318 companies in the UK Telecommunications Services industry are following a strategy that has led them into a blind alley and they must change quickly or risk disappearing altogether.
That’s according to a new study assessing the strategic, financial and commercial performance of the top 1000 companies in the market.
David Pattison, author of the new Plimsoll Analysis explains, “It’s undoubtedly tough out there with demand still subdued and costs rising all the time. With too many companies chasing too little market, many are finding it difficult to pass on rising costs to customers. As a result we have seen profitability fall with average margins in the market now down to 2%”.
Pattison then goes on to explain that his latest study shows performance in the market is fragmented into 4 distinct categories. Based on these categories, he has been able to recommend strategies for the next 12 months to improve or protect each company’s performance
Get back to growth
There are currently 91 companies in the UK Telecommunications Services industry that are struggling for growth. Granted they have healthy profit margins and most have little or no formal debt, but they are just not growing. I recommend these companies change strategy, wake up and sacrifice some of their profits on finding new growth as they are in danger of being left behind
Fix the profitability hole
165 other companies in the UK market are at the opposite end of the spectrum. They are growing at a pace way beyond the rest of the market, but they are doing so at the expense of profitability. Many of these companies could be accused of “overtrading” by continuing to make losses and/or financing growth via increasing debt. They risk running out of cash unless they return to profit soon.
Maintain their advantage
There is a band of 439 companies that are clearly the market leaders. They are achieving above average sales growth, are retaining healthy profit margins at an average of 5% and carrying little to no debt. Their challenge is to maintain this outstanding performance in such a difficult trading environment and avoid complacency. They might even consider the acquisition of distressed competitors.
Try to survive or be rescued
Finally, there are 318 companies for whom the strategy for the next 12 months is mere survival or rescue via a takeover. These companies have high debts as a percentage of sales at 51%, are averaging profit margins of -2% and are often seeing sales fall. These companies need to downsize their operations, focus solely on the profitable parts of their business and work at making a profit or the end is nigh. Some will attract buyers to rescue them but others won’t be so lucky.