New year failures and takeovers forecast

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New year failures and takeovers forecast

By: Jeff James

Listed Under: Top Story

Published: Thursday, October 28, 2010

Nearly 250 companies in the UK sports and leisurewear sector will finish 2010 in financial difficulty, claims industry analyst Plimsoll.

“Having clung on through the bad times, many of these struggling companies are running out of time and will fail unless a sustained recovery takes hold,” says David Pattison, author of the new study of the top 622 companies in the market.

“Sadly, some of them are just too weak to carry on and there will be a spike of failures in the new year. On the flipside, their demise will bring a welcome reduction in competitive pressure for those left.”

But there are still some positive stories in the market, despite the persistent gloom. Pattison says: “We have picked 223 strong companies that prove success can still be achieved in the sports and leisurewear industry, despite difficult trading conditions.

“They also prove that bad companies fail in a recession; good companies simply do not. These companies will lead the industry out of recession with some smart acquisitions to help maintain their recent success.”

Pattison is convinced the market is due further consolidation, with the number of companies in financial trouble leading to heightened takeover activity.

He explains: “With too many companies chasing weakened demand, it is inevitable that there are likely to be a number of high profile mergers and takeovers.

“Further consolidation is needed to sort out the remaining dead wood. We have named 48 companies as the best acquisition prospects in the market.”

He reserves special mention for what Plimsoll describes as reckless companies that continue to chase sales despite mounting losses: “There are a group of 150 serial loss makers still operating in the market. For the second and even third year running, these companies have made a loss.

“While the rest have taken painful but necessary decisions to refocus on the bottom line, these companies have continued to chase sales regardless. These companies have to cut their cloth accordingly or face the consequences.”

The 2011 edition of the Plimsoll Industry Analysis, individually assessing every company in the UK sports and leisurewear industry, is available now. Sports Insight readers will get a £50 discount if they call 01642 626400 and quote reference PR/AA10.