2006 has been a highly competitive year for the golf courses & clubs industry, although some companies have been enjoying historically high margins. But 2007 promises even tougher times, according to David Pattison, senior analyst with Plimsoll, one of the leading business performance analysts in the UK, France and Japan. His findings are based on Plimsoll’s Portfolio Analysis – Golf Courses & Clubs.
No-one looking at the golf courses & clubs market over the past 12 months could describe it as a comfortable environment. While growth was a modest 2.6%, roughly in line with inflation, over two thirds of the 940 companies monitored by Plimsoll saw a fall in sales.
This indicates that much of the growth is being shared by a select band of firms. The effect has been that the industry has begun heading in a new direction and, according to David Pattison, the companies which have found themselves lagging behind have been slow to recognise this.
“In 2007, this trend is set to continue,” he said. “I see growth in the coming 12 months remaining in the 2 to 3% slot, with the small group of market leaders again capturing the lion’s share and the others increasingly playing catch-up.
“Overall margins in 2006 were low at 1.3%, with some companies enjoying a record 20% or more. But I believe these margins will be squeezed in 2007, and at least a third of companies in the sector will lose money. In common with the OECD, I don’t see interest rates having a major impact.
“This, of course, will have an effect on directors’ fees. Where these increased, it was well above the rate of inflation in 2006, averaging 13% on the previous year. Things will be tighter between now and next December.
“Salaries in the industry have risen again, and the average now sits at £16,600 – up 3% on the previous 12 months. This has largely been productivity driven, with sales per employee increasing from £39,000 to £39,700, so it is fair to say staff have earned the extra rewards. Sadly, however, I think 2007 will see a wave of job losses, forced by modest growth combined with rising costs and, ironically, even better productivity. I would not be surprised to see as many as 2,800 jobs being cut.”
“Finally, the Plimsoll Portfolio Analysis – Golf Courses & Clubs indicates that a small number of companies have a large amount of cash at their disposal. This, combined with the small amount of organic growth in the market, will allow some of them to consider acquisitions in 2007. In the report, I have selected five companies I think will be taken over during the coming year.”
The complete Plimsoll publication contains an individual analysis of each of the 940 companies in this sector and sets out their challenges for the next 12 months. Copies are available from www.plimsoll.co.uk, by emailing c.sherwood@plimsoll.co.uk or by calling 01642 626400 and quoting reference PR 12. Readers of Golf Business News.com are offered the reduced price of £300 instead of the usual £350.
Next month, Plimsoll will be researching new growth areas of the market.
Plimsoll www.plimsoll.co.uk