This may not be the most obvious question to ask, but unless you have taken the time and trouble to check out your supplier’s latest financial accounts then you may be in for a nasty shock.
We do carry out this exercise every year in order to ‘benchmark’ our own financial performance against 27 other UK Film Suppliers. As their accounts are filed up to a year after their financial year end, we have just concluded our 2018 comparisons and discovered some really startling results.
- The total market for film sales, measured by value actually increased, despite the effect of Plastic Paranoia! (This was probably Sterling’s weakness reducing imports)
- The top 4 companies in the industry had sales of over £400 million, however, between them they ‘lost’ around £30 million!
- The top 10 companies in the industry increased their sales by some £24 million
- In virtually every case this sales increase was accompanied by a gross margin reduction and in many cases reduced profits!
- 18 of the 27 companies included in the survey had an annual cash outflow in the year!
- The majority of companies surveyed extended their debtor days and reduced their creditor days during 2018
- Only 7 companies increased their margins, however 2 of these were previously loss making in 2017, so had a need for profit recovery.
- Combined capital expenditure from all the companies reduced from some £33 million plus in 2017, to below £14 million in 2018
- Smaller companies, some with abbreviated accounts, appear to have suffered significantly from the downward pressure on margins and extended credit terms
As ever, there is much obfuscation in some company accounts. For example, Mondi, Saica and Coveris 2018 reports included consolidation and / or acquisitions for the first time, whilst Sappi were obviously finding the absorption of the Rockwell acquisition quite difficult.
These four companies, along with Amcor, are all Pan European major corporate entities and so no one is suggesting they are having major financial problems. But there were redundancies noted in several companies, which, along with the cash outflow and reduced capex, clearly indicate the difficult competitive trading environment which was referred to in many of the Director reports.
Both large and medium sized companies had staff redundancies, reduced capex and operating cost reductions along with business consolidation and reorganisation costs. In most cases these actions invariably resulted in reduced service levels and extended delivery times as companies focus on improving their plant efficiencies, rather than their customer service and to some degree, who can blame them?
If their customers insist on driving down prices along with longer payment terms depriving companies of cash flow, then the customer needs to recognise there has to be adverse consequences further down the line. This applies particularly to most of the large companies mentioned as they have other business areas where they can better utilise their capital. Therefore, if customers want consistent high-quality film delivered on time, every time, allied to first class technical support, it has to be worth paying for as in the end it saves them time, worry and money.
It will be interesting to see how 2019 has developed but some of the stories coming back from the marketplace in 2019 suggest that the industry seems to have fared little better financially last year.
We shall see.
As a National Flexible customer, if you would like more information on this financial analysis, please ask your Area Sales Manager or Customer Champion for details.
For anyone else, your thoughts on any of the items raised would be welcome and meanwhile, why not join me on LinkedIn for more regular contact. https://www.linkedin.com/in/barry-twigg-3a440b53/
NB These notes were written before Mondi announced the closure of their Deeside plant which suggests 2019 was the same as 2018.