Companies set to ride out economic storm

The UK economy is set for a rocky year ahead, but 58 per cent of garden centres companies look surprisingly well placed to benefit, according to leading market analysts Plimsoll Publishing.
Despite predictions of doom and gloom, the garden centres sector will not suffer terminal fallout in 2008, according to the company’s latest in-depth report on the industry.
For each of these groups, there are advantages and disadvantages to the position they find themselves in. David Pattison outlines them.
The market chasers
These 124 companies spent 2007 gearing up for growth – to such an extent that some of them are completely reliant on outside finance. Despite the prospect of even tighter credit, they look surprisingly confident to continue with their aggressive expansion plans.
With their expected growth rates likely to be in the 13 per cent to 15 per cent range, they could cause chaos in the market as their undercutting pricing policies cripple the competition.
The predators
This group has most to gain in 2008, and the companies in question are capable of funding their investments with their own cash, rather than looking for outside finance. They have enjoyed average profit margins of 5.5 per cent in the last two years, and the economy will play into their hands in 2008.
The prey
These companies are badly exposed because 52 of them are losing money, they are in debt and their ability to respond is slow. If they act quickly, cut costs and bring their bad news out now, they may still turn things around.
The fence-sitters
These companies have been slowing down their capital expenditure, controlling costs and sticking to profitable areas of their business.
The firms in question may appear to be in the lowest risk category as they ride out the storm.
David Pattison is senior analyst with Plimsoll Publishing

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