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Inside Business Magazine

The consolidated accounts for Buckinghamshire Limited show that turnover increased significantly by 12.9%, from £3.1 billion to £3.5 billion, and earnings before interest, depreciation and tax (EBITDA), taken as the best proxy for operating cash generation, has risen at an even faster rate (13.8%) from £237m to £270m. A 9.9% increase in total debt has resulted in a 5.5% increase in interest payable, but interest cover, as a measure of the adequacy of a company's cashflow to cover interest payments and expressed as a multiple of EBITDA, rose slightly from over 8.6 times to nearly 9.3 times. This is an extremely healthy position and implies a continued prudence on the part of businesses in managing their debt and, when taken in the context of the overall level of indebtedness, explains an improvement in the overall cost of capital from 5.4% to 5.2%. Gearing, a measure of the extent to which a company is funded by debt, fell slightly from 72% to 69%. It is interesting to note that in corresponding reports published by Grant Thornton last year, gearing for Northamptonshire Limited was 202% and for Bedfordshire Limited the figure stood at 130%. The above indicate that the county has been resilient in trading through the downturn and is now experiencing a greater than average uplift in activity. There is little evidence of companies using profitability to de-gear as indebtedness continues to rise modestly, although interest cover is extremely comfortable. Cash appears to have been used to support investment, with fixed assets growing by 8.5% to boost capacity and improve asset quality rather than to further de-risk the balance sheet. This is supported by a wider analysis of the robustness of Buckinghamshire as it fully emerges from the recession. A recent report by Buckinghamshire Business First highlighted some of the strengths of the county, in particular the high levels of productivity and growth in the "value add" and technology sectors as evidenced, for example, by the level of patent applications. Consolidated balance sheet According to the report, Buckinghamshire Limited's consolidated balance sheet has strengthened impressively with net assets rising by just under 14%. Fixed assets are more than 8% higher implying genuine investment in capacity and infrastructure, although for some this will be ‘catch-up' expenditure to replace old and tired assets out of necessity, rather than investment for future growth. Net current assets have risen by 13.6% in line with turnover growth, implying stable working capital. The overall liquidity of Buckinghamshire Limited is very strong. Total debt has risen by 9.9% to £559m but cash balances have also risen. Gearing remains low, implying that should the business case or appetite arise, there is significant unused borrowing capacity. Employment Buckinghamshire Limited grew its employment by some 8.2% from 16,226 to 17,555 with an encouraging increase across all but one sector. Relative productivity would also appear to be improving with Buckinghamshire Limited demonstrating greater year on year efficiency on both a turnover per employee basis and EBITDA per employee. Despite the increased numbers employed, the average salary fell slightly from £30,776 to £30,458. Interestingly however, these averages are around £5,000 higher than the top 100 companies in Grant Thornton's Northamptonshire Limited survey from earlier this year and around £3,000 higher than the national average. The report highlighted a wide range in average salaries across the nine sectors analysed, from less than £20,000 to more than £45,000. Clearly the county, particularly in its southern reaches, is very much closer to the hotspot employment areas of London and the South East and this is reflected accordingly in salary variation. Relative performance between small and large companies The report also compared larger companies with turnover over £50m to those below. Twenty one companies fell into the larger company category and these delivered 56% of Buckinghamshire Limited’s total turnover. Turnover growth at 15.9% was significantly higher in the larger businesses compared to 9.3% for small companies, perhaps reflecting an ability to resource and build capacity. However, interestingly, the combined growth in EBITDA for the 79 smaller companies is three times higher at over 23%, an encouraging sign for the future. Gearing is lower for the smaller company category, possibly reflecting continued issues in accessing debt although, perhaps surprisingly, average cost of capital is also lower. These businesses are investing more in fixed assets, although also appear to be tying up a higher amount of working capital on their balance sheets, resulting in a 21% increase in overall debt. Breakdown by sector Buckinghamshire Limited comprises nine sectors: ➤ Automotive & Motor Retail ➤ Business Support Services ➤ Food, Drink and Leisure ➤ Freight & Logistics ➤ Healthcare & Education ➤ Industrial & Manufacturing ➤ Property & Construction ➤ Retail & Wholesale ➤ Technology The report analysed the financial data by these sectors. The strongest performers by turnover were Freight & Logistics, Technology and Automotive & Motor Retail with growth of 26.4%, 19.5% and 19.4% respectively. Property & Construction, Industrial & Manufacturing and Healthcare & Education all recorded turnover growth of less than 6.5%, half of the overall average increase. Sector profitability presented a slightly more mixed picture with one sector (Business Support Services) showing a modest fall in EBITDA. The strongest performers behind the overall EBITDA growth were Technology, Freight & Logistics, Food Drink & Leisure and, perhaps surprisingly, Retail & Wholesale. The number of lossmaking companies in the survey reduced from 10 to 6 during 2012, highlighting the underlying improvement across the board in the performance of Buckinghamshire Limited. 30 INSIDE BUSINESS MAGAZINE


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