Firms 'well set' to weather recession

SUFFOLK is in a “strong position” to withstand the challenges of the credit crunch, financial experts are predicting following a survey of its top companies.

The annual Suffolk Ltd report on the county's top 100 firms revealed their average pre-tax profits rose by 23% to £169million this year.

But the study, based on publicly available data as of July 29, 2008, on firms whose principal trading address is in the county, does not reflect the seismic events of recent weeks, its author, financial advisers Grant Thornton, warns.

“These figures represent historic trading and the economy has moved quickly to where it is today, but the fact remains that Suffolk is in a strong position to face the challenges brought on by the credit crunch,” said James Brown, partner at Grant Thornton's Ipswich office.

“We are lucky in the fact that we have a broad range of sectors in Suffolk which are constantly shifting in terms of relative turnover levels. As we are not reliant on any one sector, there is less risk to the local economy in the current commercial turbulence.”

The report shows a 2% increase in Suffolk Ltd turnover year on year from £5.3billion to £5.4bn, while pre-tax profits rose to the highest levels recorded by the annual study, now in its eighth year.

This year's minimum turnover threshold for entry in the top 100 Suffolk firms was around £13m, and their workforce grew by 611 to 31,355. Average wages within the group grew by 1% to £20,807.

Retail and wholesale distribution overtook transport and motor retail, which has spent five years in the top spot, as the largest sector, and represented 23% of Suffolk Ltd's turnover. It saw an impressive 77% rise in operating profits, up from £26million in 2007 to £46million in 2008. Technology accounted for just 0.7% of turnover although this was an improvement on last year when it represented 0.3%.

The services sector came in second at 22%, and transport and motor retail dropped to third place with 21%.

Food and agriculture represented 13% of turnover, property and construction 10%, and manufacturing just under 10%.

The food and farming sector enjoyed the largest percentage growth in operating profits, which more than doubled from £11million to £24million, but manufacturing saw a fall of 40% in its operating profits.

Shareholders' funds increased by £312million or 29% over the previous year, with tangible fixed assets increasing by 5% to £1.35billion.

Investments increased by £816million, but this was mainly attributable to the growth of specialist pensions administrator Suffolk Life Group plc.

The fastest-growing company in any sector with turnover growth of 84% was WNS Global Services UK Ltd, which handles and assesses motor claims.

In second place with a 64% turnover rise was Permastore Group Ltd, which makes agricultural and industrial silos and tanks, while third with a 38% increase was KDM International Ltd, which trades in timber and forest products.

Turners (Soham) Ltd continued to be the most profitable firm in the transport and motor retail sector with a turnover of £131million and pre-tax profits of £18.1million, which was the highest in the sector and once again the highest in the whole of Suffolk Ltd.

Retail and wholesale distribution was the only sector in Suffolk Ltd where all members generated a profit for the year. The East of England Co-operative Society continued to dominate with a turnover of £399million, representing 32% of the sector, and was the largest employer with nearly 18% of Suffolk Ltd's workforce.

In the property and construction sector, turnover increased by 8% to £543million, giving it a 10% share of turnover among the companies in the survey.

Retail and wholesale distribution remained the largest sector employer in Suffolk Ltd, employing 29% of the workforce.

While average salaries rose in six of the seven sectors in the survey, services saw a 6.8% fall. Average salaries in the technology sector rose to £35,557, following the introduction of STL Technologies Ltd to this year's top 100.

Average debtor days across all sectors increased from 31 to 33 days.

Mr Brown predicted that Suffolk Ltd should be in “a good position” to service its debt and weather the current financial storm.

“There will be some tough times to come in the next 12 months, but the region's firms have built up a robust base and are prepared to confront these challenges with confidence,” he said.

But he warned: “I'm afraid to say that next year's report is likely to be more downbeat. As demand slips and customers drive harder bargains, there will be an increased pressure as margins are reduced across most sectors.

“There is no doubt that Suffolk businesses will find it tougher than in previous years, but they are in good shape to contend with anything that is thrown at them.”