Regency’s margins squeezed by competition

INTENSE competition in the invoice discounting sector dented margins at Regency Factors – the family owned firm has revealed.

Only a change in the way directors were paid – via dividend than cash – enabled Regency, owned by husband and wife Maurice and Hilary Craft, to grow operating profits in the year to the end of January, annual accounts show.

While gross profits were down from £4.8m to £4.6m, overheads fell by more than £200,000 to £3.1m, allowing operating profits to nudge up from £1.48m to £1.56m.

This marginal growth in earnings came despite a healthy – and industry leading growth in turnover of 13%, from £77.7m to £88.4m.

Sales growth was led by the firm’s trade finance division for exporting, which benefited from the weak pound.

Chairman Stephen Clague said: “The fall in gross profit margin from 6.17% to 5.29% reflects the intense competition in the market place for invoice discounting.

“The fall in overheads reflects a change in the way directors have been remunerated in the form of dividend rather than salary.”

Clague said the group was pleased with the ‘marginal’ increase in both operating profits and profits before tax (up £30,000 t0 £649,000) given the tough market conditions.

He said major expansion this year would be “unlikely” given the prevailing economic conditions, but was confident of increasing operating profits.

Looking ahead, he said the company would have to commit to “significant marketing activity” to maintain market share in a competitive industry.

Regency, which has just over 50 employees paid a dividend of £210,000 during the year, while directors’ remuneration fell from £418,538 to £310,096.