A PANEL of top investors gave an audience of UK manufacturers a blunt warning not to expect any favours from the City until they ‘fix their businesses’ to embrace high growth areas.
Manufacturers were told there was little prospect of their share prices recovering in the forseeable future unless they embark on the type of radical restructuring carried out by Marconi.
The financiers were speaking at Industry in the New Economy, a conference examining the effect of e-business on manufacturing, and organised by merchant bank Close Brothers and supported by The Engineer.
Mark Powers, managing director at asset management giant Phillips & Drew, rubbished claims by some manufacturers that investors were taking an unjustifiably harsh view of their prospects.
‘A lot of companies say they’re in the ‘old’ economy but the City doesn’t understand them. Don’t underestimate the City – I think we’re more sophisticated now than we’ve ever been,’ Powers claimed.
He told conference delegates – mostly manufacturers – that waiting for an upturn in sentiment was futile.
Powers said: ‘If it isn’t working, you’ve got to fix it. It’s no good sitting there and waiting for the stock market to re-rate you.’ He singled out Marconi as an example of a business that started out with ‘a pretty lousy hand’ but had the vision to reinvent itself. ‘They realised they had to fix it and get into new growth areas,’ said Powers.
Challenged to define what the City means by creating shareholder value, Trelawny Williams, head of corporate analysis for M&G Investment Management, said: ‘To us, shareholder value is the share price. To be brutal, to us that’s all that matters.’ Andrew Joy, a director ofventure capitalists Cinven, said more and more large companies were looking to escape the public markets, and finance ‘radical changes to their business’ through private equity.
‘We are routinely examining companies in the billions now, and have noticed a big change in the last 12 months,’ Joy said.