In a league of their own: join the private powers

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The Independent Online
THE SEARCH is on for Britain's fastest-growing privately-owned companies, writes Roger Trapp. For the eighth consecutive year, the Independent on Sunday is joining forces with Price Waterhouse, the leading accountancy firm, to prepare the definitive guide to an increasingly important sector of the UK economy - companies that are managed by people who own them and thrive away from the glare of the stock market.

The role played by these organisations in creating wealth and employment - at a time when many larger companies are contracting or struggling in the face of intense international competition - is becoming widely recognised by politicians and commentators alike. While many organisations have sought to tap into this market, the Independent 100 and its associate listing, the Middle Market 50, have become highly reliable indicators of both past achievements and future growth.

Among the companies identified by the Independent 100 and since floated on the stock market are Stagecoach, the bus and train operator; JD Wetherspoon, the pubs group; Groupe Chez Gerard, the restaurants chain; Majestic Wine; and European Telecom, the mobile phone distribution company that topped the listing last year. Others - such as Value Added Medical Products, which topped the first table, and Merlin, the company behind the craze among young boys for football stickers and another business to top the Independent 100 - have been bought by other concerns. Still others - notably Loot, the classified advertisements newspaper publisher that has appeared in every Independent 100 listing - have stayed independent, largely because their performance has been so strong that they do not need outside funds to finance expansion.

Significantly, an index of former Independent 100 companies which are now quoted on the Stock Exchange shows that these businesses have, overall, consistently outperformed the FT-SE 100 over the past five years.

Now you have your chance to see how you measure up against such outstanding success stories. If you run an unquoted company based and incorporated in the UK and have seen rapid growth over the past five years, you could be eligible to join the ranks.

The Independent 100 listing is based on annual compound sales growth over the five years to 30 June 1997. In addition, there is recognition through the Middle Market 50 listing for the outstanding achievements of companies that continue to expand quickly even though they have reached a certain size. To qualify for this listing, companies must have sales of at least pounds 5m in the financial year to 30 June 1993 and more than 150 employees in the period to 30 June 1997.

To give you some idea of the sort of performance that will qualify you for inclusion, each of the top three companies in last year's Independent 100 achieved average annual sales growth over the five years of more than 100 per cent, while even for the 100th company the figure was 33.5 per cent. In the middle market, the top-placed company, another mobile phone business called Caudwell Subsidiary Holdings, achieved average annual sales growth of more than 75 per cent, while for the 50th company the figure was just over 25 per cent.

Pointing out that the listings had "become established as a premier forum of UK fast-growth emerging companies" over the past seven years, Nigel Crockford, a PW corporate finance partner, said: "The Independent 100 and Middle Market 50 listings identify the star performers in the UK private company sector - an area of the economy so vital for the creation of wealth, employment and economic growth."

If you think your company stands comparison with firms such as those covered on these pages, fill in the forms on the left and return them by 27 February, or contact Julie Harwood at Price Waterhouse for an application form. The address for forms and completed entries is Independent 100, Price Waterhouse, Southwark Towers, 32 London Bridge Street, London SE1 9SY.

Mobile mover is a winner - three times over

IoS winner

THE BOOMING mobile phone market was behind the success of every one of the top four companies in the latest Independent 100 listing of Britain's fastest-growing private companies - and a few others besides.

But no story is more remarkable than that of European Telecom, a mobile phone distributor that followed up its pole position in the table with a stock market flotation that was three times oversubscribed. The company, founded at the turn of the decade, now has a market capitalisation of just under pounds 80m.

The move netted a great deal of money for Warren Hardy, the chairman and chief executive, who with his pregnant wife started out packing the phones in boxes in the company's then combined stock room and office. But the key reason for the flotation, said Mr Hardy, was to obtain finance to offer big customers credit terms the firm could not do "living hand to mouth".

The company gained its top place in the seventh annual Independent 100 listing through achieving average annual sales growth of more than 115 per cent over five years. In the last full year turnover climbed to pounds 144m, while in the six months to September sales grew from pounds 52.9m to pounds 81.9m. "We're hoping to grow along the same lines in the second six months," said John McFarnon, the group managing director.

Already active around the world, the Slough-based operation wants to expand into related areas. It has announced a move into supplying phone accessories, under the name Tag, and launched a joint venture with Racal for a global positioning system that can be used to track vehicles. Tag is a response to the firm's recognition that most mobile users buy at least one accessory, ranging from batteries and chargers to cases.

Having tried to buy an accessory company, it decided to set up its own to get in on another part of the buoyant market and build on its service. Though the business will not contribute to earnings this year, it is expected to make healthy profits in the next 12 months.

The Racal joint venture,Orchid, uses digital, cellular and satellite technology. It has obvious security implications in that it can help trace stolen cars. But there are other applications: ambulance services can use it to guide vehicles to accidents, while transport companies can keep track of their lorries.

The company still has only 125 employees, keeping costs low. Although phone sales have risen dramatically as prices fall, margins have been squeezed. Nevertheless, says Mr McFarnon: "The market is looking very buoyant for four to five years."


Expotel booked up

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SHORTLY before Christmas, Prime Minister Tony Blair received a stern letter from Maurice Segal, chairman of Expotel. Mr Segal complained that the Royal Yacht Britannia was not staying in London but would go to Manchester or Edinburgh.

As head of one of the UK's leading hotel, conference and events reservation companies, Mr Segal saw a golden opportunity missed to turn the yacht into a prestigious conference venue. He pledged that should the Government change its mind, his company would invest heavily in the development of any commercial venture. "No other country in the world would think of putting a vessel of such prestige anywhere but in the capital," said Mr Segal. "We would invest pounds 1m in the project if it were in London."

Segal may have missed the boat on Britannia but he has plenty of other ships in the sea. Placed 23rd in last year's Independent 100 listing of Britain's fastest-growing companies, over the past 12 months the business has gone from strength to strength. With the economy robust, the phones at the company's headquarters in a narrow street tucked behind Kilburn High Road, London, are constantly buzzing. The business has been going for 26 years, but in its present form it dates back to September 1991, when Mr Segal and his colleagues at Room Centre/Hotel Booking International bought Expotel from the Keith Prowse receivers.

With over 200 staff at offices in Glasgow, Leeds and Manchester, Expotel has 20,000 corporations and organisations on its books, including the Ministry of Defence. This year the company boasted a client spend of pounds 100m and booked more than 1 million room nights worldwide. It has long run the hotel booking desks at Heathrow airport and operates a similar service at the travel centre in London's Regent Street.

The company has embraced new technology: it runs a state-of-the-art computerised hotels database which allows Expotel to store guest profiles, including company spending limits.


Hey, good cookin'

IoS winner

S&A FOODS is one of only a handful of firms to have appeared in the Independent on Sunday's rankings four years in a row. And it is confident it can repeat the achievement this year.

Many companies appear for two or even three years in succession, but S&A Foods' extraordinary growth has ensured it has featured year in, year out.

Mrs Perween Warsi, who founded and runs the family-controlled firm, said that being handed the trophy was a real boost. She added: "I see the trophy as a reward for all my people - it's their reward, and I go and receive it on their behalf."

Last year S&A Foods came in 36th in the Mid Market 50 of the fastest growing companies whose annual sales are above pounds 5m. In 1996 it was the 75th fastest growing company in the Independent 100, 33rd the year before that, and fifth when it first appeared in 1994.

All this has come through organic growth alone, and the company, based in Derby, now employs more than 600. S&A Foods has made its name in ethnic recipe dishes. Born and brought up in Bihar, in northern India, Mrs Warsi moved to the United Kingdom with her husband in 1975. While she was dissatisfied with the quality of ethnic food in this country then, she did not start her company, selling finger food to a local restaurant, until 1986. She prepared the food in her kitchen at home.

Since then S&A Foods has enjoyed exponential growth. The company has two factories in Derby, the most recent an pounds 8m state-of-the-art plant opened in 1996. Sales this year will be close to pounds 40m.

Mrs Warsi's skills have caught the attention of New Labour. Margaret Beckett, the Secretary of State for Trade and Industry, appointed her to the Government's advisory board on small and medium-sized enterprises.

But her ambitions for the company are far from exhausted, it seems. Mrs Warsi has some bold plans for the future and a firm idea of where she wants it to be in 10 years' time.


Loot's treasure chest

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THE only company to have featured in each of the seven Independent 100 listings so far is Loot, a business set up on an impulse to publish a sales-and-wants magazine that now has a turnover of more than pounds 27m.

Founded in 1985 by David Landau, an Oxford art historian, the company started off with a London edition and - after a difficult first three years, during which Mr Landau had to sell his treasured art collection in order to assist funding - has grown to the point where there are now several UK regional editions, as well as versions in Ireland, Japan, India and New York.

Mr Landau, who trained as a doctor before becoming an Oxford don, is the first to admit that his was not an entirely original idea. He was inspired to make his move after buying a magazine called Secondamano (secondhand), to read on a flight back to London from an event in Milan. He believed it was about antiques, but it turned out to be a free-adverts magazine.

Intrigued, Mr Landau saw a business opportunity - and another career change - looming. "I stopped the taxi at a newsagent on the way in from the airport. I was frantic to find out whether anything like it existed," he says.

While the first issue sold well, dire predictions from others in the publishing industry looked well founded when subsequent issues did less well. "The problem was getting the ads," says Mr Landau. "People just didn't believe the ads were free. The concept didn't exist in this country."

Gradually, however, the concept of a free-ads paper caught on, and Loot started to hit at the previously solid classified advertising revenues of existing newspapers. Mr Landau, though, stresses that his success has not purely been at the expense of others. "We've created a new market, for people who never advertised before because it wasn't worth it," he says.

Although it is now an international company, Loot has always been a family business. Mr Landau's sister, Elizabeth, came up with the name Loot, and his business partner and brother-in-law, Dominic Gill, a former music critic and a computer expert, set up the systems.

Great effort is put into training copytakers to be aware of the possibility that they could be taking advertisements for stolen goods or paedophile rings. And, in the effort to ease the strain of sitting at a keyboard taking calls all day, staff are treated to massage breaks and free fresh fruit.

Mr Landau is considering floating the business in the future but says that being lucky enough to be in a cash-generative business means there is no immediate need for money with which to finance growth. He has also made it clear that any proceeds of a flotation are likely to be given away.


When Pace had to adjust its set

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ANYONE who thinks it is smooth sailing for companies on the Independent on Sunday's annual best 100 privately-held companies lists should consider the plight of Pace Micro Technologies, a maker of set-top decoders for digital television.

Based in Shipley, Yorkshire, Pace began in 1982 as an importer and distributor of computer software co-run by David Hood, a tekkie, and Barry Rubery, a former salesman.

A year later the company was making floppy disk drives and focusing on the technological revolution as the entertainment, telecommunications and personal computer industries converged. The key to their fortunes was their possession and development of the technology to make decoders in anticipation of the coming digital television age.

But then disaster in an unlikely guise struck. The company went public in June 1996. Bidding for shares was so intense the price tag on the company doubled; after its first day's trading Pace was valued at pounds 427m, 32 times its historic earnings.

Last March the news broke that Rupert Murdoch, Pace's prime customer, would not be needing digital set-top boxes as early as he expected. Pace's share price collapsed to 71p. Mr Rubery resigned citing "irreconcilable management differences".

The company and its digital decoder technology may still be well placed long-term. But the disruption to the company and the damage done to its reputation will be difficult to overcome.

Moral: the temptation to float a high-flying privately-held company can become enormous, especially when relatively innocent entrepreneurs become the love-objects of the City.

Small publicly-listed companies, however, become the hostages of fickle investor sentiment. For strong privately-held companies dealing in products or services with unique selling propositions, a delay in going public will very rarely hurt.


The way to contract and grow

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INNOVEX has distinguished itself by being one of the companies to have lost its independence since it appeared in the Independent 100 in 1996. The reasons are obvious: any acquisitive business wanting to build its market share will be attracted to a company that had produced average annual compound growth in sales of 38.8 per cent over four years. In 1996, its growth was close to 80 per cent, and it was about 60 per cent last year - after the merger went through.

Barrie Haigh, who founded Innovex in 1979, realised pounds 300m for his 50 per cent stake when he sold the company in 1996 to Quintiles of the US.

He had formed the company to provide contract research for blue-chip pharmaceutical companies which found it too costly to perform the work in-house. Innovex was the first contract pharmaceutical organisation.

Quintiles is in the same market and, with the purchase of Innovex and another company, can claim to be the largest integrated health product services company in the world. Innovex had branched out into providing other services to healthcare concerns and acting as a sort of global outsourcing service to the healthcare industry. It also now provides sales and marketing services for small pharmaceutical companies.

Chief executive David White says the merger has not led, as can happen, to a slowdown in growth. "Quite the opposite; it has allowed us to focus on what we do best." It can also make acquisitions of its own, using Quintiles' highly-rated paper.

In the last year, it has gone from operations in 10 countries to 14. It bought operations in South Africa, Canada and Australia and opened a subsidiary in Dublin. In 1994, Innovex employed 800 staff in the UK and 400 overseas. Now it has 5,300, of which 1,800 are in the UK. Growth overseas looks like the recipe for the future.



This spring the Independent 100 league of Britain's fastest-growing private companies will be published for the eighth consecutive year. In that time it has become a highly reliable indicator of future business success. While many companies continue to thrive away from the stock market, many are successfully floated and others bought by larger concerns. The growing significance of this sector of the economy is demonstrated by these facts:

427 different companies have appeared in the Independent 100 over the past seven years. Just one, Loot, has appeared in every listing.

Among the many millionaires created by the successful flotations of companies featured in the listing are brother-and-sister team Brian Souter and Ann Gloag, who are each reckoned to be worth around pounds 250m as a result of the continued growth of Stagecoach; Tim Martin and Tony Lowrie, who have paper holdings worth pounds 109.9m and pounds 21.6m respectively in the pubs group JD Wetherspoon; and Michael Bright, whose remaining 5.3 per cent stake in Independent Insurance Group is worth pounds 28.1m. Millionaires created by the sale of the companies they built up include Barrie Haigh, who received about pounds 400m of the pounds 543m paid for pharmaceuticals support company Innovex; and Ron Wood, who gained about pounds 78m from the sale of the greetings card business that bears his name.

The average turnover of the top 100 companies was pounds 29.5m last year, with an average sales figure for companies in the Middle Market 50 of pounds 65m.

The 124 companies featured in last year's Independent 100 and Middle Market 50 generated 24,290 jobs, and the bigger companies in the listing saw the average number of employees rise over the period to nearly 250. This is a remarkable achievement, given the great waves of job losses in industry as a whole.

The computer sector has consistently been the biggest category in the listing - in last year's table it accounted for 24 of the Independent 100 and eight of the Middle Market - but telecommunications has gained fast, accounting for 22 of the Top 100 last year compared with just 10 two years previously. Britain's transformation into a service economy was confirmed with financial and professional services, retail and distribution, and food, drink and catering also prominent.

More than 90 per cent of companies featured are started by people younger than 40, with nearly 60 per cent less than 30.

Two-thirds of companies originated as start-ups and many have grown organically rather than through acquisitions. Ninety per cent are financed from retained profits.