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PKF Francis Clark Sponsors The Western Morning News Annual Business Guide 2019

PKF Francis Clark are delighted to sponsor Western Morning News Annual Business Guide 2019 which was launched to a packed audience in Exeter this morning and will be published in the newspaper tomorrow. PKF Francis Clark Partner and Head of Corporate Finance Andy Killick provided an update on businesses in the region, how they are performing and an overview of the challenges and opportunities that they are facing.

Western News

Below is a summary of what Andy covered at the launch:


At any time there are challenges and opportunities – it’s what you do and how adaptable you are that will influence whether you are successful.

It’s too easy to point to current issues of Brexit, political change, the weather, the Internet, trade wars, exchange rates and a myriad of other factors and their individual effect. It’s how they combine and how they impact on businesses in Devon and Cornwall varies considerably and it’s this that the most successful companies in the top 150 take into account in their future strategy.

Andy Killick speaking

Whilst change has always been occurring, the pace has significantly ramped up and even the historic processes for considering them such as an annual strategic and budgeting process, may just be too slow and inflexible for what is needed going forwards. The phrase ‘change gear’ to suggest a stepped-improvement, is itself becoming outdated with technological advancement.

So, looking back, and forwards, what are the underlying trends? In summary, divergence. There are many companies and sectors under increasing pressure. The impact of minimum wage rises (actual and planned), auto-enrolment together with increases in business rates has affected many companies with premises and a high proportion of lower paid staff. Hospitality, care and retail sectors have all been hit to varying degrees. Other factors such as increased environmental concerns and worries over diesel emissions have adversely impacted on much of the car industry and its supply chain.

On the other hand, there are a number of businesses that have achieved significant growth in turnover such as IT and service companies (in many subsectors) and certain aspects of leisure & tourism. However, the added challenge is improving margin as well as turnover, and few have managed the combination resulting in a significant growth in profitability.

The underlying theory behind the old phrase of ‘turnover – vanity, profit – sanity, but cash is king’ is still valid but it perhaps needs updating judging by the prices achieved by certain loss-making internet businesses – very high prices are being paid for ‘hope’ value.

At PKF-Francis Clark we have made significant investment across numerous aspects of our own business and increased the range of services to support our clients – including cyber security where we assist clients to consider the appropriateness of their systems to prevent attack, through to leading UK IR35 experts making sure that clients are compliant with the latest HMRC requirements.

As with many other businesses, we see fundamental change in the basis of our own work and we are re-aligning significant parts of our business to be better-placed to deliver the needs of clients in the future with significant advancement in IT systems to support staff providing a more proactive service.

Devon & Cornwall is blessed by having a diverse range of businesses with a significant proportion being family owned and run. These businesses are often supported by management and money in ways that others cannot match on commercial terms. Consequently their sustainability has been far greater than their reported results would suggest. However, looking ahead, they will need to ensure that they embrace change rather than look to follow others.

In terms of transactions, Devon & Cornwall has been remarkably stable and resilient compared to the rest of the South West with 148 reported transactions in the year to April 2019, up slightly from 144 in the prior year. Volumes in the broader South West have fallen by circa 5% over the same period and 17% over the last two years.

Local businesses have not only remained attractive to overseas buyers, but they have also been making significant acquisitions themselves such as Gregory Distributions’ acquisition of Scottish-based ARR Craib Transport and Travel Chapters’ acquisition of Gorgeous Cottages.

In addition, management teams in the area have shown a resurgence in appetite for buying the business that they work for – often enabling the previous owners to retain some interest but crystallise their Entrepreneur’s Relief – something that more owners are concerned won’t be so attractive after any political change. Having advised on over 100 MBO’s we feel well placed to assist more owners and management teams achieve the great outcome all around that a management buyout can achieve.

So, in summary, there is significant variation across the region with many businesses performing well, but generally having to work harder to achieve good results. In the meantime others are suffering from a significant number of issues challenging their traditional business model. Whatever the position of individual businesses in Devon & Cornwall, compared to other times of uncertainty, there remains a significant amount of funding from a multitude of sources, to help them to achieve their aspirations.

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