This is the second year of the Broadwalk Business Services awards to recognise outstanding achievements by quoted companies in the business services sectors. The UK often leads the world in business services and is a major employer. It is one of the less well known success stories of the economy, and these awards are another step towards raising its profile. Competition for awards this year was extremely fierce with many very strong performances, despite the demanding economic environment.
ADVISORY PANEL
The awards have had the significant benefit of views from:
- Jarrod Castle, Co Head of Transport Research, UBS
- Vasco Litchfield, Director, Lazard
- Jane Sparrow, Support Services and Electronics analyst, RBS
- Stuart Vincent, Managing Director, Rothschild
Important disclosures can be found at the end of this document.
AWARDS AND SHORTLIST
Broadwalk Business Services Company of the Year[top]
Aggreko
Aggreko’s International Power Projects division has continued to grow very strongly combined with rising margins. The company under CEO Rupert Soames has superbly executed the strategy of aggressively exploiting the opportunities for temporary power in emerging markets, while containing the downturn in the more cyclical Local business. Despite being a capital intensive business, the balance sheet has been kept very strong, aided by excellent cash generation.
Shortlisted
Amec
Amec under CEO Samir Brikho has continued to improve under the Operational Excellence programme and recently announced a target to increase earnings per share by 130% by 2015, representing compound annual growth of 12.6%. The £700m of cash is likely to be deployed in what should be a well timed acquisition.
Babcock
The company under CEO Peter Rogers, has been transformed into a Support Services powerhouse with a very strong share in the UK defence outsourcing market, and marine in particular. The company has also quickly become a force in the nuclear services market.
Davis Service Group
Trading has been resilient with strong cash flow generation from Europe’s leading textile maintenance company. The company has used its network density to great effect to maintain margins and grow most areas of the business in demanding circumstances.
Michael Page
Permanent recruitment has unsurprisingly seen the most dramatic revenue reductions of any sub sector. Michael Page’s headcount has been reduced on a meritocratic basis from over 5,000 to 3,500, but the group has remained profitable in each quarter of 2009. CEO Steve Ingham’s strategy of independently focusing on organic international expansion has positioned the company extremely well for when the global economy recovers.
Broadwalk Business Services CEO of the Year[top]
Nick Buckles, G4S
Buckles was a prime mover as CEO in the Securicor merger with Group 4 in 2004, and has been the combined company’s CEO since 2005. He has firmly established G4S as the global market leader in security. The 2007 £355m acquisition of GSL was well timed to increase the group’s exposure to the public sector. In addition the strategy of moving up the value chain to a fully outsourced protection solution has produced organic growth, and improved margins, despite the challenging market conditions.
Shortlisted
Alan Brown, Rentokil Initial
Since his appointment in April 2008 Brown has sharply focused attention on service and cost levels. Two previous management teams have not succeeded in halting profit decline, and Brown looks to have made an excellent start, with no help from the economy.
Geoff Cooper, Travis Perkins
Cooper joined Travis in February 2005, three months after the £950m Wickes acquisition had been announced. Cooper has tightly focused the company on profitable cash generation and has withstood the significant decline in construction and DIY spending, better than certain other competitors. The successful £300m rights issue completed in June was therefore undertaken from a position of relative strength.
Mark Dixon, Regus
Dixon has built Regus into the world’s dominant serviced office provider with offices in 450 countries. Regus was early to offer “recession busting” services and its focus on maximising cash flow has worked extremely well despite the economic downturn.
Wolfhart Hauser, Intertek
Hauser has sharply focused Intertek on trade testing which has resulted in a resilient performance this year despite the challenge of reduced global trade. The potential acquisition of Det Norske Veritas’s Business Assurance Division also looks like an excellent new growth opportunity.
Broadwalk Business Services Chairman of the year[top]
John Peace, Experian
Peace co-founded the predecessor to Experian, CCN Systems in 1980 in Nottingham as part of GUS. He has been a key driver in building the company from a few employees into the global market leader with $4bn of sales and 12,000 employees. In July he announced he was standing down following his appointment as Chairman of Standard Chartered.
Shortlisted
Kevin Beeston, Serco
Beeston joined Serco in 1985 and has played a key part in its impressive development to a FTSE 100 company including positions as Finance Director, Chief Executive and Executive Chairman, and Non-Executive Chairman since mid 2007.
John Devaney, National Express
Devaney joined the board in April at a very difficult time for company, as it was negotiating with the government on the loss making East Coast franchise. He was then faced with an ultimately unsuccessful bid from executive management, a merger approach from Stagecoach and finally a £360m rights issue.
Philip Rogerson, Aggreko, Bunzl, Carillion
Rogerson remains one of the most widely experienced Chairman in the sector. In October he was appointed chairman of Bunzl from March 2010, and is therefore relinquishing his chairmanship of Northgate and board position at Davis Service Group.
Jeremy Ord, Dimension Data
Ord has been with the group since 1983, and its Chairman since 1987. With CEO Brett Dawson the continued focus on the services has worked extremely well. Despite a very difficult trading environment services revenues rose 13% in the last fiscal year, with managed services including the Uptime brand increasing by 21%.
Broadwalk Business Services Deal of the Year[top]
Balfour Beatty: purchase of Parsons Brinkerhoff for £380m
The acquisition was consistent with Balfour’s strategy set out in 2006 to grow its professional services offering. This deal creates a similar capability set in the US, to the very successful UK model. The company conducted six months intensive due diligence and it looks to be an excellent cultural fit. The price of 5.8x EBIT pre stock option charges represents excellent value, and was very sensibly funded by a rights issue, to maintain Balfour’s strong balance sheet.
Shortlisted
BPP: sale for £420m
The deal was announced in April, only a month after the stock market low, at a 70% premium to the closing share price. For a business with late cycle characteristics this represented an excellent exit price.
MicroFocus: Borland and Compuware Testing for £125m
The acquisitions were announced simultaneously in May, six weeks after the stock market bottomed. They were integrated rapidly with a view to achieving substantially higher margins, as a new leading player in the Testing market. The deals look to be working very well, and were a significant contributor to the earnings upgrades in November and December.
Mitie: purchase of Dalkia Technical FM for £130m
The deal provides good synergies from combining two technical FM businesses, and provides an entry into the fast growing energy consulting market. It is a business MITIE have coveted for some time and where they knew the management well. Earnings in the first full year were enhanced by c9%, and a 6% equity placing led to the balance sheet continuing to have very low leverage.
VT Group: sale of shipbuilding for £303m
VT agreed this deal in mid 2007 but exercised the put option at the first available opportunity. This was an excellent price as the carrier programme looks under increased threat, and enables VT to become a pure Support Services operator.
Broadwalk Business Services Small Company of the Year[top]
Hargreaves Services
Since its flotation in November 2005, under CEO Gordon Banham, the company has had a compound annual growth rate of an astonishing 52%. This has come through excellent execution and a strong focus on becoming a fully integrated supplier of services to the bulk minerals industry.
Shortlisted
Educational Development
CEO Nigel Snook has done an excellent job turning the company into a focused leader in accredited qualifications. While acquisitions and higher government spending have helped growth, the majority has come from growing market share through providing a wider range of services combined with very high level service levels.
office2office
CEO Simon Moate joined in July 2007 just after the company announced it had not retained its largest contract, to supply the MoD. Since then the company has cut costs, won significant new contracts and moved into potentially attractive new service areas. It is well positioned to gain market share as the public sector reduces its number of suppliers after the election.
Alterian
The company consolidated its already strong position in the fast growing web content management market in the year. It successfully cross sold to customer’s of last year’s Mediasurface acquisition, and enhanced its position in the Social media monitoring software space with the purchase of Techrigy. CEO David Eldridge who has been with the company since 1997 looks to have positioned the company very well for further growth.
Smiths News
Under CEO Mark Cashmore the company has had a transformational year with contract wins worth £460m a year as Dawson exited the newspaper and magazine wholesale market. It continues to be the clear market leader and also took the first step to diversify the group with the £12m acquisition of Bertrams.
Disclaimers
Advisory Panel
All the firms represented on the advisory panel, Lazard, Rothschild, Royal Bank of Scotland Group plc and UBS Limited, an affiliate of UBS AG, have corporate relationships with companies in these awards lists. Their inclusion is not in any way an investment recommendation to buy or sell shares in these companies. The inclusion of these companies do not necessarily represent the views of these firms and should in no circumstances be attributed to them.
This is the first year of the Broadwalk annual awards and shortlist to recognise outstanding achievements by UK quoted companies in the business services sectors. The UK often leads the world in business services and is a major employer. It is one of the less well known success stories of the UK economy, and these awards are another step towards raising its profile.
The macro environment is increasingly challenging for many service companies at present. However Business Services is also often part of the solution through the provision of outsourced services for less money using more efficient processes and practices. While we have singled out individuals, these outstanding achievements also reflect the very strong teams built up behind them.
AWARDS AND SHORTLIST
Broadwalk Business Services Company of the Year[top]
Capita
Capita, under CEO Paul Pindar, has continued to grow organically at impressive double digit rates while maintaining an entrepreneurial culture despite being one of the largest companies in the UK. It is the undisputed leader in UK BPO (Business Process Outsourcing) market, and its rapid move to become a dominant force in the Life and Pensions arena has been remarkable. The company also continues to make strategic bolt-on acquisitions, and is highly cash generative.
Shortlisted
Connaught Excellent execution to maintain its leadership in the fast growing Social Housing repair and maintenance market.
Intertek The increasingly sharp focus on the “trade testing” markets is both differentiated and higher growth.
Serco Strong double digit growth has continued, while the company has made innovative international acquisitions. The company was recently promoted to the FTSE 100.
Xchanging Has grown rapidly in the Insurance and Financial markets BPO arenas, and in October announced a ground breaking Indian acquisition.
Broadwalk Business Services CEO of the Year[top]
Richard Cousins, Compass
Since being appointed CEO in June 2006 from BPB, Richard Cousins has done a fantastic job improving the management and performance of Compass. He has delivered substantial shareholder value through disposals, country exits, restructuring and most importantly implementing a new management framework across the business. The cash generated has also enabled a significant share buyback. It is now seen as one of the world’s best food service companies as well as being the largest.
Shortlisted
Samir Brikho, Amec Amec under Brikho has been transformed into a much more focused services business with an extremely strong balance sheet, ready for a transforming acquisition.
Harriet Green, Premier Farnell Green has re-energised Premier Farnell and the focus on the faster growth R&D engineers market, plus an enhanced web offering is driving outperformance.
Paul Lester, VT Group Lester has completed the shipbuilding joint venture on excellent terms, while growing organically and through nuclear and waste acquisitions.
Rupert Soames, Aggreko Soames has transformed and enhanced Aggreko’s operations and market leadership in temporary power, and aggressively exploited the opportunities in emerging markets.
Broadwalk Business Services Chairman of the year[top]
Anthony Habgood, Bunzl
Since joining Bunzl in 1991 Habgood has managed the transformation of Bunzl into a world class specialist distribution company. The intentional focus on essential products reduces the cyclical element of the business which is particularly attractive in the current climate. Under Habgood, and from 2005 CEO Michael Roney, the company has also developed a well honed bolt on acquisition strategy which enhances organic growth.
Shortlisted
Sir Roy Gardner, Compass Sir Roy as Chairman-elect appointed Richard Cousins as CEO and has overseen the transformation of Compass.
John Hamer, Fidessa Hamer has overseen the exclusive focus on and rapid growth of Fidessa, working with CEO Chris Aspinwall.
Philip Rogerson, Carillion, Aggreko and Northgate, and non executive director of Davis Service Rogerson is one of the most widely experienced Chairman in the sector. At Carillion he has overseen the successful acquisitions of Mowlem and McAlpine, and its transformation into a higher quality support services operation. Aggreko’s achievements have already been discussed.
Peter Warry, BSS Warry appointed Gavin Slark as CEO in 2006 and while making bolt on acquisitions, has ensured its continued focus on specialist trades and crucially maintained a strong balance sheet.
Broadwalk Business Services Deal of the Year[top]
De La Rue’s sale of Cash Systems for £360m
De La Rue CEO Leo Quinn accelerated the sale process of Cash Systems as it looked as though economic conditions would worsen. It was a very good price for the business under the circumstances in mid June, and enabled a £460m cash return to shareholders in November.
Shortlisted
Sale of TDG for £228m An excellent price for the logistics company.
Sale of Axon Group for £441m An auction developed for the business even as the demand for SAP solutions looked to be weakening.
Sale of Biffa for £1,200m The largest deal in the sector, and after a demanding experience with private sector waste contracts.
Sale of Detica for £538m At a 57% premium to the share price pre bid speculation this was a very good price.
Broadwalk Business Services Small Company of the Year[top]
Mears
Mears, under CEO Bob Holt, has very successfully grown to be one of the largest operators in the Social Housing repair and maintenance market. This continues to be a strong growth market as Local Authorities are attracted to the substantial efficiency savings provided by the best private sector suppliers. Mears has also entered the fragmented domiciliary care market in the UK, which has many similar characteristics to social housing.
Shortlisted
Diploma The company has been developed to have high resilience having assembled a collection of niche businesses which distribute opex rather than capex related products.
Harvey Nash Tight management and an emerging outsourcing service positions this executive IT recruitment business very well for the downturn.
Costain Now positioned as a focused leader in the more resilient UK Civils market with a strong balance sheet.
Keller Keller is a world leader in ground engineering with a wide geographical spread. Despite the slowdown it has continued to generate very good organic and acquisition related growth.
Broadwalk Business Services Lifetime Achievement Award[top]
Gordon Campbell, Chairman, Babcock International (2000 to 2008)
When Campbell became Chairman of Babcock it was a small struggling engineering company. Through a series of successful acquisitions, and strong organic growth the company has grown into one of the UK’s largest and most respected Support Services businesses. To oversee growth in market capitalisation from £186m to £1.1bn was a truly impressive achievement.
