Member Article

Manufacturing shares bucks recession trends

The UK manufacturing sector has witnessed its share price treble since the last recession, and firms now significantly outperform the FTSE 250, according to PwC.

The ‘From Crisis to Growth’ report produced by the firm also shows that investors in manufacturing firms have doubled their money over the past five years.

The report also indicated that during the recession businesses tended to focus on eight key areas to survive, including scenario planning, supply chains, R&D and focusing much more on the customer.

Jonathan Greenaway, a partner at PwC believes that the new research will now support the companies’ positive view of how the UK manufacturing industry is performing.

He commented: We first looked at these companies in 2010 to see what strategies they were implementing to deal with the impact of the recession and found they weren’t just reducing their costs like many sectors in the UK were doing, they saw the financial crisis as an opportunity for growth – and that’s what they did.“

Prior to the recession, gross margins topped 35% in 2008 and EBITDA margins were circa 18%, dropping to 16% in 2009 as the recession hit. However, adopting the strategies in the report, EBITDA in these firms shot back up to 21% last year and gross margins stood at 37% - higher than in 2007.

Mr Greenaway continued: “The businesses we looked at restructured, re-strategised, became agile and flexible and looked to emerging markets for future growth.

“The strategies they implemented were not only crucial for survival, they have proven to be sustainable.”

Revenues show an average year on year growth of 9% and 16% in FY10 and FY11, and 2012 looks similarly positive.

Measuring alongside global export growth to emerging markets, the UK still has some way to go to catch up with its peers, but recent financial performance of the UK manufacturing industry suggests it is in strong shape to regain some of this loss.

“This is a great time of opportunity for manufacturers, and this report shows that UK companies are really rising to the challenge. Growth in Asia and other emerging markets is providing significant new export potential, offsetting the more disappointing performance in some parts of the euro area.” Mr Greenaway added.

“We have many successful, highly innovative and well managed manufacturing companies here in the UK – though perhaps just not enough of them.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .