OUR final shortlist for the third annual City A.M. awards is a big one – the Business of the Year. For this category we have looked for strong share price performance aligned to important strategic developments. We have chosen four established companies, along with one rising star in Ophir Energy.
Ophir has been one of the few successfully floated companies in the London market in a lean period for IPOs, remaining well above its offer price. Investors were happy to scoop up shares in a secondary placing earlier this year.
InterContinental Hotels has enjoyed a solid 2012, during which it launched two new brands. And its powerful portfolio of assets recently drew the attention of US activist investor Nelson Peltz, who has become the group’s fifth largest shareholder, sparking talk of possible takeover interest.
Intertek may be one of the unheralded success stories of the past decade, with its share price rising by more than seven-fold since flotation in 2002. Drinks giant Diageo has performed impressively in share price terms following a steady global expansion, while Rolls-Royce has proven that there are still manufacturing groups in the UK that can fight it out with the best of them.
All five companies have well exceeded analysts’ expectations during the year.
The drinks giant has enjoyed an excellent year, boasting growth in emerging markets and investing in several new projects, including a £1bn plan to increase whisky production in Scotland.
Brands including Smirnoff, Guinness, Baileys and Johnnie Walker posted double-digit sales growth in Latin America, Africa and Asia, thanks to increasing demand for premium spirits among middle class drinkers. These results, coupled with a strong recovery in America, countered difficult conditions in Europe.
The company has made several bold acquisitions including the £300m purchase of Brazilian producer Ypióca, which makes the country’s most popular spirit cachaça.
Chief executive Paul Walsh (right) has led the company since 2000, making him one of the FTSE 100’s longest-serving CEOs. Walsh’s determined focus on Diageo’s core business has produced excellent returns; Diageo’s shares have jumped by 28 per cent over the past year. Following a six per cent sales rise over the first quarter of the year, Diageo is now among the 10 biggest companies in the FTSE 100 index.
Not only has InterContinental Hotels delivered strong returns for investors – witness a six per cent rise in the price yesterday, after a strong interim report – it has also aggressively pursued innovative new business lines.
The hotels group, led by chief executive Richard Solomons (pictured, right), launched EVEN hotels in the US in February – the first hotel brand designed for health-conscious travellers seeking a wellness experience at a mainstream price. Further afield, InterContinental introduced HUALUXE Hotels & Resorts in China in March, launching the first international hotel brand designed specifically for the Chinese traveller.
Analysts highlight the attraction of the group’s portfolio, particularly its growth and leadership position in the fast growing Chinese market, prompting speculation of a possible bid from the Marriott Group.
In May, the US activist investor Nelson Peltz bought a 4.27 per cent stake, increasing the possibility that the group might be seen as an attractive takeover target.
That possibility alone should provide a platform for the shares.
The oil and gas exploration company’s growth has been stellar since its IPO in June last year, with shares more than doubling since its flotation.
Chief executive Nicholas Cooper (right) has overseen a number of promising ventures in east Africa, which are believed to be the continent’s last untapped energy sources, and has experienced success this year with two major gas discoveries off the coast of Tanzania, raising hopes that the country will become an important source of energy.
Ophir, founded in 2004, raised £240m with last year’s float, and has continued to grow, making it one of the few successful new listings in a challenging economic environment. The extra funds pouring into the business have financed Ophir’s ambitious drilling operations in eight African countries, as well as last October’s £118m takeover of rival exploration firm Dominion Petroleum.
Ophir, backed by Lakshmi Mittal, one of the world’s richest men, joined the FTSE 250 just two months after its IPO and has already become one of the biggest firms in the index based on market capitalisation.
Solutions provider Intertek has witnessed tremendous growth since its float 10 years ago and now sits comfortably within the FTSE 100.
Intertek helps customers across a range of industries improve their products and processes around the world, increasing their competitive advantage and supporting their innovations, global supply chains and trade.
Customers include very well known brands such as Tesco, Shell, Walmart, Honeywell, AstraZeneca and Rolls Royce. The group, led by Wolfhart Hauser (right), joined the FTSE 100 in March 2009.
Focusing on clients’ needs across supply chains, Intertek has developed its business within an industry with high barriers to entry and has consistently delivered margins in the mid-teens and average annual like-for-like organic revenue growth of nine per cent per annum since flotation.
For the year ended 31 December, Intertek delivered strong revenue growth of 27 per cent and an operating margin of 16 per cent. Says Numis: “We remain fans of the structural growth and high returns model.”
The aero engine maker posted a profit of over £1bn in 2011, a record for the firm following its joint takeover of German engine company Tognum with Daimler.
The investment in Tognum, Rolls-Royce’s largest ever purchase, has boosted the company’s position in the marine sector. It recently signed a contract in excess of £1bn to deliver reactor cores for the government’s nuclear-powered submarine fleet.
Rolls-Royce puts its success down to a “long-term strategy” that has set the stage for a doubling of revenues over the past decade. Chief executive John Rishton (right), who joined the company last year from retailer Ahold, has vowed to invest further in Rolls-Royce’s future.
Rishton’s firm is poised to continue to post strong profits, with a £62.2bn order book last year and a number of lucrative new contracts, which have allowed Rolls-Royce to increase dividends by nine per cent to 17.5p per share.
The company’s continually improving figures have prompted a more than 50 per cent rise in its share price since last year.