Produce companies are on a better financial footing than many of their manufacturing counterparts across the food retail supply chain, according to new figures from corporate financial analyst Company Watch.
The City of London firm uses its H-Score product to measure the financial health of companies. Those gaining higher scores are looking strong for the future and those in its warning area with a score of 25 or less out of 100 display characteristics of previously failed businesses. The analysis is based on each company’s last five years’ published accounts processed through its risk assessment model.
Company Watch analysed a sample of 11 prominent fresh produce suppliers, with a number, including Branston, Berry Gardens, Fresca and Poupart scoring highly. Greenvale and Albert Bartlett were also among the companies improving their scores in the last year.
Neil Hood, managing director at Company Watch, said: “Although the average score of the [fresh produce] sample was 52, which was the same for retail manufacturers, only one of the fresh produce companies was in our warning zone, compared to 25 per cent across the wider sample, so it is atypical.”
Examples of lowly rated companies in the wider food sample include Premier Foods, owner of the Hovis, Mr Kipling and Oxo brands, which scored just 14 and has been in the warning area for five years. Britvic, which owns brands such as J2O, Robinsons and Fruit Shoot, has an H-Score of 17 due in part to a level of intangible assets that are almost 15 times the company’s net worth.
Among the factors analysed are profitability and issues to do with assets and liabilities. “What we are looking for are companies with a strong equity base that are not reliant on third-party funding,” said Hood. “We are looking for companies that generate cash, have good liquidity and don’t have large intangible assets.”
He warned that although many of the fresh produce companies scored highly in the analysis, the next 12 months will be hard. “Next year could be tougher,” said Hood. “The major multiples will all be looking to put their UK operations right and someone has to pay for that. Their suppliers will be expected to chip in, whether that is in lower prices or promotional spend and that will bear down on profitability.”
