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UK haulage in debt cycle
Page 13
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• by Emma Penny
Borrowing in the UK haulage industry is "endemic", with 94% of operators relying on credit to run their companies.
A Plimsoll Publishing analysis of the top 2,000 companies shows that, for 7% of the market, the level of debt is "dangerously high" — and only 63 companies in the industry are free of debt.
According to David Pattison, senior analyst at Plimsoll, the average haulier is financing about 30% of its assets. He warns that with an average profit on turnover of 2,7%, paying back these debts is a ''very unlikely scenario", given that 20% of the industry is running at a loss.
Of the companies surveyed, 68 have debt which has risen to such a high level that normal trading has become "hazardous", Paulson warns. "All [these 68 firms] have carried some debt for the past four years, and 56 of these are making a loss — so the extra debt is financing losses in an already sinking ship."
Pattison adds that the justification for taking on debt should be financing the future of a company by accelerating profitability. He reports that the companies most deeply in debt are failing to increase sales, and interest payments account for 2% of sales at the 68 high-risk companies.
"Staying competitive will certainly become a problem." he says, predicting that the firms most deeply in debt will find an "exit route" from the market through a buy-our from a stronger predator.
• Commercial Motor readers can obtain 5% discount off the £305 cost of the Plimsoll Portfolio Analysis 1st Edition 2003 report by mentioning this article when ordering.
• Contact: 01642 626400.