The past year saw a strong rally for small-cap companies, but some were singled out for particular distinction in the Quoted Company Awards
The past year saw a strong rally for small-cap companies, but some were singled out for particular distinction in the Quoted Company Awards.
It was fitting that the 2010 Quoted Company Awards ceremony was held at the Royal Courts of Justice in London. Many of the brokers, fund managers, advisers and entrepreneurs in attendance might have felt as if they were on trial during the past 12 months.
Organised by Growth Company Investor, a sister title of M&A Deals, and sponsored by the professional services firm Grant Thornton, over 600 of the great and the good from the small-cap space gathered to see the eleven winners collect their awards for excellence in the toughest of economic circumstances.
Jonathan Milner bagged CEO of the Year based on the performance of antibody manufacturer and retailer Abcam. Producing and selling third-party antibodies, which are an important tool for the life science research industry, this $2 billion market has proved defensive in the past few years and is forecast to continue growing by at least 10 per cent a year. Abcam is no blue-sky venture, with the company’s most recent year-end showing revenue up 55 per cent to £56.8 million and pre-tax profits of £17.4 million.
Milner says, ‘It’s a great market to be in, especially after the Human Genome Project highlighted lots of proteins that all need antibodies to identify them. Also, the rise of the internet has been important as antibodies need pages of information about them and the internet is a perfect vehicle to deliver that.’
A similarly unswerving performance earned Gordon Banham, the chief executive of waste sector support group Hargreaves Services, an award for Entrepreneur of the Year. With Banham at the helm, this Durham-headquartered company has gone from strength to strength, increasing pre-tax profits 21 per cent to £14.7 million in the six months to November.
Banham says an opencast coal project in Wales is progressing ‘very satisfactorily’. In December, the company commissioned a seventh methane generator at Maltby in Yorkshire and notes that its Monckton coke works in Yorkshire ‘performed well’ in the first half-year. Banham points out that Hargreaves’ new coal operation in Belgium generated a small interim profit and stresses the importance of opportunities in continental Europe in the second half of the year. Hargreaves, which also boasts a successful coke and mineral trading operation in Germany, aims to establish a presence in Poland to tap that country’s ‘rapidly evolving’ market.
Banking for change
LSL Property Services has bettered virtually all its listed peers and last year stole a march on its rivals by purchasing Halifax Estate Agencies Ltd (HEAL) from Lloyds for just £1, winning it the Deal of the Year accolade. Simon Embley, chief executive of LSL, says, ‘There weren’t many competitors with the financial and operational capabilities to have turned the business around in such a short space of time. If you didn’t have that level of resource, it would have left you with a huge liability.’
The deal landed LSL with 225 branches of Halifax and £22 million (the cash was thrown in by Lloyds as a sweetener on the deal, such were HEAL’s losses). ‘It was very complex and was made even more so as 93 of the 225 branches were franchises and the staff were not of the business, but employees of HBOS.’
Embley has the perfect CV for the deal, having effected the transformation of Norwich Union’s highly loss-making estate agency and surveying businesses into the profitable entity that became LSL. ‘It was a difficult decision to [acquire HEAL] as our business was in good shape, making an £18 million operating profit in 2008 in one of the worst housing markets ever. Our investors had a good recovery play on their hands; if we’d screwed up this great opportunity, they would not have been happy.’
Points to prove
Newcomer Nanoco has enjoyed a warm welcome since it joined AIM last year, winning the IPO of the Year award for its reverse takeover by a listed cash shell and strong share performance since. The Manchester-based university spin-out makes energy-efficient fluorescent semiconductor nanoparticles called ‘quantum dots’ for use in lighting, LCD screens and solar panels.
Operating via partnerships with manufacturers, Nanoco has already been signed up by two Japanese electronics giants and is profitable. Chairman Peter Rowley says the AIM listing is serving its purpose of raising capital to develop the business and wasn’t concerned about the risks of floating a company in 2009. ‘The timing didn’t worry me as we were not raising vast amounts and since then the share price performance has been good,’ he says.
The Turnaround of the Year award was presented to technology and services provider Morse after its thorough shake-up by chairman Kevin Loosemore and chief executive Mike Phillips.
Morse’s acquisition spree over the past decade pulled the business too far away from its core market and left a morass of operational ineptitude in its wake. Phillips was persuaded by former Cable & Wireless man Loosemore to join him in the trenches as finance director in September 2008 as the company veered dangerously close to breaking banking covenants (a number of analysts predicted total collapse).
The pair addressed problems of slack credit control and soon moved into a net cash position. There has been much blood-letting, with the headcount coming down from around 1,500 to under 1,000, ‘including a fair chunk of management’, says Phillips.
This February’s first-half results showed revenue stabilising and continuing operations overturning previous losses to a £4.1 million pre-tax profit. ‘In simple terms, we make about £200 million revenues, and getting up to around £10 million EBIT [earnings before interest and tax] would be a good result. After that, it’s a case of seeing where we can go from there – you’ll see growth but it won’t be stellar,’ says Phillips, who doesn’t rule out making acquisitions.
Another notable revival is under way at power cord and cable maker Volex, which is in no small part down to Mike McTighe, who picked up Chairman of the Year. With a close focus on cash generation, he has sharpened ‘the people, systems and processes’ to get the company on to a growth path.
‘The business was concentrating on top-line growth via new business and not focusing on cash, while debt was going up rapidly,’ he says. ‘So I started to measure executives on cash and earnings, while managing relations with the bank.’
Volex’s interim results for the half-year to October show revenue down 18 per cent to £110 million and pre-tax profits dropping 39 per cent to £1.7 million. ‘I always maintained that Volex is a three-year project,’ comments McTighe. ‘We are two years into it now and the company is out of intensive care.’
Correspondingly at architectural membrane maker Hightex, Charles Sebag-Montefiore, named Non-Executive Director of the Year, was identified as a crucial factor in the introduction of a ‘more commercial approach’ that helped the Bavaria-based concern deliver a maiden profit in its last interim results. Boosted by securing €45.3 million of contracts for stadia in Warsaw, Kiev and Vancouver, Hightex has visibility over most of its 2010 revenues and more beyond.
Full List of Award Winners
Chairman of the Year
Mike McTighe, Volex
Chief Executive Officer of the Year
Jonathan Milner, Abcam
Entrepreneur of the Year
Gordon Banham, Hargreaves Services
Finance Director of the Year
David Forsyth, Pendragon
IPO of the Year
Non-Executive Director of the Year
Charles Sebag-Montefiore, Hightex Group
Investor of the Year
Gervais Williams, Gartmore (for Gartmore Growth Opportunities)
Turnaround of the Year
Specialist Investment Vehicle of the Year
Deal of the Year
Simon Embley, LSL Property Services (for acquisition of HEAL)
Lifetime Achievement Award
David Blackwell, smaller companies correspondent, Financial Times
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