Yorkshire Report: Companies emerging ‘stronger and fitter’
YORKSHIRE businesses have shown “true grit and hard work” to emerge “stronger, leaner and fitter” from the tough economic climate, according to BDO’s 2011 Yorkshire Report.
Companies have been able to drive costs down, push profits up and keep revenues stable despite trading through one of the toughest recessions in history, the report has found.
The report, produced by accountants and business advisers BDO, has revealed that during the reporting period the region’s top 150 companies were hit hard by weak demand, which impacted on consumer and business spending, and made maintaining revenue an uphill task.
However, by the end of last year, revenues were only down less than 1% on the previous reporting period.
Ian Beaumont, managing partner of the Leeds office of BDO, said: “Yorkshire’s businesses have had to battle hard during the recession and continue to do so in order to survive the sickly recovery period we are currently in.
“Efforts by the top 150 to reduce costs and improve efficiency have been rewarded with a sharp increase in profits, with operating profit rising substantially by 54% to £3.5bn, reversing an almost equal decline last year and driven mainly by gross profit improvement.
“However, despite a more stable economic environment, we’ve seen demand stay disappointingly flat and revenues have suffered a marginal decline. We have also seen some big casualties as the group’s workforce shrank from 469,000 to 460,000 and wage rises were kept to less than 1%.”
Mr Beaumont said out of the 150 companies analysed, 105 made a profit, with the food sector being the largest contributor to both revenue and profits.
“This sector continues to remain robust and even construction – one of the hardest and first hit by the recession – showed that, although the going remains tough, it is fighting back,” said Mr Beaumont.
The latest Yorkshire Report is BDO’s fifth and for the first time BDO has published the group’s five year record, which takes into account the period leading up to the recession, and how the region has negotiated one of the most tumultuous periods in Yorkshire’s business history.
While 2010 signalled problems in the group’s financial sector, with Bradford & Bingley and Cattles leaving BDO’s group of companies, the report found that private equity emerged “from the shadows” and snapped up some major Yorkshire names.
Deals included the £500m buyout of DFS by Advent, the £400m buyout of Card Factory by Charterhouse, the £300m buyout of Republic by TPG, the £200m buyout of JLA by Hg Capital, the £100m buyout of Andrew Page by Phoenix, and the £110m buyout of Callcredit by Vitruvian.
Last year also reported that £38bn of debt held by the top 150 would need to be repaid or renewed during 2009/10. Given the continuing difficulty in accessing appropriate finance at a reasonable cost, the fact that many companies were able to refinance reflects their inherent strength, the report found.
Despite the improvements in profits, cash generated from operating activities was unchanged at £6.8m.
The top 150’s gearing, excluding financial institutions, fell back slightly from the prior year high of 67% to 62%, reflecting cash generation in the year.
Mr Beaumont added: “As a result of GDP growth being subdued and the Eurozone struggling with austerity measures, we have seen many of the top 150 look overseas for opportunities.
“It also was positive to see that as a result of the top 150’s balance sheet strengthening during the year, although dividends increased only very slightly, they are now covered by 1.19 times by profit.”
In conclusion, Mr Beaumont said: “Overall the region’s businesses should give themselves a brief pat on the back. They have come through a very testing time in decent shape, and had what could ultimately be described as a rewarding year.
“We have seen that Yorkshire’s reputation for prudence and financial discipline was evident in increased profits but the real challenge lies ahead.”
John Swarbrick, senior director at LDC, has provided the chairman’s statement within the report, and Liz Barber, group finance and regulation director of Kelda Group, has provided the finance director’s forward.
