Deloitte Indy 100: Analysis

Hard work and innovation are vital

What do a CCTV equipment manufacturer, an organic juice specialist and a life insurance company have in common? They have all been winners of the Deloitte/The Independent on Sunday joint league table of growing businesses in the past few years.

What do a CCTV equipment manufacturer, an organic juice specialist and a life insurance company have in common? They have all been winners of the Deloitte/The Independent on Sunday joint league table of growing businesses in the past few years.

The awards recognise dynamic companies that not only grow fast but also sustain that growth over a number of years. These companies are at the heart of the UK middle market (just over 6,000 companies with sales between £5m and £100m).

With a combined turnover of £128bn and 1.2 million employees, the middle market is a vital part of the British economy. As well as creating wealth and new jobs - 154,000 in the last four years - such companies demonstrate both entrepreneurial flair and the ability to meet the difficult management challenges posed by fast growth. This is not an easy task and the achievement of every winner of the Deloitte/Indy 100 deserves to be celebrated.

What are the key points to note from this year's awards? The regional spread is more diverse than ever before, and the concentration of winners in London and the South-east has again reduced, continuing a trend noted in the last few years. Manufacturing companies have performed better than before. The average Deloitte/Indy 100 winner in 2004 has an annual sales growth rate of 41 per cent, compared to the middle market average of 7 per cent, and profit growth rate of 43 per cent compared to a middle market average of 8 per cent. Truly exceptional performance from some of the most dynamic companies in Britain.

Two manufacturers make the Top 10, including the overall winner. The proportion of manufacturers has risen for the third year in a row, from 9 per cent in 2002 to 17 per cent this year. Proof perhaps that with a well-timed and innovative product, UK manufacturing can still lead the way.

It is also worth nothing that a number of businesses near the top of the list are focused on physical and virtual security which in this day and age may not be a surprise. The winner this year, Anglo Design holdings, manufactures and supplies CCTV equipment for aircraft, transport and smoke detection, together with camera technology and digital video recorders and multiplexers. Surfcontrol, in eleventh place, provides internet, Web and e-mail filtering software. Further down the list we find an anti-virus software company, a provider of integrated security services from traditional guarding to electronic surveillance, and a company that designs, implements and manages security systems for global corporate networks.

Service and retail companies continue to dominate, making up 58 of the 100 winning companies. In the Top 10 alone we have an operator of sports arenas, two restaurant/pub businesses, and a corporate entertainment specialist. Carry on down the list and you find a coffee trader, a chain of noodle bars, three tour operators, two car dealerships, and a Shetland fish processor! With UK unemployment at a 28-year low, but consumer debt at its highest level ever, there is room for optimism in the retail and services markets, but not complacency. The winners will have to be more competitive and harder working over the next 12 months to retain their positions next year.

So far, we have looked at who the winners are and what they do, but what do the Deloitte/Indy 100 winners add to the British economy? They are not only profitable but also making significant profits - 58 companies make £1m-plus, 11 more than last year. Deloitte/Indy 100 winners are contributing to the continued low rate of unemployment in Britain, with the average number of employees in a Deloitte/Indy 100 winner up 36 per cent on last year.

For the past three years the proportion of winners located in London and the South-east has fallen, and this trend continues. From 71 per cent in 2002, there are now only 55 per cent of winners in this region. This has been matched by substantial increases in fast-growing companies in the North-west, and for the first time Scotland, Wales and Northern Ireland are all well represented. This year, 20 per cent of winners are based in these four areas, up from only 6 per cent in 2002. What is the reason for this change in regional spread? London and the South-east remain the most expensive property and employee markets in the country. For a dynamic company that is managing cost carefully, locating away from the capital is often advantageous.

A closer look at this year's winners shows that the number of listed companies has fallen again, from 28 in 2002 to 11 in 2004. This is understandable in a period where there have been fewer flotations (irrespective of the size of company). Also, Deloitte/Indy 100 winners are a young group overall, with 27 per cent having been incorporated after 1995, and therefore still in the early stages of developing their businesses.

In this challenging and unpredictable climate, it is encouraging to note that five companies have made the winners' list every year since the awards began in 2001 - Central Trust, Local Contract Hire and Leasing, Interport, JP Boden & Co and CCS Group. These five companies have maintained an average growth of 60 per cent per annum over an eight-year period - truly outstanding.

Overall, the message this year is how vital high-growth businesses are to the British economy. They are spread across all sectors and regions - the link that binds them together is their hard work, innovation and ability to adapt in testing times. Their success is a real cause for celebration.

Heather Bygrave also contributed to this feature.
David Wenborn is a partner in the Dynamic Companies programme at Deloitte. He can be contacted at dwenborn@deloitte.co.uk
Heather Bygrave is a director in the Dynamic Companies programme at Deloitte. She can be contacted at hbygrave@deloitte.co.uk