Flotation

Secrets of success

Mar 08 issue
 


There’s no better way to learn how to be successful than hearing from
those at the top of their game. Robert Tyerman speaks to some of the winners of the fourth annual Quoted Company Awards, organised by Business XL’s sister magazine Growth Company Investor

For David Jackson, chairman and chief executive of specialist engineering group Redhall and the winner of Entrepreneur of the Year, picking people and knowing how to extract the best from them are the keys to business success.

A Manchester-born accountant, Jackson took control of engineering business Totty in 1990, turned it into Peterhouse and sold it to Babcock Group in 2004 for many times its original value. With this deal under his belt, he took the chair of Redhall three years ago (then called Booth Industries), when it was facing a £3.5 million contract dispute.

Jackson claims its chief executive at the time de-motivated key managers by ‘telling them what to do’ and making it clear he simply wanted to sell the company.

Jackson forgot about the £3.5 million contract and brought in Simon Foster, former Peterhouse business development chief, as chief executive designate. ‘He is the best thing I have done,’ states Jackson, adding that the next-best decision was recruiting Tony Price, ex-British Nuclear Group and head of decommissioning at Sellafield.

‘I made small management changes, focusing people on areas and projects that we wanted to win, and morale has turned around,’ he says. Strategic acquisitions, especially in the nuclear sector, have assisted the push for organic growth. Last year profits rose more than threefold to £2.4 million, Redhall’s shares have soared and Jackson wants the company, valued at £48 million, to become a threat to £2.5 billion fuel distribution giant AMEC.

‘I hate the term “company doctor” and I can’t stand the MBA qualification,’ he declares. ‘You can’t have a textbook for turnarounds. What matters is your perception of people and products and it’s different in every case.’ Jackson clearly thrives on it. ‘I’m 61 and I feel about 45,’ he says.

Turning around companies is also a skill of Chief Executive of the Year Brian May, who heads up construction services group Renew. With 30 years’ construction industry experience, he joined what was then the ailing and much restructured Montpellier group at the invitation of its chairman and relished the challenge of turning round a group that, despite its losses, had operations ‘with good brand names’.

Changing the name to Renew (surprisingly available at Companies House), May found most of the company’s specialist divisions – label delivery, customer service and other
fields – were inherently sound. He says: ‘At a problem company, you usually find that most of what is going on is profitable. What you need is leadership and focus on what you are good at, encouraging your staff.’

When May joined, he notes, confidence was low and there was a settling-in period: ‘They had to get used to my management style. I give them space, but I like to know what’s going on.’

With the balance sheet restored by strategic disposals, May insisted the company targeted the ‘right work, with the right procurement and the right terms and conditions’. His mantra is straightforward: ‘Get value, do it well and you will win repeat business and better terms.’

Renew increased profits 55 per cent last year to £7.2 million and its shares rose sixfold from 2005 to 120p last August. He says: ‘It’s important to beat market expectations year on year and I have always been straightforward with the City.’

Keeping the City sweet
Relations with the City have been important for Keith Neilson, chief executive of West Lothian-based software group Craneware, which won IPO of the Year. The company’s revenue cycle management software had been making appreciable in-roads into the US healthcare market, helping hospitals optimise their billing, but the next big push proved too much for its existing shareholders to fund.

Neilson, who had run the company since 1998, decided on the public route: ‘We thought of floating in October 2006 but it took longer than expected to find the right advisers.’ Last September, Craneware raised £5.4 million from external shareholders, with KBC Peel Hunt as broker and nominated adviser, and strong institutional support from Artemis and others. Stock worth a further £15 million was sold by existing shareholders.

In April last year, the company staged a pre-float marketing exercise with the financial community to test the water and, says Neilson, ‘I’d advise everyone planning to float to do the same’. Craneware drew up a shortlist of advisers and held a beauty parade.

He was pleasantly surprised by the institutional investors he met. ‘We had already gone round the venture capital trusts and all they wanted to know was: “How do I
exit and what are the numbers?” But the institutions were different and really wanted to learn about the business.’

There had been the inevitable bartering over pricing and terms and, during the process, the stockmarket began to turn sour, but ‘our investors stuck in there and believed the story’. Combined costs were a little more than five per cent of the total £20.5 million placed.

The company has subsequently increased its US hospital penetration to 878 with sales bookings rising 50 per cent. Armed with a quote, Craneware ‘has got its eye’ on a potential new acquisition.

Shipping group Globus Maritime, registered in Jersey but run from Athens, achieved the International IPO of the Year award for raising £25.3 million on AIM at 300p last June, with Jefferies as broker and nominated adviser. Steered by chief executive officer George Karageorgiou, the company raised the money to complete the purchase
of its latest vessel and help pay for possible future purchases.
Globus was trying to take advantage of soaring shipping rates to expand its fleet and lock in long-term charter rates at the top of the market. The shares soon doubled to 600p, though they later eased back to 395p. The company is now worth £110 million.

The judges were impressed by its long-term revenue and earnings visibility, not to
mention its solid share price performance.

Stock market wobbles did not prevent Northern Irish accountant, financier and entrepreneur John Shannon pulling off an £80 million reverse AIM takeover and raising £20 million. The feat won him Deal of the Year. He reversed AssetCo, a company he had developed from an Ulster vehicle fleet manager into a supplier of outsourced services to various public bodies, into Asfare, which made all the ladders for the fire services.

Shannon, who took AssetCo from its original parent company through a complex buy-in management buy-out, explains: ‘It was a cottage industry needing consolidation. We had long-term deals, but were highly leveraged after the buy-out and wanted to float. Asfare had been struggling and the government put a buying embargo on the fire services during a review of the sector, so they needed a deal.’

An amicable end

It transpired that Asfare was ‘receptive and not confrontational’. Shannon assembled a strong team of advisers, with solicitor Nabarro Nathanson, accountant Grant Thornton and broker Hoare Govett and he suggests that his naivety helped: ‘I did not think stock market movements might affect funding.’

The deal went through and the business is thriving. Shannon continues: ‘These deals take a huge amount of effort and energy and my key goal was ensuring the daily running of the business didn’t suffer while the deal went through. I was lucky to have a strong management team.’ The judges liked both the size and scale of the deal, the dominance it gave the company and its ‘textbook’ use of AIM.

Striking the right balance was the most important task facing Stephen Hill, Finance Director of the Year. He was holding the purse strings at social housing market leader Connaught last September when the company bought National Britannia Group for £91 million and raised £58 million in a heavily oversubscribed placing to finance part of the deal. Hill had to cope with the company’s move to the Full List of the London Stock Exchange, with all the governance and reporting issues that involved.

Hill has the challenging but ‘stimulating’ job of handling growth, which means ‘getting the funding right and, crucially, delivering the contracts we’ve won’. With acquisitions, this involves ‘making sure we integrate where necessary and know when to leave things alone’.

One City figure whose attention is usually welcome, especially among smaller-capitalised companies, is Giles Hargreave, head of stockbroking and fund management group Hargreave Hale, whose Marlborough Special Situations Fund earned the Investor of the Year gong. ‘We buy anything if we think it offers value,’ he declares.

Hargreave and his team of six work ‘bloody hard and see a lot of companies’ to find that value. Marlborough’s biggest holding is spread-betting outfit London Capital, but ‘in small-caps you can’t afford to have too much in one stock because, if things go wrong, the downside is horrific. We try to average up our winners and cut our losses and we sell on warnings. I try to buy companies with downside protection; take Gladstone Software, I’m losing money, but three-quarters of its price is in cash and property’.

The judges noted that Marlborough Special Situations Fund has returned 290.6 per cent over five years, outperforming the sector average by 152.07 percentage points.
Experience is one of the qualifications Tim Ross, Non-Executive Director of the Year, brings to the boardrooms of acquisitive construction and infrastructure materials group Ennstone and equipment rental specialist Lavendon.

A former City solicitor who became legal adviser and then director of construction group George Wimpey, Ross was able to retire at 50 and dabbled in venture capital until non-executive directorships came his way.

‘You get a reputation,’ reflects Ross, who chairs successful expansionist mineral, fuel and waste support services group Hargreaves Services and two other quoted groups.

‘All are related to construction and some have been very successful.’

Familiarity with the law helps a non-executive, he argues: ‘I can understand governance issues and keep them in perspective. Otherwise it is easy to become mesmerised by rules.’

Value added

Other winners were Bob Morton, who bagged Chairman of the Year primarily for
his work at mid-tier accountancy firm Tenon. Profits at the firm rose 21 per cent to
£12.4 million for the most recent year-end. The judges also recognised Morton’s general contribution to the small company scene over the years (see Power Top 50, February issue).

Finally, private equity firm Beringea’s ProVen Growth and Income Venture Capital Trust was chosen as Specialist Investment Vehicle of The Year. It is the best-performing VCT in its class, achieving above average returns by delivering an investment uplift of 126 per cent in less than six years.

Entrepreneur of the Year

Winner: Redhall – David Jackson



Chairman of the Year

Winner: Tenon – Bob Morton



Non-Executive Director of the Year

Winner: Ennstone and Levendon – Tim Ross



Investor of the Year

Winner: Marlborough Special Situations – Giles Hargreave



IPO of the Year

Winner: Craneware – Keith Neilson



International IPO of the Year

Winner: Globus Maritime – George Karageorgiou



Deal of the Year

Winner: AssetCo – John Shannon



Specialist Investment Vehicle of the Year

Winner: Proven Growth & Income VCT – Stuart Veale



Chief Executive Officer of the Year

Winner: Renew Holdings – Brian May



Finance Director of the Year

Winner: Connaught – Stephen Hill