Organic retailers, vets and specialist construction traders are “top dogs” when it comes to maximising the returns they make on the capital invested in their businesses, according to research by accounting and tax information provider, CCH.
Fruit and vegetable retailers, vets and specialist construction traders are ahead of professional and financial services businesses when it comes to maximising the returns they make on the capital they invest in their businesses.
A UK business league table from CCH, a leading accounting and tax information provider, shows that vets were among the top dogs by generating an impressive average return on capital employed (ROCE) of almost 33% over the past two years, just behind the specialist food shops [see table below].
ROCE measures the efficiency and profitability of a company’s capital investments. As a general rule of thumb, a rate of 10-12% ROCE is thought to be desirable.
Industries seeing the largest drops in ROCE include specialist meat retailers (down by almost 15% to just over 9% in 2009) and companies relating to construction and property, including estate agencies, which have seen a drop of almost 12% to only 5% last year.
|INDUSTRY SECTOR||AVERAGE ROCE %|
|1||Retail of fruit and vegetables||33.04|
|5||Dental practice activities||23.545|
|6||Driving school activities||21.895|
|7||Floor and wall covering||20.575|
|8||Insulation work activities||19.955|
|9||Other building installation||19.65|
|10||Erection of roof covering & frames||19.4|
According to CCH, these findings are “an interesting indicator of how well different industries have reacted to the recession” and show some significant increases and decreases from 2008 to 2009.
The league table draws on figures from CCH Strategic Planning software, which helps accountants advise businesses on how to improve their performance and helps them explore the effect of decisions before making them. It also lets accountants compare a business’s performance against benchmark averages for other similar businesses. The benchmarks cover the financial performance of more than 530 individual industry sectors and are calculated using accounts data from Companies House.
Over 1 million sets of company accounts, submitted in 2009, were analysed to create these benchmarks.
Table (left): CCH Top 20 League Table of UK Industry Sectors by Return On Capital Employed (ROCE) %