Surviving or thriving

Keywords Manufacturing, Business, Automation, Control systems

A company can only justify its existence by generating wealth for its owners. Yet Plimsoll Publishing in its latest analysis of the automation and control systems industry shows that 44 percent of the industry is consuming rather than increasing the wealth of the owners. This loss of wealth amounted to »90 million last year. In contrast these companies are being squeezed by the 40 percent of the industry rated Strong or Good, by Plimsoll's analysis, who are generating wealth (Figure 5).

 Figure 5Automation and control systems

The latest results from June's Plimsoll analysis on the automation and control systems industry showed that out of the companies available for analysis, 150 have been rated as caution or danger. These companies must change radically or their survival will come into question. This is slightly worse than last year's results that showed 148 companies in financial difficulties.

Perhaps it is no surprise that the smaller companies in the industry are getting squeezed the most. Almost 54 percent of companies making less than »1 million in total sales are under financial pressure compared to 38 percent of companies making over £5 million in total sales. This is exactly the same as last year with 54 percent of the smaller companies in financial difficulties as compared to 33 percent of the larger companies.

On the other side of the coin, Plimsoll's latest results found that 40 percent of the automation and control systems industry was rated as financially strong or good. Plimsoll rates strong companies as companies that have been improving in financial strength over a four-year period. Good companies are maintaining their financial strength but not improving.

Plimsoll has broken down the 692 companies of the automation and control systems industry into five categories of performance based on Plimsoll's unique method of monitoring company performance.

For those companies rated as caution or danger, immediate action must be taken to ensure their survival. These companies cannot continue to destroy wealth.

Only 63 companies improved their rating out of caution or danger last year. Even though this shows that it can be done, for companies wanting to improve their rating radical changes must first take place. For many companies, what is essential is creating a return to profitability. This may mean serious cost cutting, job losses, and the like in the first instance before they attempt a push for greater sales.

For those companies looking to improve their financial standings, Plimsoll has just published their Survival Pack, 2nd edition, 1999, which includes all 692 individually analysed companies using the normal four years of audited accounts. However, it takes the 150 companies which are under financial pressure and gives them the survival plan for turning the company around by adding a fifth computer generated future year bringing these companies back to a 10 percent return on assets. This artificial survival plan is designed to stimulate the thinking of the "busy manager". Some of them have a limited time in which to generate successful ideas.

In contrast, Plimsoll has found a band of companies to which many companies in the automation and control systems industry should aspire. Plimsoll has named the top ten most successful companies in the automation and control systems industry. Success, a word often used yet difficult to describe, has been defined by Plimsoll as those companies which have combined both financial strength and terrific sales growth.

This Elite group of companies makes up about one-fifth of the top percent of all companies in the UK. To be in with these companies, you would have to have a rating of "strong" on the Plimsoll model, an average sales growth of 21 percent,a 10 percent average pre-tax profit margin and an average of 16 percent return on assets. These are real wealth creators.

The essence of competition is the survival of the fittest. To survive, your company will have to go up against "the fittest". They are stretching the boundaries of the industry. Not every company rated danger will make it next year. But trying and failing is better than never trying at all.

To jump-start your company into survival mode, Plimsoll are offering a special Survival Pack, 2nd edition, 1999, for the automation and control systems industry. Within this pack is a bound book and electronic version of 692 of the major players in the automation and control systems industry individually analysed using the company's last four years' audited accounts. In addition,there is a separate bound book of all 150 companies individually analysed and added on to each analysis is a "survival analysis" fifth year. This computer generated future year demonstrates how to put each company back to a 10 percent return on assets.

For further information contact: Plimsoll Publishing Ltd, The Vanguard Suite,Broadcasting House, Middlesbrough TS1 5JA. Tel: +44 (0) 1642 257800; Fax: +44(0) 1642 257806.