Grant Thornton’s Suffolk Limited report reveals strong year for county’s leading firms
PUBLISHED: 09:00 11 November 2014 | UPDATED: 16:26 13 November 2014
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Suffolk’s leading companies have grown their pre-tax profits by more than a quarter in the past year, accordiing to an annual report on how the counties 100 biggest firms are performing.
Grant Thornton’s Suffolk Limited report, now in its 13th year, is based on a composite set of accounts compiled by the accountancy and business advice firm from the most recent annual returns filed by the 100 largest businesses, ranked by turnover, with their head offices in Suffolk.
Turnover increased by 3.2% compared with last year to £4.135billion, with operating profit 14.2% higher at £200million and pre-tax profit 26.2% ahead at £205m.
The underlying performance, excluding the 10 companies which have dropped out of this year’s list and those which have replaced them, was even stronger, with turnover up 4.9% and operating profit up 17.5%.
Interest cover (the extent to which profits cover interest payments) improved from 5.82 to 7.83 and gearing (the extent to which a company is funded by debt) fell slightly tom 37% to 35%.
The balance sheet of Suffolk Limited companies also strengthened, with fixed assets rising by 14.3% to £1.288bn, indicating plans for future growth.
The report says: “Analysis suggests this increase was largely driven by companies taking advantage of a Government tax break (the Annual Investment Allowance increasing 10-fold to £250,000 from January 1, 2013) to make significant investments. Net current assets (working capital) improved 5.7% to £640m.”
Total debt increased by 4.1% to £535m, with a 10% increase in short-term debt (due within one year) to finance growth being partly offset by a 2.4% fall in long-term debt.
However, trade debt increased by more than the increase in sales. Grant Thornton says companies should monitor the recoverability of their debt more closely and not allow permanent periods to creep further, with average debtor days having extended to 44 days already.
Employment at Suffolk Limited companies increased by 4.2% to 28,398, with all sectors bar one increasing the payroll of the past year. The exception was Manufacturing, although this was largely attributable to one company leaving the survey this year as a result of acquisition. The biggest contributor to the increase in employment was the Services sector.
Staff costs increase marginally, by 1.3%, while the average wage rose by just 1%, from £22,838 to £23,070.
All sectors saw growth in operating profits apart from manufacturing, down 24.9%, again due mainly to the change in membership, and Transport & Motor Retail, down 4.5%.
Leading the way, as with employment, was Services, with an increase in operatinig profits of 110.7%, due to a combination of improved performance and an increase in the number of companies making up the sector.
Growth in operating profit was also recorded in Property & Construction, up 48.5%, Food & Agriculture, up 10.9%, and Retail & Wholesale Distribution, up 6.9%.
In terms of turnover, all sectors except Manufacturing and Retail & Wholesale Distribution saw growth, with Services again leading the field with an increase of 21%.
Over the last two years, Services has grown by six companies to a total of 24 to become the largest sector in Suffolk Limited in terms of the number of companies, although it remains fourth in terms of turnover.
Turnover grew by 21% to £594m overall, and by 10.2% to £543m excluding this year’s three new joiners, while operating profit increased by 110.7% to £35.7m, or by 68% to £30.8m on a same companies basis.
The report says: “With improvements in the UK economy, the Services sector has enjoyed substantial growth through increased utilisation of its biggest cost base – its employees – leading to a near doubling of its operating margin.
“However, improvements were not from across the board with the best performance coming from the largest players.”
Services also contributed the largest increase in employment, adding 1,005 jobs compared with the previous year.
Retail & Wholesale Distribution, previously the largest sector by number of companies but where membership fell by two to a total of 21 last year, saw turnover remain broadly flat at £1.045bn and while operating profit grew by 7.5% to £57m a large proportion of this was attributable to one company. The sector remains the largest employer in Suffolk Limited, with a total of 9.061 staff.
Transport & Motor Retail, which was the largest sector by membership two years ago, now comprises 20 companies, with one further departure last year. However, it continues to hold the lead in terms of turnover, with an increase of 3.8% to £1.216bn, although operating profits fell by 2.0% to £42m. It also remains the second largest employer, with a total of 6,976 staff.
Food & Agriculture also saw its membership fall by one to a total of 12 companies. Turnover grew by 5.6% to £669m while operating profits rose 11.1% to £41m. However, the sector has dropped from third to fourth in terms of employment, with a total of 3,861 staff on the payroll.
Property & Construction grew by two members to a total of 12, with turnover rising by 6.9% to £401m and operating profits by 48.5% to £13.0m.
Manufacturing saw two joiners and three leavers, leaving it with 11 companies in total. It was the weakest performing sector with sales down 27.3% to £210m and operating profit down 25.0% to £12.7m. Employment in the sector also fell, by 23.7%, although this too was affectly chiefly by the changes in membership.
James Brown, practice leader for Grant Thornton in Suffolk, said Suffolk Limited companies had tended to keep faith with their employees during the recession and this was now bearing fruit.
The growth of the past year had also been achieved without any increase in gearing, indicating the investment was being funded out of cash stored up during tougher times.
“It is not often the balance sheet is more exciting than the profit and loss,” he added. “Interest cover is nearly eight times, and there are not many counties that can say that at a time when we are still coming out of recession.
“It is good to see such a level of investment without being in hock to the banks.”
The full findings of this year’s Suffolk Limited report will be unveiled at a breakfast time event being hosted by Grant Thornton at Wherstead Park, Ipswich, today, at which the guest speaker will be Bee Kemball, who has led the Debach warehousing and distribution firm since 1992 when she took over from her father, Bill Kemball, who founded the company in 1975. A similar Essex Limited report is due to follow next month.