10 central south report Mind the gap
The recently-published Central South Report 2012, compiled by leading accountants and business advisers BDO in Southampton, indicates that the region‘s top companies are showing a degree of resilience during this ongoing downturn – but businesses need to ‘mind the gap‘
From government budget cuts to constrained bank lending and squeezed consumer spending, companies have been negotiating difficult and uncertain times. As if that wasn‘t enough, trouble in the eurozone and signs of a slowdown in the global growth engines of India and China have added a new layer of risk.
Yet, in the face of these multiple obstacles, the 2012 snapshot of the Central South‘s economic health, based on the consolidated
accounts for the Top 150 companies, shows that the region performed well last year and there are opportunities for future growth.
Adrian Gunn, CEO of Matchtech Group plc, explains in his foreword: “Few companies spend too much time worrying about macroeconomics.
Instead they focus Adrian Gunn
on their particular sector of the market, understand the individual needs of their customers and concentrate on the opportunities to be had. They know that
What the numbers tell us
The fifth annual Central South Report again considers how the Top 150 companies, referred to as “the Group“, have fared. It also explores a number of key areas including growth, private equity-backed businesses, listed companies and overseas expansion. In addition, it looks at the mergers and acquisitions landscape, the sustainability agenda, risk management and also features case studies on companies both within and outside the Top 150.
Last year it concluded that the region remained a good place to do business and, with its broad spread of sectors, was well placed to benefit from any upturn, if and when it appeared. This has largely remained true, with the Group‘s revenues increasing to just under £80 billion, employee numbers holding at around 295,000 but profits dipping £0.3b to £3.8b, with increases in manufacturing and financial services offset by falls elsewhere. Whilst employee numbers remain steady there are
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concerns remaining about skills shortages, particularly in the IT and engineering sectors.
Overseas expansion has been acknowledged as one of the key ways to achieve growth, and so it is pleasing to note that overseas turnover has increased, up by £5.4b to £39.7b.
The proportion of companies making a positive contribution to overall Group profit rose to 87%, compared with 80% in the previous year and in contrast every sector returned an overall operating profit.
Robust though the Group figures may be, it is important to remember that they are retrospective and the current economic picture is looking more, rather than less, uncertain. As Malcolm Thixton, lead partner at BDO Southampton comments: “It is important for Central South businesses to focus less on ‘getting back to normal‘ and more on investing appropriately for this market. It is possible to
generate good returns for those prepared to move beyond their comfort zone to pursue new markets and with the confidence to invest.“
Overseas expansion
In adversity, the instinct for many is to hold on to cash on the balance sheet and curb any growth. But BDO firmly believes the next generation of market leaders will be those who resist this temptation and embrace what the emerging markets have to offer.
The fact of the matter is that the UK‘s current export model is not sustainable. More than 60% of UK exports are to Europe and less than 4% to India and China. We cannot continue to export more to Ireland than we do to Brazil, China, India and Russia combined.
Geography need no longer stand in the way of a company‘s aspirations – even an emerging company. However, it also no longer serves
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – OCTOBER 2012
even though the broader market may be flat or shrinking, there will be winners as well as losers.“
Indeed, as this year‘s theme of ‘Mind the Gap‘ identifies, a divide is developing between those businesses that can access growth opportunities and those that are left behind to fight it out in stagnant markets. In the Central South, we are fortunate to have many forward-looking companies that are firmly on the right side of that gap.
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