Inside The Sustainability award entries MID-MARKET show the green agenda has not been ditched in the downturn, writes COMPANIES Fiona Harvey Page 4 FINANCIAL TIMES SPECIAL REPORT | Tuesday March 2 2010 www.ft.com/mid­market­companies­2010 Sitting tight despite brighter outlook

The stage is set for Winners of the UK equities recovery this year but 2009 PLC Awards companies and their Company of the Year FTSE indices, 2009 (sponsor: College Hill Associates) Rebased investors remain nervous, Winner: Mothercare; shortlist: writes Oliver Ralph Chemring Group; Domino’s Pizza UK & 180 IRL; Dunelm Group Entrepreneur of the Year s 2008 turned into 2009, life (sponsor: Evolution Securities) Winner: was looking bleak for Pen- Tim Martin of JD Wetherspoon; shortlist: Small cap* dragon, the car retailer. Joep van Beurden of CSR; Richard Harpin 160 Demand for new cars – espe- of Homeserve; Mark Dixon of Regus Acially the luxury brands that are a Best Investor Communication core part of its business – was dismal, (sponsor Redleaf Communications) and it was struggling with £357m of Winner: Britvic; shortlist: McBride; net debt. The shares, which had Mitie Group; Stobart Group 140 traded above 100p in 2006, had fallen Achievement in Sustainability to below 2p. (sponsor: PwC) Winner: Marshalls; Twelve months on, the picture was shortlist: AEA Technology; Carillion; RM FTSE 250 far brighter. The company had refi- Best Technology nanced its debts, trading had (sponsor: Singer Capital Markets) improved and brokers were forecast- Winner: Imagination Technologies 120 ing a sharp increase in profits. The Group; shortlist: Arm Holdings; Pace; company was cautiously confident. Vectura Group FTSE 100 That improvement was reflected in Turnaround of the Year Pendragon’s share price, which had (sponsor: Shore Capital) recovered to 23p, providing a hand- Winner: Galiform; shortlist: Renishaw; 100 some return for anyone who invested Volex Group at the bottom. Best Performing Share Pendragon’s experience was an (sponsor: Winterflood Securities) extreme version of what many mid- Winner: Pendragon market companies went through in Best Performing Smaller 80 2009. The year started bleakly, with Company Fund (sponsor: KBC Peel Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec companies struggling to cut costs and Hunt) Winner: Close Special Situations refinance amid tough trading condi- Fund Sculpture in the London Stock Exchange * Excluding investment trusts tions. Share prices had fallen heavily, Photo: Charlie Bibby Source: Thomson Reuters Datastream and bankruptcies were on the rise. But as the year progressed, compa- counterparts, suffering more in reces- are too small to be included in the the Brush and Rupert Bear charac- nies raised cash, share prices sions but recovering more quickly as All-share, which ended the year up 74 ters, went into administration after Inside this issue improved and a mood of cautious opti- they ease. per cent. hitting debt problems. Again, the Company of the Year Entrepreneurs JD Wetherspoon’s mism started to take hold. Companies The same is true for their share Such attractive returns are, as shareholders were left with nothing. The award to Mothercare recognises Tim Martin, a regular at his own pubs, are no longer asking whether they prices. Mid-market companies had a equity strategists say, simply a However outright bankruptcies the progress made under a new is this year’s winner, writes Jonathan can survive, but are instead looking poor start to 2009, falling heavily until reward for taking on added risks. And were rare. Far more common were management team headed Guthrie Page 3 for the right moment to invest. the market reached its turning point the risks of investing in small and financial restructurings that left by Ben Gordon (pictured The mid-market companies that in March. After that, though, they mid-cap companies were evident in shareholders, debtholders or both out right), says Ross Tieman Technology Philip Stafford coped best with these conditions are recovered far more quickly than those 2009. At one end of the spectrum, of pocket. For debtholders, the new Page 2 profiles winner Imagination recognised in the 2009 PLC Awards. of larger companies. The FTSE small shareholders in some companies lost bête noire is the Company Voluntary Technologies and the three The awards have been tracking the cap index ended the year up 50 per everything. Arrangement, or CVA. This process Communicating shortlisted groups Page 3 achievements of small and mid cap cent, slightly ahead of the FTSE 250 One of the most prominent exam- enables companies to avoid adminis- with investors companies for the past 23 years and which rose by 46 per cent and well ples was Cattles, the sub-prime tration by cutting debt and making A sparkling effort by Britvic Smaller company fund this year, for the first time, FTSE 250 ahead of the FTSE 100, which man- lender, which suffered from a combi- new arrangements with creditors. won the award for the soft Kate Burgess on winner companies are included. aged a comparatively pedestrian 22 nation of accounting irregularities These were most common in the retail drinks maker, says Close Special Situations Mid-market companies are, in gen- per cent increase. The star performer and trading difficulties. Its shares are sector with JJB Sports and Blacks Charles Batchelor and manager Deryck eral, more sensitive to the economic however, was the FTSE Fledgling now considered to be valueless. Enter- Page 2 Noble­Nesbitt Page 4 environment than their FTSE 100 index, consisting of companies that tainment Rights, owner of the Basil Continued on Page 2 2 ★ FINANCIAL TIMES TUESDAY MARCH 2 2010 Mid­Market Companies Success comes in many shapes and sizes

Buggy good performance: Company of the Year customers at a Mothercare Ross Tieman on the store in Croydon David Parry traits shared by four such as the Typhoon, F-22 or Joint Strike Fighter – platforms very different groups with a 25-year life-span. The development and spread of new weapons creates market he contenders for this growth and means countermeas- year’s Company of the ures must be ever more sophisti- Year Award were at cated, so Chemring has to be at first sight a diverse the forefront of its technologies. Tbunch: a national retail chain, a But it also buys three or four defence manufacturer, a pizza bolt-on acquisitions a year, add- delivery franchise and an inter- ing products and technologies it national retailer turned branded can then offer to its customers goods purveyor. in 85 countries. Typically, the Yet upon closer examination, sales of acquisitions quickly the common traits that underlie double. And by investing 8 per the success of these companies cent of turnover in its factories, have lessons for business lead- it can concentrate production in ers everywhere. automated centres of excellence. Of course, each has delivered The combination of strong remarkable and consistent organic growth, successful growth over many years, and bolt-on acquisition and integra- seen that reflected in out-per- tion, and technology develop- formance by its shares. But ment has produced impressive each also has a clear long-term results. In the year to October growth strategy measured in 31 2009, Chemring revenues rose decades, or even generations. 42 per cent to £503m, while pre- And each has very strong opera- tax profit surged 66 per cent to tional management focused on £95.8m. delivering exactly what its cus- Markets are used to this kind homes, 500,000 more than in £12bn market with a straightfor- tomers want, at the highest- of growth at Chemring, but will 2008, despite – or perhaps ward retail proposition “Simply Winner Progress is child’s play at Mothercare possible quality, at the very tightening US and UK military because of – the sour economic value for money”, it has built a moment when it is wanted. budgets constrain it? A little, climate. portfolio of 98 stores, adding 12 Mothercare, a retail brand that has been around unique Mothercare Spin pushchair, which allows Now that might sound exactly but not much, Mr Price believes. System sales (turnover of the more this year. for half a century but that lost its way in the babies either to face their parents or to look out like the task of Domino’s Pizza New threats will continue to franchised pizza outlets) rose 16 In the year to July 4, 2009, Mr 1990s, wins the Company of the Year award. The to the world. UK&IRL, but a little less require new responses, and as per cent to £407m, and pre-tax Adderley and his team delivered award is recognition of the progress made since The company has four routes to market. Around appropriate to the business of Chemring grows, its ability to profit accelerated 28 per cent to pre-tax profits of £53.9m, up 9.7 the arrival in 2002 of a new management team 600 UK retail stores, direct sales via the internet Chemring Group, a defence make bigger acquisitions, reap £29.9m, continuing a growth per cent, on sales ahead 6.7 per under Ben Gordon, chief executive. and catalogues topping £120m a year, franchised manufacturer that supplies synergies, and reach customers trend that made Domino’s a sec- cent to £424m. A trading update In the past eight years it has become a global and joint­venture stores overseas and sophisticated explosive products worldwide grows too, he says. ond-time contender for the PLC in November showed like-for- business, with 1,111 stores in 52 countries. “Babies “warehousing” for third­party retailers such as and decoy devices to military Awards. like sales growth of 15 per cent, and mothers have the same needs everywhere,” Boots. The aim is to expand all four channels. forces around the world. A readiness to innovate, and even as other retailers felt the says Mr Gordon (pictured, below). “The same In the UK overhauling the store portfolio, adding Yet according to David Price, As people get older, relentless attention to quality – squeeze on consumer pockets, solution works in Moscow, Mumbai or Manchester. out­of­town stores, and installing Early Learning Chemring’s chief executive, pro- they take their eating of ingredients, the ordering and £31.5m of cash at the bank. The product sells all around the world – we don’t Centre toy corners offer opportunities for further duction planning – to ensure process, and delivery times – are Yet the company scarcely have to change it by country.” growth. customers get what they want, habits with them, and the key to success in a highly advertises. Its customers come Mothercare has now delivered organic sales On the direct sales side, the internet offers when they need it – is one of the the potential market competitive home-delivery mar- by word-of-mouth. Mr Adderley growth every quarter for the past four and a nearly 500 pushchair options, compared with 75 group’s greatest skills and a ket, Mr Moore says. Smart sys- identifies three key strategies: half years, and its half­year ended in­store, and also solves the mobility vital competitive advantage. for Domino’s grows tems deliver online orders, appeal to all customers, from October 10 2009 showed sales challenges for expectant mothers and Chemring supplies a wide worth 20 per cent more on aver- the high-end to budget; offer a ahead 7.9 per cent at £387m, parents with young children. range of niche consumable prod- age, to the nearest outlet. This broad product range, and pro- including sound like­for­like International online stores will be ucts needed by military forces For Chris Moore, the chief pares delivery times and encour- vide knowledgeable staff and growth in the UK. Underlying launched this year. both to fight wars and for suc- executive of Domino’s Pizza UK ages repeat orders. Already, 15 good service. pre­tax profits rose 11 per cent The group is adding 100 overseas cessful peace-keeping. These & IRL, it is demographic and per cent of homes are custom- A range of 150 types of bed to £10m, though a switch to stores a year, most rapidly in India range from the decoys released prosperity trends that need to ers, but in the US, the propor- linen enables consumers to international accounting which has 24m births a year, and by warplanes, helicopters and be watched closely. “There is a tion is three times higher. brighten their homes for a mod- standards obliged the group to China, with 19m, compared with ships to distract incoming mis- large proportion of the popula- “There is still huge potential,” est price – the average spend in report a £7.1m pre­tax loss. 700,000 in the UK. “We are thinking siles, to clever explosives that tion – the over 55s – that seldom says Mr Moore. a Dunelm store is only £30. Mr Gordon says Mothercare, much longer­term than 10 years,” says power fire-suppression systems eat pizza,” he says. But as they Will Adderley, chief executive What are the biggest chal- which specialises in products for Mr Gordon. Demographics and rising or ejector seats, or “black light” get older, people take their eat- of Dunelm Group, has the same lenges of rapid growth? “Keep- mothers and infants up to age six, prosperity have a big influence on pyrotechnics that illuminate a ing habits with them, and his philosophy. “We are a young ing our culture strong, sticking is increasingly becoming a strategy. “We are very anchored to night-time battlefield only to the potential market grows. business, and we have a formula to our values, while keeping on specialised consumer goods global prosperity,” he says. “That is side equipped with matching The company, which owns that is not yet nationwide,” he responding to what customers company centred on products the future of the company. One night-vision equipment. rights to the Domino’s brand in says. Dunelm Mill, an out-of- want, and making long-term bearing its Mothercare and Early day the UK will be a very Demand can be short-term, as the UK and Ireland, operates town homewares retailer decisions,” says Mr Addeley. His Learning Centre brands. small part of what we armies engage in operations; through 136 franchisees with an founded by his parents Jean and peers at Chemring, Dominos Innovation lies at the heart of the do.” driven by replacement cycles, as average of 4.5 stores each. Bill Adderley in 1979, has a and this year’s winner, Mother- company’s success. An example charges need renewal; or tied to In the year ended December remarkable growth record. care (see article, right) would was the launch last year of the Ross Tieman introduction of new aircraft, 27, 2009, it delivered to 3.4m Battling incumbents in a almost certainly agree.

Winner A sparkling performance as Britvic adds juice to its links with investors

Smart ways to keep in Britvic, the winner in this category, has a This month he spent a week travelling round question we make sure we get back to them colourful and informative website but staying North America, meeting investors as far in 24 hours. We have a good story to tell.” in touch with shareholders still requires apart as Dallas, Denver, New York and The result has been an increase in old­fashioned footwork and an extensive Montreal. “material shareholders” from 80 to 200 over touch with investors round of face­to­face meetings with existing A long­term contract with PepsiCo helps the past two to three years while the total and potential investors. raise the British company’s profile in the US number of investors has doubled to 4,000 Craig Marks, head of investor relations, but brands such as Robinsons and J2O are over the past year. A rise in the number of terminal but attracts little never heard of us. We try to boil says he held 314 client meetings last year. unfamiliar there. Nor is sharing a common shareholders makes for a more liquid market Communications attention to itself for these vital everything down to a clear sim- language always a help, as Americans in the shares. but humdrum activities. The ple message.” consider a squash to be a vegetable and not The number of analysts following Britvic Medium­sized green-and-white lorries of Sto- Part of that message is to con- a concentrated fruit drink. has risen from seven to 22 over the past companies often bart Group, the transport and vince investors that own-label Britvic has a long history – the name was two years. “That is a good number given the logistics provider, are familiar products are not just a cheaper first applied to its fruit juices in 1949 – but it size of our business,” says Mr Marks. The struggle for the to drivers on Britain’s motor- version of the branded competi- was not until 2005 that it obtained a listing company is a member of the FTSE 250 but attention of analysts ways but the company was less tion but that they provide value on the London Stock Exchange. Initially it hopes to be approaching the FTSE 100 in well known in the City until its for the customer and a higher investor relations were contracted out but a few years. and shareholders, says 2007 listing. margin for the supermarket. they were brought in­house when Mr Marks Britvic launched an American Depositary Charles Batchelor Websites play an increasingly “We don’t keep the same prod- became head of treasury three years ago. Receipt programme last month, making it important role in investor com- uct on the shelves for years; we The company website has recently been easier for US investors to buy its shares. It munications. The best provide develop a new one,” says Mr improved and the investor relations section has also diversified its sources of debt Catching the eye of the investor almost as a matter of routine Beveridge. “We help our cus- receives 6,000 hits a month. “We put a lot funding by means of a $250m private note is never easy for the mid-market masses of data on company per- tomers compete. The Sains- of effort and resources into upgrading the placement in December. There are no company. The more stable trad- formance, share price move- bury’s dishwasher tablets are website,” says Mr Marks. “It represents a immediate plans to spend the funds but “this ing conditions of recent months ments and brokers’ forecasts different from Tesco’s.” first port of call for investors. puts our balance sheet in a good place”, may have given investor rela- that would have required hours The effectiveness of McBride’s “We have a reputation for putting says Mr Marks. tions teams a more upbeat mes- of patient searching only a few communications is reflected in ourselves forward in terms of investor sage to sell. But they still have years ago. the arrival of new investors Let’s get fizzical communications. If an investor has a Charles Batchelor to battle for the attention of They are becoming more from the UK, continental investors and analysts. interactive, allowing investors Europe and the US in the past Britvic, the soft drinks group to manipulate data, and provid- three years. The biggest share- “We did an overview of the explain to investors was the the first year engaging with the years. Accessing the company’s that includes Pepsi and Tango ing webcasts that allow distant holder is Invesco Perpetual with strategy for our annual report move from providing a single investors we inherited,” says website prompts a video of its in its range, has the advantage investors to participate in AGMs a 17 per cent holding. “We have and the website,” Ms Lockhart service to a customer – for, say, Ben Whawell, finance director. operations accompanied by a of a readily-recognisable con- and results presentations. broadened the pool of investors explains. “We looked at best cleaning – to integrated con- “We got the support of the thumping musical score. Forty sumer product but the company McBride, with 19 factories in by communicating more practice and made sure we were tracts that embrace all the facil- original investors but over the people attended its last inves- itself has to work at obtaining seven countries, offers six lan- clearly,” Mr Beveridge explains. at the top of our game.” ities management services past year we have tried to diver- tors’ day, attracted in part by recognition outside the UK. guages on its website alongside For Mitie, the challenge is to The company puts on a road required for a site or a building. sify our investor base.” Among the chance to drive one of the McBride, a supplier of own-label English. But websites are only ensure that investors and ana- show twice a year but also “It was important to communi- new investors in the company company’s articulated lorries. household and personal care part of the picture and meetings lysts have easy access to senior arranges for investors to meet cate that the business had are Fidelity, BlackRock and Westbury had fewer than 1,000 products to supermarkets, is with analysts, site visits and management without distract- the investor relations team or changed,” says Ms Lockhart. Rathbones. investors before the reverse probably in most homes but AGMs also play a big role. ing managers from running the senior managers on a monthly Stobart Group obtained its As a private company Stobart takeover but Stobart now has remains unknown to the major- “We don’t have a brand pres- business. “Our website allows basis. In January it took ana- listing through a reverse takeo- had had no need to liaise with more than 3,000, including small ity of its customers. ence with customers,” says Bob people to get the basic informa- lysts and investors to visit some ver of Westbury Property Fund, City investors so it started with investors from its 25,000-strong Mitie, a support services Beveridge, company secretary tion but analysts want to get a of the 15 sites it manages in a manoeuvre that left the com- a clean sheet after the listing, fan club. “Some of them are out- group, cleans the Tower of Lon- and head of strategy at McBride. feel for the management,” says London. pany with a large number of says Mr Whawell. It has contin- side our depot now,” says Mr don and provides security at “The challenge for us is to com- Erica Lockhart, investor rela- One aspect of the company’s investors focused on property ued the quirky, down-to-earth Whawell, “They are taking pic- Eurostar’s London St Pancras municate with people who have tions manager. business that it was keen to rather than haulage. “We spent approach that marked its earlier tures of our trucks.”

Contributors Mid­cap companies sitting tight despite brighter outlook Oliver Ralph Charles Batchelor, UK Companies Editor Ross Tieman FT Contributors Continued from Page 1 of money available, making rights issues as companies ices group Mitie, data from in the past and the UK offi- recovery. And the more tan- fundraising efforts from look to take advantage of Capita Registrars shows cially leaving recession in gible evidence of a recovery Kate Burgess Andrew Baxter Leisure taking the CVA mid-market companies far economic recovery, but that, of those companies the fourth quarter of 2009, – the deals and internal Investment Correspondent Commissioning Editor route out of trouble. more difficult. Boards warns: “We’re very nervous that paid dividends in both the stage is set for a recov- investment that would sig- For shareholders, 2009 decided to raise money of management teams who 2008 and 2009, the average ery in 2010. Certainly mid- nal companies’ willingness Jonathan Guthrie Steven Bird Enterprise editor Designer will be remembered as the while they had the chance, want to go back to the same change was a drop of market share prices, which to back their optimism with year of the equity fundrais- even if they had no immedi- level of debt-to-ebitda as almost 6 per cent. rose so strongly in the sec- hard cash – is hard to find. Fiona Harvey Andy Mears ing, especially the rights ate use for it. they had two or three years Those fundraisings and ond half of 2009, are pricing “We have a bit of paraly- Environment Correspondent Picture Editor issue. With debt markets Fundraisings were partic- ago.” dividend cuts were accom- in an improvement in cor- sis at the moment. Compa- either off-limits or ularly common in the prop- Even for those companies panied by operational porate fortunes. nies are keeping their cost Pan Kwan Yuk For advertising details, extremely restricted, mid- erty and property-related that avoided cash calls, changes. “Companies have And yet, almost a quarter bases down and sitting UK Companies Reporter contact: Robert Grange cap companies turned to sectors and shareholders, returns to shareholders spent time addressing their of the way into the year, tight,” says Mr Snell at Phone +44 (0)20 7873 their investiors for money. for the most part, signed up were dented by dividend balance sheets and cost companies and their share- PwC. John Reed Motor Industry 4418, fax +44 020 7873 Such fundraisings were to them. “If we like a com- cuts. Some companies can- base efficiencies,” says holders remain nervous. “There are good opportu- Correspondent 4006, e­mail: partly driven by fear – that pany, we’ll always support celled their dividends David Snell, partner at Companies are still cau- nities out there and once [email protected] the recession could last the management team,” entirely, and others reduced PwC. “They are in a much tious in their official out- confidence returns and the Philip Stafford or your usual Financial much longer than expected, says Catherine Stanley, them. While there were better place than they were look statements, pointing to uncertainty of the [forth- UK Companies Reporter Times representative but also that large rights head of UK small compa- some dividend increases, 18 months ago.” improvements in some of coming UK general] elec- issues from FTSE 100 com- nies at F&C Investments. including chemicals special- With fundraisings, lower their markets but unwilling tion is gone, companies will panies would empty the pot She is expecting to see more ist Croda and support serv- dividends and cost cuts now to call the start of a broader turn to investment.” FINANCIAL TIMES FRIDAY MARCH 12 2010 ★ 3 Mid­Market Companies Investing in new products and markets pays dividends

although tight financial cove- revenue down compared with research and development, and Turnaround of Year nants limited its ability to make Winner Galiform the year before, Volex is fore- engineering, steady at 17 per more forward-looking invest- cast by house broker RBS to cent of group turnover. Pan Kwan Yuk looks ments. When Matthew Ingle became chief executive of to take MFI off its hands, over numerous issues make £8.3m profit after tax for The move gave Renishaw at three successful “The business was very much MFI in October 2005, few in the City thought he pertaining to the net asset value of MFI when it the year to April 2010 after hav- some much-needed breathing in survival mode during the last could rescue a company that stood on the brink of was sold. Then, when MFI collapsed into ing incurred losses of £22m in space to adjust and adapt its recovery strategies decade,” says Ray Walsh, who collapse as its eponymous furniture retail business administration in November 2008, it became the two years to June 5 2009. business. In particular, it has was bought in as chief executive haemorrhaged cash. responsible for the leases to 46 of MFI’s stores. Like Volex, Renishaw, the been able to invest in new prod- in 2009 after the group issued But over the past four and a half years, he has The concerns were compounded by signs that the engineering company that spe- ucts in fields such as medical Doing business during a reces- three consecutive profit warn- proved the doubters wrong. While it would have onset of a recession was starting to weaken cialises in precision measure- robots for performing jobs such sion can be tough even for the ings in 2008. “Much of the been easier to try to squeeze costs further in the kitchen sales. ment systems, attributed its as brain surgery, and to spend strongest of companies, but it is period was spent on the back hope that eventually the retailing environment “For us, it has not just been about dealing with turnround to its decision to con- money on developing its expo- doubly hard for businesses that foot. There was no focus on top- would improve, Mr Ingle tackled the problem head the recession, it’s been much more,” says Gary tinue investing in new products sure to faster recovering mar- are turning themselves round. line growth.” on. Less than a year into the job, he took the Rawlinson, head of investor relations. “While other and markets in spite of the kets such as China. This has certainly been the Led by Mike McTighe, who radical decision to hive off the retail business and companies were having to face up to the recession downturn. The tactic of maintaining case for Volex, the maker of joined as chairman in March focus the company – renamed Galiform – on we had to face this additional burden of paying A global leader in the niche R&D spend is proving astute, electric and telecom cables and 2008, one of the new manage- Howden Joinery, its profitable and growing kitchen rent on MFI’s stores. As such, it has been a area of measurement probes for with the company set to bounce one of the contenders for the ment’s first priorities was to sell supply business. four­year journey, rather than one that just took metal cutting – an activity vital back as the wider economy inaugural Turnaround of the its lossmaking wiring harness For the year to December 26, 2009, the group place over the last year.” to sectors from car production regains its composure. Year award. business, which makes electri- reported pre­tax profits of nearly £69m. While this Galiform ended taking a charge of nearly £100m to white goods – Renishaw was With its order book growing The Warrington-based com- cal systems used in commercial was a 13 per cent drop compared with the £79m on rents and other associated costs related to hard hit by the sudden drop in again, Renishaw has returned pany underwent a period of vehicles and the aerospace reported in 2008, it still represented a vast these properties. But the market seems to think sales and orders in the second staff to full pay in January after rapid expansion and interna- industry. improvement over the £111m pre­tax loss in 2005. the company has finally seen the last of the half of 2008, when manufactur- an 11-month pay cut. It has also tionalisation in the 1990s, The sale put the company on Progress was also made on cutting net debt and MFI­related legacy. Shares in the group have ers abruptly switched off their reinstated its dividend six largely on the back of acquisi- a better footing to renegotiate improving margins, but it has not been all smooth nearly quintupled since the start of 2009 to 80p a capital investment. months earlier than expected tions in North America. But the its banking facilities. This in sailing for Mr Ingle and his team. share. Business conditions had dete- and Ben Taylor, assistant chief bursting of the dotcom bubble turn gave the group more head- Shares in the group lost nearly 92 per cent of And with many of Galiform’s customers more riorated to such an extent that, executive, says the company is in 2001 saw orders from telecom room to invest in new, higher their value between April 2007 and October 2008, exposed to the more stable market in tenanted by the beginning of 2009, the looking to hire more than 100 operators and technology com- margin products and allowed it hitting a low of 12.75p, partly on fears that it housing, and homeowners choosing to improve group had to lay off about a people in the UK in the months panies dry up overnight. to put more resources towards would not be able to cope with the legacy of its rather than move, the company might just be over quarter of its 2,000-strong work- to come. As a result, the company expanding its presence in Asia. separation from MFI. the worst of its troubles. force and implement a 20 per Games Workshop Group, spent much of the noughties The strategy appears to be First it was embroiled in a long­running legal cent salary cut across the board. which was on the original short- downsizing its operations and paying off. Although trading dispute with the private equity group that it paid Pan Kwan Yuk Yet management did not list, declined the nomination for rationalising its cost base, remains tough, with first-half panic. It kept its spending on the award. Making the Gadgets, broadband and most of digital TV boost suppliers Technology Winner Imagination chips away at the market Recession­proof home Apple’s choice of Imagination which would put it on the cusp of growth entertainment and mobile Technologies, a small British company becoming a notable force in the global from unfashionable Hertfordshire, as market. phone markets have the provider of the designs for key The growing importance of the UK benefited the sector, graphics chips in the forthcoming group was illustrated last June when iPad came as little surprise to the Saad, the Saudi Arabian investment prospects writes Philip Stafford industry. group, was forced to offload part of its Imagination’s graphics technology is 29m share stake. Within days it had regarded as being among the world’s been snapped up by Apple and Intel, enjoyed a rerating that val- Companies developing emerging tech- most advanced and reliable for which amassed holdings of 9.6 per Entrepreneurs ues its share capital at nologies can be made – and just as gadgets that rely on a high­quality cent and 16 per cent respectively. almost £900m. Mr Van Beur- easily as destroyed – by a recession. video interface, such as smartphones, Intel is looking to break into mobile Jonathan Guthrie den says the group’s risks As cost cutting becomes the mantra TVs and iPods. Most graphics and TV markets but Hossein Yassaie, profiles the are now much better bal- in households and corporate head- technologies treat a screen as one Imagination’s chief executive, was anced: “Our top five cus- quarters alike, one of the most scruti- piece of data, and as it becomes relatively relaxed about the business figures in tomers now represent 35 nised areas for savings is technology. denser with more pixels, it requires stakebuilding, viewing it as essentially this year’s shortlist per cent of revenues, Fundamental questions are posed; more processing power and memory. a defensive move. In his view, whereas a single customer How vital is this service for which I By contrast, Imagination’s technology complete ownership of Imagination by used to represent 30 per subscribe £30 per month? Could I get in effect breaks down the screen into any one company might upset many he shortlisting of cent.” However he fights by without that? If 2009 is a guide, smaller pieces, which requires lower of Imagination’s other customers, Joep van Beurden shy of using the word consumers and corporations alike power and less memory. which could then turn away from its in the Entrepreneur “turnround” to describe have shown a distinct unwillingness From its small and unassuming designs. Because Imagination is of of the Year cate- CSR, saying: “We have not to compromise on the gadgets and headquarters in Kings Langley, more value to its customers if it Tgory recognises his achieve- done yet. There are massive machines used every day for commu- Imagination has supplied designs that remains independent, Apple and Intel ment in reviving the for- growth opportunities.” nications and entertainment. have been incorporated into more than took stakes to ensure that they could tunes of CSR, the Cam- Richard Harpin, founder Just a few years ago, pay TV, 100 mobile handsets, including devices prevent any one group from taking bridge-based technology and chief executive of whether cable or satellite, had been from Nokia, Samsung, Sony Ericsson control. company of which he is Homeserve, is no stranger regarded as something of a luxury in and Motorola, while Apple has taken Imagination is also known for its chief executive. to enterprise awards, hav- the home. Emerging only in the 1990s, the UK group’s designs for its iPods Pure DAB digital radios. The two CSR came to prominence ing won the UK section of business models such as BSkyB and and the 3G iPhone will have seemingly disparate parts of as a designer of chips for Ernst & Young’s Entrepre- Virgin Media had never been tested Imagination­designed processors. Imagination – DAB radios and graphic Bluetooth wireless head- neur of the Year contest in by a full-blown recession and while Imagination expects to see a strong chip designs – have led to calls for pieces used with mobile 2008. Mr Harpin had an Mine’s a pint: Tim Martin enjoys his work Charlie Bibby executives were quietly confident cus- rise in royalty revenues this year after the group to divest the Pure phones. However, the com- early interest in enterprise, tomers would continue to subscribe to NEC, the Japanese group, deployed its subsidiary but Mr Yassaie has strongly pany’s popularity with setting up a mail order fish- share of cowboy traders. revenues by 9.8 per cent to TV services, an element of uncer- licences in its global brand. The UK resisted, forecasting consumers will investors began to flag after ing tackle business at the Homeserve, in which Mr £557m in the six months to tainty remained. group is on track to see about 200m see new products that integrate the this market matured and age of 15. He went on to Harpin holds a stake of last June, although profits But for Neil Gaydon, chief executive units of products containing chips two. the company lost a key con- earn his spurs as a corpo- around 17 per cent, slid to £69m. The ranks of of Pace, the recession is proving one designed from its licences shipped in tract with Nokia. rate executive at consumer demerged from South Staffs first-time entrepreneurs overriding point: that people still see the 2010­11 financial year, a total Philip Stafford Mr Van Beurden brought goods giant Procter & Gam- Water in 2004. In November have been swelled by TV as offering unrivalled value for a useful mix of corporate ble, where he worked in it announced that profits redundant executives start- money when it comes to entertain- and entrepreneurial experi- marketing. had increased £4.3m to ing their own businesses. ment. “When questioning discretion- ments rose 33 per cent to 54m units. nition that technology companies ence to reviving the busi- After a spell in manage- £18.1m on turnover almost Part of Regus’s appeal is its ary spend, there are three things peo- The popularity of the iPhone was large and small cannot afford com- ness, having worked at ment consultancy, his next £5m higher at £173.8m for flexibility, offering every- ple give up last: their mobile phone, part of a broader acceptance around pletely to turn off their research and Royal Dutch Shell, McKin- move was an apparently the six months to the end of thing from suites of offices broadband and digital TV,” he says. the world of smartphones, which are development budgets. Designs worked sey and at Silicon Valley unlikely one. Mr Harpin September. Homeserve to economical business Illustrating his point is the perform- just as much a handheld mobile com- on today are intended for devices start-ups. He joined CSR moved to South Stafford- hopes to develop a new lounges geared to the peri- ance of Pace, which raised its earn- puter as a mobile phone. Smartphone likely to be sold many years in two and a half years ago. shire Water, a small utility market for its insurance in patetic business people ings forecasts twice last April to cope sales rose 30 per cent year-on-year in advance; making efficiencies without “The challenge was to based in the West Midlands, the US, which could under- known as “road warriors”. with demand for high-definition TV the fourth quarter to 53m phones, strangling prospects for growth in the make the right choices. The where his job was to pin further rapid growth. Mr Dixon set up his first set-top boxes. It expects to ship more according to Strategy Analytics, a future is one of the toughest balanc- difficult thing was in letting Mr Harpin, 45, is an evan- business, Dial-a-Snack, after than 16m boxes around the world this research company. ing acts technology companies face. go of some activities, as gelist for enterprise. He leaving school at 16. He sub- year to the big pay-TV companies This fast-growing market also However Vectura has come up with well as choosing what to Homeserve’s speaks regularly on the sub- sequently worked as a bar- such as News Corp and Canal Plus, helped Arm Holdings outperform a novel twist on the norm. Unlike concentrate on,” he says. products have ject at schools and has writ- man, miner and encyclopae- making it the third-largest set-top box rivals in the global semiconductor many other biotechnology and small The reference is to a pro- ten a book about his philos- dia salesman. maker in the world. market downturn as its chips are in pharmaceuticals groups, Vectura’s gramme of developing base- proved popular, ophy entitled A Mind for The idea for Regus struck A glance at the performance of business model does not rely on pat- band chips to connect hand- giving peace of Business. He is also an him when he saw business Apple in the past year is likely to enting a chemical formula for a medi- sets with mobile networks. accomplished helicopter people huddling round prompt doubts as to whether there Technology companies cine. It focuses on taking existing Mr Van Beurden took CSR mind to consumers pilot, sometimes commut- small tables in a hotel in has been a recession at all. The US large and small cannot medicines – many of whose patents out of this crowded market, ing between his home in Belgium trying to hold technology group has repeatedly con- have expired – and reformulating with the aim of concentrat- Yorkshire and Homeserve’s meetings there because founded analysts and critics alike afford completely to turn them so they can be delivered via an ing on Bluetooth, wi-fi and develop a business selling headquarters in Walsall. they lacked appropriate with huge rises in sales. While the off their research and inhaler device. GPS. plumbing services. What Mark Dixon is meanwhile serviced premises. Regus latest iPhone model, the 3GS, has Last year was something of break- Just as bravely, CSR catalysed the creation of a a familiar figure to aspiring floated on the stock market been a key driver, many have been development budgets through. For the six months ended bought SiRF, a US-based business now capitalised at entrepreneurs for two rea- in 2000, but was then hit by surprised by the resilience of sales of September, Vectura’s pre-tax loss satellite navigation com- more than £1bn was the sons. First, because he is the collapse of dotcom com- the group’s desktop iMac computer. declined by 68 per cent to £3.7m on pany, for £91m during what idea of offering insurance the founder of Regus, the panies, some of whom were Nevertheless, its decision to sell a more than 90 per cent of the mobile revenues that jumped 71 per cent to Mr Van Beurden describes against domestic emergen- serviced offices company tenants. top-of-the-range smartphone in the phones sold globally. Smartphones are £22.8m. Royalty revenues jumped 15 as “the deepest, darkest cies, such as burst pipes. valued at £820m by the Regus, in which Mr Dixon teeth of a recession has been a huge particularly lucrative, containing up per cent to £6.8m, with most of this part of the nuclear winter Sold via utilities across the stock market. Second, many holds a stake of around 40 success that has benefited the compa- to six royalty-generating chips per increase coming from Advate, a treat- of the economy”. country, the product has entrepreneurs have used per cent, now operates in 74 nies that supply the components. For handset. ment for haemophiliacs that helps to At the same time, CSR proved popular, giving Regus offices, or at least countries. His “weekend Imagination Technologies, 2009 has Arm was not immune from the clot blood. was able to announce that peace of mind to consumers looked round them during a job” is to run the Chateau been something of a breakthrough slowdown. Full-year sales were up 2 Advate is marketed by Baxter and it had regained Nokia as a for whom home repairs rep- hunt for premises. de Berne, one of the biggest year. Although it is the owner of Pure per cent at £305m, but on a dollar had annual sales of $1.5bn in 2008; client. The company’s resent a financial badlands Indeed, an influx of start- producers of rosé wine in digital radios, the group has devel- basis, annual revenue fell 10 per cent. Vectura receives 1 per cent of the shares have accordingly with more than its fair ups helped raise Regus’s Provence. oped a position as a world leader in Even so, this was far better than some sales total annually. licences for graphics chips that are rivals, which saw turnover decline by It has also received milestone pay- used in laptops, mobile phones and a quarter. Full-year pre-tax profits ments from Novartis and Sandoz, the Winner Ale and hearty success for Wetherspoon’s chairman Apple’s iPhone (see article, right). were down 25 per cent to £47.3m, due Swiss company’s generics arm, for For the six months ended December mainly to higher spending on another drug targeted at both chronic According to Tim Martin, winner of the Entrepreneur of the Mr Martin believes that the contemporary view of the 31, group revenues rose 40 per cent to research and development. obstructive pulmonary disorder and Year award. “When I kicked off I couldn’t even run one pub, traditional British pub as a cheery home­from­home is £38.2m and partner chip unit ship- Yet Arm’s profits decline is a recog- asthma. let alone a pub chain.” That was 30 years ago. Now Mr tinged with nostalgia. “A lot of old­fashioned pubs were Martin is the chairman of JD Wetherspoon, which has more rubbish – they were not well run,” he says. The growth of than 700 pubs and annual turnover of £955m. coffee shops in the UK “and the aspirations of staff” made The entrepreneur is one of the most recognisable figures Wetherspoon something of an agent of change in the in British business, known both for his pithy opinions and licensed trade. The managed chain began offering food all shock of grey hair. The former law student started out with day 20 years ago. The first non­smoking areas were a single pub in North London and has expanded the introduced 15 years ago. Ten years ago Wetherspoons, company – named after one of his teachers who had which floated in 1992, began selling frothy coffees. Five problems keeping discipline – mostly through opening new years ago its pubs started opening for breakfast. premises. “I had an early vision, along with 25 per cent of The pub industry is currently struggling with a serious the population, of what a good pub should be,” Mr Martin decline in its fortunes. Licensed premises are closing at a says. rate of 50 a week. The main difficulty, exacerbated by the The formula that has driven the expansion of JD smoking ban, is that drinkers are staying at home with Wetherspoon has been to create pubs with low prices inexpensive supermarket­bought alcohol. Wetherspoons has where there is no music and the atmosphere is relaxed. Mr proved relatively resilient, reporting a 1.2 per cent increase Martin, crucially, is a regular at his own pubs. He is more in like­for­like sales in its second quarter ended January 3, often found testing their facilities than shuffling paper at 2010. Mr Martin says: “Despite everything, it is possible to Wetherspoon’s head office in Watford. The entrepreneur do well if you are good enough. People still want to go out says: “You can’t be too authoritarian with customers or and enjoy themselves.” staff. You have to try to find out what other people want and incorporate that into the actions that you take.” Jonathan Guthrie On the ball: Imagination’s chip designs are used in a wide range of handheld devices Charlie Bibby 4 ★ FINANCIAL TIMES FRIDAY MARCH 12 2010 Mid­Market Companies

Profile Marshalls To win the PLC award for sustainability twice in successive years, a company must be doing something that makes it stand out from the crowd. For Marshalls, that has meant taking the lead on one of the most promising new methods of helping consumers to make environmentally sound choices: carbon labelling. Marshalls is a garden supply specialist, with a product range including paving, exterior lighting and other indoor and outdoor features. Now, environmentally aware customers can judge the credentials of the entire range of products on sale, because Marshalls puts labels on all of them, showing how much carbon dioxide was produced in their manufacture. Chris Harrop, group marketing director, calls the move “a bold step”. Only a handful of companies put carbon labels on their products, and many of them have stopped short of applying them to their entire range. Marshalls’ reasoning was that putting the labels on the whole range would allow customers to make comparisons, and choose the lower carbon good in favour of the Paving the way: London’s Somerset House, where Marshalls worked on a refurbishment project Charlie Bibby higher carbon alternative. The more people who choose lower carbon alternatives, the stronger the signal to the retailer. Carbon labelling has some high­profile supporters. Sir Terry Green agenda holds firm in crisis Leahy, chief executive of Tesco, the supermarket chain, told the Financial Times that the labels were awards before, and has made progress the environment.” pany for sustainability, can also boast “one of the most important ways” Sustainability in pursuing its environmental agenda. AEA Technology, also shortlisted, an in-house advisory service on envi- in which retailers could help their The computer specialist, which has might be said to have a homegrown ronmental issues. One of the construc- customers to make informed Environmental concerns made its name in the education sec- advantage in reducing its carbon foot- tion and support services company’s choices about the goods they buy. are still important for tor, has a “green RM” project by print. The company advises the pri- many units is Enviros Consulting, But carbon labels are only part of which it advises schools, colleges and vate and public sector on implement- which for more than 30 years has the story. Marshalls has also made many companies, universities on how to cut their envi- ing environmentally sustainable poli- advised businesses on improving their providing other ethical information writes Fiona Harvey ronmental impact. This service that cies, and has more than 200 energy environmental and social credentials. to consumers a top priority. will be made even more important efficiency consultants and more than Another unit also helps: TPS Consult For instance, the company has when many universities and schools 130 experts on waste management. is Carillion’s design company, one of worked to educate buyers on the ith the onset of the finan- are required to monitor their energy The company’s own efforts to whose specialisms is examining life- pitfalls of Indian sandstone, an cial crisis and recession, use and emissions under new UK gov- improve its environmental perform- cycle costs for materials used in the increasingly popular material for some business analysts ernment regulations taking effect ance are informed by its advisory role construction industry, including ways garden paving but one which is predicted that the envi- from April 1. to other businesses, and neither have of re-using and recycling products and often made using child labour, and Wronmental concerns that had risen so RM has also taken steps to ensure been curbed by the downturn. Robert of using building materials that quarried in ways that can damage fast up the corporate agenda in the the computers it supplies are as Bell, operations director, says: “The improve energy efficiency. water supplies. past few years would be jettisoned, in energy efficient as possible. Airlines creation of a low-carbon economy The company has developed a “sus- Marshalls ensures its products favour of a more traditional focus on frequently come under fire from pro- remains at the heart of the interna- tainability excellence model”, which come from quarries with high pure profit. testers, because of their contribution tional business agenda, in spite of the includes efforts to minimise energy environmental and ethical standards, The entries for this year’s award for to global greenhouse gas emissions. worldwide recession.” use, cut waste and to help customers with protection for workers. sustainability show that many compa- But few people realise that the carbon AEA argues, in fact, that it is even use their resources more efficiently. Its own workers are also nies are continuing to improve their dioxide emissions generated by the IT more important to cut greenhouse gas Although the company’s carbon foot- encouraged to play their part: last environmental performance, and even industry are about equal to those of emissions in a downturn, because the print has increased in size, this was year, more than 4,500 of the saving money by doing so. aviation. Reducing emissions from IT best way to do so is by eliminating owing to an acquisition and like-for- company’s employees, from 530 To impress the judges, the short- should be seen as a high priority, RM wasteful practices. Companies can like emissions were down. In common workplaces, took part in a “walk to listed companies had to show that argues. save considerable amounts by becom- with an increasing number of compa- work” scheme that saved 12,791kg they were making their own opera- Online, the company fosters a “best ing more efficient in their use of nies, Carillion buys only green energy of carbon. tions more economically, environmen- practice” website for schools, where resources, including energy, water for its head office. As well as cutting its carbon tally and socially sustainable. They they can share ideas on how to reduce and raw materials. The company The sustainability programme also dioxide emissions, Marshalls has should also have looked outside their their carbon footprint. Last year, RM boasts it has saved its clients more includes working with local communi- targets to cut its use of water own companies, to helping customers also set up a green technology prize to than £1bn. ties, for instance with homeless char- substantially, and to reduce the and supplier companies to address the reward those schools that have per- Last year, AEA published, along ‘The creation of a ity campaigns and through working amount of waste it sends to landfill. same issues. formed best. Shaun Snowden, director with the Carbon Disclosure Project, a low­carbon economy with Age Concern. Marshalls was the first company in All the three shortlisted companies of IT at Kingswood School in Bath, study on how the UK government Carillion also has targets on main- its sector in the UK to be accepted and the winner were able to demon- the first winner of the award, says: could encourage suppliers to public remains at the heart of the taining biodiversity in the sites it into the UN Global Compact, which strate that their efforts to be greener “Using green IT is really important to sector bodies to improve their envi- international business works in, and has set up the Carillion binds companies to meet certain and more socially aware were not a school like Kingswood – not only ronmental performance, by putting in Natural Habitats Fund, through ethical and environmental standards. dented by the downturn. In fact, they because of the energy-saving benefits, place “green” standards for all pro- agenda, in spite of the which the company has given more took on even more ambitious plans. but also because it can motivate stu- curement. than £150,000 to the Wildlife Trusts Fiona Harvey RM has been shortlisted in these dents to consider their own impact on Carillion, the third shortlisted com- worldwide recession’ charity, funding 25 projects. Winning ways Cost reductions help car of a ‘pragmatic retailer shift to higher gear it had swung from an underly- used-car stock because of a lack Best Performing Share ing loss of £33.6m for 2008 to a of demand. Prices fell to their profit of £10.1m for 2009. lowest levels in decades, which contrarian’ John Reed examines Trevor Finn, chief executive, brought back buyers to an how Pendragon won attributes the shift in the com- undersupplied, severely out-of- pany’s fortunes to the £68m whack market that then saw pragmatic.” A colleague calls investors back in 2009 reduction in its cost base. He prices surge. Smaller Company Fund him “a pragmatic contrarian”. plays down the role of the scrap- Pendragon earned a 12 per The methodology worked well page scheme, which boosted cent gross margin selling used Kate Burgess talks to last year – Close, which has When the credit crunch began total industry sales in the UK cars last year, compared with the manager of Close about £18m invested in about 30 Deryck Noble­Nesbitt: ‘accounting is overlooked’ in 2008, nervous consumers last year by about 285,000. the 7.5 per cent margin it earned stocks, was up 247 per cent in reined in their discretionary “The major shift in profitabil- selling new ones. Special Situations 2009 – having fallen more than risk from a business perspective came from that holding. spending. One of the first things ity has been around cost reduc- Meanwhile, the group’s Strat- 50 per cent in 2008. was low.” Mr Noble-Nesbitt invested in they stopped doing was replac- tion, not the market picking stone premium-car division Mr Noble-Nesbitt points out Timing was on his side. He other commodity-based groups ing their cars. up,” Mr Finn says. The group sprang back to life as Britons It is moot whether it was a he has more or less built the took on the fund just as confi- that he thought would rally as While many consumer goods cut its headcount by about 2,700 began buying large and expen- degree in biological anthropol- fund from scratch since he took dence tanked. Shares were the markets’ view of economic companies saw their profits and to just over 10,000. sive cars again. Pendragon has a ogy from Cambridge or six years over managing it in August 2008 cheap and investors were taking conditions improved and took share prices hammered, automo- Pendragon’s shares began to large market share for Jaguar as an accountant that gave after the previous manager left their money and running for profits as shares bounced. In tive retailers – including Pen- surge after it negotiated a new and Land Rover cars, two Deryck Noble-Nesbitt the requi- and cornerstone investors took cash. December 2008, about 12 per dragon – fared worse than most brands whose sales suffered site skills to turn his fund – their money out. Shares in Aurum, a gold min- cent of the fund was in gold because of their direct exposure especially badly in 2008 and Close Special Situations – into But being a tiny fund had its ing company, for example, had mining and another 21 per cent to both contracting credit mar- 2009, but which are now report- the best-performing UK smaller advantages. It takes only one fallen to 12p even though the in other miners. By September kets and collapsing consumer ing rebounding sales. companies fund last year and holding in one good company to company had 40p of cash per last year the holdings in gold confidence. “The recovery financially for win the fund he manages the propel a small fund to the top of share, says Mr Noble-Nesbitt. mines had come down to 6 per The sector runs on thin oper- us has been around the pre- PLC award. the charts. That is what makes Investors sold the shares cent and he had 13 per cent in ating margins even in good mium brands – BMWs, Land Biological anthropology was it impossible, says Mr Noble- because they could not sell less other miners. times. Car retailers have high Rovers, Jaguars – not volume all about genetics, ecology, epi- Nesbitt, to compare his fund liquid holdings. “It didn’t mean The money was switched to fixed costs because of the bricks brands,” says Mr Finn. “Pre- demiology and the mathemati- with previous winners such as the company was going bust,” industrials such as British Poly- and mortar of their dealerships, mium brands went into reces- cal study of change with some Standard Life Investment’s fund says Mr Noble-Nesbitt. thene Industries. “It is one of so lower sales tend to reflect sion first then fell more aggres- social anthropology and the managed by Harry Nimmo, who Many other funds are now too the largest producers of poly- directly on the bottom line. ‘Premium brands went sively, and are coming out study of behaviour thrown in, has won the PLC award more large to benefit when such small thene in the world. Since 2005 As the crisis deepened in late into recession first faster.” says Mr Noble-Nesbitt. His years cap companies start recovering, the shares have fallen because 2008, financial investors then fell more Analysts’ consensus forecast at Deloitte, the accountancy His best pick last year says Mr Noble-Nesbitt. of cost pressures and lower deserted listed car dealership for Pendragon’s earnings for firm, from 1994 were spent stud- His best pick last year was demand.” Then as margins groups in droves. The impact of aggressively, and are this year is a £25m profit. The ying balance sheets and cash- was Norseman Gold, Norseman Gold, Australia’s recovered in 2009, the shares the crisis on the share price of company is not contradicting flows. longest continuously producing recovered, rising 85 per cent in Pendragon and its listed com- coming out faster’ the number. “I think accounting is over- Australia’s longest goldmine, which is listed on the April and May. Again Mr Noble- petitors such as Inchcape was Trevor Finn, Nonetheless, some predict looked,” he says. “It gives you continuously UK’s Alternative Investment Nesbitt took profits and rede- ugly as investors began to focus Pendragon chief executive another tough year for the sec- an important set of tools.” Then Market. He put 1 per cent of the ployed the money. on their high gearing levels. tor, with scrappage winding again, anthropology was impor- producing goldmine fund into the shares when they The market is less easy to But then the market turned down at the end of this month. tant too, he adds. “You can have were trading at 1.6p. They are read now, he says. “The obvious again in 2009, thanks in part to £530m three-year financing “It’s going to be a tough sec- as many qualifications as you now around 50p a share. “It conundrums now are the signs a government-backed scrappage package in April. Britain’s ond half – that’s the big concern want but you have to do other than once. Mr Nimmo’s fund is struck me at the time that it of fiscal stimulus being with- bonus of £2,000 per car for driv- scrappage scheme began the fol- everyone has now,” says things such as look at behav- three times Close’s size. had had operational issues in drawn and tax rises to repay ers trading in 10-year-old vehi- lowing month. Michael Vassallo, an equities iour. It is all very well to have That said, no single holding 2008 that had improved. Mean- deficits. In the small company cles, which revived car sales. While “cash for bangers” analyst with Brewin Dolphin. the tools but you need to watch accounts for the rise in the while, the Australian dollar and market there are more than The scheme brought buyers boosted Pendragon’s new-car “We won’t have scrappage and how to apply them.” fund’s value, says Mr Noble-Nes- price of oil was moving in its 1,000 companies to choose from. back into forecourts, including sales, it derived the biggest after the [forthcoming UK gen- Mr Noble-Nesbitt, from bitt, adding that many of the favour. But people were just Every one has its own story and those owned by Pendragon, Brit- chunk of its profit last year eral] election everyone is expect- County Durham, says his meth- fund’s holdings performed well. dumping the stock.” will be affected by the macro ain’s largest dealership group. from service and parts – a ing job cuts. That could affect odology can be characterised in He reckons the reasons for his But anyone who thinks that economy in a different way.” The company also took steps highly profitable, countercycli- demand for cars.” three ways: first, he tries to outperformance are “straightfor- the Close fund’s performance The UK’s outlook will ride on to put its house in order, refi- cal business that holds up even Mr Vassallo forecasts a 9 per tune out the noise in markets. ward. The second half of 2008 was driven by that one stock the general election, whether nancing its debt and cutting its during a downturn. cent drop in new-car volumes Second, he assesses downside was one of the most aggressive would be mistaken, says Mr there will be a hung parliament payroll by nearly 20 per cent. Its The business earned Pen- this year, though mostly risks carefully. Third, he uses bear markets in history.” Noble-Nesbitt. “I controlled the and how a new government will share price raced ahead of the dragon a whopping 55 per cent because of scrappage, with discounted cashflows to analyse He took a view on the macro- size of the holding and sold on tackle the deficit. It might be broader market in 2009, rising margin and accounted for 44 per underlying demand for new cars his target companies. economic conditions, deciding the way up.” It is 3.3 per cent of tough in these circumstances from 1.65p to 23p over the cent of its gross profit last year. down by just 1 per cent. “Com- “That helps cut through the that it would stabilise and mar- the fund now. He reckons not for Mr Noble-Nesbitt to replicate course of the year. Pendragon’s used-car business pared with 2008 and 2009 the noise in the market,” he says. kets would recover. He says: much more than 15 per cent of the performance he achieved in Reporting annual results in also performed well. In 2008 car market looks a lot more stable,” But he adds: “I try to remain “The upside was huge, and the the fund’s returns last year 2009. February, Pendragon said that retailers had sold down their he says.