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
