British Telecom slipped, Legal & General jumped, WPP soared and British Land stood firm. Fiona Jebb reports on the battles for the top slots in 26 sectors.
BIG MOVERS IN '98 - UP, UP AND AWAY
Smith & Nephew
ALL STARS NEVER OUT OF THE TOP 50 IN THE PAST FIVE YEARS
Marks & Spencer
BASEMENT DWELLERS NEVER IN TOP 150 IN THE PAST FIVE YEARS
Associated British Ports
South West Water
Lloyds TSB 67.33
Bank of Scotland 61.85
Abbey National 58.74
Standard Chartered 56.9
Lloyds TSB, Peter Ellwood's merged high street giant, holds on to last year's first place helped by its high-quality management, financial soundness and ability to attract and hold on to talent. Succession planning at HSBC has not damaged that bank's position either: the team Sir William Purves leaves behind is also rated highly for management quality and retention of talented people. Bank of Scotland rises three places, to third, on the back of an all-round improved performance that has made its mark on the competition.
Energy Group 56.5
Scottish Power 56.02
National Power 54.5
British Energy 52.58
Hanson's Energy Group has risen not only in the eyes of its UK peers, but has performed strongly enough to attract acquirer Texas Utilities, making its entry into the newly deregulated UK market. Energy Group was already regarded as the most innovative firm in the sector, a quality shared by Scottish Power in second place, which now makes it possible for customers to pay for gas and electricity with just one bill and benefit from better price tariffs if both are taken. Scottish Power is on the international acquisitions trail itself.
BUILDING MATERIALS AND MERCHANTS
Blue Circle Industries 57.56
Wolseley, the heating, plumbing and materials group, remains the best managed, best long-term investment in the eyes of the sector, in spite of its own regular gloomy forecasts. Acquisition-hungry BPB also rates highly (up two places this year) for slashing costs and selling plant while investing in eastern Europe and South America. Some international markets may provide better prospects than the UK. Hanson, also up two places, has created a strong presence in public building programmes in the US as well as in Britain.
ENGINEERING: AUTO AND AERO
Smiths Industries 65.26
British Aerospace 61.93
Smiths Industries, the aerospace-to-medical products group, retains its lead in a sector that has complained most vociferously about an overvalued pound. Under Sir Roger Hurn the company is on the look-out for acquisitions but claims its priority lies with organic growth. GKN slips two places to fourth, being overtaken by Rolls-Royce and BAe. The latter disposed of its stake in Orange and its Arlington property business, to focus on electronics. Rolls-Royce's tough deal-making in the summer saw it sell the rights to use its marque to BMW for £40 million.
BUSINESS SERVICES AND DISTRIBUTION
Rentokil Initial 61.57
In spite of not quite hitting its 20% growth target this year, Sir Clive Thompson's Rentokil Initial has overtaken Sir Ronnie Frost's Hays Group for top place. Both are seen as having slipped a little from their '97 performance, although this must, in part, be due to the less helpful trading conditions which inevitably confront these businesses.
Rentokil is the market's clear favourite for the quality of its management and as a long-term investment, while Hays' use of corporate assets surpasses all the other sector's players.
ENGINEERING AND METALS
Bodycote International 57.75
Morgan Crucible 54.3
Siebe rises from second to first place in spite of the £200 million restructuring it announced last year, which will see 4,000 job losses (8% of the workforce).
Sir Barrie Stephens' firm was making a pre-emptive strike in a climate chilled by the relative strengths of the dollar and sterling, as well as by the Asian crisis. By the year 2000 Siebe intends 40% of its manufacturing capacity to be in countries where labour costs are less than £1.80 an hour (compared with 30% now). Bodycote leaps from last year's ninth place to third, having shed the last of its textile interests.
CHEMICALS AND PLASTICS
Allied Colloids 59.44
Croda International 58.84
Charles Miller Smith's ICI has improved its rating under several headings, including the quality of its management and marketing, as well as the company's traditional strength of attracting, retaining and developing talent. But the sector's views will be tested by this autumn's record share price lows and dismal global economic prospects that are bound to put pressure on the bellwether group. BOC slips from first to fifth place - it will have to work through a redundancy programme before regaining the reputation it enjoyed in '97.
Provident Financial 61.89
Schroders keeps its first place in this sector and its independence, unlike last year's number two, Mercury Asset Management (now part of the Merrill Lynch empire). Schroders rates the highest score across all sectors in the survey for the quality of its management, and is placed third overall in the Most Admired Company data. The retention of talent, a vital challenge in this sector, is another Schroders' quality that characterises Win Bischoff's leadership. Provident Financial - up to third from seventh place - should do well in the downturn with its bold lending strategy.
Imperial Tobacco 57.4
Ambitious and innovative management at Wassall continues to impress competitors in this depressed sector. The company is aiming to convert itself into a venture capitalist group. Its radical plans involve senior management salary cuts of up to 50% in return for 10% of profits on all new investments - but it may only take partial stakes in acquisitions through the venture capital fund. Rival Tomkins, meanwhile, having bowed to City pressure for a share buy-back in 1997, has now put its distribution businesses up for sale.
Cadbury Schweppes 72.83
Northern Foods 58.42
United Biscuits 53.28
Cadbury Schweppes and Unilever swap places from last year, on the back of a strong performance from Cadbury Schweppes' management. John Sunderland has led the firm out of a vulnerable position where debts were high and independence looked to be in jeopardy. The business now has ambitious financial goals under the 'managing for value' initiative, and a more performance-based culture is developing internally. Unilever continues to score highly across the board and Northern Foods rises from sixth to third, having introduced higher value products.
Scottish & Newcastle 58.59
Last year's number one and two, Guinness and Grand Met, take first place in the newly merged Diageo. The sum of the parts is definitely seen as being stronger: under Anthony Greener and Sir George Bull, management quality and financial soundness are rated more highly in the new entity than in either predecessor. Whitbread, meanwhile, up from fourth to second, has calmed fears that it paid too much for its many acquisitions, including Cafe Rouge and Travel Inn. CEO David Thomas announced the creation of 5,000 jobs in the summer.
J Sainsbury 62.89
W Morrison 59.22
Terry Leahy's Tesco completely dominates its sector, rating the highest scores under all nine business attributes, making it Britain's Most Admired Company overall. Asda, which has moved ahead of Sainsbury, is also well regarded, particularly for its innovative and opportunistic style of management under chief executive Allan Leighton. Sainsbury, meanwhile, is seen as being more sluggish and although the quality of its products is not in doubt, it has work to do to convince competitors that it will innovate and market its way back to the top.
British Telecom (BT) 64
Orange - innovative, marketed in great style under group manager Hans Snook, with impressive results in a short space of time - has risen to overtake British Telecom at the top of this sector. And there's more - an £800 million investment programme to increase capacity and develop mobile phone technology. BT still has to convince doubters that it will recover from the collapsed MCI deal. There are new pricing policies in evidence, but the bigger player will have to run fast if it wants to match its nimble competitor.
HEALTH AND HOUSEHOLD
SmithKline Beecham 70.11
Glaxo Wellcome 69.85
Nycomed Amersham 59.44
Reckitt & Colman 55.94
In one of the few sectors where Britain can boast more than one genuinely world-class player, SmithKline Beecham and Glaxo Wellcome retain their peers' respect in spite of their aborted merger talks. SKB was rebuffed not only by Glaxo but also by American Home Products in the space of four months but, seen as offering better value as a long-term investment, it overtakes Glaxo. Glaxo's research-based innovation is still the sector's most impressive. Independent Zeneca retains third place, but industry experts expect consolidation in the sector.
Legal & General 64.33
Sun Life & Provincial 59.75
General Accident 59.36
Norwich Union 56.60
Commercial Union 54.25
The value of branding in a crowded market is emphasised by Legal & General's move from third last year to first place. David Prosser's group has also kept its charges low. Sun Life & Provincial, up to second from seventh last year, has managed its way successfully through post-merger integration, and is viewed as a much-improved competitor all round. Newly floated Norwich Union is straight in at number four and has impressed the market. From last year's first place the man from the Pru has slipped out of the top five (to sixth).
NEWS AND PUBLISHERS
Daily Mail & General Trust 66.00
Reed International 61.45
Euromoney Publications 57.17
The deaths this year of both Sir David English and Lord Rothermere must, in the near future at least, undermine confidence in Daily Mail and General Trust. But the sector is clear that DMGT has outperformed them all under almost every heading, and overtakes Reuters (last year's Most Admired Company) in moving from fourth to first place. Circulation and advertising revenues have been built up while other newspaper groups have struggled. Reuters, firmly in second place, is still viewed by the sector as a financially sound provider of quality products.
LEISURE AND HOTELS
Thomson Travel 56.57
Stakis has risen from fourth to first place, a reflection of the investment it has made in the hotels side of the business to compensate for poor margins on the gaming tables. Airtours, up one place to second, did well out of a rainy summer (a welcome surge in demand) and the World Cup. Although regarded as the best-managed company in the sector by far, Granada has none the less slipped to third from first, with variation in the quality of its services dragging it down. Ladbroke is considered to be slowly improving its performance and has risen two places in the sector's estimation.
OIL, GAS AND EXTRACTIVE
Burmah Castrol 51.80
British Petroleum and Shell continue to dominate this sector. Sir John Browne's global ambitions for BP were realised when he announced the planned £67 billion merger with Amoco, planting the company firmly in the premier league of oil companies. Shell is re-shaping its empire, but it remains too early to tell how successful some of Mark Moody-Stuart's tough but necessary measures will be. Demerged British Gas (BG), up to fifth from eighth position, has made an aggressive start with its electricity business by offering discounts far higher than the average.
Capital Radio 56.50
Carlton Communications 52.81
Marketing services groups and media buyers have risen to dominate this sector, with WPP up to first place from fifth, and Aegis in second from seventh. Martin Sorrell's WPP - now a FTSE 100 company - is a robust and tightly managed player. It eclipsed the old Saatchi empire years ago to become Britain's leading representative on the world stage. Aegis has risen dramatically this year, and wins praise for focusing on value-adding activities. BSkyB slips from first to third with a question mark, according to its peers, over its management following the departure of Sam Chisholm.
PAPER AND PRINTING
DS Smith 57.00
St Ives 56.67
Arjo Wiggins Appleton 54.78
Bunzl, the paper manufacturing and distribution company, has impressed the sector with acquisitions in the US and Europe while reducing its exposure to the traditionally volatile paper business. It is focusing on what it does best - making packaging for supermarkets and supplying plastic cups and plugs. New managers at Arjo Wiggins Appleton are also praised by competitors, lifting the firm from last year's eighth place up to fifth. Finances have been repaired through a two-year restructuring process. St. Ives slips from last year's first to fourth.
British Land 63.38
Land Securities 60.42
Slough Estates 55.39
John Ritblat's deal-making skills at British Land, which is particularly admired for its innovation, has kept the company at the top. Land Securities, despite the death of chairman Sir Peter Hunt, has risen to second place and has announced a £1 billion investment programme. Britain's biggest property company's expansion will focus principally on rebuilding inner-city shopping centres and bringing on retail space and leisure developments. Last year's number three - and the second most admired company overall in 1996 - Burford, has fallen to eighth position.
Courtaulds Textiles 61.75
W Baird 61.33
Readicut International 47.38
Dewhirst remains top in textiles and continues to surpass competitors in terms of the quality of its products, innovation as well as overall management. Its dedicated supplier relationship with Marks & Spencer, while undoubtedly a strength, could come under pressure as the retailer looks to source more of its products from abroad. Courtaulds, which has moved up one place to second, spreads its risk through a wider range of relationships. Its marketing is considered the strongest in the sector.
But critics suggest that the company is exposed to the vagaries of fashion.
RETAILERS: CLOTHING AND APPAREL
Marks & Spencer 67.24
N Brown 55.67
Marks & Spencer's strong showing in the sector survey predates the company's recent boardroom upheaval, but perhaps indicates that fears for the retailer's future are being overdone. M&S is admired for everything from its innovation and retention of talent, to its approach to the environment and the quality of its products and services. Only in marketing does M&S not come out on top. David Jones' Next is a close rival in all categories and the superior marketer, according to the peer group. Demerged Debenhams scores slightly less well than its Burton Group parent did in 1997.
British Airways 55.45
British Airways may be disenchanted with every regulatory body under the sun but it is still its peers' favourite transport company, retaining last year's first place. It continues to score top marks in marketing following the introduction of its controversial new livery. As well as for its customer service the company is respected for its efficient business operation. Rising to overtake BAA is Stagecoach, which entered the FTSE 100 in spring. Though the press often emphasises the negative (late trains, predatory tactics), the group gets a positive vote from those in the industry.
Body Shop 52.57
Great Universal Stores 51.13
Lord Blyth's Boots confirms its position as a dominant retail competitor, in particular through its enviable Boots the Chemist chain. Boots' financial soundness is singled out as a major strength. Sir Geoffrey Mulcahy's Kingfisher overtakes Sir Stanley Kalms' Dixons - persistence with competitive pricing has paid off, as has European expansion and brand building. Anita Roddick's Body Shop continues to impress, for its marketing, innovation and environmental responsibility, despite lacklustre financial performance. New CEO Patrick Gournay, from Danone, may help to strengthen the group.
Wessex Water 55.99
Severn Trent 55.93
Thames Water 55.56
Anglian Water 54.91
Privatised utilities have come in for a battering but the premium built into Enron's £1.4 billion approved bid for Wessex Water is testimony to the strength of the Bristol-based company's management.
And the firm's approach to the community and environment puts it in the top 10 across all sectors on this count. Severn Trent is regarded as having one of the best marketing approaches within the sector, and is also praised for the openness with which it handles the City.
It has had significant success in reducing leakage levels. In a tightly fought sector Anglian slips from first last year to fourth.