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Retailer Risk Analysis

In order to help leasing agents and asset managers understand financial stability and ability to afford rents FSP monitors the financial accounts of over 1,500 occupiers.

FSP undertakes detailed analysis of accounts to produce a series of consistent indicators including Operating Profit, Net Worth, Total Creditors, Return on Trading Assets and the BIS P2 Wealth Creation Efficiency Ratio.

BIS P2 Wealth Creation Efficiency Ratio is a good general indicator of a retailer’s health. It is defined as;

The value added by a company (sales less cost of bought-in goods and services) divided by its cost of resources used (labour and depreciation)

FSP categorises the P2 Wealth Creation Efficiency Ratio to create a scale of financial performance:

Less than 100	very worrying
Between 100-124	head above water
Between 125-149	fairly healthy
Between 150-174	healthy
Greater than 175	very strong

FSP defines the ‘very worrying’ category as ‘At Risk’. For companies in this category, value added (sales less cost of bought-in goods and services) is less than the cost of resources used (labour and depreciation)

Retailers in the ‘head above water’ category are potentially ‘At Risk’ from factors such as contracting sales, rising rents/labour costs and price deflation, and unless owners, managers and advisors become more proactive in identifying and managing retail failures, the property industry is likely to continue to experience low income growth for years to come.

FSP Retailer Risk Reports have many applications, including;

• Pre-acquisition analysis of investment risk and security of income
• Assessment of development sustainability
• Targeting less risky assets for acquisition
• Identifying vulnerable assets (marginally viable retailers will depress sustainable rental growth and lead to undesirable voids)
• Identifying vulnerable retailers for remedial intervention
• Assessing the sustainability of potential new occupiers
• Targeting healthy retailers as scheme entrants 
• Assessing town centre risk outside investment schemes
• Town reports identifying ‘At Risk’ retailers are available from FSP for just £250 +VAT  

Find out more

See an example report

Definitions

The Department for Business Innvoation and Skills’ (BIS) Value Added Scoreboard measures companies’ efficiency for wealth creation (P2). As a rough guide to financial health using P2: 175+ is Very Strong; 150 to 174 is Healthy; 125 – 149 is Fairly Healthy; 100 to 124 is Head Above Water; less than 100 is Very Worrying. See www.innovation.gov.uk/value_added.

^{Disclaimer: The content of these reports has been derived from statistical, trade and published sources together with FSP estimates and interpretation. Whilst FSP has used its best endeavours to ensure the accuracy of the information contained in these reports, it cannot accept liability for any data therein nor any interpretation made therefrom.}

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This level of market intelligence is always useful.

Andrew Bauer
Centre Director
County Mall, Crawley