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FINANCIAL

12th April 1986, Page 62
12th April 1986
Page 62
Page 62, 12th April 1986 — FINANCIAL
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Which of the following most accurately describes the problem?

REPORT

• One of the most comprehensive financial reports ever produced about motor body builders and engineers reveals that many bodybuilders are in the red. Around 30 per cent of the companies listed, where accounts figures are available, made a loss.

The report is published by business information specialist ICC and compiled from the latest information available from Companies House. It gives comparative figures for the sector. For each company listed it presents figures on turnover, pre-tax profits, directors' remuneration, total assets, current assets and current liabilities. Also included is the key business ratios — return on capital employed and profit margin. There is a directory section which lists the principal place of business, principal activities and holding company (if any), as well as the names of directors and company secretary of each company surveyed.

The listing of holding companies, is a useful guide as to who owns whom. For example, it can be found that SWOP body builder Abel Demountable Systems Ltd has (or had at the time of the last filed accounts) United Parcels Plc as its ultimate holding company, that Bardlense Ltd, the aerofoil and truck bodybuilder, has Castle Finance Ltd as its ultimate holding company and that Bedwas Bodywork Ltd has the Securicor Group Plc as its ultimate holding company.

Commercial vehicle bodybuilding is a very fragmented business, sometimes with a turnover of less that £300,000 a year and frequently with a turnover of less that 21 million. A bodybuilding company with a turnover of more than 25 million is the exception rather than the rule and those with a turnover of more than £10 million generally have other interests beside bodybuilding; usually the motor trade or other engineering activities or even coach touring, coal and coke distribution and farm equipment manufacture.

The report reveals that specialisation in bodybuilding does not guarantee a profit. For example, Gloster Sam, the tank vehicle manufacturer, has enjoyed a healthy level of sales and profits in the three years covered by the report, others involved in a similar type of business incurred substantial losses. The same applies to bodybuilders producing refrigerated vehicles, bulk dry goods carriers, tipper manufacturers and bus bodybuilders. Some make profits, some losses in the same way as with small, general bodybuilding concerns, which is perhaps surprising in spite of the known severe competition in the industry.

Some companies which are no longer trading or are too small and those whose principal activities are not considered applicable to the survey have been excluded.

There is also the odd company, like the Coalite Group, with a turnover approaching 2500 million included which surely should not be. They are there on the strength of subsidiaries like Charrold Ltd and Dormobile Ltd but bodybuilding is not the main activity. However, the authors of the survey are at pains to define what they are including and excluding and there is a useful reference to the provision of the Companies Act 1981 regarding company accounts disclosure requirements. This explains the definition of "small companies" and "medium-sized companies."

Usefully, the report also defines what is meant by the terms used, like "total assets, current assets, current liabilities, profit before tax and group relief."

The only drawback to a consolidated report like this, is that it is dependent upon information filed at Companies House some time ago, so it will not reflect the up-to-date situation in the industry.

The financial results of companies which are not Pies are rarely published, so there is little or no chance of watching the progress of most companies in this report. The fortunes of bodybuilders are inevitably bound up with those of the chassis manufacturers and, broadly speaking, if vehicle registrations increase, CV bodybuilding benefits.

There are always pointers to the state of the market from the annual reports of the larger concerns. Thus Plaxtons (GB) Plc which recently announced its results for the year to September 29 last, (pre-tax profits of .E1,310,000 on a turnover of £32,315,000 compared with .41,980,000 on a turnover of S:31,913,000 in the previous year), says that a combination of adverse factors seriously affected the company's coachbuilding results and more than offset improved results from other divisions.

All is not gloom for Plaxtons, however, for it also says that growth in demand for minibuses "should benefit vehicle fitments and small passenger-vehicle subsidiaries in the current year". In this context, Plaxtons is obviously thinking particularly of its subsidiary Reeve Burgess which has pushed up its turnover and profits in the past three years, benefiting from the trend to smaller buses.

This swing from the traditional bus and coach builders to other bodybuilding concerns, (generally small goods and small passenger vehicle bodybuilding), is already marked.

There is, of course, a further new element in the bodybuilding scene in the bus sector. This is the emergence of new companies like Carlyle Works of Edgbaston, (a National Bus Company

subsidiary), and LRT Bus Engineering at Chiswick and Aldenham, (the London Regional Transport Compan3 Carlyle Works is already heavily involved in small bus production with 16-seat and 20-seat body designs based 4 the Freight Rover Sherpa an Ford Transit. It has already supplied 25 vehicles based 01 the Ford Transit to Exeter and obtained a real "plum" tc construct 114 small buses, again on Transits, for Devon General.

LRT Bus Engineering, although not yet in bodybuilding as such, has already done some outside body modification work and does not discount the idea of using its facilities for goods a passenger body construction purposes.

This situation is a direct result of bus deregulation. Apart from the spin-off of thi on goOds vehicle bodybuilder there is only one other key issue at the present time wit possible financial implications for bodybuilders. This is the Society of Motor Manufacturers and Trades Bodybuilding Code of Practico Announced last September this is now starting to have a effect, Besco Bodies being one of the first companies to announce compliance with th( code. This was in connection with a contract for the construction of 100 demountable containers for the East Midlands Electricity Board. The code could lead t1 a certain amount of rationalisation of the body manufacturing industry should chassis manufacturers decide, say, only to apply warranty where a body meets the Cod( of Practice requirements.

The big problem with any code of practice is its enforcement. This may not lx easy with the SMMT code; it could well be shown to have no teeth.

• Motor Body Builders and Engineers (10th edition) price £108 can be purchased from John Burr, ICC Financial Surveys, 4th Floor, 28-42 Banner Street, London EClY 8QE. Tel: 01-253 9736.

by George Malcolm


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