Many UK Tour Operators are bemoaning the scarcity of bank lending to businesses but market analysts Plimsoll argue that the banks are right – many UK based operators are just not worth the risk.
High profile failures throughout 2010 have shown the danger of operating on micro profit margins and there could be more to follow. 643 of the UK's 1000 largest operators exist on profit margins of less than 1.5% - 322 of them are making a loss. Any bump in the road will be enough to see them fail because they cannot rely on cheap credit to see them through anymore.
Of course, banks have been guilty of being too harsh in turning away some perfectly healthy companies and it is essential that they play their part in getting business moving again. However, nobody should blame them for refusing credit to operators that might not be able to pay it back. Many are turning up at the bank saying “We spend almost as much as / more than we make”.
The financial sector was correctly vilified for reckless lending that lead to the economic crisis but in the case of many Tour Operators they are right. If banks are to meet government and electorate demands to lend responsibly then companies with consistently low margins just pose too big a risk.
It also seems that debt levels have little to do with the ability to secure funding. Even companies with minimal or no debt are struggling to get credit if they have thin margins. There is simply too much risk attached. We picked 212 companies who have little to no debt but have profit margins that are just too thin.
On the flipside, there is good news for 177 prudent companies that made tough decision early and focused on the bottom line instead of chasing sales over the last few years – they now have the edge in the market. Ironically, these are the companies that the banks are most willing to lend to. One or two of these solid companies should look to capitalise on this advantage and borrow money to invest in their future through a couple of smart acquisitions.
Click here for more information on Plimsoll’s latest assessment of the UK Tour Operators market.
Showing posts with label uk tour operators. Show all posts
Showing posts with label uk tour operators. Show all posts
Wednesday, 8 December 2010
Monday, 20 September 2010
177 UK Tour Operators named as Zombies by Plimsoll
177 UK Tour Operators industry are now classified as “Zombie” businesses. These companies have seen their performance deteriorate to such as extent that they now exist merely to pay off their debts and survive.
They are posting growing losses and, despite the obvious freeze in the credit markets, increasing their debts. These Zombie businesses have debts at an average of 70% of turnover – they exist to service their out of control liabilities. Many are also using their suppliers to finance their growing losses, taking twice as long as to pay their bills as the industry average of 26 days.
What's worse is they are falling behind the rest and their productivity is well below the industry average. It’s hard for them to compete as their cost base is just too high. As a result, investment plans have been mothballed meaning their aging assets are further restricting their ability to remain competitive.
So can these Zombies be saved? The first thing they need to do is sort out their immediate finances. They have to convince their banks and suppliers to keep supporting them or not pull the plug. If they can pull that off then the hard work really starts. They urgently need to stem their losses and control costs. The longer it takes them to address these issues, the harder and less likely it is they will ever fix them.
However, there are attractive takeover targets among the Zombies - canny investors could pick up a bargain. Some of these companies, stuck in a zombie state because of their balance sheet, have lots of potential for new owners to turn it around. We picked 109 companies that we feel have the most potential.
Those unable to attract new buyers may have simply had their day. A combination of aging assets, rising losses and increasing debts mean they are unlikely to attract a suitor before the receivers are called. They will be forced back into negotiations with their lenders to buy more time but their future doesn’t look good.
Click here to see how the new Plimsoll Analysis - Tour Operators will give you this key industry findings instantly
It will tell you instantly which companies are prospering in the post recession market place, those taking a big gamble and those in trouble. It gives an instant performance rating on 1000 companies and highlights those ripe for acquisition.
They are posting growing losses and, despite the obvious freeze in the credit markets, increasing their debts. These Zombie businesses have debts at an average of 70% of turnover – they exist to service their out of control liabilities. Many are also using their suppliers to finance their growing losses, taking twice as long as to pay their bills as the industry average of 26 days.
What's worse is they are falling behind the rest and their productivity is well below the industry average. It’s hard for them to compete as their cost base is just too high. As a result, investment plans have been mothballed meaning their aging assets are further restricting their ability to remain competitive.
So can these Zombies be saved? The first thing they need to do is sort out their immediate finances. They have to convince their banks and suppliers to keep supporting them or not pull the plug. If they can pull that off then the hard work really starts. They urgently need to stem their losses and control costs. The longer it takes them to address these issues, the harder and less likely it is they will ever fix them.
However, there are attractive takeover targets among the Zombies - canny investors could pick up a bargain. Some of these companies, stuck in a zombie state because of their balance sheet, have lots of potential for new owners to turn it around. We picked 109 companies that we feel have the most potential.
Those unable to attract new buyers may have simply had their day. A combination of aging assets, rising losses and increasing debts mean they are unlikely to attract a suitor before the receivers are called. They will be forced back into negotiations with their lenders to buy more time but their future doesn’t look good.
Click here to see how the new Plimsoll Analysis - Tour Operators will give you this key industry findings instantly
It will tell you instantly which companies are prospering in the post recession market place, those taking a big gamble and those in trouble. It gives an instant performance rating on 1000 companies and highlights those ripe for acquisition.
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