Report criticises UK managers for poor performance

By Ahmed ElAmin

- Last updated on GMT

Related tags: Food processors, Private equity fund

UK food processors are so badly managed that three-quarters of the
companies in the market are prime takeover targets, according to a
research report.

Plimsoll Publishing said its analysis of the industry found that 370 of the 500 companies covered would make more profit under new ownership, resulting in £1.2bn extra revenue in the industry as a whole. The report is an indictment of management throughout food and drink manufacturing operations, including those managing supplies, sales, invoicing and productivity. Companies become the takeover targets when private equity funds and competitors see faults in management and believe they can do a better job. "At the moment, that money is being simply thrown away because of companies' failure to control their losses and manage their businesses more effectively,"​ stated Plimsoll. The report highlights each firm's hidden potential and proposes how "simple" changes can transform both the performance and overall value of a company. Some of the classic strategies that companies are failing to put in place include cutting out unprofitable sales, stated Plimsoll. "In some cases, a 10 per cent drop in sales could actually improve profitability,"​ stated Plimsoll. Other strategic improvements include the need for managers to look again at unnecessary stock levels, keeping control of trade debtors to free up cash, and reducing borrowing to improve profitability, the firm stated. Another measure that often goes unchecked is to increase productivity to the point where sales per staff member are at least £150,000, the firm stated. The Plimsoll study found that UK food processors industry is wasting a collective £1.2bn worth of profit every year, by ignoring such measures, stated the study's senior analyst, David Pattison. The report found that 30 per cent of companies are making a loss, 14 per cent are losing money for the second year running and 4 per cent made less than 3 per cent return on investment. "These results prove just why the food processors industry is currently hot with takeover talk and speculation about future ownership,"​ stated Pattison. "It's certainly no surprise that trade buyers and private financiers are taking a close look at the industry - some of these food processors businesses have huge potential that is not being realised at the moment. We've heard a lot about private equity firms recently, and this is one industry where they could reap rich rewards."​ The Plimsoll analysis applies the same tests to each business that corporate investor make by identifying a "profit plan" for each one and outlining its strengths and weaknesses.

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