Nearly one quarter of the players in the petrol retailing sector have shown unprecedented confidence about their prospects for the coming year, according to a new survey by financial publishers, Plimsoll. And with sales set to increase an average one per cent and profit margins likely to remain low but steady at one per cent, Plimsoll senior analyst David Pattison believes the industry looks set for a rewarding year in 2004.
The survey was conducted among the top 861 UK companies in the petrol filling station sector – a mixture of major oil companies and independent retailers. It revealed that 22 per cent of them see 2004 as a good year, and are set to exploit what they perceive as a buoyant market.“These companies have built up a strong business to get ahead of the competition in 2003 and have now set themselves up for continued expansion in the market,” says Pattison. “The companies are reassured by the fact they have got their bricks and mortar in place in 2003, and have established good foundations to go up a gear in 2004. Sales look set to increase at a staggering 10 per cent on average and margins could be as high as 3.6 per cent.”
The survey is the first of its kind conducted by Plimsoll, although there has been a less formal gauging of moods over a number of years. Other findings revealed that 56 per cent of those surveyed felt 2004 would be the same as 2003. They would be in transition, spending the coming year focusing on internal problems. Sales for these companies would likely be flat, but margins could be as high as the industry average of one per cent, according to Pattison.
One the down side, the same number of respondents in the survey as were positive – 22 per cent – felt 2004 would be a difficult year, and would be carrying past financial difficulties into 2004. “Many of these companies were found to be losing money,” confirms Pattison. “Their immediate concerns were to reverse the loss making, but they will need to react quickly if they are to survive in 2004. Sales could drop by as much as 10 per cent at these companies, yet margins must improve as they are currently losing an unsustainable one per cent on sales.”
Pattison felt the findings prove how industry averages disguise the reality of what is really going on in the market, and how easy it is for business leaders to misread the market. “To see the facts you really need to look at these individual companies and see the different challenges each face in 2004. For example, if people see the market growing at 10 per cent they perceive it to be buoyant, but they don’t see the number of companies sharing that growth. It is quite possible the market may come to the rescue in terms of growth – but then it could be taken by someone else who’s better at business than you! Equally, the drum has been beaten for so many years that there’s no margin in the market that some people have come to believe that.”
As to who is doing well, size is no guarantee of success, says Pattison. “The bigger companies can end up making the bigger mistakes – there is more at stake.”
Overall the feeling in the market is definitely more upbeat than in the past few years: “There’s an element of coming to terms with the playing field as it is,” says Pattison. “And realising the market isn’t going to help them, so they will have to help themselves. They may be treading water to a certain extent but there is much more optimism.
“What the companies who are upbeat are saying is that the market is no barrier to success.”