As we approach the end of a turbulent 2009 for the UK Builders Merchants industry, an analysis takes a look back at the highs and lows of the last 12 months and looks forward to the threats and opportunities facing the market in 2010.
230 companies in the market are finishing the year in financial difficulty. An analysis of the top 1000 companies in the UK Builders Merchants industry explains: “Having clung on through the bad times many of these struggling companies are going to run out of time and fail just before the recovery really takes hold. Sadly, some of them are just too weak to carry on and there will be a spike of failures in the New Year. On the flipside, their demise will bring a welcome reduction in competitive pressure for those left."
However, within the gloom there have actually been some outstanding performers. A number of companies have managed to improve their performance in the last year. They are part of a band of 530 companies that prove success can still be achieved in the Builders Merchants industry despite difficult trading conditions. They also prove that bad companies fail in a recession; good companies do not. These companies will lead the industry out of recession with some smart acquisitions and maintaining their recent success.”
Those who carried out this analysis are also convinced the market is due a prolonged period of consolidation with the number of companies in trouble leading to heightened takeover activity. He explains “With too many companies chasing weakened demand it is inevitable that there are likely to be a number of high profile mergers and takeovers. In all honesty it’s long overdue. Once demand started to flag it was inevitable companies would be caught out. This period of consolidation is needed to sort out the dead wood.”
The analysis also reserves special mention for those reckless companies that continue to chase sales despite mounting losses: “There are a group of 73 serial loss makers still operating in the market. For the 2nd and even 3rd year running these companies have made a loss. Whether they are blatantly chasing sales or just trying to maintain their market share, something has to give. The recession has put prudence back at the forefront of boardroom strategy and these companies have to cut their cloth accordingly or face the consequences”.
Summing up, the new 2010 analysis shows a buffeted market emerging from recession with a third of companies making a loss and one in three companies in financial difficulty but as Pattison insists “If you are going to make a success of 2010, you need to learn the lesson of 2009. There are going to be big changes in the UK Builders Merchants industry with lots of takeovers, a number of high profile failures and even the odd surprise or two along the way.”
Greengates Builders Merchants, Lancashire would like to wish everyone the best in combating the recession.
Come on we can do it!