Britain's Most Admired Companies 2017: Why reputation really matters

In uncertain times the value of a good name is greater than ever. It's strong and stable businesses like these that will see the UK through the perils of Brexit and beyond.

by Andrew Saunders
Last Updated: 05 Dec 2017

May you live in interesting times, goes the often misappropriated Chinese curse. Well, from Brexit to fake news, from the plunging pound to the Paradise Papers, 2017 has lacked many things – political direction, economic stability and common sense – but one thing no one can accuse it of is lacking interest.

But has the year really been cursed? Certainly not for our winner, which crowns a roller coaster 12 months with a remarkable third Britain’s Most Admired Companies victory. Taking the coveted title of Britain’s Most Admired Company once, or even twice, is a high accolade for any business. It is an award, remember, that is based on the respect of your rivals, surely one of the hardest won of commercial commodities around.

But Unilever’s hat-trick – the 2017 pewter star will shortly take its place alongside those for 2015 and 2010 in the trophy cabinet at the firm’s swanky Thameside headquarters – marks the recipient out as something really special. As does the fact that it is the only business to have been in the top 20 in every BMAC league table since 1990.

And yet even these glowing achievements must take second place to an even bigger victory for Unilever this year – the besting of Kraft Heinz’s audacious $143bn takeover bid back in February, a battle in which its gold-plated reputation as one of the jewels in the crown of UK plc played no small part.

It is precisely the intangible and hard to pin down nature of corporate reputation that the Most Admired survey – conducted by Professor Mike Brown and his team at Leeds Business School – seeks to quantify. ‘Britain’s Most Admired attempts to gather the tacit knowledge of corporate executives, leaders and industry analysts,’ says Brown. ‘It’s an attempt to offer some insights into the composition of a great corporate reputation and tackle the age-old question "What’s in a name?"’

In Unilever’s case, the answer is quite a lot. The list of firms which have taken on and beaten Kraft Heinz and its acquisitive backers, private equity activists 3G Capital and legendary investor Warren Buffet, is short. These are people used to getting what they want, and so when their sights were turned on the Anglo-Dutch CPG giant – whose packaged food business and established presence in the fast-growing markets of India and the rest of Asia made it a tempting prospect – many industry watchers expected that it was more a question of when, not if, the deal would be done.

Although substantially smaller than Unilever, Kraft Heinz’s pitch to shareholders was straightforward – cost cutting and economies of scale would help boost Unilever’s operating margins, which at around 15%, were just over half of some of its rivals. It would also create a massive consumer goods powerhouse second only in size to Swiss titan Nestlé. But the bidders had reckoned without either the zeal of CEO Paul Polman and his single-minded commitment to sustainable, long-term rewards, or the post-Brexit referendum change in the national mood. The last thing embattled prime minister Theresa May wanted – especially after vowing to take a more interventionist view of foreign takeover bids during her party leadership campaign – was another Cadbury Schweppes-style debacle in the offing.

Legal & General Group CEO Nigel Wilson has pledged that half of L&G's senior executives will be female by 2020

By dismissing the $50 a share bid outright for ‘fundamentally undervaluing’ the business, Polman and the Unilever board effectively called their opponent’s bluff, forcing them to go hostile or go home. A wrong-footed Kraft Heinz chose the latter and Unilever lived to fight another day, it’s reputation for sticking to its guns enhanced by the battle.

The maker of Pot Noodle, Marmite and Domestos also takes the criteria awards for Quality of Marketing and Community & Environmental Responsibility – the latter thanks to its long-standing commitment to more ecofriendly business practices with its Sustainable Living Plan.

In the aftermath, Unilever is reviewing its complicated dual UK-Netherlands listing to make it more agile. It is also conducting an auction of its Flora to Becel spreads business– bidders reportedly include KKR, Bain Capital and Clayton, and Dubilier & Rice – with a view to boosting profitability. There is even speculation that the firm – which employs 7,500 in the UK – could retain its London market listing but move to a single headquarters in the Netherlands.

It has been a less dramatic, if barely less successful, year for our runner-up, once again Tony Pidgley’s Berkeley Group. The upmarket housebuilder known for its swanky city centre flats and executive pads in the leafy suburbs, builds 10% of new homes in the South East. Despite fears about Brexit’s impact on foreign buyers and the rise in stamp duty on more expensive properties, Berkeley’s pre-tax profits for the year to June were up a whopping 53% to £812.4m. It’s already returned £8.34 per share to investors in an ongoing share buyback programme, and is on target to have delivered £3bn of pre-tax profit in the five years between 2016-21.

Top of the most optimistic sector, home construction, Berkeley also takes no fewer than five of the criteria awards– Quality of Management, Financial Soundness, Value as a Long-Term Investment, Inspirational Leadership and joint winner with Rotork for Quality of Goods & Services.

There are signs that 2018 could be substantially tougher however – prices in the capital are stagnating and the Bank of England base rate has risen for the first time in a decade. Real wages are not growing and inflation is up – all of which adds up to potential property market trouble.

While a drop in house prices would be welcomed by firsttime buyers who struggle to save a deposit – and perhaps by some of their parents who have to subsidise them – it would not be such great news for housebuilders. The famously canny Pidgley and his long-serving CEO Rob Perrins have seen this coming, selling £93m of shares in Berkeley between them in September and October. Bosses at other housebuilders – including Taylor Wimpey’s Pete Redfern and Redrow’s Steve Morgan – have also been cashing in stock and battening down the hatches. You’ve been warned.

Unilever CEO Paul Polman defeated Kraft Heinz's $143bn takeover bid in January

In third – its highest-ever placing – comes steam engineering specialist Spirax-Sarco Engineering. It may sound like a business that harks back to the coal-fired dawn of the Industrial Revolution, but do not let that fool you – the Cheltenham-based firm designs, manufactures and installs high-tech and distinctly 21st-century processing systems for industries ranging from food and brewing to oil, gas and chemicals, aimed at boosting energy efficiency and cutting water usage and CO2 emissions. With customers across the world, it is precisely the kind of high-value manufacturing business of which post-Brexit Britain needs more.

Next is Bet365, a remarkable online gaming success story hailing from the unlikely tech hub of Stoke-on-Trent. Founded by CEO Denise Coates, Bet365 is a family business in a sector increasingly dominated by merged outfits such as Paddy Power Betfair, but thanks to Coates’ acumen it has become a market leader with 19 million customers in more than 200 countries. Unlike rivals such as Ladbrokes Coral and William Hill, Bet365 is a pureplay digital business – with no betting shops it has little to fear from the forthcoming government crackdown on fixed odds betting terminals.

As a long-time cheerleader for women in business, here at MT we were delighted that easyJet CEO Carolyn McCall (now on her way to pastures new at ITV) took the Most Admired Leader gong in 2015 and 2016. This year the coveted title goes to a chap, but one who is definitely a champion of the female boardroom – Nigel Wilson, CEO of Legal & General Group. He has five daughters, has just hired city superwoman Helena Morrissey as his head of personal investment and has pledged that half of L&G’s senior execs will be female by 2020. As one of the UK’s largest shareholders, managing almost £900bn of assets, he’s also using his clout to encourage others to follow suit.

The original (and still the largest) property portal Rightmove is up 24 places from last year to sixth, having overcome fears that it – and arch rival Zoopla – would lose out to new kid, On The Market. Rightmove’s latest surveys suggest a reversal of the usual north-south divide: while house prices across the country are growing less vigorously than they have been, the South East is suffering more than northern cities such as Manchester and Leeds. It also named Royal Leamington Spa as the happiest place in Britain.

Former overall winner Diageo returns to the top 10 again, with CEO Ivan Menezes’ diligent approach paying dividends despite the impact of a crackdown on gifting in China: premium Scotch like the firm’s £200 flagship Johnnie Walker Blue Label is no longer quite so popular there as a result.

Another business riding the trend for increasingly esoteric (and expensive) spirits is gourmet mixer master Fever-Tree, up 36 places to 14th. Founded by entrepreneurs Charles Rolls and Tim Warrillow in 2004, its top-notch tonic waters – which include Sicilian lemon, Mediterranean and elderflower varieties – go down a storm with the growing band of craft gin drinkers. It’s a favourite tipple with investors too – Fever-Tree’s share price has risen by more than 1,500% since it floated on the AIM market in 2014.

But Most Admired does not just track the fortunes of businesses on the up – it’s also a revealing barometer of the changing face of UK plc more widely.

Not many years ago we would have expected to see at least one retailer in the top 10 and several more in the top 20. This year the highest placed retailer is Next at number 25, and even Simon Wolfson’s famously tight-run ship is encountering heavy weather on the high street. Shares fell 7% after a trading update – describing conditions as ‘extremely volatile’ – in which it predicted that overall sales would fall by 0.3% in Q3, as more shoppers buy online rather than in-store.

Even the mighty John Lewis Partnership can only manage 33rd place this year, and M&S is also feeling the chilly winds of change – as it has done for several years. What’s new for 2017 is that its Simply Food stores – formerly the brightest spot on its balance sheet – are now no longer the force they once were. It seems there is a limit to our desire even for those ‘Dine in for two for £10’ offers. CFO Helen Weir is leaving and veteran chairman Archie Norman has got his work cut out as he makes the latest attempt to arrest the decline at what was once Britain’s shopping superstar.

Former overall winner Diageo makes a welcome return to the top 10, as CEO Ivan Menezes' diligent approach to premium spirits pays off

It’s also been a troubled year in the air as well as on the ground – who can forget the unhappy demise of Monarch in October? Certainly none of the 100,000 travellers who were abroad when the 50-year-old airline ceased trading, or for that matter any of its 2,100 staff.

Even easyJet, top of the transport sector again this year, has had its troubles, with fears that the chaotic Brexit negotiations could cause havoc with the budget airline’s core business. It’s bolstering its continental presence as a defensive measure, spending €40m to salvage a chunk of Air Berlin’s operations after the German carrier also went under.

But with revenues for the year up 8.1% to £5bn, Carolyn McCall can look back on a job well done as she returns to her media roots at ITV early in the new year. Under her auspices easyJet has become established as the ‘nicest’ of the no-frills operators. New chief executive Johan Lundgren is going to have to do some fancy flying to improve on her record.

Ryanair again proves to be the exception to the reputational rule, bulldozing its way through an epic PR disaster which could have been terminal to a less thickskinned brand. Thousands of cancellations left punters abandoned across Europe, swearing almost as roundly as famously foul-mouthed CEO Michael O’Leary. But love it or hate it, Ryanair continues to make the numbers with net profit for the first half up 11% to €1.3bn and revenues up 7% to €4.4bn.

2018 is shaping up to be one of the most significant years in the UK since the end of the second world war – by next December we may have a new (possibly Labour) government, and what will have happened to the pound, the property market or the Brexit negotiations is quite literally anyone’s guess. It’s not much of a comfort to reflect that fact is proved stranger than fiction in much of our lives each day.

But whatever does transpire, at least it will not be boring. And the country will also be in greater need than ever of strong, stable and prosperous businesses – this latest crop of Britain’s Most Admired Companies will be first among them.

 Photography: Getty images


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