The UK recycling industry is awash with cash and companies should use this year to go on the offensive and make acquisitions, according to new research.
Market research company Plimsoll Publishing produced the report entitled, Plimsoll Portfolio Analysis; The UK Recycling Industry. It looks at the financial fortunes of 1000 recycling companies in its annual acquisition survey.
Senior acquisition analyst David Pattison said: There is absolute evidence that the rich are getting richer as the gap between those making massive profits and those missing out has widened in the last few years. There has never been a better time for these dynamic companies to splash the cash.
But it also suggests that the profile of acquisition has to change. Pattison added: For years, acquisition activity in the recycling industry has been driven by distressed fire sales [sale of goods at discounted prices]. Acquirers have been reluctant to invest heavily, instead they have been content to snap up bargain basement companies often getting bad deals, paying peanuts and getting monkeys. This attitude needs to change. What our report suggests is that companies need to look at the wider strategic picture and spend their money wisely.
The report also found that over the last financial year, smaller firms have been outperforming their larger counterparts with their gross profit margins. It says that the average gross profit margin of a smaller company is 52% compared to their larger counterparts who manage just 19%. For example, in the last financial year, the report highlights that waste firm W H White had a 100% gross profit margin compared to European Metal Recycling (EMR) which had a 17% gross profit margin. However, EMR had a gross turnover of £1.7 billion compared to WH Whites £1.1m.
For more information on the report see www.plimsoll.co.uk
Image: Plimsoll Publishing senior acquisition analyst David Pattison