Accounts explained · 4 of 10
What is a profit margin, and what counts as a good one?
How much of every £100 of sales is left as profit.
A profit margin is profit as a share of sales: how many pounds of profit a company makes from every £100 it sells. Across 354 companies on Spark Intel, the typical one makes £3.50 of pre-tax profit from every £100, and 125 of them made a loss.
Which profit margin are you looking at?
Every margin is a profit figure divided by turnover. The difference is which profit line you use, so always check which one a company or a news report is quoting.
- Gross marginGross profit ÷ turnover. What is left after the direct cost of what was sold.
- Operating marginOperating profit ÷ turnover. What trading leaves after all running costs.
- Pre-tax marginPre-tax profit ÷ turnover. After interest and investment income too. The one Spark Intel uses.
- Net marginProfit after tax ÷ turnover. What is left for the shareholders.
Multiply by 100 for a percentage, or read it as pounds of profit from every £100 of sales.
Worked example: Greggs or Gail's, which makes more from each £100?
Greggs made £167m of pre-tax profit from £2,151m of sales in the year to December 2025: £7.78 from every £100, a margin of 7.8%.
Gail's is about a tenth of the size, with £220m of sales, but made £29m before tax in the year to February 2025: £13.41 from every £100. On their latest filed accounts, the smaller bakery makes more from each £100 it sells.
Size and margin measure different things. Greggs makes far more profit in pounds; Gail's makes more from each pound of sales. Their financial years end at different times, so this compares each company's latest filed accounts.
Greggs
£7.78
per £100 of sales, £2,151m turnover
Gail's
£13.41
per £100 of sales, £220m turnover
What is a typical profit margin in each sector?
Online marketplaces top the table: the typical company makes £23.87 from every £100. Technology and AI sit at the bottom, where the typical company made a loss and 5 of 6 were in the red.
Restaurants, food brands and supermarkets all sit at around two pounds or less per £100: high costs for ingredients, staff and rent, and fierce price competition.
| Sector | Companies | Typical profit per £100 | Making a loss | Highest in the sector |
|---|---|---|---|---|
| Online marketplaces | 6 | £23.87 | 0 of 6 | Rightmove (£68.20) |
| Gyms and health clubs | 12 | £11.16 | 3 of 12 | JD Gyms (£31.09) |
| Utilities | 10 | £9.06 | 2 of 10 | United Utilities (£29.37) |
| Transport | 27 | £5.95 | 6 of 27 | Edinburgh Airport (£49.72) |
| Travel and holidays | 29 | £5.13 | 12 of 29 | Chiltern Firehouse (£45.73) |
| High street and online retail | 39 | £4.92 | 8 of 39 | Historic Royal Palaces shops (£31.81) |
| Sport and events | 47 | £4.77 | 11 of 47 | Falkirk (£34.88) |
| Homes, property and construction | 20 | £4.76 | 3 of 20 | Berkeley (£18.94) |
| Energy | 8 | £1.91 | 3 of 8 | Utility Warehouse (£5.82) |
| Health and care | 8 | £1.84 | 4 of 8 | Vision Express (£12.36) |
| Restaurants, cafés and takeaways | 44 | £1.82 | 19 of 44 | Trishna (£29.09) |
| Supermarkets | 10 | £1.20 | 4 of 10 | Tesco (£3.26) |
| Food and drink brands | 20 | £0.79 | 9 of 20 | Harvey's (£14.86) |
| Leisure, pubs and betting | 51 | -£0.99 | 27 of 51 | Snozone (£32.53) |
| Telecoms | 8 | -£25.14 | 5 of 8 | EE (£26.80) |
| Technology and AI | 6 | -£55.47 | 5 of 6 | Kainos (£13.48) |
Pre-tax profit per £100 of turnover on each company's latest filed accounts; "typical" is the median, the middle company in the sector. Sectors with at least five companies. Banks are left out, as are profits that look like one-offs and companies filing in another currency.
So what counts as a good margin?
Compare like with like. A 3% margin is healthy for a supermarket and weak for a software company. The useful questions are how a company compares with its own sector, and whether its margin is rising or falling over the years.
A thin margin leaves little room for error: a small rise in costs can wipe out the profit. A very high margin in one year can be a one-off, such as a property sale or a dividend from a subsidiary, so check what is behind it.
Every Spark Intel profile shows the company's profit per £100 of sales, and every battle ranks rivals on it.
Profit margin: common questions
How do you work out a profit margin?
Divide the profit by turnover and multiply by 100. A company with £2,000m of turnover and £100m of pre-tax profit has a pre-tax margin of 5%: it makes £5 from every £100 of sales.
What is a good profit margin?
It depends on the sector. Across the companies on Spark Intel the typical pre-tax margin is £3.50 per £100, but the typical company in online marketplaces makes £23.87, while in technology and AI it makes a loss. Compare a company with its own sector and its own past years.
What is the difference between gross, operating and net margin?
They use different profit lines. Gross margin uses gross profit (sales less the direct cost of what was sold), operating margin uses operating profit, pre-tax margin uses profit before tax, and net margin uses profit after tax.
Why do supermarkets have such low margins?
They sell huge volumes of low-priced goods and compete hard on price, so each £100 of sales usually leaves between nothing and three or four pounds of profit. They make their money from scale.
Which margin does Spark Intel use?
Pre-tax profit as a share of turnover, from each company's latest filed accounts, shown as profit per £100 of sales.
Keep reading
Turnover vs profit
What a company takes in, and what is left after its costs.
Accounts explainedOperating profit vs pre-tax profit
Where interest, dividends and one-offs come in.
Accounts explainedWhat is EBITDA?
The profit figure that is not in the statutory accounts.
Accounts explainedReading a balance sheet
What a company owns, what it owes, and net assets.
Accounts explainedNet debt and borrowings
Borrowings, less the cash in the bank.
Accounts explainedCash vs profit
Profit is an opinion, cash is a fact.
Accounts explainedGroup vs company accounts
Why the same business can show two sets of figures.
Accounts explainedWhat each company has to file
Micro, small, medium and large: who shows what.
Accounts explainedGoing concern
The warning that a company may not last the year.
The seriesAccounts explained
Every topic, in reading order.