Food best sector for a return

Specialist food retailers are gaining some of the greatest financial returns on capital, according to a UK league table published by CCH, an accounting and tax information provider.


Specialist food retailers are gaining some of the greatest financial returns on capital, according to a UK league table published by CCH, an accounting and tax information provider.

Specialist food retailers are gaining some of the greatest financial returns on capital, according to a UK league table published by CCH, an accounting and tax information provider.

Retail of fruit and vegetables, an industry sector which includes organic foods, scored an average return on capital employed (ROCE) of 33 per cent.

ROCE measures the efficiency and profitability of a company’s capital investments by dividing income over the costs of assets.

A rate of 10 per cent to 12 per cent ROCE is perceived as optimal as it implies that a business carries a risk premium of 6 per cent to 8 per cent above “risk-free” government bonds.

Fruit and vegetable sellers, vets, plasterers, lawyers and dentists are the top sectors in terms of maximising the return on the money they invest in their business.

Specialist meat retailers saw one of the largest drops in ROCE, declining 15 per cent to just over 9 per cent in 2009.

Jeremy Foster, product manager at CCH, who conducted the ROCE survey, says the findings indicate how well industries have reacted to the recession and one interesting result is how well many construction trades feature.

He explains: ‘The reason for that is because of the freeze in the property market. People are tending to do up their houses and spend more on construction work than they would otherwise have done, when they might have considered moving.’

‘The one that came out highest, the retail of fruit and vegetables, is a trend, with more people eating or looking for organic food. A lot of the old fruit and vegetable sellers have dropped out of the market in the last 20 years.’

Foster says there is no ‘golden answer’ to improving a business’s ROCE, but he suggests working with an accountant to decide which strategies could be employed to achieve better outcomes.

The top 20 sectors for return on capital
1       Retail of fruit and vegetables  33.04  
2       Veterinary activities   32.64  
3       Plastering      31.725
4       Legal activities        29.45
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
11      Wholesale of waste and scrap    18.55
12      Joinery Installations   18.315
13      Manufacture of luggage & the like, saddlery     17.25
14      Plumbing        17.2
15      Painting and glazing    16.815
16      Manufacture of taps and valves  16.68
17      Retail of meat and meat products        16.66
18      Installation electrical wiring etc.     16.05
19      Security broking & fund management      15.745
20      Services to oil and gas extraction      15.7  

Nick Britton

Nick Britton

Nick was the Managing Editor for growthbusiness.co.uk when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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