Britain's Most Admired Companies: Marks Sparkles

With the highest score ever, M&S is a worthy winner of our Most Admired. Behind every successful company, there's an inspired leader: Rose at M&S, Leahy at Tesco and Murdoch Jnr at BSkyB. Meanwhile, retailing's on a roll, but telecoms and banking are glum - Northern Rock was shrewdly assessed by its peers. And it's a poignant farewell to Hanson and ICI...

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Last Updated: 09 Oct 2013

So, Marks & Spencer has finally done it and knocked Tesco off its Most Admired perch. In time, the tale of M&S's recovery over the past three years will go down as a textbook tale of how to breathe new life into an ailing company. It has been a process by which the old-stager regained its place in the affections of the British public with a clever 'Your M&S' marketing campaign. It's an attempt to create a warm intimacy that, while slightly old-fashioned, is also somehow very 21st century - as is its famous Plan A, which has captured the sustainability zeitgeist perfectly.

One vital weapon in the M&S armoury has been the character of its CEO Stuart Rose, who at 58 is now working harder than he has ever done during his 35-year career as a retailer. He is quite at ease with his high profile - unlike his predecessors - and has managed to charm even the most grizzled and cynical of City analysts with his quips and apercus, whether it's 'weather is for wimps' or displaying his intimate knowledge of the fabrication of his firm's men's boxer shorts.

This is not to say that he comes across as arrogant - quite the reverse: he has displayed great caution in his summaries of how he thinks the organisation for which he first worked as a youth is faring. He is no less popular with his staff. It's even said that when he visits stores, females from the tills queue up to get his autograph.

What's interesting is how high M&S's score is. It has stacked up a total of 76.33, which is the highest winning total ever. Not only that, but the company has also won outright - against 219 competitors - the highest overall marks in its Quality of Goods and Services, its Ability to Attract, Develop and Retain Top Talent, its Value As a Long-Term Investment, its Quality of Marketing and its Use of Corporate Assets. This is quite an achievement.

The figures are impressive - when Stuart Rose took over as CEO, Philip Green had been trying to buy the outfit for £4 a share, and in the dark days of 2003 the price had fallen below £3. The share price this summer almost hit £7.50, although it has since fallen back a little. The chance of making a yearly group profit before tax of £1bn is now in sight again.

Confidence - so important in a retailer - is high and M&S is out there taking the fight to all corners of the high street. Now talking about tugging customers away from Gap, for example, M&S is to open stores in China as part of a plan to generate up to a fifth of sales from overseas within five years.

The first stores will open in Shanghai next year, and the chain is also looking at sites in Beijing. The move marks M&S's return to international expansion after its humiliating withdrawal from the world stage in 2001 when sales and profits crashed. The group's forays into the US, with the Brooks Brothers menswear chain and Kings Super Markets, were no less disastrous and sold at a loss.

Stuart Rose has a typical response to doubters: 'Just because you have a car crash, it doesn't mean you should never drive again.' He said he would not 'bet the ranch' on international expansion but that his predecessor, Luc Vandevelde, had made a mistake when he pulled out of France.

There is no shame, though, in Tesco's fall to second place. The organisation has enjoyed a storming year and the score that has won it second place is actually higher than its winning total last year. Tesco remains a formidable operator and ends the year doubtless breathing a big sigh of relief that the numerous competition and monopolies investigations of its dominance seem to have thrown up nothing of any substance.

Tesco is now leading a charge into the US with its Fresh & Easy chain. The US is the toughest nut for British retailers to crack and has proved a graveyard for many of them, but Sir Terry Leahy has yet to fail at anything he has turned his hand to.

Sir Terry has again won Most Admired Leader, pipping Stuart Rose into second place with 25.2% of the free vote, compared with Rose's 21.1%. He looks as if he could go on for another 20 years: little wonder that his senior lieutenants at Tesco keep getting poached by competitors.

At rival Sainsbury's, they probably wish Leahy would go off and run the NHS instead - as consistent rumours suggest the Government would like him to. But things have got much better at Justin King's operation and as a result J Sainsbury is back into the top 10 overall at number 7.

It's astonishing that King should have achieved this while distracted by not just one bid but two this year. He's not going to be nearly as rich as he might have been if the big sale had gone through, though.

The other big Most Admired story of 2007 is the rise of BSkyB. It has climbed from 41st to third place in the overall list and this is an extraordinary achievement on the part of CEO James Murdoch. When MT interviewed him in May, it was clear that he still sees his organisation as an outsider.

The younger Murdoch is an alarmingly focused chip off the old block who shrugs aside any suggestion that he's moving to the US to head News Corp when his father finally hangs up his green eyeshade. Sky people fume about regulation, despise Sir Richard Branson and loathe the BBC. They cannot like ITV much, either: their spoiler of an investment is now looking like a substantial loss as the share price has dipped alarmingly.

The truth is that BSkyB - however ruthless and buccaneering - is now becoming a respected part of the UK business establishment. It came first in every single measurement in the Media sector, beating hardy performers such as Pearson, WPP and the Daily Mail and General Trust. It also scored the highest mark overall on two separate measurements - the Capacity to Innovate and the Community and Environmental Responsibility sections.

The company is heading towards carbon neutrality and proud of it. It does innovate, and not just with Sky+, its move into telephony and its adoption of high-definition broadcasts. It moves forward in its very own lightning-strike fashion - the raid on ITV shares was said to have been worked out on the back of a cigarette packet by James Murdoch and his wily FD Jeremy Darroch during a brief business trip to Spain; it left Branson reeling.

Professor Mike Brown of Nottingham Business School - who has researched and produced Most Admired for the past 15 years - approves of Sky's ability to embrace risk. 'You have to hand it to Sky that it knows that to win well in business, you have to play hard and really take a gamble these days.'

More broadly, he is concerned this year that with all the very high scores - especially among retailers - we may be seeing a surfeit of 'irrational exuberance'. Let's hope not.

One of the most closely watched sectors this year is banking. It has been a turbulent 12 months, with big takeover battles, notably for ABN Ambro, where Barclays faced off against RBS. And this was, of course, followed by the sub-prime fallout from the US market and the disaster that has befallen Northern Rock. Some of the research for Most Admired was conducted before the full horror of the Newcastle-based bank's desperate lack of liquidity became apparent.

The most interesting statistic is the score of 6.8 that Northern Rock received for Use of Corporate Assets, the second-highest score in the banking sector. This suggests that its competitors did once admire how much it squeezed out of what little it had in terms of real assets. Its rivals knew where the bank's strengths lay - and where its fatal weaknesses were as well. How telling, though, that for Financial Soundness it scored a lowly 5.7, which placed it ninth out of 10. The Co-operative Bank - included despite the fact that it isn't a plc - was thought to be even less sound, which seems slightly unfair. We are certainly not recommending that Co-op bank members race round to their local branches to withdraw their funds. Indeed, the Co-op bank comes top of the CSR measure in its sector.

Looking more broadly at the list, there is a sense of stasis. Sixteen of the 22 sector winners are the same as last year. That shows how difficult it is to shift well-established, professionally run outfits from their dominant position. It's a bit like the football Premiership - a clutch of stellar clubs with astronomical player-purchase budgets and wage bills hog the top quarter of the division and are trailed by also-rans that would struggle during a Sunday kickabout in the park.

One team that seems to be all-conquering is the one led by Chris Hyman at Serco. You can read more about this one-of-a-kind leader in this month's MT Interview (see p46). Serco won the Support Services sector by a huge margin and has rocketed into the overall top 10 for the first time, rising from 13th to fourth place.

How telling that the once-mighty Rentokil Initial came last in every single category but one in its sector and has plummeted to 205th in the overall list. In Telecommunications, the whole sector seems depressed, with the low overall score of just 407.8. Phone people seem to have been in the dumps for a long time.

Finally, it's time to say goodbye to a pair of old-stagers who have disappeared from the listed markets and thus from Most Admired. Both Hanson and ICI have fallen into the hands of foreign owners.

Hanson, that symbol of swaggering British capitalism of the 1980s, was taken over by HeidelbergCement - a fact that will doubtless have the late Lord H and Gordon White spinning in their tombs.

ICI was a founder-member of the FT-30 way back in the 1930s. Long the flag-carrier for British business, it was this year a trophy purchase by Akzo Nobel. As its one-time leader Sir John Harvey-Jones noted when we interviewed him for MT's 40th anniversary edition last year: 'We live in a country where every f***ing thing is up for sale. The means has become the end. I still believe money is how you measure the effectiveness of a business, not the end in itself.'

But it's still money that does the talking.

BRITAIN'S 10 MOST ADMIRED COMPANIES

1. Marks & Spencer Stuart Rose, CEO

It takes a mighty effort to knock Sir Terry Leahy's Tesco off the top spot, but under Rose, M&S has done it, rocketing up 16 places in the league table and coming first in an unprecedented five out of our nine overall criteria. Rose's 'Plan A' sustainability strategy has cleverly captured the business zeitgeist, and making a £1bn annual profit looks certain for the first time in a decade.

2. Tesco Sir Terry Leahy, CEO

Overall winner for the past two years, Tesco may have been pushed into second place but it was a close-run thing. Crucially, it slipped from first to fifth place for its quality of management, and much has been made of the so-called 'brain drain' of top executive talent. Leahy, Most Admired Leader again, is now overseeing Tesco's expansion into the US. With a favourable provisional report from the Competition Commission, things remain steady at home.

3. BSkyB James Murdoch, CEO

James Murdoch has had a busy twelvemonth, what with masterminding his firm's controversial £940m raid on ITV shares in November 2006 (now subject to Competition Commission investigation) and the high-profile spat with Richard Branson's Virgin Media. Q3 profits fell by £45m, but subscribers are up, the City likes his forthright style and BSkyB has leapt a remarkable 38 places up the Most Admired league table.

4. Serco Chris Hyman, CEO

Hyman's £2.2bn services group has a £14bn order book and a 90% success rate with re-bids. Hyman himself fasts on Tuesdays and could sprint 100m in 10.8 seconds in his youth (see MT Interview). Serco runs everything from asylum centres to London's Docklands Light Railway, and is leading the race to run the Dubai Metro from 2009. This year, it also moved into the lucrative US military market, delivering $1bn worth of contracts.

5. Johnson Matthey Neil Carson, CEO

The precious-metal specialist is nearly 200 years old, but under Carson it has retained the sparkle of youth - dominating the market in catalytic converters and powering the drive towards fuel-cell technology. It was voted Most Admired chemicals company on every criterion in its category. The company slips from second to fifth overall, but compare that to 35th two years ago and it's still an alchemic transformation.

6. Icap Michael Spencer, CEO

Spencer's inter-dealer broker barely scraped into the top 100 two years ago; now it's firmly established in the top 10. Volatility means more trading and thus higher profits for Icap, the largest broker of its type in the world. Spencer has long been considered one of the City's top financiers. Gordon Brown will be hoping he has less success raising money for the Tories.

7. J Sainsbury Justin King, CEO

The fact that a rejuvenated Sainsbury's has been the subject of two of this year's most hotly contested - and unsuccessful - takeover bids is a tribute to the changes King has wrought in his three years at the helm. Refocused and reinvigorated, the 780-branch supermarket chain has risen from 18th in BMAC's 2006 league table, to make the top 10 for the first time in 12 years.

8. Capita Group Paul Pindar, CEO

Chief executive since 1999, Pindar is now well out of founder Rod Aldridge's impressive shadow - Capita announced an 18% rise in pre-tax profits for the six months to June 2007, and the firm has rocketed up the Most Admired league table from 53rd to 8th. But it has not all been plain sailing - it has just lost the London congestion-charge contract and, with it, nearly 3% of group sales.

9. Diageo Paul Walsh, CEO

Diageo may have shot up 10 places to ninth Most Admired, but it still rankles with Walsh that the company is only number two in China. Admitting that 'My life tends to be the company', Walsh this year announced record results, and has plans to bid for Absolut vodka. But the ambitious booze baron is likely to face trouble at home as the health police train their sights on alcohol.

10. Rolls-Royce Sir John Rose, CEO

Rose has been at the controls of Rolls-Royce since 1996 and has made this BMAC stalwart one of British manufacturing's few success stories. It has not been all good news this year, with the falling dollar and rising material costs. But its focus on servicing continues to pay dividends, accounting for almost half of 2006 revenues, while RR still knows how to win big engine contracts - most recently for the new Airbus A380 superjumbo.

'MOST ADMIRED' LEAGUE TABLE 2007
'07 '06 Company Score
1 17 Marks & Spencer 76.33
2 1 Tesco 72.90
3 41 BSkyB 71.96
4 13 Serco Group 70.40
5 2 Johnson Matthey 67.67
6 7 Icap 67.63
7 18 J Sainsbury 67.07
8 53 Capita Group 66.83
9 19 Diageo 66.47
10 8 Rolls-Royce 66.33
11 12 Berkeley Group 65.67
12 52 Marshalls 65.13
13 - Aggreko 64.75
14 16 Unilever 64.49
15 4 GlaxoSmithKline 64.29
16 10 Man Group 64.23
17 31 InterContinental Hotels 64.06
18 45 WPP Group 63.96
19 3 BP 63.51
20 41 Royal Bank of Scotland 63.48
21 15 Land Securities 63.45
22 13 Rotork 63.42
23 24 BHP Billiton 63.32
24 22 IMI 63.31
25 54 Persimmon 63.25
26 100 Pearson 63.13
=27 66 easyJet 63.00
=27 6 Balfour Beatty 63.00
29 29 BG Group 62.96
30 141 Admiral 62.89
=31 87 Cobham 62.75
=31 34 3i 62.75
33 78 SIG 62.68
34 5 Carphone Warehouse 62.43
35 63 Wilson Bowden* 62.25
36 35 Carnival 61.69
37 30 Kier Group 61.54
38 119 Reuters 61.28
=39 59 First Choice* 61.25
=39 56 Carillion 61.25
41 32 BAE Systems 61.22
42 51 British Land Co 61.15
43 89 Barclays 61.14
44 57 Weir Group 61.08
=45 70 Legal & General Group 61.00
=45 144 Whitbread 61.00
47 9 Cadbury Schweppes 60.98
48 155 St James's Place Capital 60.83
49 47 Rio Tinto 60.74
50 28 Aviva 60.71
51 11 AstraZeneca 60.58
52 167 Informa 60.57
53 43 Mitchells & Butlers 60.55
54 110 SABMiller 60.53
55 26 HSBC 60.21
56 123 Yell Group 60.17
57 - Intertek 60.10
58 90 Bunzl 60.07
59 71 Spirax Sparco Engineering 59.97
60 39 Royal Dutch Shell 59.94
61 180 Travis Perkins 59.92
62 193 Daily Mail & General Trust 59.62
63 - Standard Life 59.29
64 150 BSS 59.18
65 75 Bellway 59.17
66 67 Scottish & Southern Energy 59.10
67 78 Reckitt Benckiser 59.08
68 21 HBOS 58.86
69 82 Bovis Homes 58.79
70 104 ROK Property Solutions 58.72
71 50 Next 58.71
72 46 Morgan Sindall 58.64
73 - United Business Media 58.51
74 85 Smith & Nephew 58.50
75 94 Galliford Try 58.42
76 62 Barratt Developments 58.23
77 101 Reed Elsevier 58.12
78 68 Redrow 58.07
79 115 GKN 58.04
80 - Capital & Regional 58.02
81 143 Great Portland Estates 57.96
82 111 Prudential 57.83
83 - Derwent London 57.76
84 140 JD Wetherspoon 57.72
85 153 Keller Group 57.71
86 22 Vodafone 57.63
87 96 Stagecoach 57.58
88 99 Liberty International 57.55
89 73 Brixton 57.50
90 44 Hammerson 57.43
91 48 British Airways 57.31
92 108 Burberry Group 57.30
93 60 Greene King 57.00
94 - Ladbrokes 56.86
95 123 Old Mutual 56.67
96 107 Cattles 56.57
97 88 Associated British Foods 56.38
98 95 Premier Foods 56.17
=99 - Bodycote International 56.13
=99 113 Royal & Sun Alliance 56.13
101 49 Tate & Lyle 55.99
102 128 Meggitt 55.95
103 173 Hanson* 55.93
104 58 Victrex 55.90
=105 97 Quintain Estates 55.67
=105 - Telford Homes 55.67
107 132 Standard Chartered 55.58
=108 181 Go-Ahead Group 55.57
=108 84 Taylor Woodrow* 55.57
110 112 National Grid 55.52
111 27 Wolseley 55.43
112 181 Chemring Group 55.40
113 77 George Wimpey* 55.38
114 127 Robert Wiseman 55.37
115 114 National Express 55.33
116 - William Hill 55.22
117 80 ICI 55.20
118 189 Dairy Crest 55.14
119 160 Halfords 55.08
120 147 Shire 54.83
121 185 HolidayBreak 54.79
122 82 Scottish & Newcastle 54.77
123 151 Arriva 54.57
124 38 BT Group 54.50
125 134 VT Group 54.42
126 206 Compass 54.27
=127 162 Cookson 54.25
=127 103 Whatman 54.25
129 - Marston's 54.22
130 138 QinetiQ Group 54.16
131 - Home Retail Group 54.07
132 98 Smiths Group 53.96
133 131 Lloyds TSB 53.79
=134 169 FirstGroup 53.67
=134 104 Rexam 53.67
136 116 Enterprise Inns 53.64
137 - Headlam 53.33
138 109 DSG International 53.00
=139 149 Punch Taverns 52.92
=139 178 Kesa Electricals 52.92
141 76 Northern Rock 52.83
142 202 ITV 52.56
143 205 SSL International 52.55
=144 92 Resolution 52.50
=144 - Dunelm 52.50
=144 158 Kingfisher 52.50
147 126 Cairn Energy 52.32
148 154 Premier Farnell 52.00
149 125 Restaurant Group 51.97
150 - Enodis 51.79
151 - Forth Ports 51.75
152 175 Slough Estates* 51.31
153 217 MyTravel* 51.19
154 63 Schroders 51.12
=155 - Co-operative Bank 51.00
=155 - Avis Europe 51.00
157 106 Provident Financial 50.98
=158 - Vectura Group 50.83
=158 91 Friends Provident 50.83
160 93 Tomkins 50.44
161 134 Croda International 50.38
162 - Rank Group 50.38
163 168 Henry Boot 50.32
164 165 Electrocomponents 50.17
165 161 International Power 50.14
=166 225 Centrica 50.10
=166 212 Bradford & Bingley 50.10
168 200 Group 4 Securicor 50.07
169 133 Charter 49.79
170 165 Amvescap* 49.55
171 188 BBA 49.50
172 177 Amec 49.20
173 - Galiform 49.17
174 20 Close Brothers 49.04
175 - Debenhams 48.33
176 181 Elementis 48.10
177 159 Signet 47.92
178 129 Xstrata 47.88
179 146 Anglo American 47.56
180 74 Investec 47.25
181 198 Kelda 47.20
182 139 Monsoon 47.08
183 173 Arla Foods UK* 46.93
184 176 WH Smith 46.58
185 221 Millennium & Copthorne 46.50
186 195 Wm Morrison 46.42
187 - Findel 46.40
188 203 Umeco 46.20
189 - Uniq 45.72
190 - Lonmin 44.81
191 120 Costain Group 44.68
192 - Ashmore Group 44.38
193 215 Scottish Power* 44.26
194 102 FKI 44.20
195 224 Dyson Group 43.83
196 194 United Utilities 43.71
197 237 Cable & Wireless 43.50
198 230 Northern Foods 43.17
=199 204 Alliance & Leicester 42.80
=199 170 Yule Catto 42.80
201 231 MJ Gleeson Group 42.04
202 - Inmarsat 42.00
203 210 Severn Trent 41.50
204 229 Drax 41.43
205 234 Rentokil Initial 40.93
206 - Oxford Biomedica 40.17
207 214 Vanco 39.86
208 232 Delta 39.25
209 - D1 Oils 38.50
210 239 British Energy 38.21
211 213 Kazakhmys 38.08
212 236 Porvair 37.88
213 226 Kingston Communications* 37.71
214 222 COLT Telecom 35.50
215 219 Thus Group 34.75
216 228 Woolworths 32.86
217 - Sports Direct 32.50
218 163 Telecom plus 31.60
219 - Pipex Communications 30.71
220 151 Hikma Pharmaceuticals 28.25
*Merged, acquired or name changed


HOW THE WINNERS WERE CHOSEN
In conjunction with Nottingham Business School, MT asked Britain's 10
largest public companies in 22 sectors to evaluate their peers. Using
nine criteria, participants rated their nine sector rivals on a scale of
0 to 10 (0 = poor, 5 = average, 10 = excellent). Analysts at leading
City investment firms were also polled. On the basis of these scores,
three rankings were arrived at: all 220 companies (above); top five
overall on each criteria (p37); and league tables in each category
(pp38, 41, 43). Respondents were also asked to name the leader they most
admired. Research conducted by Professor D Michael Brown of Nottingham
Business School and Stuart Laverick.


NINE MEASURES OF SUCCESS
Company performances were judged against the criteria indicated. Here
are the highest-scoring contenders in each category...

Quality of management
1 Persimmon 8.83
2 Berkeley Group 8.67
3 Icap 8.50
4 Marks & Spencer 8.33
5 Tesco 8.21

Financial soundness
1 Tesco 8.93
2 Marks & Spencer 8.83
3 AstraZeneca 8.60
4 BP 8.43
5 GlaxoSmithKline 8.40

Ability to attract, develop & retain top talent
1 Marks & Spencer 8.33
2 Tesco 8.29
3 GlaxoSmithKline 8.20
4 Capita Group 8.11
5 Serco Group 8.00

Quality of goods & services
1 Marks & Spencer 8.50
2 Johnson Matthey 8.42
3 Tesco 8.33
4 BSkyB 8.17
5 Rolls-Royce 8.08

Value as a long-term investment
1 Marks & Spencer 8.83
2 Tesco 8.71
3 Serco Group 8.40
4 Capita Group 8.22
5 Icap 8.14

Use of corporate assets
1 Marks & Spencer 8.33
2 Aggreko 7.83
3 Tesco 7.79
4 easyJet 7.67
5 InterContinental Hotels 7.63

Quality of marketing
1 Marks & Spencer 9.17
2 British Airways 8.25
3 Tesco 8.21
4 BSkyB 8.06
5 Admiral 7.89

Community & environmental responsibility
1 BSkyB 8.22
2 Marks & Spencer 8.00
3 Marshalls 7.42
4 Co-operative Bank 7.40
5 Land Securities 7.33

Capacity to innovate
1 BSkyB 8.39
2 Johnson Matthey 8.25
3 Marks & Spencer 8.00
4 Capita Group 7.94
5 Icap 7.93

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