BROADWALK SERVICES AWARDS 2019[+/-]
Twelfth year of recognising outstanding achievements in the services sectors
This is the twelfth year of the Broadwalk Services Awards to recognise outstanding achievements by quoted companies and their management teams in the broadly defined business services sectors. Competition was again fierce with a strong array of contenders – highlighted by the impressive short lists. The broadly defined services sectors are one of the less well known success stories of the global economy and are amongst the largest private sector employers. These unique awards are another step towards raising the companies’ and the sector’s profile. We congratulate all the companies and their management teams.
Charlie Cottam – founder, Broadwalk Asset Management LLP
Advisory Panel
The awards have had the significant benefit of views from:
- Jarrod Castle, BLT Sector Head, UBS Investment Research
- Vasco Litchfield, Managing Director, Lazard
- Jane Sparrow, Director Mid&Small Cap Support Services Research, Barclays
- Stuart Vincent, Managing Director, Rothschild
About Broadwalk Asset Management LLP
Broadwalk Asset Management LLP is a private investment management company based in London. It was founded in 2007 by Charlie Cottam and manages an absolute return strategy which focuses on investing in publicly quoted Services companies. This includes equities in the Support Services, Construction, Real Estate, IT, Transport and Healthcare sectors.
Important disclaimers are at the back of this document.
AWARDS
Company of the Year [top] - Unite Group
Unite Group’s acquisition of Liberty Living in November for £1.4bn has cemented its position as the largest operator of Purpose Build Student Accommodation in the UK. Liberty Living’s high quality portfolio comprising 24,000 beds across the UK was independently valued at £2.2bn in May 2019. The acquisition creates a portfolio with gross asset value of £7bn, with 75,000 beds in 27 UK towns and cities across the UK. The acquisition complements Unite’s existing portfolio, through a common focus on high quality, affordable student accommodation aligned to universities where student demand is strongest. This supports the company’s rental growth outlook of 3.0-3.5% for 2019/20 and 2020/21. The deal also leverages Unite’s best in class operating platform to deliver expected annual cost synergies of £15 million from 2021, helping to enhance Unite’s earnings yield. The Group posted strong results for the first half of the year. EPRA earnings grew 16% to £61m, compared to the same period in the previous year. EBIT margin jumped to 76.0% from 73.7%. A record 92% of beds were already booked for the academic year 2019/2020 before end of July. The Group delivered 2,390 new beds on time and on budget for the 2019/20 academic year and has a further committed development pipeline of 4,800 beds for delivery over the next three years.
SHORTLISTED
DSV Panalpina
In August 2019, DSV Panalpina became one of the world’s largest transport and logistics groups, following DSV’s CHF 5.4bn ($5.5bn) acquisition of supply chain solutions provider Panalpina. An expanded global network with vertical expertise, operational efficiencies and enhanced service offerings enables the Group to solidify its competitive position in the global transport industry. The combination employs a workforce of 60,000 in 90 countries and will generate pro forma annual revenues of DKK 118bn ($18bn), and expected annual cost synergies worth DKK 2.3bn ($340m) by 2021. Panalpina shareholders received 2.375 DSV shares for each Panalpina share, which was a 30% capital increase. This is CEO Jens Andersen’s largest purchase to date, following his strategy of acquisition led growth. The focus for the next 12-18 months is on the integration of Panalpina, before embarking on further industry consolidation. DSV’s latest results for the year to September showed organic growth in EBIT before special items of 7.9%, which is a strong result in the context of volatile markets given macroeconomic uncertainties and the trade tensions.
IWG
In April CEO Mark Dixon (Broadwalk Entrepreneur of the Year 2013), announced the intention to shift to a franchise partnership model for most of IWG’s global office operations. The first deal was the lucrative sale of the Japanese business in April 2019 for £320m to TPK Corporation. The sale included exclusive rights to use IWG’s Regus, Spaces and OpenOffice brands in the country. IWG is working closely with TKP to continue to develop attractive growth opportunities. TKP has committed to a development plan that will expand the network significantly in Japan. Under the new model, IWG will act as the master franchise, providing support services to the franchisee including access to its brand portfolio, global network, operational infrastructure and technology and sales and marketing resources in return for a recurring fee linked to revenue. The Japanese deal values the business at 15.5x 2018 ebitda of £20.6m. In November IWG agreed on the sale of its Swiss assets for £94m, to a joint entity owned by private banking group J. Safra Group and real estate investor P. Peress Group. IWG, with operations in over 110 countries globally, is in talks with a number of potential franchise partners. The franchise model could enable IWG to expand to 30,000 locations globally from its current c. 3500. IWG is confident of the structural long term growth opportunity in the flexible workspace market. Being a leader in the space, the Group is making significant progress with its asset light strategy as interest remains high from third parties for the partnership deals. By early November, IWG had 27 partners in 22 countries together committing over 400 new locations. Having bought UK meeting room provider Clubhouse in October, IWG is also open to using its strong financial position to take advantage of further acquisition opportunities.
Loomis
Loomis is a leading international cash handling specialist. Cash as a share of total transactions is declining, but in absolute terms the cash payment market continues to grow as a result of global population growth and increase in number of financial transactions per person. Projections show that the market could be 20% larger by 2023. The highly fragmented nature of the market provides consolidation opportunities for market leader Loomis. President and CEO, Patrik Andersson, has made two regional acquisitions this year. In January 2019, Loomis, through its German subsidiary announced the acquisition of Ziemann for an enterprise value of €160m. Ziemann, which primarily provides domestic cash handling services, generated revenues of €175m in 2018. In July 2019, Loomis through its subsidiary completed the acquisition of Prosegur Cash France, for an enterprise value of c. €39m. France has a large cash market and is important to Loomis. The company signed a unique agreement with fintech company WestPay in August 2019 to consolidate payments at retailers by adding card payments to cash handling operations. In the US about 60% of the cash management solutions are still handled by banks and the potential for additional outsourcing is significant. Market penetration of Loomis’s solution SafePoint is below 20%. Higher revenues from SafePoint and efficiency improvements have been driving earnings growth in the US. Loomis has undertaken restructuring programmes in different countries to further enhance efficiencies and to benefit from growth opportunities. As a result of the various initiatives, the Group is on target to achieve the 2021 financial targets, which includes revenues of SEK 24bn ($2.5bn) split 50:50 between acquisitions and organic, and operating margin of 12-14%. For the first nine months of the year, revenue grew 10% to SEK 16bn ($1.6bn), compared to the previous year. Organic growth was 3%. Operating margin (ebita) improved to 12.2% from 11.3%. Ebit amounted to SEK 1.8bn ($180m), having grown 12%.
Sopra Steria
In September, Sopra Steria, a European leader in digital transformation, launched Sopra Steria Next, one of the largest digital transformation consulting brands, with 3,400 experts in Europe. The launch is the fruition of the initiative led by CEO Vincent Paris since 2015 to consolidate and transform the Group’s consulting activities under a powerful new brand. Agility of digital technology plays a key role in organisational performance and Sopra Steria Next has the comprehensive business, sector and technology specific expertise and implementation capabilities to enable clients to achieve their innovative digital transformation goals. Sopra’s strategy is to raise value from offerings. The Group has been acquisitive and to turnaround the underperforming Banking Software division, Sopra acquired its peer, the French core banking solutions provider SAB in April. SAB generated €64m in revenue in 2018, of which 30% was recurring 12% was from ASP (Application Service Provider) services. Apart from enabling the division to return to historic operating profit margin levels from 2020 onwards, the deal enhances the division’s ability to provide core banking services in ASP mode, which is becoming more popular with the open banking initiative, for on-demand solutions without large capex requirements. To focus on its core offerings, in June, Sopra sold its UK recruitment subsidiary. Due to the Group’s consistent efforts, results to September 2019 indicate the Group is on track to achieve full year targets. Revenue rose 9.5% to €3.2bn, organic growth was 7.7%. In August, the Group had raised its full-year organic growth guidance for a second time during the year, and the current target is 6.3% to 6.5%. In July, the company had said it expected organic growth of 6% or higher in 2019 compared to 4% to 6% previously. The Group also targets operating margin from business activity to improve slightly from 7.5% in the previous year, and free cash flow above €150m.
CEO and executive team of the year [top]
Serco CEO Rupert Soames OBE and executive team
Serco CEO Rupert Soames OBE
In May 2014 CEO Rupert Soames OBE was brought in to turnaround Serco which was facing significant challenges. He also brought his Finance Director from Aggreko, Angus Cockburn. During the five years with charismatic Soames at the helm, the Group has transformed into a more agile and disciplined international specialist supplier of support services. After several years of decline, the group is now focusing on winning work at more acceptable margins, and group-wide profitability is showing encouraging signs of recovery. 2018 marked an inflexion point for Serco when the Group posted a solid performance, focusing on its core areas of health, defence, transport, justice and immigration, and citizen services. Shedding unprofitable contracts, Soames drove underlying trading profit at constant currency up 40%. Revenues stabilised, and profit growth was a result of strong operating performance and cost efficiencies from the transformation efforts. Serco closed the 2018 year with a strong balance sheet and has started making acquisitions again, acquiring in 2019 the Naval Systems Business Unit (NBSU) of US defence technology group Alion for $225m. In another major win, Serco secured an £800m contract from the Ministry of Justice to provide prison escort and custody services across the South of England. With a strong order intake, management is confident of making further progress with strong revenue and profit growth expected for this year and next, and remains focused on disciplined bidding.
SHORTLISTED
Arcadis - CEO Peter Oosterveer and executive team
On his appointment as CEO in April 2017, Peter Oosterveer conducted a strategic review of the business. His plan was to capitalise on megatrends such as urbanisation and mobility, sustainability and climate change, globalisation and digitisation. CEO Oosterveer and his team decided to invest rapidly to become a digital frontrunner in the industry. Project selection discipline was improved and client relationships leveraged to create organic growth. The Middle East and Asia were de-prioritised. Financial targets included organic growth exceeding GDP growth in end markets, and operating margin of 8.5% to 9.5% in 2020, an improvement of over 2.4% from the 2016 figure of 7.1%. CEO Oosterveer made several bolt on acquisitions. These deals enabled Arcadis to enhance technological capabilities in tools such as BIM, drones, sensors and mobile apps, and to capture market share. The optimisation of North American operations in 2017 was a key reason for the Group’s strong performance in 2018 with operating ebita margin already touching the 2020 target range, similar to the achievements in Europe, Australia, and the UK. The Group’s shift towards digitisation has been rewarded with significant contract wins including a partnership with Transport for London and the agreement with water solution provider Evocra to use its patented processes. For the nine months of 2019, organic net revenue for the Group increased 2% to €1.9bn, and operating ebita margin improved to 7.8% from 7.3%.
Computacentre- CEO Mike Norris and executive team
CEO Mike Norris has had a 35 year career at Computacentre, 25 years as its CEO. He led the company through its IPO in 1998 and has grown it into a $2.4bn business with capabilities to compete in large deals with the likes of Accenture and Tata Consultancy Services. With a significant footprint in Europe, Computacentre is the largest reseller in the continent. CEO Norris believes the channel is in the middle of a super cycle of growth. In October 2018 the company grew its US market presence with the acquisition of FusionStorm for $90m. The deal enables it to offer the full range of services in the US as in Europe. Computacentre’s focus in the US is specifically on enterprise clients, especially those with a European presence. In August, CEO Norris was able to buy back Arrow’s IT Asset Disposition (ITAD) in just three weeks, after Arrow announced that it was shutting the unit down, having bought it from Computacentre for £56m in 2015. CEO Norris moved quickly as it was important to retain the staff, customers and contracts in order to protect Computacentre’s corporate clients. For the first half of the year, despite UK revenue falling by 8% amid political uncertainty, Group revenues grew 21% to £2.4bn and adjusted profit before tax grew 2.7% to £54m. This included benefits from acquisitions made since June 2018. This is without fresh acquisitions, but with more significant contribution from the acquisition of FusionStorm. Also, on a like for like basis, revenue and profitability remains well ahead for the year to September, compared to the previous year. For the full year 2019, the Group expects profit growth in monetary terms to be the best in company history.
Ferguson- CEO John Martin and executive team
John Martin was appointed CFO in 2010 and was made CEO in 2016. In September 2019 CEO Martin announced he was standing down in favour of Kevin Murphy who runs Ferguson Enterprises in the US, and that the UK operation was to be spun off. The demerger will enable the two companies, Wolseley UK and Ferguson North America, to wholly focus on their respective markets. Each business will be able to concentrate on accelerating its independent investment and growth strategy, and Ferguson Enterprises will continue to build on a strong track record of market outperformance and profitable growth. CEO Martin has brought strategic clarity to the business, exiting lower growth markets, establishing market leading positions in attractive markets and ensuring solid financial performance. During his tenure, the Group witnessed 37 consecutive quarters of revenue growth and 9 consecutive years of operating profit growth. For the fiscal year ended July 2019, revenues rose 7.9% in constant currency to $22bn and operating profit grew 7.5% to $1.6bn. During his tenure from 2010, share price rose an impressive 3.8 times to 6,722p.
Chairman of the year [top]
William Franke, Chairman, Wizz Air
Bill Franke, airline entrepreneur and pioneer of ultra-low cost air travel, founded Hungary based Wizz Air in 2004. With a relentless focus on costs, it has grown to become one of Europe’s strongest and most efficient airlines and the largest low cost carrier in Central and Eastern Europe. Co-Founder József Váradi has been CEO of the company since its inception. Mr Franke as co-founder and managing partner of Indigo Partners is also the largest shareholder of Wizz Air with a 21% shareholding. In June Mr Franke signed an MoU with Airbus, valued c. $4.5bn, to buy 50 new A321XLR commercial jets, out of which the highest number 20 are allocated to Wizz Air. Mr Franke was able to obtain attractive pricing by placing one of the largest orders for the extended version of Airbus’s top selling aircraft through Indigo Partners. The aircrafts, to be delivered from 2023 onwards, enable Wizz to further expand its network and will give a strategic advantage to the airline due to intrinsic economics of the model. Mr Franke is also credited with placing a 427 A320 and A321 neo order with Airbus for c. $50bn in December 2017, out of which 146 aircrafts were allotted to Wizz. These customer friendly and efficient aircrafts which are expected to deliver 20% fuel savings by 2020 create more value for the airline as well as passengers. While some rivals are venturing into low cost long haul operations, Mr Franke believes it is a potentially expensive risk to take, as the industry is still waiting for the right kind of highly efficient aircraft. Having established cost leadership, superior customer services and a young best in class fleet, he is optimistic of Wizz Air’s future growth prospects and ability to perform under all market conditions. Mr Franke was CEO and Chairman of America West Airlines between 1993 and 2001. Through Indigo Partners, Mr Franke also holds majority stakes in three other low cost airlines, namely, Frontier Airlines (USA), JetSMART (Chile), Volaris (Mexico).
SHORTLISTED
Ryanair- Chairman David Bonderman
Mr. Bonderman was appointed Ryanair Chairman in 1996 and has provided invaluable support to CEO Michael O’Leary in growing the airline into an undisputed leader among low cost carriers. An astute businessman and airline veteran, Mr Bonderman has identified a number of seemingly unworthy opportunities which turn out to be excellent investments and he has participated in many large deals. His company 1996 Air GP had made a $42m initial investment in Ryanair in 1996 for what turned out to be a very valuable 20% stake after Ryanair floated in the stock market in May 1997. Air GP has subsequently reduced the shareholding to hold a minority stake currently and has made a substantial profit in the process. Over the years, Ryanair’s “yield passive, load factor active strategy” of reducing fares to whatever levels required to fill planes, has paid off and enabled Ryanair to capture significant market share. Mr Bonderman prefers to stick to the tried and tested Ryanair strategy focusing on short haul routes which helps the airline reap the maximum benefits. As a result he insists that Ryanair will not fly trans-Altantic routes, as it is a different business model altogether. The share price has raised more than 15x to €13.99 over Mr Bonderman’s chairmanship and Ryanair now has a market capitalisation of €15bn. He has had a highly successful career as founder of the TPG Private Equity Group, which has $84bn of assets under management.
Sodexo - Chairperson Sophie Bellon
Ms Bellon took over as Chairperson from her father Pierre Bellon, founder and Chairman Emeritus, in 2016. She has been closely involved with Group operations for the past 25 years in various capacities, and has played a pivotal role in growing and positioning the Group as a €22bn global leader in quality of life services with operations in 80 countries. Ms Bellon joined Sodexo in 1994, at a time when the Group was evaluating several major acquisitions. She took active part in the acquisition of Gardner Merchant in the UK which doubled the size of the Group and three years later, was instrumental in the acquisition of Marriott Management Services in the USA, which again doubled the size of the business and helped Sodexo strengthen its position as a multinational company. With her long term perspective, Ms Bellon has left an indelible mark in various facets of Group operations including defining operational controls and performance indicators which are still in force, instilling a strong client oriented culture with very high client retention rates and continuing with innovation led profitable growth. As Chairperson, she has formed a strong working relationship with CEO Denis Machuel, who was promoted in January 2018, and has enabled him to pursue Sodexo’s strategy of profitable growth. This year, she has refreshed the board to include Véronique Laury, ex-CEO of Kingfisher and Luc Messier, who has held managerial positions at ConocoPhilips, Technip and Bouygues. In addition, she had initiated a share buyback programme amounting to €300m during fiscal year 2017-2018.
Softcat- Chairman Martin Hellawell
Mr Hellawell was CEO of Softcat for twelve years before becoming Chairman in April 2018. He grew Softcat from a £57m company that made a net profit of £819k in 2005, to a leading value added reseller (VAR) in UK which crossed the £1bn revenue mark and made £55m in net profit in 2018. Meanwhile, in November 2015, Mr Hellawell hit another milestone when he led Softcat’s transition from one of UK’s fastest growing private VAR to a publicly listed company through a highly successful IPO which valued Softcat at £472m. Over the years, Softcat has followed the simple strategy of extending market share through acquisition of new customers as well as selling more to existing customers. And Mr Hellawell executed this strategy through expansion of the salesforce and focus on customer service. His successor CEO Graeme Watt has not changed this proven Softcat strategy; instead he has extended it and focused on execution. Under Mr Hellawell’s guidance, CEO Watt’s next step is to expand the addressable market as customer needs are becoming more complex and they are presented with more choices. To utilise this opportunity, Softcat is investing in expertise for the long term. Recent trend is towards customers’ reliance on a few large partners and Softcat is well positioned to benefit, given its wide range of technology and services developed over the years. In the four years since IPO, Softcat’s share price has risen nearly 5x from the offer price of 240p to 1,126p. Mr Hellawell is also Chairman of Raspberry Pi, a commercial subsidiary of the philanthropic Raspberry Pi Foundation which promotes computer science education in schools. Prior to Softcat, he was with Computacentre for thirteen years where he was part of the IPO team and built an excellent track record in senior management roles.
Deal of the Year [top]
Vinci acquisition of majority stake in Gatwick airport for £2.9bn, announced in Dec 2018
Vinci, the global player in construction and transport concessions, has acquired a majority stake in Gatwick, a freehold airport. The £2.9bn deal for a 50.01% stake was completed in May. The French group took advantage of depressed asset prices and lower sterling in the wake of Brexit uncertainty. Nicolas Notebaert, CEO of Vinci Concessions, led the deal under the guidance of Chairman and CEO of Vinci group, Xavier Huillard. CEO Notebaert believes that Brexit would not change Gatwick’s bright prospects, given capacity constraints of London airports, long list of airlines in queue for slots and strong demand from tourists for travel to London. Through the period from December 2009 to 2019, Gatwick has grown passenger numbers by more than 40% from 32m to 46m, while maintaining high passenger satisfaction scores. Vinci already operates 45 airports in 12 countries across Europe, Americas and Asia. With the addition of Gatwick, Vinci has become the second largest airport operator in the world, after Spain’s Aena. Gatwick has given Vinci access to the world’s largest metropolitan aviation market. Bringing its international expertise, Vinci aims to focus on quality of service and airport management. Gatwick, as the most efficient single runway airport globally, will share its best practises with Vinci to enhance its operational improvement strategy. Gatwick has plans to expand its two terminals in five years and to use its existing second runway by mid 2020s to increase slot numbers. The California Public Employees’ Retirement System (CalPERS), as part of remaining 49.99% interest managed by Global Infrastructure Partners (GIP), will retain a 9.99% stake in Gatwick. The sale values Gatwick at a reasonable 19 times ebitda. The transaction
SHORTLISTED
BCA Marketplace acquisition by TDR Capital for £1.9bn, announced in June 2019
British used car auctioneer and reseller, BCA Marketplace, agreed to a cash takeover by private equity group TDR Capital for £1.9bn. BCA is a European market leader in automotive aftermarket services, including purchase and remarketing of vehicles and related value added services. The offer price of 243 pence per share represents a premium of c.25% to BCA’s closing price for the month ended 19 June, the last day prior to commencement of offer period. This implies an enterprise value multiple of 12.5x adjusted ebitda of c. £172m for the year ended March 2019. The offer comes a year after BCA rejected an offer of £1.6bn, which valued the Group at £200 pence per share, from private equity group Apax Partners. BCA floated on the LSE Main Market in April 2015 at an issue price of 150p. The bid price offers a 62% upside to this issue price. TDR has a strong track record of investing in businesses and enabling the management to grow their operations. The deal will allow BCA, the owner of WeBuyAnyCar.com, to continue to develop and grow its automotive services market offerings in a rapidly evolving market driven by digital disruption and changing customer expectations. For the fiscal year ended March, BCA had delivered a resilient performance in a subdued market selling more than a million vehicles and growing revenues by 25% to £3bn and operating profits by 14% to £100m. Improved profitability resulted in adjusted ebitda growing by 9% to £172m.
RPC acquisition by Berry Global for £3.3bn, announced in March 2019
(Broadwalk CEO and Executive Team of the Year, 2015), accepted a takeover offer from US headquartered Berry Global Group, a world leading provider of plastic packaging and protective solutions, for £3.3bn. Berry outbid Apollo Global, and offered to pay c. $4.3bn in cash for the equity interest and assume $2.2bn of net debt of RPC. The deal, completed in July, created one of the world’s largest plastic packaging companies. The combined business now employs c. 50,000 people in 290 locations spread across six continents and generates c. $13 billion in revenue. Berry aims to leverage the combined power of product development and manufacturing technologies RPC had to offer. The enlarged group is now capable of offering innovative and low-cost solutions to thousands of multinational and local customers globally through the industry’s most diversified and extensive manufacturing footprint. The deal is anticipated to be earnings and cash flow accretive with c. $150m of expected annual synergies.
Sophos acquisition by Thoma Bravo for £3.1bn, announced in October 2019
In October Sophos agreed to be acquired by American private equity firm Thoma Bravo for £3.1bn ($3.9bn) at a price of £5.83 per share in cash. It represents a 37% premium on the previous week’s closing price. The valuation was an impressive 5.2x sales. The deal is one of the largest private takeovers in the UK technology space in recent years. Sophos (Broadwalk Company of the Year, 2017) is a global leader in next-generation endpoint and network security solutions, protecting more than 100 million users within 400,000 customers worldwide. CEO Kris Hagerman led the company’s float in 2015 at 225p, the largest ever IPO of a software company in UK, valuing Sophos at £1bn. In the same year, Sophos launched Synchronised Security with the Security Heartbeat, a first in the industry, which enables network and endpoint products to communicate and share intelligence to improve protection. In February 2017, it acquired Invincea for $100m to strengthen its next-generation products with learning and behavioural monitoring to enhance malware threat detection and prevention using AI. A key element of Sophos’s business strategy is the cross-sell and up-sell of its comprehensive portfolio with existing customers, which it reaches through more than 47,000 channel partners worldwide. Sophos has been driving the successful adoption of next-gen cloud endpoint. In the first quarter of the year, next-gen represented 55% of total billings, up from 39% in the previous year, growing at 43% in constancy currency. Since IPO, Sophos has continued to outgrow the IT security market with compound annual growth rate of 12% in billings and revenue. Thoma Bravo already has investments in cyber security companies Imperva and close peer Barracuda, and should be able to derive additional synergies. Sophos will remain a standalone company.
IPO of the year [top] - Prosus
Prosus, the spin-off from South Africa based global internet group Naspers, made its debut in Euronext Amsterdam in September, to become the second largest listed technology company in Europe. The issue price was €58.70 per share, implying a market value of €95bn. Goldman Sachs, JP Morgan and Morgan Stanley were the lead financial advisers. Banca IMI, Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Deutsche Bank, ICBC Standard Bank and ING were financial advisers.
Prosus Group, the largest technology investor in the world, is the holding company for Naspers’ global consumer internet businesses including social networking, classifieds, payment solutions and fintech, food delivery, e-retail and online travel booking with market leadership in 77 markets. Prosus holds a 31% stake in Tencent, the Chinese tech giant. The stake, now worth c. $130bn, originated from what is considered as one of the most profitable investments in corporate history, a $34m investment by Naspers Chairman, Koos Bekker, in 2001 when Tencent was a start-up. This propelled Naspers’ rapid growth to become Africa’s most valuable listed company. For years, the Tencent stake was worth more than Naspers itself and one reason for the Prosus spin-off is to narrow this value gap. The Prosus listing will move about a quarter of Naspers’ value to the Amsterdam exchange and thereby reduce its heavy weighting in the Johannesburg exchange. Prosus comprises all internet interests outside South Africa, previously held by Naspers. It owns stakes in more than 40 companies including global online marketplace OLX, payment technology company PayU, German food delivery group Delivery Hero, Indian online food delivery service Swiggy, Indian online travel site MakeMyTrip, Russia’s biggest online classifieds and property platform Avito and the biggest Russian internet company mail.ru. This is a unique portfolio of internet businesses, and enables CEO Bob van Dijk to pursue future growth plans. In the past year, Naspers made investments worth c. $3bn globally in various ventures. In October the Group made a cash bid of £4.9bn for UK’s Just Eat, and increased it to c. 5.1bn in December. Further investments are also expected in classifieds, machine learning and online education. No new shares were issued for the listing. Only existing shareholders could convert part of their shares into the new Prosus shares. Naspers retains a 73% stake in Prosus.
SHORTLISTED
DWF
With its March 2019 IPO at a market capitalisation of £366m, DWF became the largest listed law firm globally and the first and only law firm to float in the main market of LSE. The IPO was priced at 122p per share. The firm raised £95m. Stifel and Jefferies International were the joint global coordinators and Zeus Capital the lead manager.
DWF provides a range of legal professional, business and consulting services through its Commercial Services, Insurance and International divisions. For the full year to April 2019, DWF generated gross profit of £146m, which increased 16% year over year. Revenues grew 15% to £272m. Out of the IPO proceeds, £19m repaid a portion of members’ capital and £10m was to be invested in additional IT systems, with the reminder for working capital and targeted acquisitions. The IPO will enable DWF to capitalise on the positive trends in the global industry and to continue to offer differentiated services and to expand to international markets. Managing Partner and CEO Andrew Leaitherland plans to build on the strong track record and to further grow the firm’s complex managed and connected service capabilities. The Group continues to deliver on its strategy and for the half year, revenues grew at not less than 10%, majority of it being organic. The pipeline of work for the second half is strong, aided by further partner hires in International and activation of the BT Managed Services contract. The shares floated represent 26% of the firm’s issued share capital. Resultant upon the IPO, former equity partners will face a 60% reduction in their current profit share and non-equity partners will see a reduction of 10%. Partners will be locked in for five years with shares released in tranches of 10% per year after publication of financial results in 2020. Depending on performance, a further 10% will be released.
Network International
Network International raised £1.1bn in its April 2019 IPO in the London Stock Exchange. The Dubai based company priced the offering at 435p per share; a market capitalisation of £2.2bn. Citigroup was the sole sponsor and joint global coordinator. Emirates NBD Capital, JP Morgan and Morgan Stanley were joint global coordinators. Barclays and Goldman Sachs were joint bookrunners. Liberum was co-lead manager and Evercore Partners the financial adviser.
Network International is a leading payments solutions provider in the Middle East and Africa, with a partner network of 220 financial institutions and 65,000 merchants across more than 50 countries. The company was created as a subsidiary of Emirates Bank, Dubai largest bank, in 1994. Network owns the distinction of being the first independent vendor to be certified by both Visa and MasterCard for payments in the Middle East. Under the leadership of CEO Simon Halsam, Network has continued to invest in strategic partnerships to grow the geographic footprint. This enabled the company to grow revenues at 13% per annum over the past three years to $298m in 2018 at a relatively stable ebitda margin of 50%. Middle East constitutes 75% of sales and Africa 25%. For the half year to June, revenues grew 12% to $152m, with underlying ebitda margin of 50.1%. Network is the leading enabler of digital commerce across the most underpenetrated markets globally. Cash is still dominant in these regions at around 75% of payments. Shareholders Emirates NBD PJSC, Warburg Pincus and General Atlantic reduced their holdings through the IPO. Post-IPO, Emirates owns 25.5% of shares and Warburg and General Atlantic own 24.5%. Shares offered also include the investment of $300m by MasterCard in return for a 10% stake.
Nexi
The Milan IPO of digital payment services company Nexi raised €2bn. Shares were offered at €9 each giving the company a valuation of €7.3bn including debt, or 17.2 times core earnings. The offer was a combination of existing and new shares and resulted in a capital increase of €700m. Market capitalisation at debut was €5.7bn. BofA Merrill Lynch, Banca IMI, Credit Suisse, Goldman Sachs and Mediobanca acted as joint global coordinators. Bank of America Merrill Lynch, Banca IMI, Credit Suisse, Goldman Sachs and Mediobanca were joint global coordinators and joint book runners along with Banca Akros, Barclays Bank PLC, Citigroup Global Markets, HSBC, MPS Capital Services, UBI Banca, UBS and UniCredit.
Based in JersAs the largest payment technology company in Italy, Nexi partners with around 150 banks covering 80% of the domestic banking sector. Nexi and partner banks serve around 890,000 merchants and manage 1.4m POS terminals. The company has a 60% market share in card issuing and manages 41m cards with banks. Nexi manages 13,400 ATMs and over 900m transactions in clearing services. The company is also developing open banking in collaboration with Interbank Corporate Banking (CBI) consortium. Nexi is profitable and generated operating pro-forma revenue of €931m and normalized ebitda of €424m in 2018. For the year to September, revenues grew 5.6% to €718m and underlying ebitda grew 19% to €369m. The proceeds of the IPO, combined with €1.35bn in fresh financing from a group of banks involved in the IPO, were primarily used to reduce and refinance debt to a projected €1.8bn gross. Nexi expects its net financial position to be at c. 3.0x by end 2019. In Italy, only 24% of purchases are cashless compared with more than 50% in the Netherlands. Nexi is well positioned to take advantage of the relatively underpenetrated market. The financial guidance is for annual revenue growth at 5%-7% and ebitda growth of 13%-16% in the medium term, with 2019 ebitda growing at 18% to c. €500m. Nexi is headed by CEO Paolo Bertoluzzo and investors include private equity firms Advent International, Bain Capital and Clessidra, who bought Nexi from a group of Italian banks. Following IPO, their combined shareholding reduced from 94% to 60%.
TeamViewer
TeamViewer, a leading global connectivity platform, floated on the Frankfurt Stock Exchange in September at an offer price of €26.25 per share and value of €5.25bn, raising €2.2bn. Goldman Sachs and Morgan Stanley acted as joint global coordinators and joint bookrunners. BofA Merrill Lynch and Barclays were joint bookrunners. RBC Capital Markets was co-lead manager. Lilja & Co. was independent adviser.
TeamViewer was founded in 2005, in Goppingen, Germany, as a local provider of tools enabling remote computer access. It has grown to offer services in 180 countries. Remote desktop access and online meeting modules constitute the core offering. The tool has been installed on 2bn devices globally. A free version of the software is available to private users whereas enterprise customers pay a subscription fee. The subscription based model helps boost revenues and the company is already profitable. The aim of the IPO was to gain more visibility globally. The company’s addressable market of €10bn is projected to grow to €30bn in 2023 as companies invest in digital control, and as the number of employees working from home increases. TeamViewer was owned by private equity firm Permira, which acquired it in 2014 for €870m. Permira sold a 42% stake to generate €2.2bn. It retains 58% and will remain a strategic investor. CEO Oliver Steil came from Permira two years ago. TeamViewer’s focus in the short term is to build its presence in Asia Pacific and United States. It also plans to expand its marketing team for the enterprise version of the product. Selective acquisitions will complement organic growth. Billings grew an impressive 45% to €224m in the first nine months of the year, compared to the same period in the previous year. Cash ebitda grew 54% to €120m, resulting in a 3% increase in margin to 53%.
Trainline
Trainline, Europe’s leading independent train and coach ticket retailer, raised £110m in its June IPO in the London Stock Exchange. The offering was priced at 350 pence per share at a market capitalisation of £1.7bn. JP Morgan and Morgan Stanley acted as joint sponsors, joint global co-ordinators and joint bookrunners, KKR Capital Markets was joint global co-ordinator and joint bookrunner, and Barclays Bank and Numis Securities were joint bookrunners.
Trainline was founded in 1999 by a consortium of UK train companies and sold to private equity Exponent for £163m in 2006. An IPO was planned in 2015, but KKR bought the company for an estimated £450m. Under KKR, Trainline has pursued a high growth trajectory to become a one-stop shop for train and coach travel by integrating on its platform millions of routes, trips and fares from 260 rail and coach companies across 45 countries in Europe. Trainline acquired the French online ticketing platform Captain Train in 2016, to combine two of Europe’s leading digital ticket retailers and significantly expanded its geographic footprint. The company also developed its Single Global Platform, enabling it to improve from one release every six weeks to over 300 per week to provide real time insights to customers. Trainline’s intuitive AI driven mobile app is an essential travel companion for many frequent rail users. With an increasing global reach, the Trainline booking system receives 80m visits per month, 80% of which is from repeat customers. CEO Clare Gilmartin, who joined in 2014, has led Trainline’s transformation. Revenue has grown at a CAGR of 18% during FY 2016 to FY 2019, driven by 20% CAGR in net ticket sales. For the half year to August 2019, net ticket sales grew 19% to £1.8bn to generate revenues of £129m which grew 29%. Adjusted ebitda grew 99% to £42m. Trainline aims to use the net proceeds from the IPO to accelerate expansion plans, to benefit from the ongoing digitisation of rail and coach ticket booking across Europe and also internationally. Rail travel is expected to increase as reducing carbon footprint becomes a priority. KKR reduced its stake from 79% to 25% after selling shares worth £829m. Through two further placings in September and November KKR no longer has a stake in the company.
Small & mid-cap company of the year [top] - PTSG
Premier Technical Services Group (PTSG) is UK’s leading provider of niche specialist safety testing and compliance services through its four divisions of Access and Safety, Electrical Services, Building Access Specialists and Fire Solutions. PTSG offers services to more than 20,000 customers and 180,000 buildings across UK from its 29 sites, and benefits from substantial recurring revenues and high margins. With an industry leading renewal rate of 88% in year 2018, the Group generated more than 50% of its revenue from recurring maintenance and compliance services.
In July PTSG agreed to be acquired by Macquarie for £265m, all cash, at a huge premium of 142% to the closing share price prior to the announcement of the deal. The offer represents a very significant 304% premium to the IPO price of 52 pence per share in February 2015. The deal will enable co-founder and CEO Paul Teasdale to accelerate the selective M&A strategy to complement organic growth, which reached 19% in year 2018. From fiscal year 2015 to 2018, PTSG has grown revenues at an average annual rate of 39% to £69m and adjusted ebitda at 40% to £17m. End markets are becoming increasingly competitive, hence funding and quick closure are important. Macquarie’s backing will provide PTSG with enough firepower and flexibility to pursue a significant pipeline of opportunities it has carefully identified. PTSG has built a strong track record of successful acquisitions and has bought 15 businesses since IPO to attain market dominance. A majority of these acquisitions have been in Electrical Services which has enabled the division to become the largest contributor to Group revenues. PTSG’s goal has been to achieve the same in Fire Solutions by capitalising on high demand for services in this area. The Group also plans to achieve balance in the portfolio by further expanding services and regional presence in the other two divisions of Access and Safety and Building Access. In the meantime, the Group is also working towards ensuring that its infrastructure is capable of scaling to absorb significant additions. PTSG is constantly looking for ways to innovate in technology and software as well as organisational processes, and to improve efficiencies.
SHORTLISTED
Aptitude Software
Aptitude Software was founded in 1974 and is a leading provider of financial management and planning applications for CFOs. The company has offices in London, Boston and Singapore, and has a global reach. Aptitude has been successfully implementing its strategy of growing the recurring revenue base and focusing on higher growth segments.
In the year to June 2019, annual recurring revenues increased 29% to £28m, with the core offering Aptitude Accounting Hub (AAH) being the largest contributor to recurring revenue. The group also made a strategic move in June by divesting Microgen Financial Systems for a cash consideration of £51m, freeing up management time to focus on driving higher growth segments. Market fundamentals remain supportive as Aptitude’s target market of large global businesses has increasingly been automating financial operations, often being driven by increasing regulatory requirements. Aptitude’s global partner network includes KPMG, Deloitte, Accenture and Ernst & Young, and the company is engaged in an ongoing transition to a SaaS delivery model. This should enable Aptitude to capitalise on cloud deployment, where its North American clients are already focused, and open up cross selling opportunities in Europe and Asia.
Charles Taylor
Charles Taylor was founded c. 1840 in the north-east of England and has evolved over the years to become a leading international provider of professional services to clients in the global insurance market. The company was taken private for £261m ($325m) in September 2019 by LMP Bidco.
Charles Taylor is led by CEO David Marock, who joined in July 2011, and has overseen a significant increase in the share price. Mr Marock’s strategy was to make large, long term investments to secure the long-term success of the company, even if this was at the expense of near-term profits. Realising clients’ need for insurance solutions to solve problems, the company built up a range of technological solutions to transfer large amounts of data efficiently and effectively in a highly networked market. This enabled Charles Taylor to be successful in winning significant contracts, including a five-year transformative contract with leading Latin American insurer Seguros. LMP Bidco’s bid of 315p per share in cash represented a 34% premium to the share price prior to announcement of the deal.
Enter Air
Polish based Enter Air is one of the largest charter airlines in Europe. CEO Grzegorz Polaniecki has been at the helm since its formation, and the airline has grown consistently since its first commercial flight in 2010. The airline is the market leader in Poland with a 34% share, carrying 1.5m travellers. The international segment, where Enter Air carries 0.5m travellers is becoming increasingly important for the group, representing 40% of sales at higher margin.
Enter Air’s efficient low-cost business model has enabled the airline to remain profitable even under challenging market conditions. During the past two years, several competitors have exited the market while Enter Air emerged to the forefront. Tour operators have been supportive, with c.90% of Polish tours using air transport, and in the past decade, the number of tours conducted by Polish travel agencies has grown at c. 10% annually. The group has also entered/extended several strategic deals; in October 2019, Enter Air extended its co-operation agreement with TUI Poland for another two years. The co-operation began ten years ago with 8 routes and currently they together offer 120 connections for Polish tourists. In May 2019, Enter Air became a strategic partner and shareholder of Swiss airline Chair Airlines, with a 49% stake.
Murgitroyd
Murgitroyd is an international patent law firm and was founded by the current chairman Ian Murgitroyd in 1975 in Glasgow. Murgitroyd specialises in patents, trademarks, designs and copyrights, and provides clients with a broad range of services from case filing to litigation support and oppositions. The company was acquired by private equity firm Sovereign Capital Partners in October 2019 for 675p per share cash, valuing the business at c. £61m.
Murgitroyd has 18 offices in 10 countries including UK, Finland, France, Germany, Ireland, Italy and Switzerland. The firm also has direct representation rights in Austria, Belgium, Denmark, Luxembourg, Monaco, Netherlands, Norway and Sweden, as well as two client liaison offices in the US, and an office in Nicaragua which handles patent searching. Half of its revenue originates from the US. Over the years, Chairman Murgitroyd succeeded in transforming the company into one of the most highly rated patent law firms across different sectors. In the fiscal year ended May 2019, revenues increased 7.5% to £48m and profit before tax rose 16% to £4.2m, allowing for an increased final dividend.
Entrepreneur of the year [top]
Andrew Brode - Chairman, RWS Holdings
In 1995 Mr Brode acquired RWS, a professional translations business from the founding family with minority equity from 3i. He held a 75% shareholding and in 2003 listed RWS on AIM and currently owns a 32.8% stake. Under Mr Brode’s guidance, RWS grew to become a global leader in intellectual property support services and localisation and a major player in life sciences. Mr Brode promoted CFO Richard Thompson to CEO in April 2017. In November 2017 Mr Brode led RWS’s largest acquisition of Czech based Moravia for $320m, a leading provider of technology enabled localisation services, with operations in USA, Japan, China, Argentina, Hungary and Ireland and a client base that included the large US technology firms. The Moravia acquisition, contributed 25% of 2018 profits as its margins rose from 9.3% to 19.3%. For the year ended September 2019, RWS Moravia contributed 42% to Group revenues having generated record sales of £150m with growth of 18% over the previous year. The division posted adjusted operating profit of £26m with record growth of 52%, contributing 33% to Group profits. The Group as a whole also saw record performances across all three main divisions. Revenues grew 16% to £356m and adjusted operating profit grew 18% to £78m. Net debt fell by 43% to £37m and net debt to ebitda stood at less than 0.5x at year end, underscoring the cash generative business model. RWS continues to focus on international expansion and profitable growth by combining organic growth, selective acquisitions and cross selling opportunities from enhanced service offerings. The share price on a total return basis is up 2800% since the 2003 float, given a stunning annualised return over 16 years of 23.4%. Mr Brode is also Chairman of £760m market cap Learning Technologies Group.
RWS Holdings Chairman Andrew Brode (left) with Charlie Cottam
International Services Company of the year [top]
Jacobs
California headquartered Jacobs provides end to end professional services including technical, scientific, project delivery and consulting to industrial, commercial and government clients. Since August 2015, Chairman and CEO Steven Demetriou has led the Group’s transformation and growth, from an engineering and construction services provider into a higher value, higher growth, solutions oriented company.
To steer the portfolio towards highest margin growth businesses, and reduce cyclicality, Jacobs completed the sale of its Energy, Chemicals and Resources business for $3.3bn in April. Further, to position itself as a leader in high value and mission critical government services, the Group completed the acquisition of KeyW, a leading national security provider of advanced engineering and technology solutions for intelligence, surveillance and cyber operations, in a $903m transaction in June. Significant synergies have already materialised in the first quarter of fiscal year 2020, as Jacobs has won a five year $216m specialised cybersecurity training contract from the Department of Defence which leverages its combined capabilities with KeyW. In August Jacobs announced the $300m acquisition of UK based Wood Group’s nuclear services, which will further strengthen the Group’s positioning in highly profitable and complementary sectors in nuclear and defence. The transformation efforts concluded in November with the global launch of the new brand and proposed name change to Jacobs Solutions to reflect the new image. The transformed portfolio is well positioned to capitalise on secular growth trends such as environmental resilience and sustainability, IT-OT convergence and national security. In October Jacobs won a landmark project to deliver renewal energy solutions to support the planned SuedLink programme, a key component of Germany’s power grid upgrade to meet its renewal energy goals. To support its growth strategy in Europe and Middle East, the Group, in November, opened a European flagship office in London, to provide advanced digital and other solutions to enable successful delivery of various projects related to clean energy, cyber defences and connected communities, among others. Results for the full year to September showed strong net revenue growth of 22% to $10bn year on year. Adjusted ebitda grew 22% to $981m and adjusted operating profit grew 25% to $893m. Backlog grew 13% to $23bn and book to bill ratio was 1.1x. The full year 2020 guidance indicated further double digit growth.
SHORTLISTED
CSG Systems
CSG Systems, led by President & CEO Bret Griess, provides business support solutions to communications service providers (CSPs). This includes customer account activation and fulfilment services. The company has achieved growth by displacing a major competitor to provide services to Altice, a large US based broadband/video service provider. CSG also did a deal with Charter Communications and enabled world's largest movie theatre chain, AMC Theatres, to provide an on-demand streaming service.
CSG (Cable Services Group) was founded as a division of payment processing company First Data Corp which was at that time operated by American Express. Growth initiatives include increasing R&D and go-to-market investments, as well as making acquisitions to expand solutions and build scale. The group also aims to further collaborate with partners to extend capabilities and footprint. Examples of strategic moves include the October 2018 acquisition of Texas based payment solutions provider Forte Payment Systems for $85m. This expanded CSG’s payment and monetisation capabilities by enhancing its public cloud offerings and presence in new verticals. Figures have been encouraging, with CSG posting strong results for the first nine months of the year with adjusted revenues increasing 10% to $691m and adjusted operating profit growing 17% to $124m, year on year.
Service Stream
Service Stream is a provider of services to Australian utility companies. This includes services to develop and operate utilities such as telecommunications, energy and water networks. Mobile network operators have been increasingly outsourcing management of sites & towers and the company has also been successful in gradually broadening its service offerings to include the utilities sectors of energy and water.
Under Managing Director Leigh Mackender, Service Stream has positioned itself well to take advantage of both organic and acquisition led growth opportunities. Examples of this include the company winning a contract extension in June 2018 from NBN, a government entity established to develop and operate Australia’s wholesale broadband access network. In October Service Stream won a strategically important contract with Optus, the second largest telecommunications company in Australia, to help complete its 5G network rollout. Having won this contract, the Group will be providing services on all the three wireless network carriers in the country. For the year ended June 2019, Service Stream delivered strong results with revenue increasing 35% and ebitda 41%, compared to the previous year.
SMS
SMS was established in 2003, initially focusing on job placement services for medical and nursing care professionals in Japan, but more recently has moved into providing information infrastructure related to an aging society, launching over 40 services since then. This includes offering services such as drug and healthcare information services as well as a management support platform for nursing care operators. SMS holds strong positions in markets which are expanding due to an aging population in Japan as well as economic growth in Asia.
In Japan, seniors already constitute 28% of the population, with medical expenses and paid benefits under nursing care continuing to increase. As a result, the growing demand for accurate presentation of highly specialised information regarding medical and nursing care presents a potentially large business opportunity. SMS has offices mainly across Asia Pacific, including Singapore, China, India, Australia and New Zealand. Led by CEO Natsuki Goto, one of the group’s strategies has been to establish itself as the global leader in recruitment of healthcare professionals. Overall, the Group’s aim is to create the information infrastructure to contribute to the well-being of the aging society. The Group reported strong results for the half year to September 2019, with sales up 17% to ¥18bn year on year, and the group guiding for FY2020 revenue up 22% to ¥38bn.
TopBuild
TopBuild, spun off from Masco Corporation in 2015, is a leading installer and distributor of insulation products to the US construction industry. Led by CEO Jerry Volas since IPO, the Group has developed a diversified business model with continued focus on operational efficiency enhancements and has positioned itself to take advantage of market conditions. Encouraged by recent strong results the Group raised its guidance for FY19.
The Group provides countrywide installation services through its Contractor Services business TruTeam, which has 190 branches in 43 states. It also distributes products through its Service Partner business with over 70 distribution centres in 35 states. Strong household formations and positive builder sentiment coupled with low mortgage rates and wage growth are driving an acceleration in certain segments of the housing industry. As a priority, TopBuild is targeting acquisition led growth in core areas of residential and commercial insulation. The company has a strong pipeline of targets and has completed 11 acquisitions since 2016. A recent sizable acquisition was that of United Subcontractors Inc. (USI) in May 2018 for $475 million in cash. This strategically important acquisition strengthened TopBuild’s position in the US insulation installation and distribution market, and significantly increased TopBuild’s service capabilities.
Previous Awards
The finalists of all years can be found on the website www.broadwalkam.com
Disclaimers
Advisory Panel
The firms with whom the individuals on the advisory panel are employed; Barclays, Lazard & Co., Limited, Rothschild and UBS Limited, (an affiliate of UBS AG), may have corporate relationships with companies included in these awards. The inclusion of a company in the awards is not in any way an investment recommendation to buy or sell shares in these companies, or a recommendation to engage in any other business activity or arrangement with them. The inclusion of these companies, and the individuals and transactions, included in these awards represent solely the personal views of the individuals on the advisory panel and does not represent the views of these firms and should not in any way be attributed to them. Where UBS and Barclays has active research coverage of a company for consideration they abstained in providing a view on that company.
Broadwalk Asset Management LLP
This document is issued by Broadwalk Asset Management LLP which is authorised and regulated by the FCA. The Awards do not constitute investment advice. Funds that are controlled by Broadwalk Asset Management LLP and its members may have positions in some of the companies mentioned in the Awards. This document should not be distributed to any third party without the express approval of Broadwalk Asset Management LLP.
BROADWALK SERVICES AWARDS 2018[+/-]
Eleventh year of recognising outstanding achievements in the services sectors
This is the eleventh year of the Broadwalk Services Awards to recognise outstanding achievements by quoted companies and their management teams in the broadly defined business services sectors. Competition was again fierce with a strong array of contenders – highlighted by the impressive short lists. The broadly defined services sectors are one of the less well known success stories of the global economy and are amongst the largest private sector employers. These unique awards are another step towards raising the companies’ and the sector’s profile. We congratulate all the companies and their management teams.
Charlie Cottam - founder of Broadwalk Asset Management.
ADVISORY PANEL
The awards have had the significant benefit of views from:
- Jarrod Castle, BLT Sector Head, UBS Investment Research
- Vasco Litchfield, Managing Director, Lazard
- Jane Sparrow, Director Mid&Small Cap Support Services Research, Barclays
- Stuart Vincent, Managing Director, Rothschild
BROADWALK ASSET MANAGEMENTBroadwalk Asset Management LLP is a private investment management company based in London. It was founded in 2007 by Charlie Cottam and manages an absolute return strategy which focuses on investing in publicly quoted Services companies. This includes equities in the Support Services, Construction, Real Estate, IT, Transport and Healthcare sectors.
Important disclaimers are at the back of this document.
AWARDS AND SHORT LISTS
Company of the Year [top] - IMCD
Piet van der Slikke has been CEO since the company’s formation in 1995. It has become a world leader in the distribution of speciality chemicals and food ingredients, partly by consolidation. Since its 2014 IPO, the group revenues have grown 55% to €1.9bn in 2017. IMCD now offers best in class solutions including innovative formulations to 37,000 customers and a diverse range of suppliers in 45 countries across 6 continents. The Group targets opportunities to broaden the product portfolio and to expand to new geographies. In 2017 IMCD acquired L.V. Lomas, one of North America’s leading distributors of specialty chemicals which enabled IMCD to further strengthen its position in the US and to create a significant presence in Canada. In June 2018 the company bought E.T. Horn, a leading speciality chemicals distributor in the US which has proved an excellent fit. In September 2018, IMCD made another important acquisition, of Velox in Germany. Velox strengthened its positioning in speciality plastics and additives. IMCD had strong results for the first nine months of this year. With revenues of €1.8bn, the company generated 29% constant currency revenue growth, of which 11% was organic growth.
SHORTLISTED
Edenred
Listed on the Paris Euronext Stock Exchange since 2010 when it was demerged from Accor, the business has been a great success as an independent entity. Bertrand Dumazy has been Chairman and CEO since late 2015. Originally an employee benefits business where it is still global leader it has diversified to become a world leader in transactional solutions for companies, employees and merchants, including Fleet and Mobility (for Toll Roads and Fuel Cards) and Corporate Payments. Employee benefits still account for about 65% of the business. In 2017 Edenred worked with almost 800k clients, was used by about 44m employees who made 2bn transactions worth €26bn through 1.5m partner merchants. The Group has substantial operations in Europe and Latin America and smaller activities in N America and the Far East. Profits look to return to healthy growth after several years of stagnation. In November 2018, Edenred bought US firm Corporate Spending Innovations (CSI), which provides corporate payment solutions, for c$600m. Edenred still has significant firepower for further acquisitions to grow as a business payment solutions provider. The Group has set annual medium term targets including like for like operating revenue growth more than 7%, operating ebit growth more than 9% and growth in cash from operations more than 10%. For the first nine months of 2018, revenue was €990m, up 11% like for like.
Juventus
Juventus is a leading international football club that originated in Turin, Italy in 1897. It is the most successful Italian football club, having won 65 official competitions. Juventus is 4th in Europe and 8th globally to have won the most international titles. Under CEO Giuseppe Marotta from 2010 to very recently the Club won seven consecutive Scudetti, four Italian Cups consecutively, three Italian Supercups, and two Champions League Finals were reached in three years. Apart from the sporting successes, other key developments include inauguration of the new futuristic Allianz Stadium and the formation of Juventus Women. The club is also developing a large project, the J Village, which will host the new Juventus headquarters, its training centre, youth academy, a J-Hotel and a concept store. For the fiscal year ended June 2018, revenues were €505m, a decline of 10% compared to the same period last year. The year saw a loss of €19m compared to profit of €43m the previous year. After the summer World Cup the Club, in what was seen as major coup in the sporting world, signed for €100m, 33 year old Cristiano Ronaldo, the winner of an unprecedented 5 Ballon d’Or awards. Exor N.V. through its subsidiary Giovanni Agnelli B.V. holds 64% stake in Juventus.
Nemetschek
The company develops Building Information Modelling (BIM) software which enables architects, engineers, construction companies and building managers to plan, exchange information and collaborate more closely. Deputy Chairman Professor Georg Nemetschek, who founded the company in 1963, still holds a majority stake of 53%. The company went public in 1999 and now supports c.4m users globally through its 16 brands in 67 locations, selling to 142 countries. Patrik Heider CFOO (Chief Financial and Operations Officer) joined Nemetschek in 2014. Nemetschek generated four year revenue CAGR of more than 20% in a market estimated to be worth €8bn by 2021. Growth is driven by increased penetration of digitisation compared to other industries, a shift to 3D, and an increase in regulations globally. Construction is also growing from urbanisation and population growth, and has been helped by acquiring Bluebeam and Solibri. In August 2018, Nemetschek became an end-to-end solutions provider for the entire building life cycle through the strategic acquisition of Belgian MCS Solutions. MCS Solutions offers Integrated Workplace Management System (IWMS) which services core workplace functions and has a smart building platform that uses IoT (Internet of Things) sensors and big data analytics. With a healthy balance sheet and strong cash generation, Nemetschek is well positioned to generate growth organically and through acquisitions. In the nine months of 2018, revenues grew 14% to €331m, of which recurring revenues making up 49% of total grew at 21%. Earnings (ebitda) grew 15%.
Pearson
CEO John Fallon has been leading the turnaround at Pearson, the largest education and learning company in the world. The company has had to address the structural shifts of lower rates of US college enrolment, and students renting text books rather than buying. Since becoming CEO in 2013, Fallon has streamlined the employee base with a reduction of 10, 000. In 2015, Pearson divested Financial Times and its 50% stake in Economist to focus on education. To strengthen the balance sheet, Pearson sold a 22% stake in Penguin Random House for c. US$1bn in July 2017. Also, in October 2017, Pearson launched a £300m a share buyback programme which ended in April 2018. Fallon has embarked on the “digital first” strategy with digital growth partially offsetting textbook decline. In February 2018 it agreed to integrate Microsoft’s artificial intelligence capabilities into its market leading English language learning curriculum. For the nine months of 2018, total revenues were flat year on year as the expected decline in US Higher Education Courseware was offset by growth in rest of the Group. The company is on track to deliver annualised cost savings of £300m, with full benefits materialising from end of 2019.
CEO and executive team of the year [top]
John Laing Group CEO Olivier Brousse and executive team
John Laing Group CEO Olivier Brousse (left) with Charlie Cottam
Together with his team, Olivier Brousse, CEO of the leading global infrastructure investor John Laing Group since 2014, has significantly developed the company’s previous UK focus, to an international footprint. He initiated a rights issue of £210m in March 2018. Brousse and his executive team’s objective was to take advantage of their strong pipeline, particularly in the US, which grew primarily as a result of the company’s excellent relationships with leading international contractors in a rapidly growing market. These relationships are considerably assisted by Laing’s highly experienced regional managers, who actively manage projects from bidding to construction to delivery. John Laing’s £383m investment commitments, announced in December 2017, were well ahead of its guidance. In May, the Group sold its 15% stake in the Intercity Express Programme (IEP) Phase I to AXA for £228m, in excess of the portfolio valuation at December 2017. This year, with an enhanced capital base, John Laing’s bidding teams have again been very active, with recent investments in the US and Australia. The Group delivered strong first half year results realising £241m from sale of investments, up 60% from the £151m in the comparable period of previous year. NAV per share rose 9% to 307 pence at the end of June 2018 from 281 pence in December 2017. The Group’s potential investment pipeline was an impressive £2.3bn at the end of first half of 2018.
SHORTLISTED
Entertainment One - CEO Darren Throop and the executive team
Since his appointment in 2001, CEO Darren Throop has built a global entertainment Group, Entertainment One (eOne), with annual revenues of US$1.4bn. Based in Toronto, it is now a pure play content licence company. The Company's rights library was worth $2bn in March 2018, and includes the Peppa Pig and PJ Masks brands in the preschool market. eOne entered production in 2015 with the acquisition of 51% stake in Mark Gordon Company for US$133m. This enabled the company to sell content to 500 broadcasters in around 160 countries. In January 2018, eOne paid US$209m to acquire the remaining stake. The company has also acquired a minority stake in Steven Spielberg's Amblin Partners. In 2015 eOne bought a 70% stake in Astley Baker Davies, part funded by a £201m rights issue. In October 2018, eOne announced a multi-year, first look deal with Mottola Media Group (MMG). On-demand services, whether through traditional TV providers or through offerings such as Netflix, Hulu and Amazon Prime, has seen rapid growth in North America, but many countries are very much behind the curve. With personnel in the less mature but high growth markets in Asia and Latin America, eOne is well placed to take advantage of the shifts as and when they occur. Throop’s ambitious goal is to double ebitda from £100m in 2015-2016 to £200m by March 2020. For the first six months ended September 2018 ebitda grew 10% to £60m with margin up 160 basis points to 14.8%. The Group also aims to deliver £13-15m of annualised cost savings by end of fiscal year 2020.
Schibsted - CEO Rolv Erik Ryssdal and the executive team
Schibsted is an international media group with operations in 22 countries. Rolv Erik Ryssdal, CEO joined Schibsted in 1991 and became CEO in 2009. Ryssdal has done an impressive job in shifting from declining traditional media to fast growing digital, and steadily acquiring a portfolio of newer businesses. As well as owning newspapers in Nordics, it is now a world leader in online classified adverts, ranking number one in 18 countries including France, Spain, Sweden and Brazil with a reach to 200m people. Monetisation has been supported by the portfolio of leading brands, focus on product development and well established traffic positions. Examples are the 2018 investment in real estate business habity and the 2017 investments in education tech business poio, fintech startup Harvest which offers robot managed fund, ahum a digital health marketplace, yepstr a first time jobs marketplace for youngsters and hygglo a rental marketplace. In 2017 Schibsted raised NOK 2.5bn ($300m) in new equity to fund acquisitions. In September 2018, the Group decided to spin off and list the international online classified business (MPI). Schibsted will retain majority shareholding of MPI which will be well positioned to take advantage of the consolidation opportunities in the industry. Schibsted will continue to innovate and build on its market positions in the Nordics. The plan is for 15 to 20% revenue growth in online classified for the next three to five years. Focus will also be on cash flow and profitability. For the first nine months of 2018, operating revenues generated by the Group increased 6.6% to NOK 13.3bn, and ebitda rose 24% to NOK 2.4bn, with adjusted earnings per share up 65%.
Wirecard - CEO Markus Braun and the executive team
Dr. Markus Braun, CEO and CTO of the German fintech company Wirecard, was appointed in 2002 to turnaround the three year old startup. It is now one of the fastest growing digital platforms globally. Wirecard has a German banking licence and holds issuing and acquiring licences from all major payment and card networks. The company offers omni-channel payment solutions to merchants, risk management and physical and virtual payment cards, serving 40,000 large and medium customers and 225,000 small customers. The tailor made solutions have enabled Wirecard to increase its commission on payment transactions to 1.6%. It has expanded in North America and Asia through the acquisition of two portfolios from Citi. Since 2015, Wirecard has offered the fully digitalised, mobile payment-app boon, based on virtual MasterCard which runs on Android and iOS. Boon enables contactless payments and peer-to-peer transactions. Wirecard has been collaborating with AliPay since 2015 and with Tencent since 2017 to offer WeChat Pay. The company expects growth to accelerate over the next decade, and forecasts core profits to grow six fold by 2025 aided by boom in ecommerce and digital payments. Growth is assisted by major deals with banks such as Credit Agricole. Even though the global payment market is highly fragmented, Wirecard will focus on organic growth. In 2020, Wirecard expects to be able to handle more than €215bn in payments and to generate €3bn in revenues compared to €1.5bn in 2017. For the first nine months of 2018, transaction volumes increased 44% to 90bn, with European volumes increasing 21% and non-European volumes rising 78%. Revenues for the nine months of 2018 grew 41% to €1.4bn, ebitda grew 38% to 395m. Following strong performance, the company has raised ebitda guidance from €530-560m to €550-570m. In September it entered the DAX index, and had a market capitalisation of c. €16bn at the end of November.
Chairman of the year [top]
Karl-Heinz Streibich, Chairman, Software AG
Software AG Chairman and CEO Karl-Heinz Streibich
Having spent 15 years at the helm, Karl-Heinz Streibich, Chairman and CEO stepped down in July 2018 having reached the recommended age limit. Under Mr Steinbach’s leadership, Software AG underwent a very significant transformation. He initiated a strategic realignment to focus on the integration business. He established a new second division at Software AG, leading to the company’s global digitisation business. He has built a large portfolio of digital transformation solutions. Mr Streibich also enabled the company to lay the foundations to succeed in Internet of Things, Big Data Analytics and Artificial Intelligence. The Group made 18 acquisitions between 2007 and 2016 to develop its product portfolio. Additionally in March 2017, the Group acquired Cumulocity, a further step in expanding leadership in Internet of Things(IoT). In recent months, Software AG has also announced major strategic alliances with companies such as Bosch, Octo, Dell and Huawei. In June 2018, The Group acquired Belgian company TrendMiner to expand Cumulocity IoT portfolio with an intuitive analytics platform for visualization of time series data. In March to May 2017, the Group undertook a €100m share buyback programme. In January 2018, Mr Streibich appointed as his successor Sanjay Brahmawar who was General Manager, Global Revenue, at IBM Watson in Germany. Mr Streibich has more than 35 years of experience in the international IT services industry with companies such as Daimler-Benz, Dow Chemical, ITT and debis Systemhaus.
SHORTLISTED
Ashtead - Chairman Christopher Cole
Chris Cole (Broadwalk Entrepreneur of the Year 2012) was appointed Non-Executive Chairman in March 2007. Mr Cole retired in September 2018, when the share price was 2,437p, up from c.150p on his appointment. He was member of the Board which appointed Geoff Drabble as CEO in 2007. Mr Cole steered the company through a very difficult time during the 2008-2009 financial crisis and set the company on its trajectory of organic growth combined with acquisitions. During the many years under Mr Cole’s leadership and counsel, Ashtead has made considerable progress to grow into one of the biggest and most successful equipment rental companies globally. Mr Cole’s significant contributions include successful negotiations with banks and instigation of some important acquisitions including that of Pride Equipment Corporation and CRS Contractors Rental Supply. Mr Cole, who has over 40 years of experience in engineering and consulting services, was previously Non-Executive Director at Ashtead since 2002. He is the founder of WSP Global. Additionally, he is Non-executive Chairman of Tracsis, Redcentric and Applus+.
McCarthy & Stone - Chairman Paul Lester CBE
Paul Lester (Broadwalk Chairman of the Year 2016) was appointed Chairman in January 2018. He oversaw the appointment of John Tonkiss as CEO in September. Tonkiss had previously been COO of McCarthy & Stone, and before that had performed the same role at Unite Students for 10 years. Mr Lester undertook a strategic review. The initiatives announced in September included focusing purely on the core retirement products, rightsizing the business to operate at a more sustainable volume level, reducing build costs and reorganising the sales team. The company is looking to make cumulative cash savings of c. £90m by October 2021 and reducing the capital employed by £70m. Mr Lester is also Chairman of Essentra and Forterra.
Skanska - Chairman Hans Biörck
Having been CFO from 2001 to 2011, Hans Biörck was appointed Chairman of Skanska in 2015. Following a period of difficult trading, in December 2017, he appointed a new CEO, Anders Danielsson who has worked at Skanska since 1991. Most recently Danielsson served as executive vice president with responsibilities of Skanska’s construction units in the US and infrastructure development. Under the guidance of Mr Biörck, Skanska has set strategic targets for 2016-2020, to achieve the next level of performance. The return based targets of return on equity of 18% and return on capital employed of 10% have already been achieved in the year 2017, and the Group is working towards an average construction margin over a business cycle of 3.5%.
Deal of the Year [top]
UBM acquisition by Informa for £4bn, announced in January 2018
Informa CEO Lord Stephen Carter (right) with Charlie Cottam
Informa, the events and business intelligence group has acquired UBM, the events organiser for £4.3bn. The combination will create the largest organiser of business events globally, with a portfolio ranging from the Monaco Yacht Show to Hong Kong Jewellery and Gem Fair. The companies had explored a deal in 2008, but this was sealed under the leadership Lord Stephen Carter, who will remain CEO of Informa. After shedding non-core businesses, UBM, under CEO Tim Cobbold, had become a pure play exhibitions operator holding events in Europe, US and China. The acquisition enables Informa to build scale in the exhibitions business and expand in Asia. The new group will be the leading Exhibitions business in the key growth markets of US and China. Annual recurring pre-tax cost savings of at least £60m will result from scale efficiencies and reduced duplicate costs, with c. £50m to be delivered in FY2019. The deal is expected to deliver positive earnings accretion in the first full financial year and a post-tax return on invested capital exceeding Informa’s cost of capital within three full financial years. More than two-thirds revenue of the combined Group will be forward booked and predictable. Incremental revenue synergies have yet to be quantified. The Group expects debt to reduce from c.3x net debt to adjusted ebitda at the effective date to below the target ceiling of 2.5x over time. UBM shareholders received 83% of the consideration in Informa shares with the remainder in cash. This reflects a premium of c.30% to UBM’s share price before the bid. Informa shareholders will own c.65.5% of the combined group.
SHORTLISTED
Atlantia, ACS and Hochtief joint acquisition of Abertis for €16.7bn, announced in March 2018
Global infrastructure operators, Atlantia, ACS and Hochtief acquired Abertis, a global leader in toll road management, for €16.7bn. ACS Chairman and CEO Florentino Pérez Rodríguez, Hochtief CEO Marcelino Fernandez Verdes and Atlantia CEO Giovanni Castellucci masterminded the deal. It is the largest ever transaction in transport infrastructure. Under the agreement the holding company will be owned by Atlantia (50% plus one share), ACS (30%) and Hochtief (20% minus one share). As part of the agreement, Atlantia will own up to 24% in Hochtief, leaving ACS with just above 50%. The cash offer of €18.36 a share represented a premium of 33%. Abertis has operations in 15 countries with more than 8,600 km under management in Europe, Americas and Asia. ACS estimates the net present value of synergies in the range of €6bn to €8bn, generated mainly by obtaining a significantly larger share of expanding public private partnership (PPP) opportunities in high growth North American, Australian and European markets. ACS aims to target a pipeline of €200bn in identified projects over four years. ACS subsidiary Hochtief’s greenfield development expertise and experience, complements Abertis’ brownfield capabilities. ACS expects substantial EPS accretion. Atlantia’s also reduces its Italian exposure to 45%. For Abertis, the deal will extend the average life span of its toll road concessions. The transaction will be financed through debt facilities of €10bn and equity of €7bn. The new Group will have c. €8bn of ebitda and c. €40bn of debt. The deal completed in October.
DS Smith acquisition of Europac for €1.9bn, announced in June 2018
Leading international packaging group DS Smith under CEO Miles Roberts, (Broadwalk CEO of the year 2012) in its largest acquisition, has bought Spanish packaging business Europac for €1.9bn . The offer valued Europac at 8.4 times ebitda for the year ended March. It was part funded through a rights issue of £1bn. Europac was 42% owned by the Isidro family. It has a diversified portfolio of 6,000 customers with strong exposure to fast moving consumer goods, agri-food and e-commerce. In 2017, 34% of revenue originated in France, 32% in Spain and 21% in Portugal. The businesses are highly complementary. The acquisition enables DH Smith to enhance its position in the fast growing Western European packaging for online retailers. After the deal, the group is market leader in France and number two in Spain. DS Smith expects €50m cost synergies from the transaction. The acquisition is earnings enhancing and pre-tax return on invested capital will exceed the weighted average cost of capital in the first full financial year of ownership. Post the deal, the Group’s net debt to ebitda is 2.5 times, with a medium term target of 2.0 times. The transaction is expected to complete in December having recently received clearance from the EU.
Fidessa acquisition by Ion Investment Group for £1.5bn, announced in April 2018
John Hamer, Chairman who joined Fidessa in 1983, agreed to a takeover by rival Ion at £1.5bn. The bid was a 50% premium to Fidessa’s share price before rival Temenos’s interest because public. Ion, backed by private equity group Carlyle, is one of Europe’s largest software companies providing trading and risk software solutions to financial markets globally. It has grown by making several acquisitions over the past decade, including a controlling stake in Dealogic, Patsystems, Ffastfill, Rolfe and Nolan, Wall St Systems and Openlink. Fidessa’s leading position in equities and derivatives trading solutions complements Ion’s fixed income and forex capabilities. It enables the combined Group to serve customers across all asset classes and to accelerate innovation. Ion estimates operational efficiencies from reduction in combined headcount by 15-20% to generate cost savings of c.$50m per annum. Synergies from removal of duplication of infrastructure facilities will generate a further $60m of savings with the majority expected in the first year of completion of the acquisition.
Teleperformance acquisition of Intelenet for US$ 1bn, announced in June 2018
Teleperformance is the global leader in outsourced omnichannel customer experience management. India based Intelenet is a high-end business services and digital transformation solutions provider. Intelenet is 55,000 people strong, serves 110+ clients and offers top-rated innovative business process management solutions to multinational clients. Its services bouquet includes customer management services, industry specific solutions, knowledge services and shared services set-up for various Fortune 500 companies across industry verticals such as banking & financial services, travel, healthcare, retail & e-retail. The deal was sealed under the leadership of Teleperformance Co-Founder, Chairman and CEO Daniel Julien (Broadwalk Entrepreneur of the Year 2016). Teleperformance aims to enhance its offerings significantly with Intelenet’s integrated solutions and digital optimization capabilities. Intelenet’s strong presence in India will enable Teleperformance to strengthen its presence in this key market. The deal will help Teleperformance meet its strategic plan of achieving revenues of €6bn by 2022. Intelenet generated $449m revenue and $83m ebitda during the financial year ended March 2018 and expects 10%-12% revenue growth per annum. The transaction is expected to enhance Teleperformance’s proforma adjusted earnings per share for 2018 by 10%. Net debt to ebitda is forecast below 2.5x by end of 2018 and is expected to reduce quickly. The deal was completed in October 2018.
IPO of the year [top] - Adyen
Payment processing firm Adyen’s IPO in Amsterdam in June 2018 was one of Europe’s largest technology IPOs. Shares were priced at €240 giving Adyen market capitalisation of €7.1bn. The company raised €849m. Morgan Stanley and JPMorgan acted as joint global coordinators and joint bookrunners. ABN Amro, Citi and Bank of America Merrill Lynch were joint bookrunners.
Co-founded in 2006 by the current CEO Pieter van der Does and Arnout Schuijff, Adyen helps merchants process payments online across mobile and in-store. The company also sells point-of-sale systems for physical stores. This year, eBay has chosen Adyen to be its primary payment processor replacing PayPal from 2021. Its 4,500 customers include eight of the 10 largest US internet companies and several large retailers. Facebook, Netflix, Spotify, Uber, Airbnb, Booking.com, easyJet and Vodafone are all customers. Adyen processed payment transactions worth €108bn in 2017 up from €66bn the year before, achieving 63% growth. For the first half of 2018 ended June, processed volume was €70bn, a 43% increase over the same period in the previous year. Revenues crossed €1bn, growing at 53%. Adyen has been profitable for many years and is debt free. It expects sales to grow by 25-35% annually. Adyen has obtained a pan-European banking license and expansion into settlement services will help grow revenues and margins further. It became one of the best European IPOs in a decade after the shares rose 91% on the first day of trading. The share price has risen 88% since the IPO to €452 at the end of November.
SHORTLISTED
Avast
Leading global cybersecurity provider Avast’s debut in May 2018 is one of Britain’s five largest technology IPOs ever. The private equity backed firm was priced at 250p per share for a market capitalisation of £2.4bn. The company sold 25% stake for total proceeds of £600m, of which the company received £200m. Morgan Stanley and UBS were global coordinators and Barclays, Bank of America Merrill Lynch, Credit Suisse and Jefferies joint bookrunners.
Founded in 1988, Avast has 435m subscribers globally. Key markets are US, Canada, Brazil, France, Russia and Germany. According to Avast, it prevents up to 2bn cyber-attacks a month. For the nine months of 2018, adjusted revenue grew 8.5% to $600m, with ebitda up 8.8% to $336m, a margin of 54.7%. Avast used the IPO proceeds to de-leverage to c.3x net debt to adjusted cash ebitda. The founders, Czech entrepreneurs Pavel Baudis and Eduard Kucera, own 37.5% of Avast following the IPO. CVC Capital Partners and Summit Partners also sold down their stakes and hold 22.7% and 5.7% respectively. Summit Capital subsequently sold down their stake in October 2018.
Hipgnosis
Hipgnosis raised £196m net in July 2018 at 100p per share to create the UK’s first listed song royalty company. The financial advisor and bookrunner was NPlus1 Singer.
The business was formed at the time of flotation. The key management are employed by the company’s Investment Adviser, Family (Music) Ltd. This organisation includes some key individuals with very extensive knowledge of the music publishing world. This includes Merck Mercuriadis the former manager of Elton John, Guns N’ Roses, Morrissey, Iron Maiden and Beyoncé, and hit songwriters such as Diane Warren, Justin Tranter and The-Dream, and also former CEO of The Sanctuary Group. The Company’s strategy is to acquire a portfolio of songs with associated musical intellectual property rights, which would comprise their writers share, their publishers share and their performance rights. After many years of decline the music industry is enjoying a recovery in growth with the emergence of streaming services such as Spotify and iTunes. In 2017 retail spending in the US increased by almost 20% and the growth in spending on digital streaming was even faster.
JTC
Financial Services firm JTC listed on the London main market in March 2018 with a market capitalisation of £310m and a price of 290p per share. The IPO raised £244m. Zeus Capital was financial adviser, broker, and joint co-ordinator and bookrunner. Numis was also joint co-ordinator and bookrunner.
Based in Jersey, JTC has a 30 year track record in providing market leading administration services to funds with more than $85bn in assets ranging from real estate to private equity. JTC serves over 5,600 international institutional and private clients. Nigel Le Quesne who joined the company as CEO in 1991 successfully led the company to its IPO. Revenue growth has been strong in recent years, both organic and through acquisitions. Revenues grew 17% to £60m in 2017. The IPO provided an exit for private equity backer CBPE Capital, who invested in 2012 to enable JTC to expand globally. Currently JTC is present in 17 jurisdictions in United Kingdom, Europe, Americas, Caribbean, Asia-Pacific and Africa. The IPO provides access to capital markets and has positioned the firm strongly for the next stage of growth. JTC aims to be a consolidator in the industry. The firm is majority owned by its employees, and plans to remain so.
Mind Gym
Behavioural science group Mind Gym debuted at AIM in June 2018 at an issue price of 146p per share with a market capitalisation of £145m. Liberum was the adviser. The company raised £51.8m.
Founded in 2000 by CEO Octavius Black and Sebastian Bailey, Mind Gym delivers human capital and business improvement solutions to an impressive list of clients which include 62 FTSE 100 and 59 S&P 100 companies. Mind Gym has a portfolio of more than 300 products, typically in 90-minute sessions, delivered face to face in virtual classrooms or digitally through a network of 300 self-employed coaches. The company offers differentiated products in a highly competitive market. Solutions offered are related to culture, judgement, inclusion and well-being. The company has operations in 29 countries though majority of the revenue originates from UK and US. Mind Gym reported revenues of £37m in the year to March. Annual revenues have grown at more than 20% over the past few years and profit at an even higher rate. Mind Gym has net cash on the balance sheet and funds product R&D from profits. The IPO helped raise the profile of the business, and to fund growth plans. The company aims to challenge old traditional training methods through the development of fresh evidence based psychological tools.
Small & mid-cap company of the year [top] - Future
Future was founded in 1985 and after changing hands several times, CFO Zillah Byng-Thorne was installed as the new CEO in 2014 after a near loss making year. By 2017, Future had increased its revenues by 43% to £84m with ebitda doubling to £11m, three times that of 2015. The US returned to stable profits with more than 60% of 2017 revenue from ecommerce. Costs were also brought under control with a 500bp reduction as a percentage of sales compared to 2014. Future owns some 100 brands covering print, events and online sites mostly in UK, US and Australia including T3, Total Film, PC Gamer, Digital Camera, Guitarist, and Computer Music. The company’s key advantage is its proprietary technology stack which handles a variety of functions such as content management, audience insights, user experience and customer relations management. The company strategy is to become a global content provider with revenues from advertising, e-commerce, events, licensing and readership. Future has made five key acquisitions in the past three years including Imagine’s 19 magazines and hundreds of book zines (£16m), Homebuilding (£32m), four magazines from Haymarket (£13m) and Newbay, US B2B media company (£9m). The July acquisition of consumer division of US tech publisher Purch (£101m) took Future to number one in consumer tech publishing in the US. Integrating Purch’s brands and digital platforms will further consolidate Future’s position as a growing global platform for specialist media. For the year ended September 2018, Group revenue was up 48% to £125m year on year, with 11% organic growth and Media organic growth of 40%. Online Revenue per User, a key metric of the company’s ability to monetise audiences, increased by 26% to £1.68 in UK and by 32% to £0.96 in US. Adjusted earnings per share increased 33% to 26.2p.
Future CEO Zillah Byng-Thorne
SHORTLISTED
Bioquell
Bioquell offers bio decontamination solutions and modular isolators for the Life Sciences, Pharmaceutical and Healthcare markets. The company has done over 300,000 decontaminations. A new executive team took charge in August 2016. Following a strategic review, Chairman Ian Johnson decided to simplify the business and focus on core products and services. The focus was also on generating revenue growth from international Life Sciences business, further efficiency improvements and additional recurring revenues from higher margin services. In August 2017, Bioquell exited the legacy Airflow service business. Furthermore, in May 2018, the company divested the final non-core business of MDH Defence. In the results for the half year ended June 2018, revenues excluding defence increased 7% to £15.7m. Like for like revenues were up 15% in constant currency and ebitda increased 28% to £3.3 million. Going forward the leaner business will have better revenue visibility and higher quality earnings. This attractiveness was recognised by a £141m bid from US Ecolab in November, at a 41% premium to the closing share price the day before.
Huntsworth
Huntsworth creates, acquires and develops specialist agencies that deliver marketing and communication services. Paul Taaffe was appointed CEO in 2015 after a turbulent period of senior management departures. Taaffe undertook full strategic review of the Group businesses and identified that problems were mainly structural and operational, rather than fundamental. Despite the financial difficulties, the Group still commanded respect from clients such as Hilton, Fujitsu and PayPal. During 2015, Taaffe led a transformation programme refreshing the senior management in a number of agencies, and investing in talent to facilitate growth in high potential businesses. Taaffe established the right talent in each market to drive new business wins, improve client retention and deliver organic and profit growth. Right sizing cost base was also a priority and most of the restructuring was complete by the end of 2015. The Group recorded very strong operational performance in the year 2017 with like for like revenue growth of 20%. For the half year ended Jun 2018, revenue grew 8% and adjusted headline operating profit grew 8%. The Group continued to make good progress despite tough comparatives in its Marketing division, and saw very strong organic growth in Medical and Immersive divisions. The growth remains focused on the three Healthcare based divisions. To support this, in July 2018, Huntsworth purchased San Francisco based Giant Creative Strategy for $72m. Giant is the leading West Coast healthcare professional and consumer marketing agency. The acquisition will facilitate larger client opportunities. In September 2018, the healthcare agency Evoke acquired the New Jersey based market access firm Navience for $24m. As one of the leading specialists in the fast growing area of payer marketing, Navience fulfills healthcare marketing in higher value added services such as for drugs awaiting launch.
Flowtech Fluid Power
Flowtech’s focus has been on its core competencies within the fluid power market with offerings across channels and sectors. The Group floated in 2014. CEO Sean Fennon has been in charge since 2009. Flowtech has grown through product innovation, value added services and new customer wins. In 2017 the Group also made five strategic acquisitions for a total of £22m, and reports to still have an active pipeline. Flowtech’s multichannel strategy has enabled increased market penetration, while its procurement strategy has delivered price and range benefits.
K3 Business Technology
K3, a leading global provider of next generation enterprise software solutions to retailers, manufacturers and distributors, is emerging out of a successful turnaround. In May 2017, new CEO Adalsteinn Valdimarsson initiated a strategic review following a period of weak performance due to lost contracts. K3 raised new equity of £9.2m. Focus was put on the stable cash generating business units, and the group’s significant customer base of SMEs. The benefits of the restructuring exercise were visible in the company’s results for the half year to May 2018. The Group swung from a £3.6m adjusted pre-tax loss the previous year to an adjusted pre-tax profit £1.2m. Revenues increased 2.6% to £41m. The company also saw a jump in gross margin from 46.8% to 52.2%. Services and software licences contributed substantially to the result. Increasing revenue from software developed in-house remains central to company’s growth strategy. There is a healthy pipeline of software licence and support renewals. The latest launch, an ERP agnostic modular cloud platform named Imagine has already won a major contract. K3 also has the opportunity to grow global accounts particularly from IKEA and its franchisees.
YouGov
YouGov is an online market research firm with operations in Europe, North America, Asia Pacific and Middle East. It was co-founded in 2000 by Stephan Shakespeare who became CEO in 2010. The company listed on AIM in 2005. YouGov’s product portfolio includes comprehensive market intelligence, planning and segmentation tools. It has a brand perception tracker powered by data gathered from millions of people participating in their online community. The company has one of the top ten international market research networks. YouGov has successfully expanded internationally and has offices in 20 countries and panel members in 38 countries. The strategy of improving the product mix through a continuous process of innovation is working well, with new markets planned for the future. A key part of strategy was to increase the proportion of revenues from core data products and services in all geographies, and match it with revenues from custom research. This was achieved in the fiscal year ended July 2018 when Data Products and Data Services both generated 50% of the total revenue. The company aims to invest in growing its product suite as well as expanding geographically. Focus is now on high margin opportunities. For the year ended July 2018, the company experienced strong growth and margin improvement across all divisions. Revenue growth of 12% generated £117m, and adjusted operating profit grew 35% to £20m. The operating margin rose 300bp to 17%. Operations were organically expanded in India, Italy and Spain. YouGov also made three strategic acquisitions of SMG Insight, a sports sponsorship research agency with a global footprint for a maximum total consideration of £21m, Galaxy Research in Australia and an audience conversation platform InConversation in the UK.
Entrepreneur of the year [top]
Keith Neilson - Co-Founder and CEO, Craneware
Winner of several young entrepreneur awards, Keith co-founded Craneware in 1999 as CEO, with his school friend Gordon Craig. Craneware became a pioneer in value cycle solutions for the healthcare market. From the beginning, the company established an innovative approach. Keith floated Craneware on AIM in 2007. Craneware is to make a difference in the healthcare market. The US healthcare market particularly is witnessing an ongoing shift to value based care, and Keith has positioned Craneware very strongly from a software perspective. The company serves more than a quarter of the registered US hospitals. Keith’s priority is scaling up and integrating financial, operational and clinical data to create a value cycle to generate better outcomes for hospitals and patients. Craneware’s newest innovative cost analytics solution Trisus Healthcare Intelligence consolidates all aspects of patient data to measure Patient True Cost of each session based on consumption of resources. In 2018, Chargemaster Toolkit, Craneware’s flagship solution was named by KLAS as the best in class in the Chargemaster Management category for the twelfth consecutive year. For the fiscal year ended June 2018, revenue rose 16% to US$67m and adjusted ebitda increased 20% to US$ 22m. New sales increased more than 100%. Craneware was awarded five significant contract wins and extensions. Sales pipeline continues to be at record high levels and the company has $50m to fund acquisitions. During the year, Craneware signed a deal with a large hospital network in eastern US under which their technology is being rolled out to 12 facilities. The contract is expected to deliver in excess of $6m over the initial five year term.
Craneware Co-Founder and CEO Keith Neilson
International Services Company of the year [top]
FTI Consulting
FTI Consulting grew from a small forensic consulting firm in 1982 with $7m in revenue to a $1.8bn global consulting firm specialising in corporate finance and restructuring, economics, forensics and litigation, strategic communications and technology across 16 industries. FTI currently has more than 4,600 professionals and offers services in 28 countries. President and CEO Steven H. Gunby was appointed in January 2014 to take FTI to the next level of growth. FTI is known for advising corporations, governments, financial institutions and law firms on the most significant, large-scale and complex assignments, and in 2018 FTI won an exceptional number of these, giving strong operational leverage. FTI has made 8 lateral SMD hires during the first half of the year and 23 in the second half of 2018, as of October 25th, 2018. The investments made during the year will be a key contributor to revenue growth in the future. In October 2018, FTI expanded its forensic technology and data & analytics capabilities by appointing five Senior Managing Directors in the Middle East, UK and India. Additionally, professionals were appointed to enhance disputes and valuation capabilities in Australia. FTI has also been adding professionals in fields such as Business Transformation, Public Affairs, Restructuring, Healthcare, Energy and Construction, among other sectors, to take advantage of opportunities arising in these fields. For the first nine months of 2018, revenues of $1.523bn grew 14% compared to the first nine months of 2017, and Adjusted EBITDA of $212m in the first nine months of 2018 grew 55% compared to the first nine months of 2017.
Kevin Hewitt (right), Chairman EMEA, FTI Consulting with Charlie Cottam
SHORTLISTED
Amedisys
Louisiana based Amedisys is a leading independent provider of high quality, clinically distinctive home health, hospice and personal care to 3.7m patients. Amedisys partners with 3,000 hospitals and 59,000 physicians nationwide and has over 18,000 employees at 421 care centres in 34 states. Industry veteran Paul Kusserow, President and CEO since 2014, has repositioned the company clinically and financially as a leader in the fast growing home health and hospice sectors. Growth has been organic as well as through smaller targeted acquisitions. The number of people choosing hospice benefit is increasing and hospice reimbursement scenario is relatively stable. Top 10 players command only about 18% market share and this creates opportunities for inorganic expansion. In October 2018, Amedisys made a relatively large acquisition of Compassionate Care Hospice (CCH), a national hospice care provider, for $290m, representing 10.7 times ebitda. Once integration is complete and synergies materialise, the multiple will reduce to 7.8 times. CCH cares for c. 3,300 patients per day in 53 locations in 24 states. After the deal closes in February 2019, the combined hospice operations will care for c. 11,000 patients in 136 centres. Going forward the company will focus on capabilities in care coordination, shifting more patients to their home, benefitting from Medicare Advantage insurance and offering lower cost, higher quality managed care. The Group is experiencing healthy growth across all three business lines. For the nine months of the year, Amedisys posted adjusted net service revenue of $1.2bn compared to $1.1bn million in 2017, growing 10%. Adjusted earnings ebitda grew 30% to $137m.
Computershare
Founded in Melbourne in 1978, Computershare specialises in share transfer and share registration services. It has grown organically as well as through many acquisitions to become a global operator. In the past decade, Computershare also entered the loan and mortgage services markets in US and UK. Stuart Irving, an employee since 1998, was appointed as President and CEO in 2014. For the full year ended June 2018, strong growth in the US operations led to ebitda growth of 13% to $610m on US$2.3bn of turnover, of which $1bn was generated in the US. In November 2018 it acquired Zurich based Equatex, the employee share plan administrator servicing over 1.1m share plan participants. The €355m deal will enhance Computershare's employee share plans capabilities in key European markets. The company expects US$30m of synergies annually over the next three years from the deal. Mortgage servicing is another driver for growth. Computershare is continuing to build its revenue model across the value chain in the US mortgage services market, driving scale in servicing. In the UK, the company is progressing well with the integration of UKAR mortgage servicing business acquired in 2016. The company is aligning with challenger banks in UK to drive volume growth.
Infomart
Tokyo based Infomart Corp is a leading B2B e-commerce platform in Japan for restaurants and hotels to interact with wholesalers. Infomart’s cloud based system enables its client base of 2.5m companies to leverage of groupware to share information between the company and existing customer accounts to increase business efficiency. 95% of revenue is generated from monthly system usage fees. Over the years, Infomart has grown by aggressively increasing market share in the food industry. The company achieved this by expanding its Platform Ordering and Platform Food Standards databases, and also by making electronic invoicing standard practise. Osamu Nagao took over as President and CEO in March 2018 having been previously head of venture capital at Mitsui. The third quarter results showed increasing system usage fees due to consistent growth in the number of buyer companies using the B2B Platform Ordering between restaurants and wholesalers. In September, the number of buyer companies using B2B Platform Ordering exceeded 2,500 covering over 50,000 restaurants. Growth in system usage fees was also driven by adding the Standards Database to the Platform Ordering. In October, the number of companies using B2B Platform Invoicing rose to 240,000. There was a consistent flow of referrals from alliance partners. New customers have also been added in the pharmaceutical wholesaler, amusement, financial and IT sectors. The company intends to continue to invest heavily in system development. For the nine months in 2018, sales grew 14% to ¥5.6tr and operating profit grew 28% to ¥1.6tr.
Insperity
Paul Sarvadi, co-founder, Chairman and CEO of Inspirity based in Houston, Texas, launched not just a company in 1986, but an entire industry. He pioneered the concept of co-employment. Sarvadi overcame many legal and regulatory battles to establish the Professional Employer Organisation (PEO) model, where the employee is co-employed by Inspirity and the worksite employer. The employee works only for the primary employer, but is legally co-employed by Inspirity, so it is able to carry out the some HR functions and appraisal, which an outsourcer would not be legally able to do. Inspirity is now the third largest operator with a market share of 10%, in an industry of $170bn gross revenue. Eleven years after founding Inspirity, Sarvadi took the company public and Inspirity now generates more than $3bn in annual revenue, from a client base of more than 100,000 SME businesses in the US. Inspirity targets well paid white collar jobs that carry lower than average health and safety risks. The company has 183,000 workplace employees, and 3000 corporate employees. The business grew through resource expansion as well as geographic expansion. The key resource is the 550 Business Performance Advisors (BPAs) whom Inspirity recruits and trains to take responsibility for the full cycle from the initial sales through support and maintenance. BPAs reach peak productivity in 12 months. In early 2017 the company extended its offering launching Workforce Acceleration, a comprehensive solution for traditional payroll and other human resource management services. Currently, of the company’s 100,000 customers, only 7,500 are in full-service co-employment arrangements. Every year Inspirity interacts with roughly 35,000 employers and adds around 3,000 clients to their co-employment business. For the nine months of 2018, revenue was $2.9bn, growth of 16% from a combination of new sales and wage growth. From 2015 to 2017 adjusted earnings (ebitda) growth exceeded 26%. Adjusted ebitda per worksite employee per month is a key metric and has improved from $54 in 2014 to the current projection of $95. Inspirity estimates BPA count will grow 15% in 2019. The balance sheet is strong with net cash of $300m.
Previous Awards
The finalists of all years can be found on the website www.broadwalkam.com
Disclaimers
Advisory Panel
The firms with whom the individuals on the advisory panel are employed; Barclays, Lazard & Co., Limited, Rothschild and UBS Limited, (an affiliate of UBS AG), may have corporate relationships with companies included in these awards. The inclusion of a company in the awards is not in any way an investment recommendation to buy or sell shares in these companies or to engage in any other business activity or arrangement with them. The inclusion of these companies does not necessarily represent the views of these firms and should not in any way be attributed to them.
Broadwalk Asset Management LLP
This document is issued by Broadwalk Asset Management LLP which is authorised and regulated by the FCA. The Awards do not constitute investment advice. Funds that are controlled by Broadwalk Asset Management LLP and its members may have positions in some of the companies mentioned in the Awards. This document should not be distributed to any third party without the express approval of Broadwalk Asset Management LLP.
BROADWALK SERVICES AWARDS 2017 [+/-]
This is the tenth year of the Broadwalk Services Awards to recognise outstanding achievements by quoted companies and their management teams in the broadly defined business services sectors. Competition was again fierce with a strong array of contenders – highlighted by the impressive short lists. The broadly defined services sectors are one of the less well known success stories of the global economy and are amongst the largest private sector employers. These unique awards are another step towards raising the companies’ and the sector’s profile. Interestingly in a market sometimes sceptical of IPOs, we note four of the winners are recent IPOs. We congratulate all the companies and their management teams.
Charlie Cottam - founder of Broadwalk Asset Management.
ADVISORY PANEL
The awards have had the significant benefit of views from:
- Jarrod Castle, BLT Sector Head, UBS Investment Research
- Vasco Litchfield, Managing Director, Lazard
- Jane Sparrow, Director Mid&Small Cap Support Services Research, Barclays
- Stuart Vincent, Managing Director, Rothschild
BROADWALK ASSET MANAGEMENT
Broadwalk Asset Management LLP is a private investment management company based in London. It was founded in 2007 by Charlie Cottam and manages an absolute return strategy which focuses on investing in publicly quoted Services companies. This includes equities in the Support Services, Construction, Real Estate, IT, Transport and Healthcare sectors.
Important disclaimers are at the back of this document.
AWARDS AND SHORT LISTS
Company of the Year [top]
Sophos
Sophos is a global leader in next-generation endpoint and network security solutions, protecting more than 100 million users within 280,000 customers worldwide. Under CEO Kris Hagerman, the company floated in 2015 at 225p, the largest ever IPO of a software company in UK, valuing Sophos at £1bn. In the same year, Sophos launched Synchronised Security with the Security Heartbeat, a first in the industry, which enables network and endpoint products to communicate and share intelligence to improve protection. In February 2017, it acquired Invincea for $100m to strengthen its next-generation products with deep learning and behavioural monitoring to enhance malware threat detection and prevention using AI. A key element of Sophos’s business strategy is the cross-sell and up-sell of its comprehensive portfolio within existing customers, which it reaches through more than 34,000 channel partners worldwide. Sophos continued to outgrow the IT security market with compound annual growth rate of 18% since 2014. In November 2017, the private equity owners Apax were able to sell a further £315m of shares, bringing their combined holding down to 11%. Shareholders have been well rewarded since the float, the share price having risen strongly.
SHORTLISTED
Amadeus IT
Under Luis Maroto, President and CEO since January 2011, Amadeus has seen very profitable expansion. Amadeus returned to the stock market in April 2010, and has since built up its world leading IT Solutions business for the global airline industry. In October, it signed a wide ranging venture with Air Canada to power its digital transformation and delivery of customer experience. Amadeus has also successfully implemented a global expansion of its Hospitality IT offering with Whitbread, owner of Premier Inn, adopting its systems and rolling them out to its 765 properties. It has also planned an extensive reservation system roll-out for InterContinental Hotels Group. In October, Amadeus signed a contract with Hong Kong International Airport to provide solutions for their new kiosks to make the check-in process more traveller-friendly and to generate significant cost savings for the airport. Five other airports have also signed up for similar offerings during the year. The core GDS (Global Distribution Systems) airline booking system remains the world leader with a particularly strong position in Europe. For the nine months of 2017, revenue grew 9%, and EBITDA grew 10% on strong operating performances in both main divisions, and the consolidation of Navitaire acquired in January 2016.
Forterra
Forterra, the leading building products manufacturer, is celebrating 140 years of production of the iconic London Brick. CEO Stephen Harrison, has been with Forterra since 2002, and oversaw its IPO in April 2016. He has successfully steered the company through a weaker phase of demand by managing supply through short term capacity closures in the aftermath of the uncertainty caused by the EU Referendum vote. The bolt-on acquisition of concrete flooring maker Bison Manufacturing in July for £20m was part of the strategy to expand product footprint in UK, and creates a unique positioning for Forterra as a leading supplier of clay bricks, concrete blocks and precast concrete. The acquisition enables Forterra to efficiently reallocate capacity and presents an opportunity to partner with Laing O’Rourke, a leader in off-site construction techniques and innovation in construction.
Temenos
Swiss listed Temenos, a global leader in banking and finance software, partners with banks and other financial institutions to transform their operations in an increasingly dynamic market. CEO David Arnott, who has been with the business for 16 years, pursues a strategy focused on packaged, upgradeable, vertically integrated software. Temenos’ software enables financial institutions to move to real-time IT operations and benefit from emerging technologies, as well as adopt open banking and platform-based business models. Temenos has over 2000 clients around the world, out of which 700 banks globally are running on Temenos’ core banking software. 41 of the top 50 banks rely on Temenos to process the daily transactions of more than 500 million banking customers. In the past 3 years alone, multiple tier 1 and 2 banks have selected Temenos as their strategic partner for progressively renovating their IT infrastructure including Nordea, Standard Chartered, Bank of Ireland and Santander for its digital banking subsidiary, Openbank, one of the first fully digital banks in the world. The company sees significant potential in the US, with the aim of increasing revenue contribution from North America to over 25% in the medium term. Temenos’ focused strategy is showing results; software licensing grew at 20% with an EBIT margin of 30% over the last twelve months to Q3 2017.
CEO and executive team of the year [top]
SSP Group CEO Kate Swann and executive team
SSP Group CEO Kate Swann
Kate Swann, CEO, who joined in 2013 with a highly successful track record in the retail industry, was instrumental in floating SSP in 2014 at 210p. SPP boasts a strong pace of contract wins, especially in North America and Asia Pacific, including the new Terminal 7 at New York’s JFK airport, a joint venture partnership in India and entry into Israel. The Group continues to invest in the business by adding new brands and concepts, and opening profitable new space. At the same time, CEO Swann and the executive team have done an excellent job at rationalising operations, and reducing the number of suppliers. For the financial year ended September 2017, on a constant currency basis, the Group showed an impressive performance with revenues increasing 12% and underlying operating profit up 27%, driven by a combination of increased like for like sales, new contract wins and margin expansion. Shareholders have been amply rewarded since the IPO with the shares up over 200%.
SHORTLISTED
Equiniti - CEO Guy Wakeley and the executive team
Led by CEO Guy Wakeley, who joined the executive team in January 2014, Equiniti floated in October 2015 at 165p. The Group is a leading provider of technology, administration, processing and payment services in the UK and internationally, and handles more than half of FTSE100 dividend payments. The Group’s organic growth strategy has been complemented with bolt-on acquisitions adding new capabilities. In July, Equiniti announced the strategic acquisition of the share registration arm of Wells Fargo for US$227m. The deal was part financed through a rights issue of £122m at 190p per share. Wells Fargo’s share registration business caters to 1,200 firms across the US, which is the largest and the most active share registration market. Synergies are expected from introducing Equiniti’s market leading technology and new products, especially the share-save scheme into the US market, which is similar, but eight times bigger, than the UK market.
FDM - CEO Rod Flavell and the executive team
FDM Group provides IT consultants or “Mounties” to assist clients with key IT functions. Founded in 1991 by CEO Rod Flavell, the business is now well diversified with 50% of revenue originating outside UK with operations in the rest of Europe, North America and Asia Pacific. The company floated in June 2014 at 287p per share. It has been pursuing a strategy of consistent and profitable organic growth through its established Mountie model of hiring, training and placing its own consultants at client sites. Demand for Group’s services has been strong with a 78% growth in revenue in three years to £189m in 2016. This year a new centre was opened at Singapore and existing facility at Frankfurt expanded, taking the total number of permanent academies to nine. Recently the number of Mounties assigned to client sites grew to over 3,000 for the first time with utilisation rate of more than 95%. For the first time, Mounties were placed in Australia, Spain and Portugal, and 35 new clients were won globally. The Group continues with their strategy of diversification with 71% of the new client acquisition now from outside financial services. Revenues and adjusted operating profit grew at 35%. FDM entered FTSE 250 in June 2017.
First Derivatives - CEO Brian Conlon and the executive team
First Derivatives, founded by CEO Brian Conlon in 1996 in Northern Ireland, has an impressive growth record having grown revenues between 20% and 45% every year except in 2015 when it achieved 19%. The company has a strong track record of organic growth. The business has established itself as the market leader in real-time capture and analysis of high volume market data for applications such as risk management, regulatory compliance and balance sheet optimisation. The company has transitioned its Kx technology, developed in the core FinTech market, into other high value industries such as utilities and pharmaceuticals. During the past five years, the Group has more than trebled revenues, most of it organically. The company continues its track record of contract wins, including the European operations of a Japanese investment bank, and a Scandinavian asset manager. Management remains on the lookout for further bolt-on opportunities to complement the strong organic growth.
Grafton Group - CEO Gavin Slark and the executive team
Under CEO Gavin Slark, who joined in 2011, Grafton, the international distributor of building materials, has pursued a strategy of establishing market leading positions in national and regional markets through organic growth and acquisitions. This has led to significant improvements in operating profit margin and ROCE to 5.8% and 13.2% respectively. The growth strategy of opening more branches under the Selco brand has yielded good results, consolidating its position as UK’s fastest growing and fourth largest general builders merchant. The group entered the Netherlands via an acquisition in 2015 and in January 2017 a further business was acquired for £31m. For the ten months of 2017, revenue increased 7% with growth in all regions under Merchanting and double digit growth in Retailing and Manufacturing. A solid balance sheet with 7% gearing and strong operating cash flow supports Grafton’s strategic initiatives.
Chairman of the year [top]
Steve Parkin, Chairman, Clipper Logistics
Steve Parkin - Chairman, Clipper Logistics Steve Parkin founded Clipper Logistics in 1992, and has grown it from a single van operation to a major industry player with £340m turnover. The company floated in June 2014 at 100p per share. Since then strong results boosted by new contract wins in the UK and Europe have seen the shares rise over three times. Clipper serves an extensive blue-chip client base, including Asos, and is ideally positioned to benefit from the structural growth of ecommerce fulfilment and returns management services. In the recent interim results revenues grew 21% and ebit by 19%, from strong organic growth and two strategic acquisitions.
SHORTLISTED
EasyJet - Chairman John Barton
John Barton was appointed Chairman of EasyJet in May 2013. He supported Dame Carolyn McCall, CEO from 2010, in her initiatives to transform EasyJet and generate strong financial performance. Operating margins peaked in 2015 and passenger numbers have reached record highs. He successfully negotiated with the founder shareholder on a variety of matters including the fleet expansion plan and dividend policy. When CEO McCall announced her decision to move to ITV, he initiated a search for a new CEO. In November, he made the appointment of Johan Lundgren, whose track record in the travel industry demonstrates strong leadership with focus on customer and operational excellence.
Mr Barton is also a non-executive director of SSP Group, Matheson and Company Limited and Luceco. He has served as Chairman of Next, Catlin Group Ltd, Cable and Wireless Worldwide, Brit Holdings and Wellington Underwriting.
NCC Group - Chairman Christopher Stone
Christopher Stone was appointed Chairman in April, after NCC had had a number of challenges. On joining, Mr Stone undertook an extensive strategic review. Mr Stone initiated a process of reorganising operations and streamlining business processes. The Assurance Division was refocused on achieving larger, more integrated higher value added sales. It was decided to sell the Web Performance and Software Testing businesses and focus on cybersecurity services. In November he appointed a new well qualified CEO, Adam Palser who had been CEO of public service provider NSL, before it was sold in March, and prior to that he had been at QinetiQ. Mr Stone is also Chairman of CityFibre. He has held non-executive and CEO positions at listed and private equity backed technology companies including CSR Group, which was acquired by Qualcomm in 2015.
SIG - Chairman Leslie Van de Walle (until October)
Mr Van de Walle was Chairman of SIG from February 2011 until his retirement in October. Mr Van de Walle displayed strong leadership qualities through a period of trading difficulty. He appointed an interim CEO to help steady the business. He then brought in a new team with extensive turnaround experience with Meinie Oldersma as CEO, the ex-CEO of Brammer, and Nick Maddock, previously CFO of McCarthy & Stone. Oldersma has been able to reduce debt levels, stabilise profits, bring top line growth back and start to reassert management control. Mr Van de Walle worked closely with the new management team to develop a revised strategy, setting medium term targets for return on sales of c.5% and ROCE of c.15%. Andrew Allner, previously Chairman of Marshalls, is his successor. Mr Van de Walle has extensive experience and his previous roles include CEO of Rexam and Executive Vice President of Shell’s Global Retail Division. He remains Non-Executive Chairman of Robert Walters and non-executive director of DCC.
Deal of the Year [top]
Rentokil Initial Joint Venture with Haniel announced at the end of December 2016
SHORTLISTED
Atkins sale to SNC-Lavalin for £2.1bn announced in April 2017
SNC-Lavalin of Canada acquired Atkins for £20.80 per share in cash, at a premium of 35% to Atkins’ closing price. During Atkins CEO Uwe Krueger’s five year term, the company has delivered consistent margin expansion to achieve an 8% operating margin target, and made several strategic acquisitions to expand its energy offerings. The combined entity has 53,000 employees, and a more balanced geographic footprint and business portfolio and higher overall margins. Atkins’ strength in infrastructure, rail and transit and nuclear creates opportunities for cross selling and major projects in new regions. The acquisition was immediately accretive to SNC-Lavalin’s adjusted earnings, even before revenue and cost synergies. Cost synergies of C$120m (£70m) are expected at the end of the first full financial year. The purchase price was 9.8x trailing 12-months adjusted EBITDA post synergies including Atkin’s significant pension deficit. The deal was completed in July 2017 and funded through a combination of new equity and debt.
Aveva reverse takeover by Schneider Electric Software in a £3bn deal announced in September 2017
This was the third attempt for a merger between these parties since 2015. Jean-Pascal Tricoire, Chairman of Schneider Electric and Philip Aiken, Chairman of Aveva negotiated the deal. In exchange for its software division, Schneider received 60% of the combined company, valued at £1.7bn. The shares rose 23% on the announcement which included a £550m compensation for majority control. In addition Aveva will distribute excess cash of £100m. The combination creates a global leader in engineering and industrial software business, and will retain Aveva’s London stock market quote. Schneider is a leader in software for manufacturing operations and capital intensive industries globally, bolstered by its acquisition of Invensys in 2013 (Broadwalk Deal of the Year 2013). Aveva provides software solutions mainly to oil and gas, power and marine industries. The combination will also give Aveva better access to the North American market. Management expects substantial revenue and cost synergies. The enlarged Aveva Group will have a strong balance sheet, with no net debt.
Elis acquisition of Berendsen for £2.2bn completed in September 2017
Elis acquired Berendsen, to create the Pan-European leader in the textile rental sector. The deal was sealed under the leadership of Elis CEO Xavier Martiré for £2.2bn or 1,250p per share, a premium of c45% to Berendsen’s closing share price prior to initial announcement of the deal in May 2017. The offer comprised 57% new Elis shares, with the cash component funded by a rights issue and placing. Elis has strong market position particularly in France and Berendsen in UK and Scandinavia. Both have businesses in the fragmented German market and Benelux. In November Elis reported it expected synergies significantly higher than the €40m mentioned at the time of the bid, by the end of the third year after completion of the deal. This deal comes after two successful acquisitions announced in December 2016 in Spain and Brazil.
Worldpay merger with Vantiv for US$10.4bn announced in July 2017
US credit card processing company Vantiv and global payment processing firm Worldpay (Broadwalk IPO of the year 2015) proposed a merger that will create the Number 1 global acquirer with an enterprise value of c.US$29bn, under the leadership of Charles Drucker, President and CEO of Vantiv and Philip Jansen, CEO of Worldpay. The highly strategic transaction joins two complementary businesses, creating a leading payments provider with a capability to power integrated omni-commerce globally. The combined technology platform will deliver innovation at scale to merchant customers in almost every geography, currency, and region. The deal offers incremental revenue opportunities, significant cost synergies and additional benefits from operating leverage. The predominantly equity consideration, valued Worldpay shares at 397p, an almost 19% premium to prevailing trading and a substantial premium to its flotation price of 240p. Following the merger, Worldpay shareholders will own c41% of the combined Group. The combined group will have a primary listing on the NYSE, and a secondary listing on the LSE.
IPO of the year [top]
Alfa Financial Software
Alfa develops specialist software for the asset finance industry to manage loans for purchase of a range of assets including office equipment, cars, planes and satellites. The company was founded by Andrew Page and others in 1990. Based in London, Alfa’s customers include Barclays, Bank of America and Mercedes-Benz. For the fiscal year 2016, Alfa reported revenues of £73m and adjusted ebit of £33m. The listing aimed to raise the company’s profile, helping to win further market share. It has been very successful at winning new customers migrating from legacy systems to its highly effective modern technology, in part to keep up with regulatory changes. The $5.4 trillion asset finance industry presents huge growth opportunities. Motor financing especially is a fast growing segment in US and UK and Alfa is a major player in the American market. Alfa has a track record of solid returns and the IPO will assist in continuing the growth momentum of the business. Executive Chairman Andrew Page and Chief Executive Andrew Denton, are remaining in post, and continue to own 61% and 7% respectively of Alfa.
SHORTLISTED
Prosegur Cash
The Spanish security services company Prosegur spun off its Cash subsidiary to raise €750m. The offer price of €2.00 per share valued the company at €3.5bn. BBVA, Santander, Citigroup and Goldman Sachs were the joint global coordinators and joint book runners. Deutsche, HSBC and JB Capital Markets were book runners. Lazard was Financial Adviser.
Prosegur’s objective was to rebalance its portfolio, while creating a pure play cash operator. The Group plans to use a significant element of the proceeds to grow its alarms and security businesses, while also returning some proceeds to shareholders. Prosegur retains 72.5% shareholding post IPO. Prosegur Cash under CEO José Antonio Lasanta Luri offers a full range of cash services. It is the second largest cash in transit business globally with market share of 14%, and handled c.$550bn of cash in 2016. As well as having a strong presence in Spain, it has a dominant position in Brazil and Argentina. Year 2016 revenues were €1.7bn with an impressive 19% ebit margin. The company has completed 18 bolt-on accretive acquisitions since 2011 and aims to be a consolidator in a fragmented market, complementing organic growth. For the nine months to September, the company posted strong results. Revenue increased 17% of which 15% was organic, and adjusted ebit rose 22%.
VolkerWessels
The IPO in May 2017 raised €575m when owner Reggeborgh Holding sold a 31% stake in the Dutch construction and engineering company. The listing price of €23 per share valued the Group at €1.85bn. ABN Amro, Bank of America Merrill Lynch, ING and Morgan Stanley were global co-ordinators, and BNP Paribas and Rabobank, the book runners.
Formed in 1997 through the merger of Kondor Wessels and Volker Stevin, the second largest construction company in Netherlands was fully owned by the Wessels family before the IPO. The company was listed on the Amsterdam bourse until 2003, when it was taken private by the then chairman Dik Wessels. The objective of the IPO was to diversify family assets. The Wessels family plan to remain long term shareholders. VolkerWessels constructs a range of assets from light rail systems to football stadiums, and has a real estate development arm. About 70% of the Group’s €5.5bn sales originate in Netherlands, with the remainder from UK, Germany and North America. The IPO was conducted under the leadership of Executive Chairman Jan de Ruiter who joined in March 2017. For the nine months of the year order book grew by 11%, revenue remained stable but ebitda grew 10%.
Xafinity
The IPO in February raised £180m at 139p. Zeus Capital was the financial adviser and book runner.
Private equity CBPE Capital bought Xafinity from Equiniti in 2013 and exited their investment entirely. The new money of £46m was used for debt reduction. Xafinity is a provider of pension compliance and advisory services to UK corporate pension schemes. The company has long standing relationships with more than 550 pension schemes. The substantial investment in infrastructure and technology enabled Xafinity to establish itself as a strong competitor to the Big Three actuarial firms. Co-Chief Executive Officers Ben Bramhall and Paul Cuff plan to capitalise on the increased demand for innovative actuarial services as a result of ongoing regulatory changes. In December the company announced it was to buy Punter Southall for £153m, part financed by a £70m rights issue. The deal will create a leading player in the mid market actuarial, investment and administrative services to UK pension schemes. It is expected to be materially earnings enhancing in the year to March 2020.
Small & mid-cap company of the year [top]
discoverIE (formerly Acal)
discoverIE CEO Nick Jefferies (right) with Charlie Cottam Under CEO Nick Jefferies since 2009, discoverIE’s strategy has been to create a high margin differentiated business through organic and acquisition led growth. This strategy has delivered with sales doubling in the last four years. discoverIE, a leading designer, manufacturer and supplier of customised industrial electronics products and solutions, has focused on niche areas and also in the design to delivery processes. Cross selling opportunities has been a key factor in the acquisition strategy. The acquisition of UK based Variohm Holdings for £14m in January added a highly complementary business. Though the majority of revenues are in Europe, the company has been growing its presence in US and Asia, with the aim to become an international leader in customised electronics. The latest results showed 9% organic growth, and EPS up 24%.
SHORTLISTED
Communisis
Communisis, led by CEO Andy Blundell since 2009, has entered its next phase of growth supported by a global client base, long term contracts, technological investments and cost initiatives. In August, Communisis signed a five year deal for marketing communications with HSBC. The overseas business which accounts for 30% of total revenues is growing fast and Communisis has plans to expand to new territories such as Russia and Africa. Debt is being reduced through free cash flow. In August, the Company refinanced on improved terms, and negotiated a contributory pension plan. The first half results show good progress with revenue increasing 6% and adjusted operating profit growing 10%.
Flowtech Fluid Power
Flowtech’s focus has been on its core competencies within the fluid power market with offerings across channels and sectors. The Group floated in 2014. CEO Sean Fennon has been in charge since 2009. Flowtech has grown through product innovation, value added services and new customer wins. In 2017 the Group also made five strategic acquisitions for a total of £22m, and reports to still have an active pipeline. Flowtech’s multichannel strategy has enabled increased market penetration, while its procurement strategy has delivered price and range benefits.
Harvey Nash
Under CEO Albert Ellis and new CFO Mark Garratt’s leadership, IT recruitment specialist Harvey Nash has undergone a transformation programme, with the full benefits to be realised by 2019. The strategy has been to invest in select geographies, both organically and through acquisitions. The company recently acquired Crimson, for £15m a UK-based consultancy which specialises in digital and technology transformation solutions. Crimson presents cross selling opportunities and enables Harvey Nash to position itself as one of the leading full service providers of technology talent services to the IT and Digital sectors in UK. Despite acquisitions, balance sheet remains strong with gearing of £10m or 16% at the end of first half of the year in July.
Entrepreneur of the year [top]
Award withdrawn
International Services Company of the year[top]
Recruit Holdings
Recruit is one of the world’s largest staffing companies as well as owner of a number of market leading online titles in its Marketing Solutions division, including housing, bridal, travel and beauty. It has expanded its global footprint rapidly since 2010, to become an international business covering North America, Europe, Australia and Japan. Under Masumi Minegishi, President and CEO since 2012, the company has more than doubled revenues to over ¥1.8tr (US$16bn) to March 2017, and expects to cross ¥2 trillion (USD$18 billion) for the financial year ending March, 2018. This has primarily been achieved through acquisitions including Indeed, a job advertisement business for US$1bn in 2012, and USG People, the Dutch recruitment company for US$ 1.6bn in 2016. Another key priority is margin improvement by leveraging the fixed cost base. The organisation is divided into small scale autonomous units based on job category. Each unit aims to deliver incremental improvements, leading to overall margin enhancement. A solid balance sheet with net cash supports Recruit’s expansion plans. For the three months ended June 2017 revenue increased 20%.
Recruit CEO Masumi Minegishi SHORTLISTED
Hexaware Technologies
Hexaware Technologies is an IT and BPO services provider. Chairman and Founder Atul Nishar, has targeted the fast growing trends of automation, artificial intelligence, Internet of Things and Blockchain. This focus has proven a differentiator in a competitive market. Expanding the global delivery footprint is an important element of company strategy. In January, it opened a large delivery centre in Pune, India to accelerate the delivery of domain specific business process solutions to clients across industries and geographies. Hexaware’s goal is to be the first IT services provider globally to have a 50% digital workforce. For the nine months ended September, Hexaware posted 10% increase in revenues and 24% increase in consolidated net profit. The company is 70% owned by Barings Private Equity Asia who initially invested in 2013.
The Brink's Company
Under President and CEO Douglas Pertz, who joined in June 2016, Brink’s has been implementing a three year strategic plan to improve the world’s largest cash management company. A key element has been M&A. South America is Brink’s fastest growing and most profitable segment. In July, it acquired Maco in Argentina for $209m, which will be integrated with Brink’s existing operations. Substantial cost synergies should be generated over the next two years resulting in a post-integration multiple of c.6x adjusted EBITDA. In total Brink’s has completed five earnings accretive acquisitions in 2017, including Temis in France, for $71m, which strengthened Brink’s route density in Paris. Brink’s expects to make acquisitions totalling $400m in 2018 and 2019. These aim to increase route density, expand the customer base and generate cost synergies. The US cost reduction initiatives are also progressing well and are on track to meet 2019 profit targets. For the nine months of 2017, Brink’s generated organic revenue growth of 6% and organic operating profit growth of 37%. The company is confident of exceeding the 2019 organic growth target of 5% annually. For the year to December 2019, Brink’s targets 8% growth to $3.6 billion and operating profit of $400 million with margin of 11.3% up from 7.3% in 2016.
TransUnion
President and CEO James Peck, joined in 2012, and has repositioned TransUnion as a higher growth and margin business. The strategy has been to focus on innovation, enhance the already extensive data, technology and analytic capabilities, and to expand to new verticals and international markets. By leveraging innovation and technological capabilities, TransUnion was able to fully deploy its leading edge solutions into international markets such as Canada, India, Columbia, Hong Kong and South Africa. This has helped generate double digit organic revenue growth. For the nine months to September, revenue increased 13%, supported by strong organic growth in all segments, verticals and almost all markets, while cost savings through the technology transformation programme and productivity initiatives led to adjusted EBITDA increasing by 18%.
WorleyParsons
WorleyParsons, the Australian engineering Group, has an extensive global portfolio of energy, infrastructure and chemical contracts. Andrew Wood, who has been with WorleyParsons for 23 years, was appointed CEO in October 2012. The business required a major organisational restructuring to adjust to the oil price fall. The new focus has been on operational excellence, and overheads of A$500m have been removed. The October acquisition of upstream oil and gas services division of Amec Foster Wheeler for £228m has enabled WorleyParsons to become a leading player the UK North Sea oil and gas market. The deal is part of the strategy to build best in class capabilities in Maintenance, Modifications and Operations. For the financial year to June, given the challenges in end markets, revenue decreased by 24%, but ebit was stable.
Previous Awards
The finalists of all years can be found on the website www.broadwalkam.com
Disclaimers
Advisory Panel
The firms with whom the individuals on the advisory panel are employed; Barclays, Lazard & Co., Limited, Rothschild and UBS Limited, (an affiliate of UBS AG), may have corporate relationships with companies included in these awards. The inclusion of a company in the awards is not in any way an investment recommendation to buy or sell shares in these companies or to engage in any other business activity or arrangement with them. The inclusion of these companies does not necessarily represent the views of these firms and should not in any way be attributed to them.
Broadwalk Asset Management LLP
This document is issued by Broadwalk Asset Management LLP which is authorised and regulated by the FCA. The Awards do not constitute investment advice. Funds that are controlled by Broadwalk Asset Management LLP and its members may have positions in some of the companies mentioned in the Awards. This document should not be distributed to any third party without the express approval of Broadwalk Asset Management LLP.
BROADWALK SERVICES AWARDS 2016[+/-]
This is the ninth year of the Broadwalk Services Awards to recognise outstanding achievements by quoted companies and their management teams in the broadly defined business services sectors. Competition was fierce with a strong array of contenders – highlighted by the impressive short lists. The broadly defined services sectors are one of the less well known success stories of the global economy and are amongst the largest private sector employers. These unique awards are another step towards raising the companies and the sector’s profile. We congratulate all the companies and their management teams.
Charlie Cottam - founder of Broadwalk Asset Management.
_
ADVISORY PANEL
The awards have had the significant benefit of views from:
- Jarrod Castle, Super sector head of business services, leisure and transport, UBS
- Vasco Litchfield, Managing Director, Lazard
- Jane Sparrow, Director Mid&Small Cap Support Services Research, Barclays
- Stuart Vincent, Managing Director, Rothschild
BROADWALK ASSET MANAGEMENT
Broadwalk Asset Management LLP is a private investment management company based in London. It was founded in 2007 by Charlie Cottam and manages an absolute return strategy which focuses on investing in publicly quoted Services companies. This includes equities in the Support Services, Construction, Real Estate, IT, Transport and Healthcare sectors.
AWARDS AND SHORT LISTS
Company of the Year [top]
PROSEGUR
Prosegur, a global leader in private security solutions with operations in 18 countries spanning five continents, is celebrating its 40th anniversary this year. Under the leadership of CEO Christian Gut Revoredo since 2008, Prosegur has been pursuing an international growth strategy, acquiring and successfully integrating companies in Europe and Latin America including Spain, South Africa, Portugal and Columbia in 2016. At the same time Prosegur has maintained organic growth in all the three business lines, Cash Management, Security and Alarms. Latin America, and in particularly the cash in transit business, has been a very strong growth driver for Prosegur despite challenging economic conditions. Growth in Alarms business has also been strong. Prosegur recently announced an innovative plan to float a minority of its cash management business, to invest in other areas of growth.
SHORTLISTED
Homeserve
Founded in 1993 by the current CEO Richard Harpin, Homeserve, the international home assistance provider serves 7m customers in UK, USA, France and Spain. In July 2016, as a further step forward in building its pipeline in the US, Homeserve acquired United Service Partners for $75m, adding 0.4m customers and strengthening the customer base in US to 2.7m. The company now provides services to 43m US households through affinity partnerships. A strong partnership pipeline will enable Homeserve to access 80m households in the US in the long term, with 10% market penetration and a potential 20% operating margin, compared with the current 8%. For the financial year ending March 2016, the Group has delivered customer growth of 7% adding an impressive one million to the existing base. The UK business was stabilised with the retention rate broadly maintained at 82% and marginal growth in customers added to the existing base. Interim results I the slower summer period reported continuing progress. The Group is giving particular attention to digital innovation to enable effective product sales through self-serve customer experience.
Informa
Under CEO Stephen Carter, who joined Informa in 2014, and the executive team the Group is pursuing a strategy called the Growth Acceleration Plan (GAP), 2014-2017. The key theme of the Plan is to return all the operating units to growth, and at the same time build capabilities and platforms to scale the business and deliver consistent future performance. GAP aims to touch different facets of the business, namely, management model, operating structure, portfolio management and acquisition, investment and funding strategies. As part of the plan, £50m has been invested in more than 30 initiatives in 2016. For the first nine months of the year, Global Exhibitions Division delivered more than 10% organic growth as a result of scale and international expansion. The Group acquired US based Penton Information Services in September for £1.2bn. With a fast growing portfolio of 30 Exhibitions and 20 attractive digital subscription data brands, Penton enables Informa to add more scale and US presence in the Exhibitions and Business Intelligence Divisions. The deal, funded partly through a rights issue of £715m, improves visibility and sustainability of growth and cash generation.
Relx
Under Erik Engstrom, who joined Relx in 2004 and became CEO in 2009, the Group has been pursuing the goal of building leading positions in secular growth markets globally. To achieve this, the strategy has been to transform the core business through innovative products and expansion in high growth geographies. To stay ahead in the market, 95% of the $500m average annual capex is spent on technology. Organic growth is complemented through targeted acquisitions of assets and specific product sets that are a natural fit to the existing business and enable the Group to harness opportunities in high potential markets. True to the strategic objectives, in the first nine months of the year, Relx has acquired 15 content, data and exhibition assets for a total consideration of £330m, to enable a disciplined evolution of the business. The group, with the help the strong balance sheet, has delivered consistent underlying revenue growth of 3% and return on invested capital between 11 and 13% over the past five years.
Serco
CEO Rupert Soames was appointed in 2014, to revive the services provider which had lost traction in recent years. Under his leadership, the Group embarked on a major strategy overhaul to rebuild trust in the business. Currently, the focus is on reducing the impact of loss making contracts and rebuilding the contract pipeline. The next phase, planned for 2018-2020, will target 5-7% growth in certain sectors. Early signs of progress are visible in better than expected first half results. The £0.9bn new contracts wins and improved new bid opportunities pipeline of £7.3bn, has led to upward revision in guidance for 2016 for revenue of £3bn and trading profit of not less that £80m. Aided by simplified management procedures, improved procurement and greater efficiency in shared services, the targeted cost reduction of £50m for 2016 is proceeding ahead of plan. Focus is on investing in the core areas to build strong service capabilities and improving quality of service delivery. Serco has begun to win new contracts such as the £600m contract facilities management of Barts Health NHS Trust in September, their largest win since 2014.
CEO and executive team of the year [top]
Electrocomponents CEO Lindsley Ruth and team
Electrocomponents CEO Lindsley Ruth with Charlie Cottam
CEO Lindsley Ruth joined in April 2015, from $5bn distributor Future Electronics. Under him and the executive team, the company has set the strategic priorities of best-in-class supplier and customer experience to be delivered through high performance culture, operational excellence, innovation and accelerated growth through reinvestment of free cash flow. They have pioneered e-Commerce in the sector with concepts such as online design community and resource centre for engineers. The company has made good progress with its Performance Improvement Plan, and reported underlying headline operating profit growth of 42% for the first half of the financial year. The total annualised savings target is revised from £25m to £30m by March 2018. North America and Asia Pacific has returned to positive growth and most of Europe is seeing good growth. There is still potential for significant improvement in growth and efficiencies as the company proceeds with the implementation of further initiatives.
SHORTLISTED
BBA Aviation - CEO Simon Pryce and the executive team
Under CEO Simon Pryce, who joined in 2007, the business has become significantly more focused as a leading provider of flight support and aftermarket services to the aviation sector. In February US fixed base operator Landmark Aviation was acquired for £2.1bn, funded partly through a £748m rights issue. This acquisition is progressing ahead of plan and the Group is confident of delivering annualised cost savings of $35m. ASIG, the aviation services business was sold to John Menzies for $202m in September. BBA has outperformed the market, with the enlarged Flight Support revenues growing 4% compared to total US flight movements which were up by less than 1%. A further deal has been agreed upon in November to acquire the legacy avionics business from GE Aviation for $61m, adding to its legacy aviation parts offering.
Diploma - CEO Bruce Thompson and the executive team
Diploma is an international supplier of specialised technical products to Life Sciences, Seals and Controls sectors. Under CEO Bruce Thompson, who has led the executive team since 1996, the company retains an entrepreneurial culture with emphasis on agility in response to customer requirements. Through its disciplined approach centred on strong customer relationships and a portfolio of high quality differentiated products, Diploma has achieved five year revenue CAGR of 13% with adjusted operating margin of 18-20%. The growth strategy is based on quantifiable criteria of exceeding IRR of 13% to deliver 20% pre-tax Return on Investment. Targeted acquisitions are undertaken to typically provide synergies through joint purchasing, cross selling and sharing back office functionality to generate profitable growth. Diploma has an impressive record of acquiring one business per year since 2000. The latest addition is specialist controls distributor Cablecraft acquired for £26m in March.
James Fisher - CEO Nick Henry and the executive team
James Fisher is a leading provider of specialist services to marine, oil and gas and other strategically important industries. CEO Nick Henry has been in charge since 2004. Unmatched operational excellence and innovation are the drivers of growth. Realising the opportunities presented by the fast growing marine markets globally, James Fisher has reoriented their strategy to focus on their marine service businesses. Encouragingly, marine support division delivered strong 26% profit growth during the first half of 2016. While the Group has grown organically over the recent years, the company made two bolt on acquisitions in August 2016, Singapore based Lexmar Engineering, and Hughes Sub Surface Engineering in the UK which focuses on offshore renewables.
Rentokil Initial- CEO Andy Ransom and the executive team
Rentokil is one of the largest business services companies globally, providing Pest Control, Hygiene and Workwear services, with operations in over 60 countries. CEO Andy Ransom, who joined the Group in 2008 and was appointed CEO in 2013, has significantly strengthened the balance sheet with the disposal of Initial Facilities in 2014. This has enabled a highly acquisitive programme in emerging and high growth markets, buying 33 businesses and adding incremental revenue of £109m during the nine months of 2016. North America is a key growth market for Rentokil, and on track to generate $1bn of revenues by the end of 2016, two years ahead of plan. Since 2014, the Group has been successfully pursuing the RIGHT WAY plan, targeting sustainable revenue and profit growth.
Chairman of the year [top]
Paul Lester CBE, Chairman, John Laing Infrastructure Fund, Essentra, Forterra
Paul Lester CBE with Charlie Cottam Paul Lester CBE is currently Chairman of John Laing Infrastructure Fund, Essentra, Forterra as well as some private companies. Mr Lester was hired to spearhead the £360m float of one of Britain’s biggest building products suppliers, Forterra, in April 2016. He has also been Chairman of John Laing Infrastructure Fund since its £270m flotation in November 2010. During the six years with Mr Lester at the helm, the Fund has grown to a market cap size of £1.2bn. Mr Lester took over as Non-Executive Chairman of Essentra, the packaging and components company, in April 2016, having been Chairman Designate since December 2015. Essentra has encountered difficult trading, and he has recently appointed a new CEO. Mr Lester, who has more than 30 years of experience in senior operational and strategic executive roles, and was CEO of VT Group, before its acquisition by Babcock in 2010.
SHORTLISTED
Electrocomponents - Chairman Peter Johnson
Peter Johnson has been Chairman of Electrocomponents since 2010 and is also Vice-Chairman of the Supervisory Board of building products manufacturer Wienerberger AG. His previous appointments include Chairman of DS Smith, CEO of George Wimpey and The Rugby Group and a Non-Executive Director of SSL International plc. After a period of underperformance, Mr Johnson agreed the company needed new blood and a strong, experienced leader to drive improved performance. As the new CEO he appointed Lindsley Ruth (Broadwalk CEO of the year 2016), who had an excellent track record in global distribution businesses, but had not worked in the UK or in a senior position in publicly-quoted companies.
Mr Johnson has provided Mr Ruth with support and guidance as the CEO of a UK publicly-listed company. He has also led the Board in supporting a radical programme of change, including extensive changes to the senior team and a turnaround programme with the aim of creating a vastly improved customer experience, sharpening management responsibility and lowering costs. Just 18 months after Mr Ruth's appointment, results have improved dramatically, with profits growth in the first half of the financial year 2016/17 up 42 percent and a £50m year-on-year improvement in cash flow.
Micro Focus - Chairman Kevin Loosemore
During 2016, Executive Chairman Kevin Loosemore has led Micro Focus through a year of further positive transformation, with the successful inking of the deal announced in September to acquire the Software Business segment of HPE. The acquisition, with a transaction value of US$ 8.8bn, is expected to close in the third quarter of 2017 and will create one of the largest global pure play infrastructure software companies. The deal fits well with Micro Focus’s strategy to deliver outstanding shareholder returns thanks to its exceptional operating model as the most effective and efficient manager of mainly mature infrastructure software assets. The combined Group, with annual revenues of $4.5bn, will benefit from the highly complementary portfolios of the two companies. Micro Focus will be in a position to deliver more comprehensive solutions to customers, which enable legacy applications to communicate seamlessly with emerging technologies to meet changing customer demands. About 80% of the total assets in the HPE Software deal are mature with a core earnings margin of 21%. The target is to bring this to Micro Focus’s current level of 46%, within three financial years from the close of the deal. The combined entity will be headed by Executive Chairman Loosemore and run by his team under the Micro Focus brand.
Premier Farnell - Chairperson Val Gooding CBE (until October on its acquisition by Avnet)
Val Gooding was appointed Chairperson of the distributor to electronics and maintenance engineers in mid-2011. This was a difficult time for the business particularly towards the end of her term, with variable trading conditions and an increasingly competitive environment. In March 2015 she appointed a new CEO Jos Opdeweegh. With the turnaround under way the company received a cash bid from Datwayler of Switzerland just ahead of the Brexit vote. Then another bid was received from Avnet of the US for £691m, a 12% premium over the earlier offer, and an impressive 51% premium over the undisturbed price. Ms Gooding is also currently Non-Executive Director of Vodafone Group and TUI AG.
Deal of the Year [top]
UBM Sale of PR Newswire for £555m to Cision announced in December 2015
SHORTLISTED
Avnet Acquisition of Premier Farnell for £691m, announced in July 2016
Avnet, one of the largest global providers of electronic components, enterprise computer solutions and embedded technology and services, has acquired Premier Farnell for £691m. Premier Farnell is a leading multi-channel, distributor of high-service electronic components with a comprehensive product range and global footprint. The deal has been launched under the stewardship of Avnet’s new CEO William Amelio. The all-cash offer is for 185p per share. The companies complement each other very well in terms of product range, distribution channels and geographic footprint. The ability to service customers earlier in the design process is becoming increasingly important. Avnet’s strategy is to provide a differentiated digital experience throughout the product life cycle starting right from the idea generation stage. Premier Farnell’s pioneering online services will combine with Avnet’s best in class supply chain to create industry leading customer experience. This will enable the Group to capture more market share earlier in the design process and accelerate global growth. The transaction is expected to be EPS accretive right from the beginning and will support Avnet’s return on capital goals. Revenue synergies will emerge from cross selling and line fill effects. The combined Group will be able to realise additional economies of scale. The capital structure will be conservative.
FedEx Acquisition of TNT Express for €4.4bn, announced in May 2016
FedEx, one of the world’s largest express delivery companies has acquired TNT Express, the fourth largest global parcel player, in an all cash offer of €8 per share, a premium of 33% over the prevailing TNT share price. The deal was planned and executed under the leadership of Frederick Smith, Chairman and CEO of FedEx. By bringing TNT’s expansive European network with 700 flights and 55,000 road trips each week into its fold, FedEx has gained substantial ground in Europe and has become one of the most important delivery companies in the continent. The individual companies’ capabilities are largely complementary; FedEx’s strength is in US domestic and extra-EEA international services whereas TNT’s focus is in intra-European services. With better trans-Atlantic coverage, customers will benefit from ability to conduct business on a global scale. Consumers and SMEs in Europe and other regions will benefit from a more comprehensive e-commerce offering. The deal will be earnings accretive in 2018.
Merger of Technip and FMC Technologies to create a US$13bn market cap, announced in May 2016
This merger will create one of the largest oil services company in the world. It has been planned by Thierry Pilenko, Chairman and CEO of the Technip and John Gremp, Chairman and CEO of FMC Technologies. The key attraction is the high level of vertical integration from complementary technologies and capabilities. The merger will also facilitate sustained cost reduction, essential for survival in this severe industry downturn. The share for share transaction will also result in one of the strongest balance sheets in the industry. The expected $400m synergies annually should enable the Group to make deep sea projects viable in a low oil price scenario of below $60 per barrel. The deal comes at a time when others have failed due to competition concerns. There is no overlap in offerings or competition between Technip and FMC Technologies, though both have expertise in subsea technology. The merger is expected to be complete in 2017.
gategroup sale to HNA Group, China for CHF 1.4bn ($1.5bn), announced in April 2016
gategroup, the second largest inflight services provider globally, has been bought by Chinese conglomerate HNA Group, a Fortune 500 company and a leader in aviation and tourism. The offer price was at a 38% above the weighted average share price over the 60 days prior to announcement of the deal and over double the price a year and a half before the bid. After a difficult year in 2015, gategroup under Chairman Andreas Schmid, launched Plan 2020 with the aim of strengthening their leadership position, delivering market leading technology through innovation, growing in emerging markets and driving cost efficiencies. HNA are now looking to grow gategroup’s presence in Asia, and partly diversify from the more mature European and US operations.
IPO of the year [top]
Ascential
Ascential, previously part of an extensively restructured Emap, has been led by CEO Duncan Painter since October 2011. It is a global leader in Events and Information Services products. 84% of Ascential’s revenues is generated from products ranked number one in their respective markets. The portfolio includes the Cannes Lions advertising festival, the financial services event Money 20/20 and the fashion trends forecasting site WGSN. A continued focus on enhancement of product range and operational excellence enables the company to penetrate deeper into end markets and deliver organic growth. Ascential will also engage in bolt on acquisitions. As part of this strategy, Ascential has acquired One Click Retail, the US based provider of e-commerce analytics, in August for an intial consideration of $44m and future earnouts. After two further successful placings Apax and GMG own 21%.
SHORTLISTED
Ahlsell - Ahlsell's IPO in October on Nasdaq Stockholm Exchange was Sweden’s largest in 16 years. It raised SEK6.9bn (US$ 770m) at SEK 46 per share resulting in a market capitalisation of SEK 20bn ($2.2bn). Goldman Sachs and Nordea were Joint Global Coordinators and Joint Bookrunners. Carnegie, Danske Bank, Deutsche Bank, JP Morgan and UBS were Joint Bookrunners and ABG, DNB and SEB, Co-Lead Managers.
Ahlsell is a market leader in the Nordic wholesale distributor of heating, ventilation, air conditioning, plumbing and electrical tools and supplies with an estimated 21% market share. The company is headed by President and CEO Johan Nilsson who joined in 2008 and became CEO in 2015. Ahlsell operates a one-stop-shop concept with an extensive range of products, sales channels and highly optimised delivery methods. The product portfolio is complemented with specialised value added services such as flexible storage solutions. Ahlsell has grown primarily through its M&A strategy. Between 2003 and 2016, it has acquired 51 companies. In 2015, Ahlsell distributed approximately 380,000 product articles from 3,300 suppliers to 100,000 customers. The listed shares represent 30% of the total number of shares of the company. Major shareholder CVC retains 60.4% of shareholding after floatation.
Biffa -Biffa in October raised £262m at 180p per share giving the company a market capitalisation of £450m. Citigroup and JP Morgan are Joint Global Coordinators and HSBC joins them as Joint Bookrunner.
Biffa is a leading integrated waste management specialist providing collection, landfill, recycling and special waste services to local authorities and industrial and commercial clients in UK. Biffa collects more than 6m tonnes of waste annually from 130,000 customers. In 2014, Biffa’s energy from waste services enabled Sainsbury to take one of its stores off the National Grid. The IPO proceeds will be mostly channelled to reduce debt to the targeted level of 2 times EBITDA. CEO Ian Wakelin was appointed in 2010 and has since driven a strategy of organic as well as acquisition led growth by expanding service offerings. In order to consolidate their market position, Biffa has acquired two businesses this year, Cory Environment Municipal Services in June and Blakeley Recycling in October. The 100 year old company, in 2012, agreed to a restructuring with senior lenders Avenue Capital Group, Angelo Gordon and Bain Capital, through a debt equity swap which reduced debt from £1.1bn to £520m. These firms continue to own 53%.
Countryside Properties - Countryside Properties raised £114m from the IPO in February at 235p per share. JP Morgan Cazenove, Barclays and Numis were the Joint Coordinators and Peel Hunt, the Bookrunner.
Countryside’s property portfolio comprises of middle and upper end housing, primarily in London and South East of England. 50% of the company revenues are from urban regeneration business on a partnership basis that delivers private and affordable homes in and around London and in North West England. Private equity owner Oaktree Capital Management in 2013 acquired a majority stake controlled by Lloyds Banking Group. Following this, the company refined its strategy and took steps to progressively exit from commercial and design build projects and focus on Housebuilding and Urban Regeneration. Under the leadership of CEO Ian Sutcliffe, Countryside has delivered strong growth in recent years. In February 2014, Countryside acquired Millgate and successfully integrated it into the Housebuilding division. Countryside completed 2,364 units in the year to September 2015, up 16% compared to the previous year. Revenue grew 31% to a record £616m and operating profit almost doubled to £91m. Countryside’s target is 1,200 housing completions per annum by the financial year 2018. In the Urban Regeneration business, the target is 2,400 completions annually by financial year 2018. The focus will be to further improve margins and return on capital employed through higher volumes, better product mix and improved efficiency.
The market capitalisation at IPO was £1bn. Oaktree retains 56.1% of the shareholding.
Nets - Nets’ IPO in September on Nasdaq Copenhagen Exchange raised DKK 15.8bn (US$2.4bn) at DKK 150 per share. The third largest IPO in Europe this year had Deutsche Bank, Morgan Stanley and Nordea as Joint Global Coordinators and Lazard as Financial Adviser.
Nets is a leading provider of payment processing services in the Nordics. In 2015, the company processed more than 7.3bn card transactions for more than 300,000 businesses and 240 banks. Bo Nilsson, who joined in 2013 and became CEO in 2014, has transformed the business with seven acquisitions, streamlining personnel and investing more than DKK 800m in information technology. Part of the proceeds from IPO were used to reduce the net debt to EBITDA to 3.75x, with a target of 2.0x and 2.5x in the medium term. Nets will also invest the capital raised in growth markets and bolt on acquisitions. The strategy is to focus on the core Nordic region and to grow through innovative products and solutions. Nordics present an attractive market for Nets with its high digital literacy, and minimal timeframe required to implement new technology solutions. The company targets medium term organic growth of 5 to 6% annually and EBITDA margin in the high 30s. The market capitalisation at IPO was DKK 30bn (US$ 4.5bn) with a free float of 52%. Following the offer, Advent and Bain hold a 39.9%.
Small & mid-cap company of the year [top]
4imprint Group
Charlie Cottam with 4imprint Finance Director David Seekings4imprint is a leading distributor of promotional products for corporate customers in North America and the UK. The Group strategy is to enhance their market leadership position in fragmented markets. Kevin Lyons-Tarr who has been with the business since 1991, and pioneered launch of the internet offering, became CEO in March 2015. He has done an outstanding job growing the US promotional products direct marketing operation which is currently 96% of total revenue. Adjusted operating profit for the Group direct marketing operations grew 560% in six years, from $5.6m in 2009 to $37m in 2015. North America and UK both experienced organic revenue growth with total revenue increasing 17% in the first half of the year 2016. Going forward the strategy will be to continuously deliver organic growth through investments in marketing. 4imprint has also successfully completed a pension de-risking exercise.
SHORTLISTED
John Menzies
John Menzies’ expertise is in providing time critical logistics services including ground handling, cargo handling, cargo forwarding and distribution. The Aviation Division services 143 airports globally and the Distribution Division delivers 110 million units annually. Giles Wilson, who has been with Menzies for five years in different capacities, was appointed CEO in June 2016. Under his leadership, the Group is keen to expand to emerging markets with potential for high air traffic growth. In Distribution, resources have been reallocated to favouring high growth areas to generate maximum returns. In line with the objective to enhance its global footprint, Menzies acquired ASIG from BBA in September for US$ 202m part funded by a rights issue of £75m. ASIG is a leading provider of fuel management services at major international airports, in 2016, with annual revenue of $416m and pre-tax profits of $18m. The deal is expected to deliver pre-tax cost synergies of c£10.5m in the financial year ending December 2018, and significantly enhance earnings per share next year.
Microgen
The Group delivered revenue growth of 23% during the first half of the year. It owns two leading software businesses. The Aptitude Software supports corporate finance operations across industries. Tom Crawford, who has been with the Group since 2003, has headed Aptitude since January 2016. Aptitude’s strategy is to grow through installation of specialised financial applications. Aptitude has been able to deliver 27% growth in recurring software revenue and a stellar 49% growth in implementation. Three of the four largest US telcos have the licence for Aptitude’s Revenue Recognition Engine. The Financial Systems Division provides application management services to global Wealth Management sector and UK payment market. This Division concentrates on Trust and Fund Administration (T&FA). Simon Baines, who joined Microgen in 2010, has been leading the Financial Systems Division since January 2016. Financial Systems has been increasing their presence in T&FA sector and currently has 350 customers in 30 countries. The Division delivered revenue growth of 11% in the first half of the year. In line with strategy, the proportion of revenue generated from T&FA has increased to 51% in the first half. To enhance offerings in the T&FA space, the Division has made 4 acquisitions in the past two years, the last one being Infoscreen, for €1.8m.
Tribal Group
Tribal Group is a market leading global provider of education technology solutions. Under Ian Bowles, who joined Tribal as CEO in February, the business is being streamlined to focus on core activities. As part of the reorganisation efforts, the Synergy business has been sold for £20m, and along with the rights issue enabled Tribal to raise £38.5m to rebuild the balance sheet and fund future growth plans. Tribal’s refreshed product strategy is centred on five priorities including data migration from existing systems, cloud based on-premise deployment, language customisation, modular design and database independence. This should lead to improved return on investment and to realise the goal of becoming a world-class business. The first half of 2016 has seen annual recurring revenues grow by 14%. Better product mix has led to improvement in gross margins. The results show good signs of progress.
YouGov
YouGov is an online market research firm with operations in Europe, North America, Asia Pacific and Middle East. The company was co-founded in 2000 by Stephan Shakespeare who became CEO in 2010 and in 2005 listed on AIM. YouGov’s product portfolio includes comprehensive market intelligence, planning and segmentation tools, and the brand perception tracker is powered by data gathered from millions of people participating in their online community. The company has successfully expanded internationally. In 2006, YouGov acquired Dubai based Siraj and subsequently expanded in the US and Asia Pacific through acquisitions and opened an office in Paris. The strategy of improving the product mix through a continuous process of innovation is working well, with new markets planned for the future. For the year ended July 2016, underpinning the robustness of the business model, the company experienced strong revenue growth of 16% and adjusted operating profit growth of 27%.
Entrepreneur of the year [top]
Daniel Julien - Chairman and Founder, Teleperformance
Teleperformance Chairman and Founder Daniel JulienChairman Daniel Julien founded Teleperformance in 1978. He has been instrumental in the transformation of the Group into the undisputed leader in global outsourced customer experience management and contact centre services. Teleperformance commands the largest geographic footprint among outsourcers, employing 190,000 personnel in more than 311 facilities spanning 65 countries, serving more than 850 clients and touching 35% of world population. Apart from size, Teleperformance also scores in cohesiveness of service offerings and exceeding customer expectations. Under the guidance of Mr Julien, the team relentlessly strives for excellence, leveraging their international experience, global reach, innovation capabilities, omnichannel strategy, marketing expertise and financial stability. In 2013, Mr Julian appointed long standing employee Paulo César Salles Vasques as CEO. Under challenging conditions globally, Teleperformance outperformed the market in 2015, with record revenue growth, organic growth of 7.5% and EBITA growth of 32%. In the first half of this year, the Group delivered strong organic growth of 6.8%, and improved recurring EBITA margins. Teleperformance has been on a path of consolidation in a highly fragmented but growing market through selective high profile acquisitions. In July 2014, to achieve better sector diversification and presence in the US, the Group acquired Aegis USA, a major outsourcing and technology company with $400m revenue, for $610m. In August 2016 the company completed another significant deal when it acquired US high-end BPO services company Language Line Solutions for US$1.5bn. With annual revenue of $388m and expected 2015-2020 revenue CAGR of more than 10%, this transaction ties in well with Mr Julien’s vision to further grow Teleperformance to a €5bn revenue company.
Previous Awards
The finalists of all years can be found on the website www.broadwalkam.com
Disclaimers
Advisory Panel
The firms with whom the individuals on the advisory panel are employed; Barclays, Lazard & Co., Limited, Rothschild and UBS Limited, (an affiliate of UBS AG), may have corporate relationships with companies included in these awards. The inclusion of a company in the awards is not in any way an investment recommendation to buy or sell shares in these companies or to engage in any other business activity or arrangement with them. The inclusion of these companies does not necessarily represent the views of these firms and should not in any way be attributed to them.
Broadwalk Asset Management LLP
This document is issued by Broadwalk Asset Management LLP which is authorised and regulated by the FCA. The Awards do not constitute investment advice. Funds that are controlled by Broadwalk Asset Management LLP and its members may have positions in some of the companies mentioned in the Awards. This document should not be distributed to any third party without the express approval of Broadwalk Asset Management LLP.
BROADWALK SERVICES AWARDS 2015[+/-]
This is the eighth year of the Broadwalk Services Awards to recognise outstanding achievements by quoted companies and their management teams in the broadly defined business services sectors. As usual, competition was fierce with a strong array of contenders – highlighted by the impressive short lists. The broadly defined services sectors are one of the less well known success stories of the economy and are amongst the largest private sector employers. These awards are another step towards raising their and the sector’s profile.
Charlie Cottam - founder of Broadwalk Asset Management.
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ADVISORY PANEL
The awards have had the significant benefit of views from:
- Jarrod Castle, Super sector head of business services, leisure and transport, UBS
- Vasco Litchfield, Managing Director, Lazard
- Jane Sparrow, Director Mid&Small Cap Support Services Research, Barclays
- Stuart Vincent, Managing Director, Rothschild
BROADWALK ASSET MANAGEMENT
Broadwalk Asset Management LLP is a private investment management company based in London. It was founded in 2007 by Charlie Cottam and manages an absolute return strategy which focuses on investing in publicly quoted Services companies. This includes equities in the Support Services, Construction, Real Estate, IT, Transport and Healthcare sectors.
AWARDS AND SHORT LISTS
Company of the Year [top]
RYANAIR
In a highly competitive marketplace Ryanair has established itself as Europe’s lowest fares and cost carrier. It is number one for traffic, coverage and customer service. October traffic statistics were a record, with strong passenger growth to 9.68m customers and a load factor of 94%. CEO Michael O’Leary has succeeded in raising the perception of its service offering under the "Always Getting Better" customer experience programme. Performance was very strong in peak summer trading partly due to the lower oil price, weak Euro and poor UK weather. However shareholders and analysts were thoughtfully urged to avoid irrational exuberance as it executed its ambitious growth plans in an expected tough pricing environment this winter.
SHORTLISTED
Regus
Under CEO Mark Dixon, Regus has established itself as the dominant global operator in the rapidly growing, flexible workplace sector with over 43m sq ft in more than 2,580 locations, having added 341 in the last year. The management team, identified in 1998 the significant opportunities from structural changes in the marketplace with a shift towards flexible work. Results have been impressive and Regus is now the undisputed market leader. Revenues have doubled over the last five years alone. Investment returns remain above the cost of capital. The group is now focused on increased use of partnering in its new locations, which reduces capex and improves returns.
Elior
Founded in 1991, Elior has established itself as one of the world’s leading operators in the contracted food and support services industry. The expansion of the group is highlighted by revenues in 2014 of €5.3bn in 13 countries with its 106,000 employees serving 3.8m customers daily. Operating in high-growth markets, there remain numerous opportunities open to the group. In September, Philippe Salle, the CEO since March, outlined the strategic plan for 2016-2020 with a new organisational structure to accelerate growth, reduce costs and support operational excellence. Elior looks well placed to consolidate its leading position in its key markets.
Savills
Under CEO Jeremy Helsby, Savills has positioned itself well as an international real estate advisor. The group has grown substantially, given the significant increase in capital allocated to real estate worldwide. Management has also successfully diversified its business model into less cyclical activities (property management, consultancy and investment management) as well its traditional transactional activities. It has made number of attractive bolt-on acquisitions this year in Europe. Last year’s acquisition of Studley in the US for $260m has bedded in well and has strongly enhanced its global platform.
CEO and executive team of the year [top]
RPC Group CEO Pim Vervaat and team
RPC Group CEO Pim Vervaat
RPC is a leading plastic products design and engineering company for both packaging and non-packaging markets. Under CEO Pim Vervaat and the executive team, the group is pursuing a focused growth strategy under its Vision 2020. The key elements to this strategy are continued organic growth in selected markets of the packaging markets, selective consolidation, and also to create a meaningful presence outside Europe where the growth rates are higher. This December the group announced the €650m acquisition of Global Closure Systems, part funded by a £232m rights issue, which adds closures to its current container range, where there should be cross selling opportunities. This comes after the €386m acquisition of Promens last year which strengthened market positions in core European end markets, and produced very attractive synergies.
SHORTLISTED
Petrofac - CEO and Founder Ayman Asafri and the executive team
Petrofac is a leading international service provider to the oil and gas sector. CEO and Founder Ayman Asafri has positioned the group well despite an extremely challenging backdrop following the fall in the oil price. This included terminating the shipyard contract to build a new multi-purpose offshore vessel in October. The strong revenue growth at the interims, up 25% to $3.2bn reflected prior contract wins, but the group has secured over $6bn of new orders in the current year. With a total order backlog of $21.6bn and a strong Middle Eastern presence, the group has considerably better visibility than a number of its oil services peers. In overall terms, the group’s strategy has been vindicated as it is well positioned to capitalise on a low oil price environment in the future.
Cerved - CEO Gianandrea De Bernardis and the executive team
Cerved is market leader in the Italian credit information market, with a consistent track record of growth and impressive margin improvement under CEO Gianandrea De Bernardis since mid-2009. The group’s focused and careful strategy to strengthen its market position has been vindicated, with strong performance since the 2014 flotation. Recent results showed continued strong growth and management reiterated 2015 EBITDA guidance. Under Gianandrea De Bernardis and the executive team the company has been well positioned for Italian banking and insolvency deregulation. In November CVC Capital was able to sell down its residual shareholding leading to a 100% free float.
NCC - CEO Rob Cotton and the executive team
Rob Cotton was appointed CEO in 2003 ahead of the flotation in 2004. Under him and the executive team NCC has an impressive track record of growth as a global information assurance specialist providing organisations with a suite of expert escrow, security and risk consultancy, website performance, software testing and domain services. NCC has undertaken a sequence of acquisitions including in 2015 Accumuli, a leading IT security and risk management business in the UK. The group has just completed the acquisition of Fox-IT, a leading provider of high-end cyber security solutions for a total consideration of €133m, funded by a £126m placing. This enables NCC to become the leading player in the expanding global cyber security market and the complementary client bases create multiple cross-selling opportunities. NCC has also just launched the secure internet domain .trust.
ISS - CEO Jeff Gravenhorst and the executive team
ISS is one of the world’s leading facility services companies, operating in a $1 trillion market. ISS seeks to add value to clients through an integrated, self-delivery model. CEO Jeff Gravenhorst has been with the group since 2002, becoming CEO in 2010, ahead of the successful flotation last year. He and the team have focused on strong cash flow and generating shareholder value, demonstrated by a 50% payout policy. Despite difficult macroeconomic conditions, management has generated organic growth, an improvement in operating margin and continuing strong cash flow. Most recent interims showed continued strong growth, the group also secured a number of major new integrated facility services contracts and extensions including Danske Bank in the Nordics and Eastern Europe and a major contract with Danish State Railways.
Chairman of the year [top]
Micro Focus Executive Chairman Kevin Loosemore
Kevin Loosemore with Charlie Cottam 2015 has been a transformational year for the global infrastructure software business, with the $2.5bn acquisition of The Attachmate Group announced in September 2014 bringing Micro Focus into the top 15 by size worldwide of similar businesses. The acquisition should allow Kevin Loosemore to deliver significantly higher returns to shareholders in the medium term, even above its target of 15%-20%. Recent first half results were ahead of expectations with strong cash flow enabling early repayment of acquisition related debt bringing leverage down to 2.6x with a target of 2.5x.
SHORTLISTED
Unite Group - Chairman Phil White
Phil White joined the Unite board in May 2009 at a difficult time for the company due to a high level of debt, and extreme investor caution for real estate in general including student housing. He worked closely with CEO Mark Allan to restore the balance sheet and since then the company has re-established itself as the UK’s leading manager and developer of student accommodation. The management team has delivered against its three strategic objectives: to be the most trusted brand in its sector, to operate the highest quality estate and maintain a strong capital structure. A well received 10% share placing in April at 570p (currently 638p), raised £115m. The proceeds were used to acquire new sites for its 2018 development pipeline and buy units in a specialist fund, The Unite Student Accommodation Fund, increasing its exposure to an established, high quality, predominantly regional portfolio with excellent growth prospects and a low fixed cost capital structure. Phil White is also Chairman of Kier and Lookers.
Eurofins - Chairman, CEO and Founder Dr Gilles Martin
Eurofins provides a unique range of analytical testing services, with a particular focus on fast growing pharmaceutical, food and environmental testing markets, all of which have a strong impact on human health. Results for the nine months reflect continued momentum across all of its businesses with growth above target. It completed 17 acquisitions in 2015 with total annualised revenues of €570m, reinforcing its leadership in the higher-growth niche areas of the clinical testing market (Boston Heart Diagnostic, Diathrix, Emory Genetics Lab, BioAccess and Biomnis). Having consistently delivered strong profitable growth, the group under Dr. Gilles Martin has doubled revenues three times since 2004. Sales and EBITDA have multiplied ten-fold since 2004. The group has the ambition to double in size by 2020 from 2015 to €4bn turnover, and will consider raising further equity in favourable market conditions.
Xchanging - Chairman Geoff Unwin
Geoff Unwin joined CEO Ken Lever in 2011 to lead Xchanging’s drive to curtail losses and exit unprofitable legacy business as it looks to establish itself as a leading business technology and services provider. The restructuring programme was completed last year. Interims results in July demonstrated the progress, with the majority of the group performing in line or ahead of expectations. The progress achieved was highlighted in October 2015 when the group was subject to a recommended cash offer from Capita at £412m, a premium of 44% on the share price. Since then two US companies, Computer Sciences and Ebix have offered higher prices.
Rightmove - Chairman Scott Forbes
Rightmove is the UK’s number one property website. In many ways its development and technologic innovation has revolutionised the property transaction market. Scott Forbes was appointed to the board in 2005 ahead of the group’s flotation in 2006. His tenure has involved steering the group through changes to the Home Information packs and the global recession that was particularly difficult for Rightmove’s estate agent customers. Since the group’s IPO the board has had a policy of consistently returned excess cash to shareholders, which is now over £500m. Scott Forbes is also Chairman of Orbitz Worldwide, Innasol Group and Bridge Capital Advisors.
Deal of the Year [top]
Telecity acquisition by Equinix for £2.4bn, announced in May .
Telecity Executive Chairman John Hughes with Charlie Cottam
The global leader in carrier neutral colocation datacentres, Equinix, under Executive Chairman John Hughes, has agreed a cash and share offer for Telecity Group, which had previously negotiated a merger with European market number three InterXion. It represents a premium of 35% to the closing price of Telecity prior to a previous merger proposal. Equinix has obtained clearance from the European Commission. The transaction will give Equinix a stronger European platform with increased network and cloud density. While expected synergies have not yet been disclosed they are likely to be significant. The transaction is seen by Equinix as providing the opportunity to strengthen its platform for increased network and cloud density.
SHORTLISTED
Capgemini acquisition of IGATE for a total consideration of $4.0bn, announced in April
The acquisition of IGATE consolidates Capgemini’s position as a leading company in IT services, outsourcing and consulting, with combined revenues of €12.5bn. North America becomes the largest region, accounting for 30% of combined revenue in 2015. The transaction added 12% to Capgemini’s earnings forecasts in 2016 and 16% in 2017. Chairman and CEO Paul Hermelin has achieved both a strategic and financially attractive deal involving relatively straightforward execution with no antitrust issues. Total synergies after three years are forecast to be between $175m-$255m as a result of revenue, capacity and cost savings.
Kier acquisition of Mouchel for £387m, announced in April
The acquisition of Mouchel represents a natural fit, reinforcing Kier’s strong position in the local authority roads market under CEO Haydn Mursell. With an annual cost synergy assumption of £10m per annum ending in June 2017, the transaction should meet Kier’s pre-tax ROCE target of 15%. England’s Roads Investment Strategy plans to double the investment expenditure on strategic roads from 2012-2019. The acquisition which was conservatively financed through a rights issue, raising £340m, with pro-forma net debt in June 2015 of only 1.3x EBITDA.
Aer Lingus acquisition by IAG for €1.4bn, announced in May
IAG CEO Willie Walsh had previously been CEO of Aer Lingus so knew the business extremely well. Aer Lingus will benefit from being part of the larger group. Aer Lingus contributed €45m to group operating profit in the third quarter of 2015. The synergies include cost savings, given additional scale and shared services as well as coordinated hub to hub flying to optimise traffic flows. The deal required delicate negotiations including with the Irish government who owned 25% of Aer Lingus. It will continue to operate as a separate business, providing connectivity to Ireland but allows Aer Lingus to join the Oneworld Alliance, of which British Airways and Iberia are members. It will also enable Aer Lingus to join IAG’s business over the North Atlantic with American Airlines, leveraging the natural traffic flows between Ireland and the US.
IPO of the year [top]
Worldpay
Worldpay, under CEO Philip Jansen, is a leader in global payments, providing a broad range of technology-led solutions to its merchant customers to allow them to accept payments of almost any type, across multiple payment channels, nearly anywhere in the world. As one of the few global businesses able to offer functionality in most aspects of payment acceptance, Worldpay’s management has identified substantial opportunities to capitalise on the significant growth in this marketplace. On a typical day Worldpay processes 31 million mobile, online and in-store transactions.
The IPO was the largest in the UK this year, with a market value at the offer price of nearly £5bn [initial market cap was £4.8bn]. The group was previously owned by two private equity owners, Advent and Bain, who bought it from RBS five years ago and still retain a c42% holding in the business. The share price has performed well since IPO, currently standing at 292p, an increase of c22%.
SHORTLISTED
Aena - €4.2bn raised at €58 in February, Bank of America Merrill Lynch, Banco Santander SA, Banco Bilbao Vizcaya Argentaria SA, HSBC Holdings, JP Morgan Chase & Co, Goldman Sachs Group Inc and Morgan Stanley managed the IPO.
Aena is the world’s number one airport operator by passenger volume, running 46 airports in Spain and participating in the management of 15 more in Europe and the Americas. The group is a classic recovery play, following significant restructuring by the group, it moved from losses in 2011 to profit in 2013. Aena was valued at €8.7bn on flotation. The IPO was the largest in Spain in more than seven years and was oversubscribed five-fold. It enabled the Spanish government to sell 49%, while retaining 51%. Results for the nine months in 2015 showed a consolidation of the recovery in domestic and international passengers, close to the 2007 peak. Having invested heavily over the last decade to make its airports the most modern and competitive, the group has necessary capacity to absorb future growth in traffic and capex will decline. The group stands to benefit from further improvements in the economic backdrop with increased demand from both domestic and international passengers.
Wizz Air - Raised €150m in March, priced at £11.50. Joint Global Co-ordinators and Bookrunners were Barclays Bank, Citigroup Global Markets, JP Morgan Securities and Nomura International.
Since its first flight in 2004, Wizz Air under CEO Jozsef Varadi has become the largest low-cost carrier in Central and Eastern Europe (CEE), with a market share of 40%. Management identified the opportunities that the accession of a number of CEE countries to the EU would stimulate a sharp increase in traffic to Western Europe. The most recent results showed record first half profitability on passenger growth of 20% to 10.7m passengers. The group has continued to expand its network, now offering more than 390 routes to 38 countries from 22 bases. The group’s ultra-low cost model gives it clear cost advantage versus its peers, enabling low fares as well as a relatively high growth rate. Indigo Partners, a US private equity firm retains 13%.
BCA Marketplace - Share placing raised £1.02bn in April. Cenkos Securities acted as Nominated adviser, joint financial adviser and joint broker, in conjunction with Zeus Capital as joint broker and Merrill Lynch International as joint financial adviser for the acquisition and debt financing.
BCA Markeplace listed via a reverse takeover of Haversham Holdings, valuing it at £1.2bn, and moved to the Full List, after an unsuccessful attempt to float the business in 2014. BCA is the market-leading business with a unique position in the used vehicle marketplace in the UK and Europe. The changes currently underway in the European marketplace should offer significant growth opportunities. Executive Chairman Avril Palmer-Baunack stated that the trading performance of the group since the acquisition has been positive, reflecting previous expectations for volume growth. US Private Equity fund, Clayton, Dubilier & Rice sold its shareholding in BCA, having seen an 85% increase in EBITDA under its ownership.
Sanne Group - Raised £142m in April, priced at 200p. Investec Bank acted as sponsor, financial adviser, sole bookrunner and broker.
Sanne is a specialist global provider of outsourced corporate and fund administration, reporting and fiduciary services. The Group, led by CEO Dean Godwin, targets alternative asset markets that play an increasingly important role in investment portfolios, as investors seek out return that are uncorrelated with equities. Founded in 1988, Sanne has built a global network of regulated business within nine leading financial jurisdictions, employing more than 350 experienced staff and administering structures and funds that have in excess of €100bn of assets. The Group has continued to record strong revenue and underlying profit growth since the IPO and trading has been in line with expectations. The share price is up over 90% since flotation. The Group sees strong future growth driven by market expansion as well as a growing trend towards outsourcing resulting from a demand for independent compliance monitoring and oversight within an increasingly complex cross-border regulatory landscape.
Small & mid-cap company of the year [top]
James Halstead
SHORTLISTED
Staffline
Under CEO, Andy Hogarth, Staffline has become a leading provider of services to the Government-funded Welfare to Work and Skills programmes. The acquisition of A4e in April for £34.5m significantly expanded its Employability division and the group has become one of the largest providers of Work Programmes in the UK. The full impact will be seen in the second half of 2015 and is expected to be significantly earnings enhancing going forward. The market reaction subsequently has been favourable with the share price performing exceptionally well since the transaction in April, rising from 984p to 1547p currently.
CVS Group
Under CEO, Simon Innes, CVS has become the UK’s leading provider of integrated veterinary services with a 12% market share with 333 surgeries, up from 128 at the time of the IPO in 2007. The group now has four key business areas: veterinary practices, diagnostic laboratories, pet crematoria and an on-line dispensary. The practice division is also supported by the Group’s referrals business which provides high value specialist services both to its own and third party practices and is a core area of development focus for the business. CVS is looking for further acquisitions as it continues to consolidate its position in a still fragmented market, allowing practitioners to concentrate on service provision while CVS takes care of the administrative functions.
Ricardo
Ricardo is a global engineering, technical and environmental consultancy, which develops applications and solutions to meet the challenges faced by the transportation, energy and resource sectors. Under CEO, Dave Shemmans, it has delivered a strong set of financial results with both revenue and profit growth of 9% - driven by global megatrends such as air quality, climate change, resource scarcity, urbanisation and energy security. The group has made four acquisitions since October 2014 for a total of £46m. The group has made a good start to the current year with strong order book intake.
Next Fifteen Communications
Next Fifteen is a digital communications group. Under CEO Tim Dyson, it has made significant progress this year, following an earlier equity placing to fund three acquisitions in the brand marketing, consultancy and advertising technology sectors. Recent results showed profits up 30% and revenues up over 18%. There was strong organic growth in its North American business, as well as doubling of profitability in Asia Pacific. In the UK, it benefitted from the contribution from strategic acquisitions and margin improvements. The group remains confident about the outlook.
Entrepreneur of the year [top]
Mike Slade - CEO Helical Bar
Charlie Cottam with Helical Bar CEO Mike Slade Mike Slade joined the board of Helical Bar in 1984 when the share price was 5p on an adjusted basis. With a tightly focused team he has generated immense value over several cycles with a development led approach over multiple types of property from West End office to retirement villages. Numis have estimated £1 invested in Helical in 1984 would be worth £1,100 today, a compound annual return of c19% a year. Often biding his time, he has described the company as "constantly reinventing itself" to find the most attractive returns. In 2005 he retuned £100m to shareholders ahead of the sharp valuation declines seen in 2008, and then raised 10% of new equity (£29m) close to the bottom in January 2009. On turning 70 he is retiring as CEO to become Non-Executive Chairman in July 2016, and will be succeeded by Gerald Kaye who joined the group as Development Director in 1994. He is also President of the charity LandAid.
Previous Awards
Disclaimers 2015
Advisory Panel
All the firms represented by an individual on the advisory panel; Barclays, Lazard & Co., Limited, Rothschild and UBS Limited, (an affiliate of UBS AG), may have corporate relationships with companies included in these awards. The inclusion of a company in the awards is not in any way an investment recommendation to buy or sell shares in these companies or to engage in any other business activity or arrangement with them. The inclusion of these companies does not necessarily represent the views of these firms and should not in any way be attributed to them.
Broadwalk Asset Management LLP
This document is issued by Broadwalk Asset Management LLP which is authorised and regulated by the FCA. The Awards do not constitute investment advice. Funds that are controlled by Broadwalk Asset Management LLP may have positions in some of the companies mentioned in the Awards. This document should not be distributed to any third party without the express approval of Broadwalk Asset Management LLP.
BROADWALK SERVICES AWARDS 2014[+/-]
This is the seventh year of the Broadwalk Services Awards to recognise outstanding achievements by quoted companies and their management teams in the broadly defined business services sectors. As usual, competition was fierce with a strong array of contenders – highlighted by the impressive short lists. The broadly defined business services sectors are one of the less well known success stories of the economy and are amongst the largest private sector employers. These awards are another step towards raising their and the sector's profile.
Charles Cottam - founder of Broadwalk Asset Management.
ADVISORY PANEL
The awards have had the significant benefit of views from:
- Jarrod Castle, Super sector head of business services, leisure and transport, UBS
- Vasco Litchfield, Managing Director, Lazard
- Jane Sparrow, Director Mid&Small Cap Support Services Research, Barclays
- Stuart Vincent, Managing Director, Rothschild
AWARDS AND SHORT LISTS
Company of the Year [top]
DCC
Under CEO Tommy Breen since 2008, DCC has grown its Energy division to become the largest oil and LPG sales, marketing and distribution business in Europe with market leadership positions in seven countries. Its second and third largest divisions, DCC Technology and DCC Healthcare, also hold leadership positions in their respective markets. Acquisition activity has been increased to £148m so far this year and the focus tightened by the disposal of its Food and Beverage business for approximately £60m. The company has a track record of sustained profit growth, cash generation and high return on capital employed; with an unbroken record of dividend growth and cumulative acquisition spend of £1.3bn since its IPO in 1994. In 2013, DCC joined the FTSE 250 index and is now the largest support services company in the FTSE 250 with a market cap of approximately £3bn.
SHORTLISTED
Ashtead
2014 was another very strong year for Ashtead under CEO Geoff Drabble. The company has been well positioned for the long awaited recovery in US non-residential construction. Due to the strong momentum capex for the year ended April 2015 was upgraded to £825m well ahead of £276m depreciation levels. Debt at 1.9x ebitda is very comfortable and return on investment at 21% is impressive for a capital intensive business.
Intrum Justitia
Intrum Justitia is Europe's leading credit management company, specialising in debtor collection. With operations in 20 countries and market leadership across Northern Europe, the group has enjoyed another strong year of growth in 2014. Third quarter results revealed a 15% increase in revenue, and in improvement in margins, driving the shares up some 30% year to date. With opportunities to expand the range of services and locations the group's target of 10% growth should be achievable.
Loomis
New CEO Jarl Dahlfors has continued to achieve the strong trend in revenue, profit and share price development that Loomis began in 2013. At its September Capital Markets day the company announced its new 2017 growth targets which call for at least maintained margins and further strong revenue growth - coming from outsourcing, market share gains and acquisitions. With market leading positions in over 12 countries the company looks well placed to continue to deliver.
Securitas
In a difficult environment sales and profits have continued to grow through a successful sales effort and successfully offering security solutions and technology offerings to customers which has grown from 6% in 2012 to almost 10%. President and Chief Executive Officer Alf Göransson has been in charge since 2007. This has seen acquisition growth in 2011 and a successful restructuring in 2012.
CEO and executive team of the year [top]
Aer Lingus CEO Mueller and executive team
SHORTLISTED
Bunzl
CEO Mike Roney and the executive team
Under Mike Roney's leadership since 2005, Bunzl has continued to execute a strategy of building a global business in defensive sectors – packaging for the food industry, supplies to the health care and janitorial sector. Bunzl has grown at a compound annual rate of over 10% per annum by a combination of organic growth augmented by acquisitions at attractive prices which have been funded by its prodigious cash flow. Return on average operating capital of 58% and return on invested capital of 18% speak for themselves, and despite the acquisition programme the balance sheet remains very comfortable with net debt at 1.9x historic ebitda.
Go-Ahead
CEO David Brown and executive team
Go Ahead is one of the UK's leading bus operators and its rail division carries 35% of all UK rail passenger journeys. Results have been well ahead of initial expectations this year and the company also won the largest rail franchise Thameslink, Southern and Great Northern. CEO David Brown remains on course to hit the operating profit target of £100m by 2015/16. Supported by strong cash flow the balance sheet is robust, and can support potential value adding opportunities within and outside the company's traditional geographic markets.
Homeserve
CEO Richard Harpin and the executive team
In February Homeserve received a £30.6m fine from the FCA principally in relation to sales and controls issues in the UK for the period from 2008 to October 2011. Comprehensive action was taken by the executive team in 2011 to address the issues identified and to restore customer focus. It has not been distracted from continuing to grow its international portfolio - and is making particularly good progress in building its US business. The company looks well on its way to rehabilitation.
Songbird Estates
Sir George Iacobescu and the executive team of Songbird subsidiary Canary Wharf Group
Sir George has been working on Canary Wharf since 1988. He and his executive team have created one of the largest ever development in London of 97 acres of office, retail and increasingly residential space. The company has also started to add other central London sites to its portfolio. The value creation has recently been further enhanced by a bid from two existing shareholders for the shares in holding company Songbird Estates. A recent update of the NAV showed a 19% increase since 30 June.
Deal of the Year [top]
Amec acquisition Foster Wheeler for $3.2bn, announced January
SHORTLISTED
Kentz sells to SNC-Lavalin for £1.2bn, announced June
Kentz under CEO Christian Brown rejected a bid from others including Amec, in September 2013 at around 580p a share. Kentz then went on to acquire US based Valerus in January for $435m in cash which was strongly earnings enhancing. In June Kentz accepted a bid valued at 935p a share from Canadian SNC-Lavalin under CEO Robert Card. SNC-Lavalin were attracted by Kentz's services focus in attractive specialisms and geographies within the oil and gas market. The exit PE for the current year was 15.6x and a 33% premium to the prevailing share price.
Synergy Health combination with STERIS valued at £1.1bn, announced October
Synergy, under CEO Dr Richard Steeves, announced a shares and cash combination with US peer STERIS that equated to a 39% premium to the prevailing share price. This now values the Synergy equity at around £1.1bn, with Synergy shareholders owning 30% of the combined STERIS group. The deal is due to accelerate the growth of both companies cross selling STERIS's products and services to Synergy's customer base. The deal will be substantially earnings enhancing for the combined STERIS, due to cost savings, and in part due to the lower tax rate, from the wider geographic footprint.
Micro Focus acquisition of Attachmate Group Inc. for $2.35bn announced in September
This was one of the UK's largest ever M&A transactions in the technology sector. Under Executive Chairman Kevin Loosemore Micro Focus has generated prodigious cashflow from its mainly legacy business. The acquisition of Attachmate, a diversified portfolio of software tools and products, will create one of the UK's largest Software & IT Services companies. There should be significant synergies and the combined group should have very high profit margins and recurring revenues.
Advanced Computer Software acquisition by Vista Equity Partners for £671m in November
The cash bid price represented a 17% premium to the previous closing price and a 75% premium to the placing price of 80p in February 2013 when the company raised £44m. Since founding ACS six years ago CEO Vin Murria has created a company with £203m of revenue and £45m of ebitda. Vin Murria has extensive software acquisition and integration experience. Vista has been extremely active in acquiring software companies and had completed 35 transactions with a total value of $32bn in the previous 12 months.
IPO of the Year [top]
AA - Raised £930m in June, Cenkos was sole coordinator, Deutsche and Greenhill were Financial advisers.
Although the business is highly financially geared, the stability of its roadside business allied to its remarkably strong brand and strong cash flow were quickly appreciated by the market, with the result that it quickly became one of the best performing IPOs of 2014.
SHORTLISTED
Spire Healthcare
£344m raised in July at 210p. BoA Merrill Lynch and J.P.Morgan Cazenove were Joint Global Co-ordinators, Morgan Stanley and Numis acted as Co-Lead Managers.
In a volatile stock market Cinven were able to sell 41% of the equity in Spire, a leading provider of elective healthcare in the UK operating 39 private hospitals and 13 clinics. CEO Rob Roger has been with the group since 2007 and has implemented a strategy of growing new services at additional sites, while maintaining good patient volumes, which enable a low cost per patient admitted.
FDM Group
£242m raised in June at 287p. Investec acted as Sponsor, financial adviser and sole bookrunner.
The group was founded in 1991 by still current CEO Rod Flavell, floated on AIM in 2005 and was taken private by Inflexion in 2010. The IPO allowed Inflexion to exit almost its entire 62% holding. It employs high calibre graduates as well as ex-military personnel, and provides them with high quality IT training to qualify them as FDM Consultants. These Mounties are deployed to client sites as low risk and flexible resource. At the latest trading statement in October over 1,800 personnel were deployed at 99% utilisation rates.
SSP
Raised £997m in July. Goldman Sachs and Morgan Stanley were joint global coordinators, Bank of America Merrill Lynch and Jefferies joint book runners and Nomura and Shore were co-lead managers.
SSP was bought by Swedish Private Equity group EQT in 2006 and after a difficult period during the crisis, in 2013 appointed Kate Swann, responsible for turning round WH Smith, to drive the company forward. The company is increasingly benefitting from its international scale as is well positioned to benefit from structural growth drivers in its markets. The IPO was a success, being multiple times oversubscribed during a period when many flotations were being pulled, and recent results showed the company to be well on track.
Logista
Raised €518 in in June. Joint global coordinators were Goldman and Credit Suisse, Morgan Stanley, BBVA and Societe Generale were joint leads
Imperial Tobacco strategy is to concentrate on its core activities. This does not include Logista, the Imperial distribution business to capillary networks of points-of-sales, with operations in Spain, France, Italy and Portugal. It capitalised on an improving business and stock market climate in Spain, to float Logista in June. Under CEO Luis Egido the company has proved resilient in adverse macroeconomic circumstances. It has stated its intention to propose distributing at least 90% of its annual net profits in dividends. Imperial retains a majority stake of 70%, and the share has performed relatively well since IPO.
Small and Midcap Company of the Year [top]
Safestore
Safestore has developed a tight operational focus on internal performance and improving conversion of new enquiries at appropriate rental rates. Recent quarterly revenues were up 8.4% on a same store basis. CEO Vecchioli was appointed in September 2013 having run the company’s 25 store Paris operation Une Piece en Plus, which he co-founded. A £32m placing was completed in January as part of a £75m debt reduction exercise to bring balance sheet loan to value from 50% to under 40% and save £5m of annual interest cost.
SHORTLISTED
Hyder Consulting
In August after a bidding war, Hyder agreed a bid from the Dutch group, ARCADIS worth £288m, representing an impressive 56% premium to the closing price the day the first bid was announced. CEO Ivor Catto joined in late 2008 and guided the group through the recession, and protected the company's balance sheet. Project delays in Australia and the Middle East in early 2014 resulted in a profits warning, but the strength of the competing bids confirm that was only a short term blip.
Marshalls
Marshalls is the UK's leading hard landscaping manufacturer to both the commercial and residential markets. The company, with an inevitably high fixed cost base, had a difficult time in the recession. However while cutting costs it maintained operational flexibility to benefit when demand began to recover. CEO Martyn Coffey joined the company in October 2013 from BDR Thermea. The company is focused on product innovation and service delivery initiatives to deliver continued sales growth and looks well set to return profit levels to pre-recession levels.
Assura
UK REIT Assura is a leading property investor and developer in the primary care sector, with 247 medical centres. CEO Graham Roberts joined from being Finance Director of British Land in 2012. In September the company raised £175m of new equity. £80m was ear marked for further near term acquisitions and a further £55m for reducing the loan to value ratio from 65% to 47%. In November it announced two acquisitions for £74m for a further 15 medical centres.
WYG
Under CEO Paul Hamer since March 2009, consulting firm WYG (previously White Young Green) has been transformed. The business required significant re-capitalisation after an acquisition spree, and Paul Hamer had to undertake substantial business rationalisation and cost cutting. The international business has been successful grown into further geographies and clients and ha becomes a world leader in advising fragile states. The UK has refocused to its core activities, and remains a leader in urban development, climate resilience and infrastructure.
Entrepreneur of the Year [top]
Greg Fitzgerald Executive Chairman, Galliford Try
Disclaimers 2014
Advisory Panel
All the firms represented by an individual on the advisory panel; Barclays, Lazard & Co., Limited, Rothschild and UBS Limited, (an affiliate of UBS AG), may have corporate relationships with companies included in these awards. The inclusion of a company in the awards is not in any way an investment recommendation to buy or sell shares in these companies or to engage in any other business activity or arrangement with them. The inclusion of these companies does not necessarily represent the views of these firms and should not in any way be attributed to them.
Broadwalk Asset Management LLP
This document is issued by Broadwalk Asset Management LLP should not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or unauthorised. Broadwalk Select Services Fund Limited
(the Fund) is not a recognised scheme under s.264 of the Financial Services and Markets Act. The Fund may hold positions in any of the companies mentioned above. Most, if not all, of the protections provided by the United Kingdom regulatory structure will not apply to investments in the Fund. The Fund is not traded on an exchange or recognised market. This document should not be distributed to any third party without the express approval of Broadwalk Asset Management LLP.
Broadwalk Asset Management LLP is Authorised and Regulated by the FCA.
BROADWALK SERVICES AWARDS 2013[+/-]
This is the sixth year of the Broadwalk Services Awards to recognise outstanding achievements by quoted companies and their management teams in the broadly defined business services sectors. As usual, competition was fierce with a strong array of contenders - highlighted by the impressive short lists. The broadly defined business services sectors are one of the less well known success stories of the economy and are amongst the largest private sector employers. As the Financial Times recently commented, very successful businessmen in Europe are often only celebrities to the fund managers. However they achieve much more widespread acclaim in the US and this trend will hopefully continue to rise in Europe. These awards are another step towards raising their and the sector's profile.
ADVISORY PANEL
The awards have had the significant benefit of views from:
- Jarrod Castle, Super sector head of business services, leisure and transport, UBS *
- Vasco Litchfield, Managing Director, Lazard *
- Jane Sparrow, Director Mid&Small Cap Support Services Research, Barclays *
- Stuart Vincent, Managing Director, Rothschild
*Jarrod Castle (UBS), Vasco Litchfield (Lazard) and Jane Sparrow (Barclays) did not participate in discussions relating to the IPO of the year award 2013.
Broadwalk Asset Management LLP
Broadwalk Asset Management was founded in 2007 by Charlie Cottam, previously an equity analyst with Panmure Gordon and Cazenove (now J.P.Morgan Cazenove). The investment team includes Mark Shepperd (32 years at UBS) and Simon Strong (over 20 years experience particularly in technology). It manages the Broadwalk Select Services Fund, Europe’s first absolute return fund to focus on the broadly defined business services sectors. The fund has risen almost 158% since its inception in June 2008, compared to the FTSE All Share which on a total return basis is up 41%.
Broadwalk Asset Management LLP
charlie.cottam@www.broadwalkam.com
0044 (0)207 491 7384
Broadwalk Asset Management LLP is Authorised and Regulated by the FSA.
Important disclosures can be found at the end of this section.
AWARDS AND SHORT LISTS
Broadwalk Services Company of the Year [top]
Interserve
The strategy set by CEO since 2003, Adrian Ringrose to strengthen the core UK businesses while expanding internationally is working extremely well. It has become a very significant player in the UK outsourcing arena with a future workload of £5.4bn. Significant cash has been recycled from the legacy PFI investments in a number of bolt on acquisitions in UK frontline services and the oil and gas services business in the Middle East. Large new contracts such as the BBC and the University of Sussex have also been won recently. Cash conversion has remained strong enabling the group to invest in further growth opportunities.
SHORTLISTED
BBA
BBA, under CEO Simon Pryce, has outperformed the overall flat to down market by driving organic growth from BBA’s market leading Flight support business Signature. This has been aided by acquisitions and expansion through new legacy product support licences, reaching $141m of committed spend this year so far. The balance sheet remains strong and there is considerable opportunity for further growth in expenditure.
Euromoney
Under Chairman Richard Ensor, Euromoney has continued to focus on organic growth, which has impressively been maintained at consistent levels through the very challenging markets of the financial crisis. Growth has been driven through investing in data, research and editorial, migrating print to online and expanding into emerging markets. The group has an excellent track record of deriving synergies from acquisitions and from widening the customer base. Tight cost control has also helped maintain high operating margins of 30%. This margin level has also been consistent despite the inevitable impact of the recession.
Hays
Hays is emerging from the downturn in good shape. CEO Alistair Cox has appointed new management in Australia which is suffering from the resources downturn. The cost cutting in the UK has been sufficiently strategic that as the market begins to recover Hays is well positioned to grow profitability. The international strategy remains robust with the German business continuing to grow strongly in its still immature staffing market. The company also recently explained the benefits of its very effective IT platform.
IAG
IAG, under CEO Willie Walsh, held firm on supplier negotiations in Spain earlier this year and combined with recovering expectations for the Spanish economy the Iberia merger is looking a lot more promising. The acquisition of the majority stake in low cost airline Vueling is also helpful in expanding into growth markets and areas of reduced capacity. British Airways is also outperforming expectations. The company recently raised its targeted 2015 earnings target and a commitment to produce returns above its Weighted Average Cost of Capital which has not been easy for legacy carriers.
Broadwalk Services CEO and executive team of the year [top]
Paul Pindar joined Capita in 1987, and became Chief Executive in 1999. He transformed the Company into a contract winning powerhouse. He has grown segments such as justice and emergency services and health into substantial new businesses. The Company’s extensive bolt on acquisition strategy has been enormously successful, and led to the creation of further significant business lines such as asset services and customer management. Paul, together with Capita’s executive team, has steered the business through the ongoing challenging economic conditions in the UK and continued to deliver an unbroken track record of year-on-year earnings growth. Over the 10 years to 31 December 2012, Capita delivered shareholder returns of more than 200% compared to the FTSE 100 average of 113%. Paul will be succeeded in February by Andy Parker.
SHORTLISTED
Atkins CEO Prof Dr Uwe Krueger and executive team
Professor Krueger was appointed in mid 2011 from TPG. The recent results have really shown the success of the team’s strategy since 2011. The portfolio has been aligned to the core engineering and consulting skills, with the riskier services businesses being sold. Good growth has been generated from the focus areas of Energy and Asia Pacific, as well as a recovering UK business. Cash generation has been strong which will enable further growth organically and through acquisitions.
Berendsen CEO Peter Ventress and executive team
Berensden has continued to deliver solid returns for its shareholders. Investors have warmed to the steadily improving progress that the company has made both in its top line and in improving it margins, while its cash flow continues to be remarkably strong. CEO Peter Ventress was appointed in January 2010 from the office products distribution industry. He and his team’s strategy of moving to a business line structure, rather than geographic divisions, is showing through in better transfer of best practice and incremental margin improvement.
Howdens CEO Matthew Ingle and executive team
Howdens under CEO Matthew Ingle has continued to grow its depot network despite the very difficult retail environment. Ingle and his team’s impressive strategy has been consistent in focusing on supplying the small builder with high quality locally stocked kitchens and joinery at very competitive prices. It is on course to open a further 30 depots in 2013 bringing the total to 560. The target of 700 depots in the UK continues to look achievable.
Workspace CEO Jamie Hopkins and executive team
Since his appointment as CEO in April 2012, and aided by his able executive team, Hopkins has sharpened Workspace’s focus on maximising value from its well located portfolio of 100 properties in London. Extra effort has been deployed in its redevelopment programme to add value from planning applications which add residential space while improving its existing commercial space. In addition communication has been clearer. There has been greater emphasis on improving the customers experience and increasing the value they derive from being a Workspace customer, including the rollout of Club Workspace.
Broadwalk Services Chairman of the Year [top]
John Connolly is chairman of G4S and Amec. He joined G4S shortly after its aborted merger with ISS in 2012. Since then he has had to contend with the problems ensuing from the London Olympics contract, profit short falls, and an investigation into the company's UK Justice contract. This led to the resignation of the group's CEO. In response he has hired well regarded new CEO, Ashley Almanza, a new Finance director and several new non executives. In August the company successfully raised £350m of new equity to shore up the balance sheet. The group is now much better positioned to focus on its higher value added sectors and grow particularly in developing markets.
SHORTLISTED
Michael Harper, Chairman BBA
Harper joined BBA as a non executive in 2005 before becoming interim CEO in 2006. As interim CEO he focused the group on its core Aviation Services activities and oversaw the demerger of non-woven subsidiary Fiberweb. Harper appointed Simon Pryce CEO in 2007 and has overseen a number of acquisitions to bolster Signature's industry leading Fixed Base Operations network for aircraft operators. He is to be succeeded replaced by Sir Nigel Rudd.
Bob Benton, Chairman of Clarkson until August
Benton joined the board of shipbroker Clarkson in 2005 and became Chairman in August 2008 at the height of the financial crisis. The share price fell 60% in four months but despite an inevitable revenue decline, the impact was mitigated by Benton and CEO Andi Case's tight cost control. At the same time, the company continued to grow market share in its core markets and expand into related areas. It's a tribute to Benton's skill in managing a broking business with strong personalities that the shares were up over 100% during his tenure. His replacement as Chairman was Philip Green.
John Dodds, Chairman Severfield-Rowen
Dodds became Chairman in September 2011 and in January the following year assumed the role of Executive Chairman after the announcement of further material cost overruns. In February he succeeded in raising £48m via a rights issue and negotiated revised banking facilities with the company’s lenders. This returned the company to a sound financial footing. The UK business was reorganised with a 10% reduction in capacity to align the business with market conditions. In September he appointed Ian Lawson as CEO, and stepped back to non executive Chairman.
Broadwalk Services Deal of the Year [top]
Invensys acquisition by Schneider Electric for £3.4bn in July
After the commendable sale of the Rail division (Broadwalk deal of the year 2012) last year to Siemens Invensys CEO Wayne Edmunds negotiated the sale of the core business to Schneider Electric. The price was a 14% premium to the closing price and a 27% premium to the prior three month average price. The offer presented a value over 500p a share, which is a very impressive achievement when compared to a price of around 220p when Edmunds was appointed CEO in June 2009.
SHORTLISTED
APR Energy acquisition of GE’s power rental business for $314m in October
APR bought GE’s remaining power rental business encompassing 20 turbines and 5 ongoing contracts with 520MW of generating capacity. This increased APR’s capacity by over 30%. 80% of the purchase price was financed with APR equity, with GE taking a 16.5% stake in the company. This significantly diversified APR’s global contract and revenue base, and was earnings enhancing. It also increased APR’s exposure to energy from natural gas which is the fastest growing technology in the industry which is ideally suited to large urban contracts.
Experian acquisition of Passport Health Communications for $850m in November
This trebles Experian’s health business and makes it the US market leader covering 3,000 hospitals. Passport is a software as a service subscription business with 84% of 2014 revenues already on the books and is based on a very strong technology platform. Despite the rich acquisition multiple, with revenue and cost synergies, the deal will be immediately earnings enhancing. It is forecast to make double digit returns within Experian’s five year target.
Essentra (previously Filtrona) acquisition of Contego Healthcare for £160m in March
The deal further expands Essentra’s product offering in the faster growing pharmaceutical and healthcare markets. The price of 11.5x EBIT looks reasonable value when the opportunities for cost synergies and cross selling revenue benefits are factored in. CEO Colin Day has extensive experience of making and then integrating this type of acquisition. The transaction was funded by a c.£143m placing enabling Essentra to retain its strong balance sheet and make further bolt-on acquisitions going forward.
Kier acquisition of May Gurney in May for £297m
Kier won a bidding war against Costain for May Gurney with a bid where the equity component was 85% was financed by Kier shares. This enabled the balance sheet to remain strong with no recourse to existing Kier shareholders. The deal achieved Kier’s ambition of growing its services offering from 21% of sales to 41%. There should be multiple cross selling opportunities to the 65 local authorities the combined group serves, as well as £20m of cost synergies.
Broadwalk Services European IPO of the Year [top]
Royal Mail
£2bn raised in October at 330p. Goldman Sachs International and UBS Limited were Joint Global Co-ordinators and Joint Bookrunners, Barclays Bank PLC was Joint Bookrunner and Sponsor, BofA Merrill Lynch was Joint Bookrunner and Investec Bank plc, Nomura International plc and RBC Europe Limited were Co-Lead Managers.
The flotation will enable Royal Mail to become more flexible and responsive in the UK’s postal market, which is arguably the most competitive in the world. Under CEO Moya Greene the company has undergone a significant transformation process and has a clear strategy built around growing the parcels business, managing the decline in letters and being customer focused. The recent interim results showed the business is trading as expected and is well poised for the crucial Christmas trading period. The flotation included 10% of the company being allocated for free to the company’s 150,000 eligible UK based employees.
SHORTLISTED
Fusionex,
Raised £12m in December 2012 at 150p. Panmure Gordon were Nominated Adviser.
FusionEx has been a star performer since its IPO in December last year. Its share price has more than doubled since listing, partly in anticipation of the company’s big data product, Giant. FusionEx should benefit from the anticipated strong growth rate in online analytics and the extent of the share price rise typifies how much growth stocks are in demand.
Bpost,€812m raised in June at €14.5. J.P. Morgan, Nomura and BNP Paribas Fortis were joint global coordinators. Joint international bookrunners: J.P. Morgan, Nomura, Morgan Stanley and UBS. JointBelgian bookrunners BNP Paribas Fortis, KBC and ING.
Bpost is Belgium’s dominant postal operator. CEO Johnny Thijs has a strategy to continue to increase productivity and grow parcel volumes in Belgium and abroad. He has also focussed on major customers who will benefit from e-commerce growth. This will offset the inevitable decline in transactional mail volumes, while a strong cost focus generates industry leading margins. It has stated its intention to pay a minimum of 85% of its annual net profits as a dividend.
Countrywide,
£224m raised in March at 350p. Joint sponsors Goldman Sachs and Jefferies, Joint global co-ordinator Credit Suisse.
Under CEO Grenville Turner Countrywide has transformed from a collective network of estate agencies into the UK’s leading property services group. The IPO allowed Oaktree, Apollo and Alchemy to reduce their holdings in the company and in August the former two sold a further 17% of the company. In September the company announced the acquisition of commercial property consultant Lambert Smith Hampton for £34m, increasing its offering to corporate customers.
Foxtons,
£429m raised in September at 230p. Joint sponsors Credit Suisse and Numis, co-Lead Manager Canaccord
The IPO left the group debt free after a buyout at around the peak of the last residential market cycle. Under CEO Michael Brown since 2007 Foxtons has maintained its reputation for a very strong marketing approach, as well as customer orientated services such as longer open hours. It is well placed to continue its branch expansion programme throughout London, funded by internal cash generation and is not dependent on an increase in the number of London housing transactions. The IPO enabled Foxton’s private equity owners to reduce their stake to just 22%.
Broadwalk Services Small and Midcap Company of the Year [top]
KBC Advanced Technologies
KBC Advanced Technologies has transitioned from a consulting led model into a company with a strong software focus. The company’s consulting and technology offering helps the hydrocarbon processing industry maximise profitability. The new senior management team under Ian Godden, who became Executive Chairman in the autumn of 2012, has made good progress over the last year restructuring the operations, growing revenues and profitability, increasing the focus on technology and positioning the business for continued growth.
SHORTLISTED
Matchtech
Matchtech has emerged as the most one of the successful Specialist, or White Collar staffing companies in the UK. Under CEO Adrian Gunn, its strategic office locations and cost culture has seen strong underlying growth in it core discipline - the recruitment of Engineering staff. Profitability has also improved and it is now one of the most efficient staffing firms. The company achieved a major coup in September when it announced that Brian Wilkinson, former main Board Director of Randstad, Vedior and Select Appointments would become Chairman.
Staffline
Staffline has shown that despite operating at the lower end of the skill market, it is possible to run a very successful and profitable business. The business enjoys one of the highest operating margins in the industry, and has a very good record in bolting on small acquisitions. Under CEO Andy Hogarth the company has successfully diversified into the Work Programme where it is top ranked for performance.
Wincanton
Contract logistics operator Wincanton has recovered from an overly indebted position heading into the financial crisis. Net debt has fallen from £160m in March 2011 to £87m at the latest interim results, primarily through internally generated cash flow. CEO Eric Born has done a very good job in sharpening the division’s focus on cost control, cross selling and higher margin technology supported contracts.
Xchanging
Ken Lever became acting CEO in February 2011, having only joined four months earlier as finance director. It was a difficult start as the company had to issue a severe profit warning and the departure of the founder. Lever acted quickly to implement a recovery plan and restore confidence. The business has been considerably simplified with a focus on its strong position in Insurance. The strategy of serving a larger number of customers and offering high value added services was recently enhanced by the acquisition of bolt on MarketMaker4.
Broadwalk Services Entrepreneur of the Year [top]
Mark Dixon
Mark Dixon founded Regus in Brussels in 1989 when he saw how many businessmen needed to work in hotels or cafés for lack of a more professional environment. He opened the first business centre and started persuading companies to outsource their work place requirements to a specialist operator. A global network of flexible workplaces was established, and in 2000 the company floated on the London Stock Exchange. After a very difficult period of trading during the subsequent recession the group was refinanced, which allowed for two significant US acquisitions, making the company by far the largest US operator. Regus was much better placed to cope with the next recession in 2008 with a more diversified customer base by sector, a wider suite of products and services and a higher proportion of flexible rental deals. As the global economy recovered the aggressive centre rollout continued, responding to the growth in flexible working. As a result the company is currently opening one new location a day, and has a network of some 1,700 business centres in 100 countries. Dixon recently announced plans to accelerate new openings in 2013 and the target of 2,000 centres looks achievable, as more organisations want more flexible working environments for their employees.
Regus CEO Mark Dixon and Mark Shepperd
Disclaimers 2013
Advisory Panel
All the firms represented on the advisory panel, Barclays Capital, Lazard, Rothschild and UBS Limited, an affiliate of UBS AG, have corporate relationships with companies in these awards. 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 not be attributed to them.
Broadwalk Asset Management LLP
This document is issued by Broadwalk Asset Management LLP should not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or unauthorised. Broadwalk Select Services Fund Limited (the Fund) is not a recognised scheme under s.264 of the Financial Services and Markets Act. The Fund may hold positions in any of the companies mentioned above. Most if not all of the protections provided by the United Kingdom regulatory structure will not apply to investments in the Fund. The Fund is not traded on an exchange or recognised market. This document should not be distributed to any third party without the express approval of Broadwalk Asset Management LLP.
Broadwalk Asset Management LLP is Authorised and Regulated by the FSA.
BROADWALK SERVICES AWARDS 2012[+/-]
This is the fifth year of the Broadwalk Services Awards to recognise outstanding achievements by quoted companies and their management teams in the broadly defined business services sectors. Similar to the London Olympics, competition was fierce with a strong array of contenders – highlighted by the impressive short lists. The broadly defined business services sectors are one of the less well known success stories of the economy, and these awards are another step towards raising their profile.
ADVISORY PANEL
The awards have had the significant benefit of views from:
- Jarrod Castle, Co Head of Transport Research, UBS
- Vasco Litchfield, Managing Director, Lazard
- Jane Sparrow Director Mid&Small Cap Support Services Research, Barclays Capital
- Stuart Vincent, Managing Director, Rothschild
Broadwalk Asset Management LLP
Broadwalk Asset Management was founded in 2007 by Charlie Cottam, previously an equity analyst with Panmure Gordon and Cazenove (now J.P.Morgan Cazenove). It manages the Broadwalk Select Services Fund, Europe's first absolute return fund to focus on the broadly defined business services sectors. The fund has risen almost 90% since its inception in June 2008, compared to the FTSE All Share which on a total return basis is up 17%.
Broadwalk Asset Management LLP
charlie.cottam@www.broadwalkam.com
0044 (0)207 491 7384
Broadwalk Asset Management LLP is Authorised and Regulated by the FSA.
Important disclosures can be found at the end of this section.
AWARDS AND SHORTLISTS
Broadwalk Services Company of the Year
easyJet
SHORTLISTED
Howdens Joinery
Under highly experienced CEO Matthew Ingle, Howdens has successfully negotiated extremely demanding conditions in the UK kitchens market, with a very tight focus on its operations. This includes price and margin discipline, new kitchen ranges incorporating the demand for more complex functionality, and a continued depot opening plan, bringing the total to 530. The balance sheet has also been much improved with the legacy property liabilities much diminished and a new arrangement negotiated with the pension trustees.
Intertek
CEO Wolfhart Hauser has continued to exploit the structural growth opportunities driven by customers' demands for quality and safety. A number of bolt on acquisitions have widened the range of services offered. The latest report reiterated the company's confidence in growing organic revenue in the high single digit range despite the uncertain economic environment.
Travis Perkins
Travis Perkins, under CEO Geoff Cooper, has insulated itself from fragile trading conditions through continued tight management of costs and efficient gains from self help projects. There has been a focus on cash generation to bring group indebtedness down further with the group on track to be at around £450m for the full year. Travis has continued to consolidate the industry with the acquisition of Toolstation fro £107m, and its further small step overseas into the Dutch market.
Wolseley
CEO Ian Meakins has successfully executed on his strategy since becoming CEO in July 2009. The less strategically well placed businesses have been sold, and the balance sheet significantly strengthened. The businesses now look well set to increase their already leading market shares despite the still potentially difficult market backdrop. Bolt on acquisitions are likely to help this, as well as a commitment to grow the dividend and return any excess cash to shareholders.
Broadwalk Services CEO and executive team of the year
Miles Roberts CEO and executive team, DS Smith
Roberts joined DS Smith as CEO in May 2010. Since then the company has been transformed. In 2010 corrugated packaging company Otor of France was bought for €247m. In 2011 Spicers the wholesaling business, was sold for £200m. In January the company announced the purchase of SCA Packaging for €1.6bn, partly funded by a skilfully handled £466m rights issue. DS Smith became the leading corrugated packaging company in Europe and was strongly earnings enhancing. In October Roberts and Finance Director Steve Dryden announced the integration is ahead of expectations with higher synergies and a faster debt reduction schedule.
DS Smith Finance Director Steve Dryden, CEO Miles Roberts, and Charlie Cottam
SHORTLISTED
Greg Fitzgerald, CEO and executive team, Galliford Try
Fitzgerald was one of the fastest housebuilders to reduce inventory as the credit crunch hit the housing sector. He led a £125m rights issue in June 2009 and used the proceeds to buy land in a difficult market, which is now yielding sales at attractive margins. The construction business is operating in extremely difficult conditions but has only bid work which can achieve an acceptable return. Fitzgerald's transformational three year plan can certainly be seen as a success.
Gavin Slark, CEO and executive team, Grafton
Slark was appointed CEO of Grafton in mid 2011, having been CEO of BSS. The Irish construction markets remain extremely difficult, and the UK which now accounts for 76% of sales has suffered after a further recession. Slark has introduced a disciplined focus on "self help" measures and taken some tough decisions on restructuring. This has resulted in a rise in shareholder value as confidence in the company returned.
André Lacroix, CEO and executive team, Inchcape
Lacroix became CEO of Inchcape in 2006 and had to guide the business through very difficult trading in the financial crisis. The distribution element accounts for 65% of the group's profits helped by its focus on the premium brand partners. The retail operation has an intense focus on customer service and has been successfully expanding in emerging markets, in particular Russia and China.
Mark Allan, CEO and executive team, Unite
The UK's leading developer and manager of student accommodation under CEO Mark Allan has coped well with government funding changes during the year, and a series of disposals has strengthened the balance sheet. Allan's strategy to focus on London and strongest university cities has worked well with occupancy for the current academic year still at 96% or fourty-two thousand students (42,000) across the 130 property portfolio.
Broadwalk Services Chairman of the Year
Sir Ian Wood, Chairman, Wood Group (retired November)
Sir Ian joined the business in 1964 and as Chief Executive since 1967 pioneered the group's move into oil and gas engineering and support services as reserves were discovered in the North Sea in the 1970s. Sir Ian build a global energy services group with 42,000 employees in 50 countries. This included well integrated acquisitions of JP Kenny, Mustang and PSN, as well as the $2.8bn disposal of the well support business in 2011. CEO Allister Langlands has taken over as Chairman, with Bob Keiller becoming CEO.
Sir Ian Wood
SHORTLISTED
Sir Patrick Brown, Chairman, Go-Ahead
Sir Patrick became non-executive Chairman in 2002 having been permanent secretary of the Department of Transport. Over the 10 years of his Chairmanship rail and bus operator Go-Ahead has grown considerably, and become a large player in the UK rail market. With a robust balance sheet it successfully negotiated the difficult economic conditions which caused significant problems for other competitors. He will be succeeded as Chairman by Andrew Allner with David Brown continuing as CEO.
Kevin Loosemore, Executive Chairman, Micro Focus
Loosemore took over as Executive Chairman of Micro Focus in April 2011. He has strongly focused the group on cash generation, enabling the return of £82m in October, having returned £84m in December 2011, having previously spent £66m buying back 10% of the outstanding equity base. There has also been a renewed focus on new products for the legacy COBOL division which may bring further opportunities.
Glen Moreno, Chairman, Pearson
Moreno since his appointment in 2005 has overseen the continued transformation of Pearson to become the world's leading learning company, with a stronger focus on digital content and services. In October Moreno appointed John Fallon to succeed Marjorie Scardino as CEO from January 2013. Fallon has planned and led the very strong growth in Pearson's international education business over the last decade.
Leslie Van de Walle, Chairman, SIG
Van de Walle became Chairman in early 2011 and has overseen the strengthening of the group through difficult trading conditions in the UK and Continental Europe. This has involved restructuring to refocus the group on its core activities. In November he announced the appointment of Stuart Mitchell as CEO designate from Wilkinson Hardware Stores. Mitchell will take over in March from current CEO Chris Davies who is retiring after 19 years with the company to focus on non-executive roles.
Broadwalk Services Deal of the Year
Invensys sale of Rail to Siemens in November for £1.7bn
With a single transaction CEO Wayne Edmunds has effectively neutralised the pension fund issue and focused Invensys on its core industrial software and systems businesses. The price of £1.7bn was good representing 15x historic EBIT. After two £625m returns to shareholders and to the pension fund, it allows for £400m of bolt on acquisitions without going into debt. Invensys is now very well positioned to act as a consolidator in the fragmented industrial software market in particular.
Invensys CEo Wayne Edmunds and Charlie Cottam
SHORTLISTED
Misys bid from Vista Equity Partners in March for £1.3bn
Despite very difficult end markets and the departure of well respected Misys CEO Mike Lawrie, the Misys board under Chairman Sir James Crosby achieved a cash bid at a 32% premium to the share price before bid talks were announced. Misys had seen its Q3 sales fall 12% and its order intake fall by 5%, though an element of this reduction might have related to the uncertainty over Misys's ownership.
Aegis acquisition by Dentsu in July for £3.1bn
Aegis announced a £3.1bn cash offer at 240p per share from Dentsu of Japan, which represented a 48% premium to the share price. This was a vindication of CEO Jerry Buhlmann strategy having been appointed in May 2010. He sharply focused the business on media and digital communications, selling the market research business Synovate for £525m in late 2011. Organic revenue growth significantly outperformed the sector at 10% in 2011, with operating margins rising 130bp to 17.4%.
CGI acquisition of Logica in May £1.7bn
The cash bid at a 60% premium to Logica's closing price. The deal gave Canadian CGI and its CEO Michael Roach immediate critical mass in the European IT Services market. Logica's exit price earnings ratio was less than 10x. CGI announced the deal was c30% earnings enhancing. While the market sentiment was depressed by Euro area uncertainty, Logica had stated just three weeks earlier it was trading in line with expectations.
Experian acquisition of 29.6% stake in Serasa, Brazil for $1.5bn
Experian under CEO Don Robert initially acquired a 65% stake in Brazil's largest credit bureau, Serasa in 2007. Since then Serasa has EBIT on average by 28% a year. The transaction importantly also included an extension of existing agreements for the banks to both provide data, and extend minimum purchase guarantees. The transaction was earnings enhancing for the year to March 2013. Post the cash funded transaction Experian's leverage of around two times net debt to EBITDA is still comfortable.
Broadwalk Services European IPO of the Year
DKSH
CHF 903m (£600m) raised in March at CHF48. Joint Global Coordinators: UBS, Deutsche Bank. Joint Bookrunners: Berenberg Bank, Credit Suisse.
Zurich based DKSH is the leading market expansion services group focused on Asia with over 24,000 staff and sales of CHF 7.1bn. It distributes products in the consumer goods, healthcare, performance material and technology sectors. Chairman Adrian Keller and CEO Dr.Joerg Wolle have overseen the doubling of net sales and the quadrupling of profits since the merger of two 150 year old Swiss trading houses in 2002. The maiden interim results as a listed company in the summer showed 16% growth in sales, and 24% rise in net profit.
Charlie Cottam and DKSH CEO Dr.Joerg Wolle
SHORTLISTED
NMC Health
£117m raised in March at 210p Deutsche Bank Sole Global Co-ordinator, Sole Sponsor and Sole Bookrunner. Numis and SHUAA Capital Joint Lead Managers.
NMC, the Abu Dhabi based operates hospitals in the UAE, where it is the largest healthcare provider. It used the proceeds to buy Healthcare Suites in Dubai and build a maternity hospital in Abu Dhabi. The company was founded by CEO Dr. B.R.Shetty 37 years ago. It was the first Abu Dhabi company to list on the London market. In November NMC announced the award of a five year contract to operate and manage the new Sheikh Khalifa General Hospital in the UAE.
Clinigen
£55m raised in September at 165p by Numis Securities
Clinigen is a fast growing company providing sourcing and distribution of comparator drugs for clinical trials on a global basis as well as acquiring niche drugs for further commercialisation. CEO Peter George joined in 2010 to consolidating the businesses that form the current group and start the products division following the acquisition of Foscavir. Founder Andrew Leaver continues to own 31% of the shares.
WANdisco
£15m raised at 180p in June by Panmure Gordon.
Sheffield based WANdisco is a leading provider of global collaboration software to the software development industry. Chairman & CEO David Richards founded the company in 2005 with COO Jim Capilgli and Chief Scientist Yeturu Aahlad. In October the company announced Q3 subscription bookings had risen 86% to $2m with a number of new blue chip customers announced. The shares have risen to 450p, a 150% increase on the flotation price. While this was a small flotation it is good to see new UK listed technology companies emerging after a large number of the larger operators in the sector have been bought.
Broadwalk Services Small and Midcap Company of the Year
Vp
Under founder Chairman Jeremy Pilkington and Managing Director Neil Stothard capital discipline has been impressive, with a tender for 7% of the outstanding share capital undertaken in February. The specialist focus on Vp's rental fleet has enabled it to grow despite a continued difficult operating environment. Strong cash flow has continued to ensure a strong balance sheet that supports re-investment in the fleet, share buybacks and further bolt on acquisitions.
Vp CEO Neil Stothard and Charlie Cottam
SHORTLISTED
Anite
Anite has seen strong demand for its 4G testing software. CEO Christopher Humphrey Anite has positioned the business to be a major beneficiary of the shift to 4G LTE networks, demonstrated by 351 operators globally that are currently investing in LTE. The company is exposed to an increasingly wide market from new variants, and new product areas such as Voice over LTE.
Kewill
Kewill, the supply chain software supplier under CEO Paul Nichols 2012 saw a competitive bid situation that resulted in a 40% premium to the share price before the first bid announcement. Kewill's high quality Software-as-a-Service logistics and shipping software was valued at almost 12x 2012 EV/NOPAT on exit. Nichols joined Kewill as CEO a decade ago when the shares were trading at 7.5p, compared to the eventual bid price of 110p.
Tribal
CEO Keith Evans has focused Tribal on its market leading technology products and services to the education and training market. In March the mission was outlined with a target to more than double earnings per share in the next three years. Both elements of the business are achieving success in selling internationally with technology particularly successful in Australia.
Lavendon
Don Kenny has been CEO of Lavendon since October 2011, joining from Carillion. His initiatives to improve operational and capital performance have enhanced the results in mixed market conditions. Pricing discipline has been maintained in the largest territory, the UK and the fleet has been successfully expanded in the rapidly growing Middle Eastern markets.
Broadwalk Services Entrepreneur of the Year
Chris Cole, CEO WSP Group (now Executive Chairman, GENIVAR)
Cole and his fellow partners founded WSP in 1969. He floated the company in 1972 with sales of £1.9m and 50 people. Through organic growth and well integrated acquisitions WSP grew to 9,000 employees in over 30 countries generating £717m of annual revenue. The company was particularly strong in high rise building, Rail, Bridges and the environmental sector. In June Canadian GENIVAR paid a 67% premium to WSP's closing price with a £343m cash bid. The 435p per share bid represented around 13x current year earnings forecasts which was a very good price given the depressed stock market conditions.
Cole remains Chairman of equipment rental operator Ashtead which has also performed very strongly. Cole commented "The achievements of WSP are a reflection of my vision and the enormous support and hard work from so many people, without whom I would not have received this recognition."
Charlie Cottam and Chris Cole, CEO WSP
Disclaimers 2012
Advisory Panel
All the firms represented on the advisory panel, Barclays Capital, Lazard, Rothschild and UBS Limited, an affiliate of UBS AG, have corporate relationships with companies in these awards. 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 not be attributed to them.
Broadwalk Asset Management LLP
This document is issued by Broadwalk Asset Management LLP should not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or unauthorised. Broadwalk Select Services Fund Limited (the Fund) is not a recognised scheme under s.264 of the Financial Services and Markets Act. The Fund may hold positions in any of the companies mentioned above. Most if not all of the protections provided by the United Kingdom regulatory structure will not apply to investments in the Fund. The Fund is not traded on an exchange or recognised market. This document should not be distributed to any third party without the express approval of Broadwalk Asset Management LLP.
Broadwalk Asset Management LLP is Authorised and Regulated by the FSA.
BROADWALK BUSINESS SERVICES AWARDS 2011[+/-]
This is the fourth year of the Broadwalk Business Services Awards to recognise outstanding achievements by quoted companies and their management teams in the broadly defined business services sectors. The UK has many world leading companies 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.
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 Director Mid&Small Cap Support Services Research, Barclays Capital
- Stuart Vincent, Managing Director, Rothschild
Broadwalk Asset Management LLP
Broadwalk Asset Management LLP was founded in 2007 by Charlie Cottam, previously an equity analyst with Panmure Gordon and Cazenove (now J.P.Morgan Cazenove). It manages the Broadwalk Select Services Fund, Europe’s first absolute return fund to focus on the broadly defined business services sectors. The fund has risen over 50% since its inception in June 2008, compared to the FTSE All Share which on a total return basis is up 5%.
Broadwalk Asset Management LLP is Authorised and Regulated by the FSA.
Important disclosures can be found at the end of this section.
AWARDS AND SHORTLIST
Broadwalk Business Services Company of the Year [top]
Ashtead
Ashtead led by CEO Geoff Drabble announced plans to start increasing the US equipment rental fleet in mid 2010, having refinanced the business with very limited covenants until 2015. Despite continuing declines in US construction markets this incremental equipment has been very successfully placed on rent, as the group continues to win market share. Recent interim earnings showed very strong growth driven by a larger fleet and yield improvement.
Charlie Cottam presenting the award to Ashtead’s Finance Director Ian Robson.
SHORTLISTED
Aggreko
2011 has been another very strong year for Aggreko, run by CEO Rupert Soames. Revenues have increased by over 20% in the International Power Projects division and momentum looks to continue to be strong. The Local business benefited from the FIFA World Cup but even without that, has achieved very respectable growth in a difficult economic environment. The high cash generation and conservative balance sheet enabled a £148m return of capital in July.
Bunzl
Bunzl, under CEO Michael Roney, has demonstrated an impressive level of stability in a demanding year, as it remains focused on the distribution of essential products. Bolt on acquisitions remain a key part of the growth strategy, and so far this year Bunzl has spent over £145m on 10 purchases, with the pipeline continuing to look promising. Cash generation has also been strong.
Interserve
Under CEO Adrian Ringrose Interserve has successfully reversed margin declines in its Support Services division and won £600m of new business since June alone. The Middle Eastern operations have continued to expand with a focus on the rapidly growing Qatar market. Strong cashflow has enabled the continuation of good dividend payments.
Kentz
The company has continued to deliver market share gains as it capitalises on its strength in the technology distribution industry. CEO Harriet Green has reinvigorated the business since her appointment in mid 2006, with a strategy to drive profitable growth particularly through the web, and further internationalising the business. Recent results show the strong momentum is continuing.
Broadwalk Business Services CEO & executive team of the year [top]
Peter Rogers CEO Babcock
Rogers was appointed CEO in 2003 and has taken the group from EBIT of £23m to £287m last year. Building on the strong platform in Marine Services he and his team have overseen a number of successfully integrated acquisitions including Peterhouse for £97m in 2004 Devonport Management Limited for £350m in 2007 and VT Group for £1.3bn in 2010. Despite a demanding trading environment Babcock has continued to grow organically and has an order book of £12bn with a bid pipeline of a further £10bn.
Charlie Cottam presents Babcock CEO Peter Rogers with the CEO and executive team of the year award.
SHORTLISTED
Tim Cobbold, CEO De La Rue
Cobbold joined De La Rue in January this year after production problems with its largest customer, and a rejected takeover approach. He has implemented an Improvement plan with a target of making £100m of operating profit in the year to March 2014, up from £40m in the year to March 2011. In November he reported this plan was making excellent progress and cashflow has been particularly strong.
Colin Day, CEO Filtrona
Day was appointed CEO in April, having been CFO of Reckitt Benckiser since 2000. The business was already in good shape. Day however has brought new expertise in sales and marketing which will be a beneficial stabilising factor if the economy deteriorates. The recent acquisition of Richco for $110m, valued at 11.5x EBIT looks a good fit, and provides access to the faster growing consumer electronics market.
Michael Tobin, CEO Telecity
Tobin led the merger of Telecity and Redbus in 2003, and then the acquisition of Globix before successfully completing the company’s IPO in 2007 at 220p, since when the shares have risen c180%. Tobin has capitalised on the very highly connected hub in London’s Docklands while expanding around Europe. Growth has been both organic and well timed acquisitions. Given strong demand Tobin and Telecity looks well set to almost double capacity to 116MW in the next four years.
Ed Williams, CEO Rightmove
Williams joined Rightmove at its inception in 2000 and has built the UK’s largest property portal. The company has a dominant market share of property website impressions. Having floated at 335p in 2006 the shares are now up 250% having paid 45p of dividends. Williams has had to overcome the dramatic fall in residential transaction volumes since the 2008-9 recession, and the unexpected change in Home Information Packs requirements. The company is highly cash generative and has maintained tight capital discipline, buying back 16% of its shares since 2007.
Broadwalk Business Services Chairman of the Year [top]
Sir Peter Ellwood, Chairman Rexam
Sir Peter was appointed Chairman of Rexam in mid 2008 just before the recession, having previously been Chairman of ICI, Chairman of Visa International and Group CEO of Lloyds TSB. To protect the credit rating in mid 2009 his board took the decision to raise £351m in a rights issue, and oversaw a restructuring to save £75m of cost. In 2010 he appointed Graham Chipchase as CEO who had been on the board since 2003. In September he oversaw the sale of the closures business for $360m. He recently announced his decision to retire as Chairman in February 2012 and will be succeeded by Stuart Chambers.
Charlie Cottam presents Rexam Chairman Sir Peter Ellwood with the Chairman of the year award.
SHORTLISTED
John Standen, Chairman Lavendon
In June Standen became Executive Chairman on the CEO’s retirement after a strategic review, and in October Standen appointed Don Kenny as CEO. Kenny looks a strong candidate having previously been Group Managing Director of Carillion’s Business Services which generated £1.2bn of revenue with 15,000 employees. In January the Lavendon board under Standen announced that the 115p per share takeover bid for the company was opportunistic, and significantly undervalued Lavendon.
Antonio Vázquez Romero, Chairman IAG
Vázquez Romero was appointed Chairman and CEO of Iberia in June 2008 having been on the board since 2007. He has overseen the combined British Airways / Iberia business since its inception in January. While the economic environment has been unhelpful with higher fuel prices and weaker customer demand, the merger has progressed smoothly. He looks to have established a good relationship with CEO Willie Walsh. Further acquisitions look to follow BMI and the company is on track to meet its five year target of €400m of revenue and cost synergy benefits.
Robert Webb QC, Chairman Autonomy
Webb was appointed Chairman of Autonomy in May 2009 having been General Counsel at British Airways since 1998. His detailed expertise in litigation, regulation and compliance was useful to Autonomy’s new business focus. It is often not an easy balance to find as Chairman working with the dominant founder as CEO. The completion of the exceptional sale of the company to Hewlett-Packard demonstrated Webb very successfully found the correct balance.
Broadwalk Business Services Deal of the Year [top]
Award withdrawn
SHORTLISTED
Avis Europe acquisition by Avis Budget Group for £1.2bn
In June Avis Budget Group announced the acquisition of Avis Europe for a 60% premium over the closing price. CEO Pascal Bazin was appointed in January 2008 and had to deal with sharp volume and price declines due to the recession. He reduced costs by £150m including £30m of fixed costs while sensibly increasing the presence in China. Avis Europe was 60% owned by D’Ieteren of France.
Forth Ports acquisition by Arcus for £1bn
In March after long running on/off negotiations Forth Ports agreed to an offer by Arcus at a 21% premium to the closing price at the start of the year, and around a 50% premium to when the bid was first mooted in March 2010. Arcus already owned 22% of the company. CEO Charles Hammond was appointed in 1999, having been responsible for doubling the size of the company when he bought Tilbury port in 1995. He grew volumes at both Tilbury and Leith ports, while developing value added real estate and renewable energy opportunities.
Intertek acquisition of Moody for $730m
Intertek under CEO Wolfhart Hauser had been tracking well regarded Moody and approached its owners when they saw the industrial cycle beginning to turn in their own business. The price at 13.4x 2010 EBIT looks high but Moody’s earnings should recover significantly as the oil capital spending cycle recovers. Including synergies of $10m the 2013 multiple may well be less than 10x EBIT. The acquisition gives Intertek the full suite of services to the oil industry including the capital cycle, and importantly also gives the business global scale.
Wood Group acquisition of PSN for $995m*
The disposal of the Well Support division for $2.8bn to GE, and subsequent acquisition of PSN, is the execution of Wood Group’s CEO Allister Langlands strategy of focusing on its core engineering, operations and maintenance activities. The PSN purchase also maintains a good balance between Wood’s oil and gas development operations and its later cycle production support business. The pre synergy EBITDA multiple of 9.5x looked attractive. The deal internationalises Wood’s production business with the North Sea now accounting for 40% of its revenues, compared to 54% in 2010.*This transaction was announced on 14 December 2010, the day before the 2010 Broadwalk Business Services Awards were released.
Broadwalk Business Services European IPO of the Year[top]
Aker Drilling
Aker Drilling, raised NOK3.6bn ($635m) at NOK19. Arctic Securities, DnB NOR Markets, Pareto Securities and RS Platou Market acted as advisers.
Aker Drilling is a Norwegian drilling rig operator. It was spun off from Aker Solutions in February and operates two harsh-environment, ultra-deepwater semi-submersible rigs and is expected to take delivery in 2013 of two drillships. In August the world’s largest drilling contractor, Transocean agreed to buy the company for NOK 26.5 ($1.4bn), a 39% premium to its flotation price six months earlier. Aker Solutions had continued to own 41% of the company after the spin off.
SHORTLISTED
APR Energy,
relisting after the APR acquisition with a market capitalisation of c£860m. Numis acted for the company
Hugh Osmond’s Horizon Acquisition company bought 60% of APR in June and relisted the company on the London Stock Exchange in September. Under CEO John Campion APR has grown its revenues from $37m in 2007 to $126m in 2010, generating very high returns on capital. The company is very well placed to take advantage of the global structural imbalance between supply and demand for electricity which is forecast to grow at 50MW a year to 500MW by 2015. Since relisting the company has signed a global framework agreement to partner with Caterpillar in globally pursuing temporary power solutions.
Circle Healthcare,
£45m raised at 152p. Numis acted as bookrunner with Investec as lead manager.
Circle was co founded by CEO Ali Parsa and CMO Massoud Fouladi to take part in transforming the value offering for patients and the taxpayer in the UK healthcare arena. In November Circle signed the contract to run Hitchingbrooke Healthcare Trust for £1bn over 10 years. When the contract commences in February 2012 Circle will be the first ever non-state provider to deliver a full range of NHS district general hospital services.
HMS Hydraulic Machines & Systems Group,
raised $360m at $8.25 in GDRs. Joint Global Coordinators and Joint Bookrunners J.P.Morgan, Morgan Stanley and Renaissance Capital
HMS is the leading pump manufacturer and provider of flow control solutions and related services in Russia and the CIS. In the first half of 2011 the company reported hitting its goals set for the year, and with two acquisitions, has strengthened its position in its most profitable market segments including its oil and gas project and design segment.
Broadwalk Business Services Small and Midcap Company of the Year [top]
Hogg Robinson
Under CEO David Radcliffe faced very demanding trading conditions in the recession. However the focus on a differentiated technology led offering combined with impressive service levels has delivered high client retention rates and good new client wins from the 50% of the market that currently does not use an agent to manage their corporate travel spend. Recent results confirmed HRG is continuing to make good progress and strong cash flow has reduced the debt burden.
Charlie Cottam presents Hogg Robinson CEO David Radcliffe with the Small and Midcap Company of the year award.
SHORTLISTED
Impellam Group
The group formed in 2008 by the merger of The Corporate Services Group and the Carlisle Group is a recruitment firm operating in a number of disciplines in the UK and US, and also provides BPO services. Executive Chairman Cheryl Jones has implemented efficiency and revenue quality initiatives which have significantly improved profitability, while considerably reducing net debt. The company is 58% owned by a trust related to Lord Ashcroft.
iomart
CEO and co-founder Angus MacSween has built a business due to generate sales of over £30m and is growing rapidly. Most of the growth has come from hosting revenue as the company increasingly moves its customers into the “cloud.” This provides an excellent recurring revenue stream with very high retention rates using the iomart’s five state of the art datacentres. Recent results reported that demand continues to be strong as more and more organisations take advantage of the benefits of outsourcing their IT infrastructure requirements.
Monitise
Monitise looks very well placed to become a world leader in the Mobile Money arena. CEO and co-founder Alastair Lukies has wisely concentrated on establishing strong relationships with the banks in building the business, including one bank which took three and a half years and 279 meetings to convince. 10m mobile banking transactions are processed each month from the 4.5m registered customers. Visa Europe recently increased its stake to almost 9% in a £25m capital raising, and bought out its US joint venture partner.
Paypoint
CEO Dominic Taylor has overseen considerable growth at the company since his appointment in 1998. The UK retail network won the highly significant tender to be the Department of Work and Pensions replacement for giro-cheques in March. 292m transactions were processed in the six months to September, an increase of 9%. The Romanian operation is positioned to move into profitability and other developing businesses are also strong.
Broadwalk Business Services Entrepreneur of the Year [top]
The finalists of all years can be found below. We have withdrawn certain awards where subsequent news has shown them to be inappropriate.
Disclaimers 2011 [top]
Advisory Panel
All the firms represented on the advisory panel, Barclays Capital, Lazard, Rothschild and UBS Limited, an affiliate of UBS AG, have corporate relationships with companies in these awards. 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 not be attributed to them.
Broadwalk Asset Management LLP
This document is issued by Broadwalk Asset Management LLP should not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or unauthorised. Broadwalk Select Services Fund Limited (the Fund) is not a recognised scheme under s.264 of the Financial Services and Markets Act. The Fund may hold positions in any of the companies mentioned above. Most if not all of the protections provided by the United Kingdom regulatory structure will not apply to investments in the Fund. The Fund is not traded on an exchange or recognised market. This document should not be distributed to any third party without the express approval of Broadwalk Asset Management LLP.
BROADWALK BUSINESS SERVICES AWARDS 2010[+/-]
This is the third year of the Broadwalk Business Services Awards to recognise outstanding achievements by quoted companies and their management teams in the broadly defined business services sectors. The UK has many world leading companies 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.
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 section.
AWARDS AND SHORTLIST
Broadwalk Business Services Company of the Year [top]
Intertek
CEO Wolfhart Hauser has sharply focused Intertek on the trade testing segment which has led to a strong recovery from the global downturn with recent results showing organic growth of 6.5%. Environmental regulations, renewable energy industries and consumer’s concerns over health and safety all look set to continue strong growth. The company also has a very good record of integrating bolt on acquisitions to further enhance growth.
Charlie Cottam presents Intertek CEO Wolfhart Hauser with the Company of the Year award.
SHORTLISTED
Aveva
Under CEO Richard Longdon has further established itself as the world leader in design software to the Oil and Gas, Power and Marine markets. The extreme focus of the business has led to the development of excellent products, which combined with longstanding customer relationships, has contributed to building a world class business. Strong recurring revenues and growth from developing economies has mitigated the slower recovery of advanced economies.
Compass
The business has been transformed under Richard Cousins (Broadwalk Business Services CEO of the year 2008). Recently reported organic growth was 3.2% in a hostile economic climate, and margins were increased a further 40 basis points to 6.9%. This has led to impressive cash generation with net debt at only £620m, the group was able to raise the dividend by 33%, and is likely to make further acquisitions in both food and support services.
Electrocomponents
With 70% of sales now coming from outside the UK, CEO Ian Mason has focused on international markets, developed the maintenance offers, and exploited eCommerce while maintaining profitability in its UK stronghold. eCommerce sales now represent 48% of group sales, and the company states it is on course to hit its target of 70%. Cashflow has been consistently high at Electrocomponents and the dividend record, although reduced, has been impressive over time.
Premier Farnell
The company has continued to deliver market share gains as it capitalises on its strength in the technology distribution industry. CEO Harriet Green has reinvigorated the business since her appointment in mid 2006, with a strategy to drive profitable growth particularly through the web, and further internationalising the business. Recent results show the strong momentum is continuing.
Broadwalk Business Services CEO of the Year [top]
Willie Walsh, British Airways
This has been an excellent year for Walsh despite adverse conditions. During the unprecedented volcanic ash cloud in April, Walsh successfully urged the UK government to lift the air space ban, and showed exceptional leadership by example when he personally piloted an aircraft through the closed area. Walsh has successfully negotiated a transformational merger with Iberia, and made good progress with an Atlantic joint venture with American Airlines. He also took decisive action on both the pension fund and negotiations with the unions.
SHORTLISTED
Keith Clarke, Atkins
Clarke was appointed CEO in 2004 during a difficult time for Atkins. He considerably sharpened the group's focus on the company's three core divisions, and significantly grew the engineering and design skills. Atkins saw the UK government spending cuts coming, and Clarke went on record in June to say they would not be a reason for further reductions in forecasts. In August he completed Atkins's largest deal, buying employee owned PBSJ of the US for £178m, which balanced Atkins's geographic exposure at an attractive price.
David Martin, Arriva (Bought by Deutsche Bahn for £1.6bn in August)
Arriva’s strategy, under Martin, of building out a Pan-European bus and rail network was very well rewarded by the bid from Deutsche Bahn, completed in August at a 56% premium to its three month average share price. Martin joined the group on its acquisition of British Bus in 1996, and joined the Board in 1998 with specific responsibility for developing the international operations, becoming Group CEO in 2006.
Ian Meakins, Wolseley
After his appointment in July 2009, Meakins comprehensively reviewed the strategy, and made senior board changes. The focus has been firmly placed on growing the strongest franchises organically with a systematic approach to measuring service levels, and a much tighter focus on resource allocation. The 19 problem businesses have been addressed. Full year results released in September show the strategy is working despite challenging end markets.
Christoph Mueller, Aer Lingus
Mueller was appointed CEO in September 2009 and lost little time making his mark in a challenging situation with the airline strongly cash flow negative. Uneconomic routes were cut and yields improved to staunch the cash flow losses. Cost saving measures were then executed which should deliver over €50m of benefit this year. While the Irish economic backdrop is still not helpful, Mueller is now in a position to concentrate on the airline’s market position.
Broadwalk Business Services Chairman of the Year [top]
Sir Moir Lockhead, First Group, CEO & Deputy Chairman (1995 to 2010)
Sir Moir led the employee buy-out of GRT Bus Group Plc in 1985 and became CEO and Deputy Chairman on the formation of FirstBus in 1995. He oversaw significant consolidation in the UK bus market and took the group into the rail market in 1998. In 2007 he completed the transformational Laidlaw acquisition for $3.7bn, entering the North America market. When he retired in September the group had become one of the world's leading transport operators with revenues of over £6bn, employing 130,000 staff, and transporting 2.5bn passengers a year in the UK and North America. He handed over to very well regarded US and UK experienced CEO Tim O’Toole.
SHORTLISTED
Nicholas Brookes, De La Rue
To have a major break down in controls in the main business is not a situation any Chairman wants to preside over. Brookes acted decisively to take control of the situation. The CEO resigned four weeks later, new operational management were appointed, processes were upgraded and new certification for paper supplies was introduced. Customers have been kept fully informed. The company continues to face demand uncertainty and has had a bid approach. Brookes has just appointed well respected CEO Tim Cobbold, previously of Chloride. Overall this was an example of good crisis management.
Bob Lawson, Hays (2001 to November 2010)
Lawson oversaw the complex restructuring of the group from a logistics/mail/recruitment conglomerate after a series of profit warnings. The decision to focus on recruitment has worked well, with the resilience of its contractors and temporary employee model enabling it to be the only major staffing company to maintain its dividend throughout the recession. He also ensured the smooth transition from Dennis Waxman after 38 years as CEO of Hays Recruitment, to Alistair Cox in 2007. He remains Chairman of Barratt Developments.
Jamie Pike, Lupus and RPC
Pike was appointed Chairman of RPC in mid 2008 and conducted a strategic review. Significant operational and commercial improvements were identified with a target of improving ROCE by at least 4 percentage points. This worked well and allowed the group to now focus on organic growth despite a still weak trading environment. The board structure was also simplified. Pike was appointed Chairman of Lupus in November 2009 and first had to oversee a hostile EGM. He was then able to secure the services of the well regarded Louis Eperjesi from Kingspan, as CEO in February.
Sir Michael Rake, Easyjet
Sir Michael joined the company as Deputy Chairman in June 2009 and became Chairman in December 2009. He oversaw the appointment of a new Finance Director, and then in March appointed Carolyn McCall from Guardian Media Group as CEO, succeeding Andy Harrison. The volcanic ash disruption followed swiftly after in April. Finally, in October, Sir Michael oversaw the settlement of the long running dispute between founder Sir Stelios Haji-Ioannou and Easyjet. This resulted in much greater clarity over the brand licence agreement and the founder’s rights in return for an annual royalty payment.
Broadwalk Business Services Deal of the Year [top]
Misys sale of Allscripts realising a value of c$1.5bn
Misys under CEO Mike Lawrie bought its majority stake in clinical software provider Allscripts in 2008 for $760m. The company doubled its money when it sold the vast majority of the stake in August for c$1.5bn, showing a profit of c$760m. This transaction enabled a £670m cash return to shareholders and the €435m acquisition of Sophis, another capital markets software vendor with very good synergy opportunities with Misys’s remaining business.
SHORTLISTED
British Airways merger with Iberia
This was a transformational deal for British Airways, giving it 408 aircraft carrying 57m passengers a year. Operationally it increases the destination points to 250 and frees up some BA capacity. Synergies are forecast to reach €400m by year five of the merger. It also strengthens BA’s balance sheet which is important for the likely further consolidation to come.
Dimension Data acquisition by NTT for £2.1bn
Under Executive Chairman Jeremy Ord, Dimension Data has built up the global leader in the provision and management of IT infrastructure solutions, and as a systems integrator which when combined with NTT’s global assets will provide an end to end, global one-stop-shop.
Travis Perkins purchase of BSS for £642m
The acquisition creates the largest plumbing and heating trade and retail distribution business in the UK, with around a 20% market share. The timing of the acquisition at the beginning of June was good. With uncertainty on the UK economy and specifically the housing market meaning a really full price was not required. The £25m synergy target looks understandably cautious given the macro environment. The price was 11.7x BSS’s trailing EBIT, or 8.0x EBIT including synergies. 40% of the purchase price was in Travis Perkins equity which ensures it has flexibility for further consolidating deals going forward.
VT purchase by Babcock for £1.3bn
Having first started discussions in 2004, this deal was finally consummated in March 2010. The price at over 11x current year EBIT before synergies was fair given the uncertainties over defence spending. Cost synergies were initially estimated at £50m, with the combined business becoming the leading outsourcing supplier to the UK Ministry of Defence. The deal was around 10% earnings enhancing to Babcock, and due to financing by way of a 50:50 split between new debt and Babcock equity, its balance sheet remains in reasonable shape.
Broadwalk Business Services European IPO of the Year [top]
Amadeus
€1.7bn raised at €11 per share in April. Joint Global Co-ordinators Goldman Sachs, J.P. Morgan and Morgan Stanley. Rothschild acted as financial advisor to Amadeus in connection with the offering.
The IPO was the largest in Europe since 2007 having been oversubscribed by three times. Madrid based Amadeus is the global market leader in distributing air bookings with a 37% market share. In addition its IT Solutions business is the leading provider to airlines of Passenger Service Solutions including reservations, inventory management and departure control. Despite the global downturn, under CEO David Jones the business has grown annual revenues by 35% from 2004 to 2009. A further 10% representing €617m of the company was placed at €13.50 with investors in October ahead of the pre-agreed lock in, which was likely to reflect strong institutional demand.
SHORTLISTED
Brenntag
€748m raised at €50. Global Co-ordinators Deutsche Bank and Goldman Sachs, Joint bookrunners Bank of America Merrill Lynch and J.P. Morgan.
Brenntag is the world's largest chemical distributor benefitting from being a full line distributor with over 10,000 products offering a one stop shop solution, which creates significant efficiencies for its 150,000 customers. CEO Stephen Clark has been with the company for 30 years and has overseen a number of substantial acquisitions to establish the global leadership position. The company joined the market in March, as the second largest German IPO since 2007. The offer was "multiple times" oversubscribed, despite volatile conditions. In June it acquired EAC Industrial establishing a fully-fledged Asia Pacific platform. In October a further €668m shares were sold by BC Partners increasing the free float to 50%.
CPP Group
£150m raised at 235p, Joint Global Co-ordinators J.P. Morgan Cazenove and UBS.
CPP floated in March as the fast growing international life assistance business with 10m policies in 14 countries. Founder Hamish Ogston retained a 62% stake in the company. As well as raising the profile of the group, the IPO will assist in retaining and incentivising employees. Under CEO Eric Woolley since 2003, it will provide the additional flexibility to finance growth through acquisitions. A recent trading update showed the company was on track with 11% underlying sales growth.
Flybe
£60m raised at 295p, Sole Sponsor, Global Co-ordinator and Bookrunner BofA Merrill Lynch, Joint Lead Manager Investec, Co-Lead Manager Execution Noble.
Flybe floated in December with half the net proceeds being used to fund its aircraft fleet expansion programme, and half to provide strategic growth opportunities as they arise. Jim French became CEO in 2002 and developed the plan which transformed Flybe into Europe’s largest regional airline, including the 2007 acquisition of the former regional airline business of British Airways.
Broadwalk Business Services Small and Midcap Company of the Year [top]
Cape
CEO Martin May first task on his appointment in 2002 was to bottom out legacy liabilities, before dramatically growing the operations. The strategy has been to focus on non mechanical industrial services to the energy sector, with a powerful bundled services offering. Underlying profits have increased nearly fourfold as the company has expanded internationally, with the Far East operation growing particularly rapidly. The group looks well set on the route to its target to double EPS in the next 5 years.
Charlie Cottam presents Cape CEO Martin May with the Small and Midcap Company of the year award.
SHORTLISTED
Acal
Nick Jefferies was appointed CEO in January 2009 and in June that year announced the new specialisation strategy to differentiate the company's product offering and raise margins. Operating costs have been reduced by a further 12% this year. The BFi Optilas bolt on acquisition has integrated well. It increased the electronics exposure, and also bolstered the presence in Continental Europe where the group has considerable historic tax losses.
Hyder Consulting
CEO Ivor Catto who was appointed in 2008 has done an excellent job improving the consistency of the performance, and growing the international side of the business which now represents 85% of profits. The company has been made more efficient with a 7% headcount reduction in the first half which has helped considerably in growing the EBIT margin to over 8%.
Robert Walters
Under CEO Robert Walters the company has developed an extremely strong Asia Pacific business which has maintained strong momentum, and been very helpful given the economic uncertainty in the UK and Europe. The group has maintained a net cash position throughout the downturn which has provided a significant stability advantage compared to some of its peers.
Scott Wilson (bought by URS for £223m in June)
The day before the bid was announced Scott Wilson’s shares were trading at 87p. The winning bid by URS, after a bidding war, was 290p, a 233% premium and reportedly the second largest premium paid for a UK company in the last decade. The company floated in 2006 and went on to make 10 engineering consultancy acquisitions under CEO Hugh Blackwood, building on a strong UK presence with international offices in four regions.
Broadwalk Business Services Entrepreneur of the Year [top]
Richard Harpin, CEO of Homeserve
Harpin established Homeserve in 1993 as a joint venture with South Staffordshire Water. He has built up a very strong team that has in many ways created the home emergency insurance industry, particularly for plumbing. The business has grown to providing over 10m policies to 4.6m customers in five countries, generating £100m of profit before tax. This year saw a doubling of the US footprint to 20m potential customers in what is an exciting market with a high level of insurance consciousness. The exit from Emergency Services was completed without disrupting good growth in the core business.
Richard Harpin, CEO of Homeserve
Disclaimers 2010 [top]
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.
Broadwalk Asset Management LLP
This document is issued by Broadwalk Asset Management LLP should not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or unauthorised. Broadwalk Select Services Fund Limited (the Fund) is not a recognised scheme under s.264 of the Financial Services and Markets Act. The Fund may hold positions in any of the companies mentioned above. Most if not all of the protections provided by the United Kingdom regulatory structure will not apply to investments in the Fund. The Fund is not traded on an exchange or recognised market. This document should not be distributed to any third party without the express approval of Broadwalk Asset Management LLP.
BROADWALK BUSINESS SERVICES AWARDS 2009[+/-]
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.
| Company of the year | Aggreko |
| CEO of the year | Nick Buckles, G4S |
| Chairman of the year | John Peace, Experian |
| Deal of the year | Balfour Beatty - Parsons Brinkerhoff |
| Small company of the year | Hargreaves Services |
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 section.
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.
Charlie Cottam presents Aggreko’s Finance Director Angus Cockburn with the Company of the Year award.
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 2009 [top]
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.
Broadwalk Asset Management LLP
This document is issued by Broadwalk Asset Management LLP should not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or unauthorised. Broadwalk Select Services Fund Limited (the Fund) is not a recognised scheme under s.264 of the Financial Services and Markets Act. The Fund may hold positions in any of the companies mentioned above. Most if not all of the protections provided by the United Kingdom regulatory structure will not apply to investments in the Fund. The Fund is not traded on an exchange or recognised market. This document should not be distributed to any third party without the express approval of Broadwalk Asset Management LLP.
BROADWALK BUSINESS SERVICES AWARDS 2008[+/-]
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.
Important disclosures can be found at the end of this section.
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.
Disclaimers 2008 [top]
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.
Broadwalk Asset Management LLP
This document is issued by Broadwalk Asset Management LLP should not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or unauthorised. Broadwalk Select Services Fund Limited (the Fund) is not a recognised scheme under s.264 of the Financial Services and Markets Act. The Fund may hold positions in any of the companies mentioned above. Most if not all of the protections provided by the United Kingdom regulatory structure will not apply to investments in the Fund. The Fund is not traded on an exchange or recognised market. This document should not be distributed to any third party without the express approval of Broadwalk Asset Management LLP.