Revenue Up, Gross Profit Up, Profit Before Tax Upand Cash at Bank Up
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the yorkshire report REVENUE UP, GROSS PROFIT UP, PROFIT BEFORE TAX UP AND CASH AT BANK UP the region’s recovery is continuing and there are even better prospects ahead 2 What is the o yorkshire 14 Yorkshire Report? on the up & up revenue £91bn (up 5%) taking the region’s gross profit £20bn (up 4%) temperature, examining its health and considering the figures profit before tax £3bn (up 18%) best course of treatment… key cash at bank £10bn (up 22%) We compile the latest published accounts of Yorkshire’s 150 biggest companies (by revenue) and aggregate the figures to create a barometer of economic health for our region. Please note that we refer to the top 150 companies collectively as ‘the Group’ throughout the report and, as the Group’s composition changes every twelve months, year-on-year comparisons may not be like-for-like. CURRENT PREVIOUS CHANGE YEAR YEAR % As a proud region with a strong sense of identity, Yorkshire has its own distinct Revenue £90.7bn £88.7bn 2% economy. So why shouldn’t it have its Operating profit £4.56bn £4.34bn 5% very own annual review? That was the highlights thinking behind the first BDO Yorkshire Effective tax rate 32.0% 28.5% 12% Report and now, seven years later, we have charted our fictional Group through Dividend £0.9bn £1.4bn (36%) some of the most turbulent economic times in our region’s history. Investment in £3.4bn 2.9bn 17% property, plant & machinery No. of employees 470,000 479,000 (2%) Average salary £24,340 £23,730 3% Average director’s £183,000 £178,000 3% emolument Gearing 37% 41% (10%) 2014 | the yorkshire report 1 The latest results for the Group, comprising Yorkshire’s Top 150 companies, show the region’s recovery continuing and even better prospects ahead welcome contents It’s a pleasure, after a number of tough years for the region, to introduce such an upbeat Yorkshire Welcome 01 report. Not only did the Group increase revenue and profit during the period covered by the report, FD Agenda 02 it also laid down the foundations for growth which we are already seeing come through. To highlight just People and jobs 03 three bits of evidence to support this: cash balances among Group companies reached record high levels; Access to finance 04 newer, leaner companies are joining the Group; and overseas sales are rising. Managing cash 05 With this positive outlook comes a major challenge – the M&A 06 need for management teams to switch from shorter- term thinking to a longer-term vision for growth. Exporting Yorkshire 07 The good news is we’re already seeing many of the region’s major companies Fraud and forensics 08 take that step by investing heavily in the future. But the fear is that Sustaining success 10 some management teams have spent so long with their heads down Driving innovation 11 firefighting that they may not look up and seize the opportunities for growth. Manufacturing 13 Whatever the sector or size, BDO will be Food and drink 14 supporting all our clients in navigating this new landscape. I hope you enjoy this report and that it Consumer markets 15 provides useful insights for you and your business. New energy 16 terry jones Lead Partner | Yorkshire Meet the team 17 Company profile 18 The 150 group 19 2 the yorkshire report | 2014 finance directors’ agenda WHO WANTS TO BE AN FD? 100 100 women in the It continues to be a demanding period for women % boardroom financial managers, with significant new regulation to contend with as well as the need There are over 100 women to refocus for growth. At least, with cash on the board of Group balances at record levels for Group companies, companies the pressures on day-to-day working capital But they appear to have lessened. represent only 12% of the total More women are on the boards of top applicable, FRS 101 or the FRSSE. The directors’ pay Yorkshire companies than ever before. impact that these new standards will have recovering (£ ‘000) The Group had over 100 female directors on company results is causing many FDs during the reporting period, although sleepless nights. Will the new accounting 200 they represented just 12% of the total. methods make it look, externally at least, Boardroom pay remains a thorny issue as if the business is going backwards? 190 and that may explain why Group directors’ And could this lead to a breach of debt pay remains below 2010 levels. It is rising covenants? Adding to the regulatory 180 again though, as profits grow and success burden has been the need for non-listed is rewarded. companies to produce a Strategic Report 170 and for listed companies to meet new regulation ISA700 requirements for disclosure around From 1 January 2015, any company risk. As ever, thorough preparation and 160 currently using UK GAAP will need to professional support remain key to meeting have changed their accounting standards the challenge. 150 to either FRS 102, EU IFRS or, where 2010 2011 2012 2013 2014 2014 | the yorkshire report 3 people and jobs KEEPING YORKSHIRE WORKING Employment fell by 1.8% as a number of newer, less labour-intensive companies joined the Group – but on a like-for-like basis employment actually increased. While some This suggests that, this time around, We also saw employers using new ways to growth and higher employment may not reward and incentivise their employees. sectors, such as be so closely correlated – evidence perhaps For example, by making use of salary that lower skilled jobs are being replaced sacrifice arrangements whereby part of an manufacturing and by fewer, more skilled ones. employee’s remuneration shifts from cash to non-cash benefits. In terms of red tape, employers had plenty technology, posted to deal with in 2013. As auto enrolment Looking ahead, it’s vital to our economy for pensions becomes a reality for even that the next generation of workers are double-digit Yorkshire’s smallest companies, so does being supported into our industries. the need to put in place the procedures, rises in employee policies and people to introduce and We therefore welcome initiatives administer it. aimed at reducing high levels of youth numbers, the unemployment and hope that proposals At the same time, employers had to get to offer incentives to employers taking on picture for the used to reporting PAYE information to HM young people will come to fruition in 2014. Revenue & Customs (HMRC) in real time Group was mixed. during 2013. 4 the yorkshire report | 2014 access to finance FUNDING IMPROVES, CHOICE WIDENS gearing* 38% 37.9% 37.7% 36% Our previous report showed Group Although their impact at the moment is gearing rising strongly, and this has still limited, we are starting to see new been maintained during the reporting lenders enter the market. New banks such 34% period, with gearing held at 38%. The as Metro Bank are looking to challenge wider picture is that access to funding traditional lenders; new concepts such as is improving but, as ever, it will only crowd funding and peer-to-peer lending be those with strong businesses and are beginning to gain some profile in the persuasive business plans that will find SME market. Asset based lending is coming the process straightforward. back strongly, driven by an increased requirement to fund working capital needs, 33% When it comes to lending to larger with the Asset Based Finance Association corporates, greater competition among recently delivering the strongest quarterly 32% banks for good risks is leading to lower figures since before the recession. In this and more consistent pricing. On the other changing landscape, and with so many side of the curve, demand has also been options available, it is vital to assess the rising, particularly for refinancing, with best funding route for your business and a number of Group companies taking to establish whether your primary lender advantage of the softening debt market has the appetite to fund you through what, and better trade outlook to improve terms for many Yorkshire businesses, should be a and/or build headroom for growth. For strong growth phase. Yorkshire’s SMEs, access to funding is more of a challenge, but one they appear to be 30% winning. As economic growth accelerates 2012 2013 2014 and consumer spending improves, this is feeding into companies’ future earnings forecasts and helping to unlock bank funds. * excluding Banks and Utility Companies 2014 | the yorkshire report 5 managing cash more help for uk exporters What the 2014 budget can do for you: www.gov.uk/government/news/ budget-2014-further-action-to-enhance-uk-export-finance-support As economic recovery drives orders up, Yorkshire businesses are facing one of their biggest challenges yet – financing the upturn READY FOR TAKE OFF? While part of the challenge is access to So it’s important to keep options open, But don’t get lost in the detail either. Step finance, it’s not just about cash in the making sure you understand your present back to consider if you have the right bank. It’s also about keeping a firm eye on lenders’ appetite and have back-up plans systems in place – from credit control to a wide variety of issues – from avoiding in place – and also be aware of support you cash management. Is your management too much concentration of business with can get from organisations such as UKTI. team, which has been busy firefighting one customer to ensuring that your trade its way through five years of economic insurance cover is keeping up with higher Careful stock control is essential.