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The Drainage Report
Drainage Sales and Prospects Still Robust
Overview“November's rise in interest rates to 3.75% is the first upward move in four years,” says Mike Rigby, whose company produced this report. “The Bank of England hopes the rise will be enough to cool house prices and consumer demand. It worries that an increasing number of households are unable to cope with their debt even when rates are low - what will happen when rates go up, as they will? But business groups warn that further hikes could choke off the economic upturn, still at an early and fragile stage.
“The global economic recovery appears to be gathering momentum, though the pattern is uneven. In the US recovery is well under way. Figures show that the economy is growing at its fastest rate for 20 years. A recovery in tourism, the housing boom, good company results and rising stock markets combined with tax cuts and interest rate cuts has helped the US economy grow at its fastest rate since 1984. Britain leads the way in Europe, but performance in Germany, France, Italy and the Netherlands is disappointing.”
Building Drainage Sales - All materialsForty two percent of merchants reported increased sales of all types of drainage in the last three months compared with the previous three months. Twelve percent saw a decrease and forty five percent report no change.
The difference between the number of companies reporting an increase over those reporting a decrease is the net balance, expressed as a percentage. A positive net balance indicates growth, a net balance of zero implies little has changed.
On this basis, a net 30% of merchants increased sales of all types of drainage in the last quarter compared with the previous quarter. Medium-sized merchants showed most widespread growth with a net 47% increasing sales. Small and large outlets also increased sales. More branches in the North (net 45%) saw sales increases followed by merchants in the Midlands (40%), Scotland (21%) and those in the South (18%). More independents reported growth (net 36%) than National merchants (22%).
Compared with the same period last year, a net 63% of merchants increased sales of all types of drainage products (chart 1).
All sizes of merchants saw sales go up over the period with more medium-sized outlets (net 70%) increasing sales than large or small merchants. All regions improved with merchants in the North (68%) ahead. Nationals (66%) were just ahead of independent merchants (60%).
Building Drainage Sales: Above and Below Ground - Plastic Materials
July to September sales compared with the previous 3 monthsABOVE & BELOW Ground Plastics Drainage Products by size of firm
|Size of Merchant||Increase||Decrease||Stay the same||Total||Base|
July to September sales compared with the previous 3 monthsABOVE & BELOW Ground Plastics Drainage Products by area
|Area||Increase||Decrease||Stay the same||Total||Base|
A net 31% of merchants reported increased sales of above and below ground plastics drainage in the last three months compared with the previous three months.
More medium-sized outlets (49%) increased sales of plastic drainage than large and small merchants. Outlets in the North and Midlands (net 40%) saw sales go up with merchants in the South and Scotland also reporting increases (22%). Independent outlets (35%) reported increases with nationals just behind.
A net 60% of merchants increased sales of above and below ground plastic drainage products in the last three months compared with the same three months last year. More small and medium-sized merchants saw sales increase (61%) with large outlets just behind (57%). Merchants in the South were ahead with a net 69% reporting increases.
Building Drainage Sales: Above and Below Ground - Non-Plastic MaterialsA net 7% of merchants improved sales of above and below ground non-plastics drainage in the last three months compared with the previous quarter.
Large outlets (12%) recorded increases with medium-sized merchants just behind (7%).
In the North a net 28% of merchants improved sales. Outlets in Scotland and the Midlands reported no change but merchants in the South said sales fell (-6%).
A net 8% of merchants sold more non-plastics above and below ground drainage products in the last quarter compared with the same time last year.
Large and medium-sized outlets (18% and 14%) increased sales compared with small merchants who saw sales drop (-13%).
Outlets in Scotland and the North reported sales growth (44% and 28%) compared with the South and Midlands (-13%) where sales weakened.
Product MixAll merchants interviewed sell above and below ground plastic drainage products. Thirty percent of merchants sell other types of above ground drainage such as cast iron and aluminium. Fifty four percent of outlets sell other types of below ground drainage such as clay.
Plastic drainage sales through merchants continue to make inroads. By volume 88% of drainage sales in the quarter were above and below ground plastic drainage (chart 2).
EmploymentA net 7% of outlets took on more staff compared with three months ago (chart 3).
StocksA net 19% of merchants increased stock levels compared with three months ago (chart 4). Medium-sized (33%) and small outlets (20%) increased stocks. Large merchants cut back. More outlets in the Midlands (28%) built up stocks than elsewhere.
PricesA net 1% of merchants put up prices compared with three months ago (chart 5). More small outlets (8%) raised prices than others. Merchants in the South (net 10%) and Scotland (14%) increased prices. Outlets in the Midlands (-4%) and the North (-18%) decreased prices.
Price ExpectationsA net 82% of drainage merchants expect to put up prices in the next twelve months compared with the previous twelve months. The picture is similar across the board with small outlets (94%), those in the South (90%) and independent merchants (88%) all strongly forecasting price hikes.
ProfitabilityA net 70% of merchants expect profits to increase in the next twelve months compared with the previous twelve months. All sizes of merchants have high expectations but small outlets are the most confident (75%). Outlets in the Midlands have the highest profit expectations.
OutlookLooking ahead a net 3% of merchants expect sales of all types of drainage to expand in the next three months compared with the previous three months (chart 6).
Large outlets have the greatest expectations (net 19%), in contrast to small outlets (-3%) who expect sales to ease off.
More merchants in the North (net 32%) expect to sell more in the next year. Outlets in Scotland also forecast sales growth (7%). Merchants in the South expect sales to fall (-13%).
Just under a net one in three merchants are confident about the overall prospects for builders' merchants compared with three months ago (chart 7).
Merchants are positive across the board with small outlets and those in the North most confident.
A net one in four merchants are more confident about the prospects for the building drainage products market compared with three months ago (chart 8).
Medium-sized outlets and those in the North are most positive.
ProblemsPrice cutting in the market (42%) and margin squeeze (30%) were the biggest problems facing merchants in the last three months (chart 9).
But 27% of merchants had no problems - a strong indication of a buoyant market. These who did have problems mentioned price cutting as their single biggest problem (26%).
|PROBLEMS FACED BY MERCHANTS IN LAST 3 MONTHS||% MERCHANTS REPORTING PROBLEMS IN Q3 03|
|Price cutting in the market||42%|
|Supplier service and availability||22%|
|Slow payments & bad debt||21%|
|Too much volume||19%|
|Lack of sales leads||16%|
|Low sales volumes||14%|
|Lack of confidence in market||6%|
|Bank's support, interest rates, charges||3%|
Internet UsageJust over a third of the merchants interviewed use the Internet on a daily basis. Twelve percent use it weekly and 32% never use it (chart 10).
Fifty seven percent of merchants that have a website say customers can order on-line.
Comment“Looking back at over the last two to three years a number of key themes which affect merchants keep coming up” says Mike Rigby whose company produced this report. “The lack of affordable housing and the Government's 2016 target of 200,000 new homes is good news for merchants and manufacturers who'll supply the materials. The only concern is where the money will come from to build the infrastructure.
“The apparently relentless march of plastics has been an important trend in the market. Approximately ninety percent of merchants' drainage volume is now plastic. But will the trend towards plastics continue? In windows, PVC's penetration appears to have stalled and timber in particular appears to be making a comeback.
“A regular theme has been how growth in one sector can stimulate growth in another. Increasing interest in home improvement and makeovers has boosted products such as hard landscaping. Quick thinking merchants are capitalising on this growing market and the rise in other lifestyle markets such as conservatories.
To see the issues discussed in the last two to three years and before visit www.521621.com where the reports appear in full.
The Drainage Report, a quarterly trends survey, is produced by Michael Rigby Associates and sponsored by Builders' Merchants News. The aim is to keep a finger on the market pulse and to monitor merchants' views and expectations of market movements in above and below ground building drainage products.|
Michael Rigby Associates specialises in research based marketing in the home improvement and building materials' markets in the UK and Europe.
The survey covers a representative sample of 100 builders' merchant outlets. Telephone interviews took place between the 20th and 24th of October 2003 across a balanced spread of size and type of merchant, and geographical area. Numbers employed was used as an indication of size. The size categories of merchant outlets are small (1-9 employees), medium (10-25 employees) and large (over 25 employees).