Product category:
Printing Trade Organisations - including Allied Industry Bodies
News Release from: BPIF
Edited by the Printingtalk Editorial
Team on 24 March 2004
Survey Reveals Declining UK Profit
Margins
The BPIF Printing for Profit Survey Report shows that profit margins as a percentage of sales in 2003 have fallen.
For the first time since its inception in 1997, the BPIF Printing for Profit Survey Report shows that profit margins after financing charges as a percentage of sales in 2003 have fallen below 4%, at 3.29% - down from 4.47% in 2002 However similar ratios before financing charges show an improvement of 3.34% at 11.34%
This article was originally published on Printingtalk on 23 Aug 2005 at 8.00am (UK)
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BPIF director of corporate and external affairs Cicely Brown has urged companies to be vigilant of this potentially vicious spiral.
"Profitability is vital to the health of an industry as it affects businesses' ability to re-invest in appropriate technologies and new equipment, skills development, new premises and other elements which will secure their future existence and growth of the business," she said.
"At the same time as companies are experiencing declining profits, it appears that finance costs are growing at an alarming rate with the average company experiencing a 9% increase in financing charges between 2001-2002.
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The median level of capital employed fell during the same period," added Brown.
That suggested that although the net level of investment was lower, this investment is being funded increasingly through debt which is likely to depress surpluses further in coming years as well as putting increased pressure on businesses' cash flow and, therefore, increases their vulnerability in tough times, she warned.
Other indicators point to a deteriorating use of operating assets in the industry, which could be fuelling the problem, as well as providing the source of its solution.
Considering profitability ratios before financing charges (EBITDA) both these ratios increase (slightly) as a percentage of sales (+2.82%) and value added (+3.34%) over the previous year but decline in terms of operating assets (-9.85%) and capital employed (-5.53%).
That indicates that the sector is not exploiting its assets as effectively as possible.
BPIF chief executive Michael Johnson emphasised the importance of companies taking advantage of the tools put at their disposal through the BPIF and Vision in Print to improve the productivity and competitiveness of the sector.
"Pressure on prices due to a sluggish economy and chronic over-capacity have forced printers to use every lever at their immediate disposal to address the situation, in particular cutting input costs and labour.
The likelihood of a price rise is still remote, which increases the urgency of taking action to improve operational productivity and raise the level of skills within the sector.
Printers of all sizes, and particularly those owner-managed businesses which are put under less pressure by external shareholders, must recognise that addressing this issue is crucial for the future of sector," he said.
The annual BPIF Printing for Profit Survey Report calculates 17 productivity and profitability ratios compared to previous years and is broken down to show individual ratios for Scotland and nine different sectors of the industry including book production and periodicals, cartons and flexible packaging, stationery and business forms and commercial printing.
Once again small general printers (with an annual turnover of less than ?1 million) are the best performing sector in terms of profitability, followed by cartons and flexible packaging, which also exhibited above average labour productivity.
Full reports are available to BPIF members at ?250 and non-members at ?500.
Those interested should contact call the BPIF Information Services manager, Kyle Jardine on (020) 7915 8317 to buy a copy.
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