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Where did it go wrong for Wellgrain Ltd?

Where did it go wrong for Wellgrain Ltd?

Published on: 16/03/2017

Grain Merchant Wellgrain Ltd went into administration earlier this month owning at least £15m to almost 300 creditors.

So where did it go wrong for Wellgrain Ltd?

Take a look at our analysis below which indicates the company was competing in a very difficult environment.

Company Analysis:

  • Low Profit Margins: Wellgrain Ltd was exposed to low profit margins over the last 5 years.
  • Gearing: In 2015, debts were at 11million up from 5.5million. The company was becoming increasingly exposed to lenders and this has been the case ever since. As a result of the high debts, it meant the company had no room for manoeuvre.
  • For the last 4 years the Plimsoll Financial Health Rating has been declining. Users of the Plimsoll Analysis would have been aware that the financial health of WellGrain Ltd was deteriorating.
  • Take a look at the declining Gearing & Liquidity charts in the attached company analysis – the deterioration of these key ratios indicates the company had been increasing borrowings & that there was less cover for creditors.
  • For just £350+VAT, Plimsoll provides a trend analysis on the 50 largest UK Grain Merchants enabling Grain Growers to monitor the financial well-being of companies in the industry.

 

Industry Analysis:

  • The Grain Merchants industry has witnessed a sales decline for the last three years
  • Over the last 5 years, however, profits have dropped by over a third as average margins are now less than 1%.
  • 44% of companies analysed in the Plimsoll Grain Merchants Analysis have been giving the financial health rating of Caution and Danger.
  • With margins so slim an important lesson for anybody selling grain is that they need to be clear on the financial performance of the company with whom they are doing business. The Plimsoll Analysis trend analysis enables this.
  • Unlike a typical credit rating, The Plimsoll Analysis provides business owners with a set of tools to monitor the financial health of customers, competitors and suppliers as well as alerting readers to the early warning signs of danger within a company. It provides awareness to the changing character of a company.

To find out more about the Grain Merchants Analysis please click here.

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