The 100 businesses earning the highest pre-tax profits, in the reports for the latest annual results, have, on average, improved their performance. Northern Ireland has over 100 locally registered companies which recorded pre-tax profits of £4.8m or over.
uring 2021 most businesses were facing unwelcome challenges as the pandemic affected working hours and conditions. At the start of this year, there was a hope that the business world will offer more stable operating conditions.
But now there is a new concern: the impact of rising inflation combined with disruption caused by events in Ukraine.
So far in 2022 the business climate is stronger and slightly more reassuring. However, forecasts of business activity remain very cautious.
In preparation for this annual report on the changing profitability of Northern Ireland registered businesses, we have updated our continuing survey of the registered accounts of the largest local businesses.
As an indicator of the changing results we have identified, as far as possible in the main table, the trading results of the 100 business groups which have registered the highest levels of pre-tax profits.
Based on the accounts officially registered up to April 2022, there are 100 entities reporting pre-tax profits of over £4.8m, usually for the financial year ending in December 2020 or a later date in 2021.
One encouraging indicator emerging from the analysis is that, to identify the 100 businesses with the highest profits, last year this extended to all known businesses with profits of over £4.5m. Now, well into 2022, the 100 with largest profits all had profits of over £4.8m.
Tracing the local businesses which are reporting the largest profits is an important indicator of which parts of the local economy are either doing well or facing harsher trading conditions.
Inevitably, there will be significant changes year by year. One of the most variable features of business performance will be pre-tax profits.
It is no surprise that the list of highest profit makers changes more dramatically than (say) year to year comparisons of turnover or employment. Our most recent analysis shows that, in the early months of 2022, 21 of the current entries are new to the list compared with the previous analysis in mid-2021.
This is a reflection of the varied experiences of different companies. Three of the companies which have dropped out of the list have, unhappily, reported that they have more recently traded at a pre-tax loss.
The other 18 companies, continuing to trade, have reported lower profits in the more recent year. None of the companies have closed.
The overall trading results give an obvious contrast. In identifying the 100 making the largest pre-tax profits, there must be a trade-off. That means 21 which have dropped down the rank order are replaced by 21 which have climbed the rank order.
More significantly the cut-off level of pre-tax profits needed to reach the top 100 has risen to just over £5m.
Another reassuring feature of the 100 highest profit earners is that, even reflecting business in 2020-21, increasing pre-tax profits is well in evidence.
Simply comparing profits most recently with those a year earlier, 68 have reported improved results, although 32 have seen profits reduced.
The overall picture merits a word of caution. Measuring, in absolute terms, the pre-tax profit of a business is only an approximate guide to the changing trading position.
It does not say anything about the rate of return on the capital invested nor whether that rate of return would adequately remunerate the investors who are carrying the business risks.
Nevertheless, the evidence is suggestive of a sustainable viable core number of businesses.
Despite the difficult trading conditions in 2021, it is reassuring that the overall position is that the best performing businesses in Northern Ireland have sustained their viability.
