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Plimsoll reveals the latest developments in the UK wood flooring market

If the results of the recent annual NWFA Industry Outlook Survey were to be taken at face value, the UK wood flooring industry would be facing a bleak 2024. Less than one in 10 companies surveyed expected sales to be significantly higher than 12 months ago, with a third expecting sales to be flat, says Plimsoll.

The market is said to have been buffeted recently by a prolonged cost of living crisis and a cooling of the housing market as interest rates continue to bite. However, that’s been balanced owing to a slowing housing market forcing homeowners to upgrade their current abode rather than moving to pastures new.

The UK economy continues to flirt with recession and consumer spending is forecast to remain uncertain and sluggish for some time yet. Many in the flooring market are reporting that consumers remain ‘skittish’ or ‘extremely spend conscious’. This is reflected in the sales performance figures coming out of the market with growth halving since 2021 according to new research from Plimsoll. It adds: ‘In addition, the usual macroeconomic factors remain at play. White hot global demand for raw materials continues to be affected by everything from climate change to a post Covid supply crunch. In addition, the dearth of available staff continues to drive human resource costs.

With all this noise in the market, analysts Plimsoll are encouraging everyone to pause, take stock and focus on the fundamentals. Their latest analysis takes a completely objective view of the UK flooring market. Yes, it’s proven graphical analysis confirms there’s weakness in certain quarters of the industry, but it also reveals some bright spots.’

Since the mid-90s Plimsoll has been producing analysis of the UK wood flooring industry. Their latest assessment has awarded a ‘danger’ rating to 46 of the top 200 companies analysed. Nine out of 10 previously failed companies were rated as ‘danger’ by Plimsoll two years prior to their demise so this is an early warning that they need to change their course and quickly, says the company.

As alarming as that statistic may appear, it must be tempered by two other findings from the latest Plimsoll analysis.

Firstly, the percentage of companies rated as ‘danger’ is broadly flat year-on-year. Some of the companies that were rated as such previously have recovered, failed, or been bought out. Witness Wooden Flooring Direct and their fall into administration and subsequent rescue by Nestware Holdings, says the company. The Plimsoll analysis shows these failing companies are being replaced by others following the same mistakes as their predecessors.

Secondly, the number of wood flooring companies rated as ‘strong’ in the Plimsoll analysis has increased to 94. A ‘strong’ rating from Plimsoll is awarded to companies that have the most financial strength to withstand multiple years of sub-prime trading conditions or external, macroeconomic shocks. History proves that those listed ‘danger’ companies fail, while ‘strong’ companies thrive. The company adds: ‘Plimsoll encourages every flooring company to review their Plimsoll rating and work on their revealed financial weaknesses as we continue through these challenging times.

With such polarisation in the market, Plimsoll is projecting that a period of consolidation in the market is highly likely in 2024 and into 2025. Strong companies will look to acquire undervalued competitors to consolidate their hold on the market for the medium to long-term. The latest Plimsoll analysis has named 43 SMEs in the wood flooring as ‘highly attractive M&A targets’. These companies are all undervalued, mostly independently owned and with good upside potential.’

Says Plimsoll: ‘Adding one of these companies to a current portfolio could be an easy win in a market of slowing growth. The Plimsoll analysis has isolated these companies for those interested in buying a competitor in 2024.

This year and the next are likely to see continued uncertainty for the UK economy and with it the wood flooring market. Further uncertainty may be fuelled by political uncertainty with the 2024 general election heading our way and the potential from further trade disruption driven by our evolving relationship with the EU and the world. All the leaders in the wood flooring market can do is ensure their financial resilience is up to scratch, their threats are contained, and opportunities are fully explored. The Plimsoll analysis can help achieve all three of these things.’
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