'No growth' in 09 for A-V equipment market

Despite the problems facing the overall UK economy, Plimsoll feels the players in the UK a-v equipment sector need to be ready and prepared for a series of opportunities that will present themselves in the year ahead.  Listed below is a summary of their findings;

MARKET VIEW
On the surface, the overall a-v equipment market is not in bad shape. Sales growth is running at a little over 0 per cent, which is up in fact on the previous year. However, even the most bullish of companies will need to rethink for 2009. Plimsoll predicts that the overall market will see very little growth, if any. Already over half of all UK a-v equipment companies have seen a decline in sales as the impact of the wider economy moves into this market. Where opportunities to increase sales do not materialise, this is sure to be at the expense of other, weaker players in the market.
 
PROFIT
Historically, profitability in the UK a-v equipment market has been very uneven; we've seen a select band of 62 super profitable players delivering 18 per cent+ margins, whilst most of the other companies are achieving 3.4 per cent margins at best, with loss making not uncommon. In 2009 margins will again be under pressure from increased pricing competition. However, 2009 could turn out to be a profitable year if companies take action now to reduce their costs and accept their current level of business activity. 

DEBTS
If 2008 taught us anything, it was that using other people's money to run your company is a risky business. 136 heavily indebted a-v equipment companies are now paying the penalty. Having invested heavily, they are now desperate to keep busy; they are a serious threat to pricing levels in the market in 2009. Their high risk strategy is in stark contrast to the 296 companies who have elected to run their businesses debt free, many carrying large cash surpluses.
 
DIRECTORS AGES
2009 will see 247 of the 1418 directors working in the a-v equipment market exceed the retirement age, most of these having spent a lifetime in the industry. We expect to see a wave of significant retirements. This will drive a number of noteworthy companies to consider their independence, as the primary owners consider their futures. 502 of the UK's leading 698 companies remain in private hands; expect this number to reduce by this time next year. Opportunity then, for those wishing to seize the moment and acquire one of these businesses, a clear way to way to gain and advantage on your competitors in 2009.
 
SALARIES / PRODUCTIVITY
As sales decline companies will need to work hard to maintain their competitiveness- estimates suggest 2000 jobs could be under threat as business come under pressure to reduce costs in line with sales. 243 companies are currently on the watch list for this exact scenario. Over the last few years productivity levels have been increasing well, the sales per employee figures rising from £175,900 per person two years ago to just over £162,900 now. Managers should be setting their businesses up to deliver at least £169,000 sales per employee in 2009.
 
ACQUISITIONS
The top of the market is most congested: 72 per cent of the total market size is now shared by the top 15 players, and the significance of this should not be underestimated. As the market tightens the major players have started to review their strategic options. However their key strategy will be to look at the emerging sectors within the market and target their acquisition strategy at a group of 120 high growth, high margin players that are leading the industry forwards.
 
SUMMARY
2009 will be a very exciting year for the industry; it will be a time to choose your enemy wisely. Going on the offensive may well be the best defence. Key to this is the successful targeting of your weakened, low margin and heavily indebted competitors, their failure will be vital to your own company's success.
 
All these findings and views were given by David Pattison the senior analyst at Plimsoll Publishing and were expressed using the 1st edition 2009 of the Plimsoll Portfolio Analysis - Audio Visual Equipment.

Copies are available from Clair Sherwood by calling 01642 626400, priced at £350.