Secrets of prosperous companies revealed

A new league table from leading financial analysts Plimsoll Publishing aims to provide an answer to that age-old question in the Packaging market: Why do some companies fail and others prosper?

1 in 5 UK Packaging services companies are currently at risk of failure, while 1 in 4 are doing well.

The equation is not as simple as strong sales equals survival.

Nor is the success rate of a firm automatically affected by market conditions.

Instead, it depends on the ingredients in a finely-balanced recipe that includes good margins, low borrowing, responsible management and foresight.

Plimsoll's new analysis of the market weighs all these ingredients and turns them into a unique one-page snapshot of each company's prospects.

From that, it establishes a league table based on 800 leading firms that looks like this: 210 companies are in a strong position, with a pre-tax margin of 7% 76 are in the good sector, on 3% margins 145 are rated as mediocre, on 3% 194 are in the "caution" category, with minus 1% margins An alarming 175 are in the "danger" range, on minus 2%.

Nearly nine out of 10 UK companies currently in receivership were rated in the lowest two categories by Plimsoll in the two years before their demise.

Its senior analyst David Pattison says: "169 of the 210 companies in the strong section are there for the second year running, proving that if you have a solid business where management is in control, you can maintain success irrespective of market conditions.

The most successful firms are also largely free of debt.

"At the other end of the scale, there is no doubt in my mind that if the pundits are right and the UK market tightens towards the end of the year, then the 175 companies in the danger category will take the brunt of the downturn.

The Plimsoll analysis looks at the financial strength of each company based on four years' figures.

Said David Pattison: "All is not lost for those firms that find themselves at the lower end of the table.

But the management needs to accept that the business has a problem and take action today, rather than next week or the week after".

The Plimsoll analysis is aimed at busy managers who need to understand their own place in the market, as well as the likely future performance of their competitors, customers or suppliers.

Plimsoll, based in Stockton-on-Tees, is one of the leading business analysts in the UK, France and Japan.

It has 16,000 customers worldwide who rely on its reports to take crucial commercial decisions.

The ratings explained: Strong - Companies proving sound financial management over the last 4 years, viewed through a rising or high Plimsoll Chart.

Good - Companies of sound financial strength over the last 4 years, viewed through a stable but high Plimsoll Chart.

Mediocre - These companies are in a transition, either moving up to strong, or down to danger.

Caution - Companies with a weakening financial position with a temporarily stable but low Plimsoll Chart.

Danger - These companies must change, as they all have a falling Plimsoll Chart over the last four years.

This could mean opportunity for some of their competitors.

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