 [www.plimsoll.co.uk]. Readers of this publication will obtain a 5% discount off the £305 report when mentioning this article upon ordering.