UK: BRITAIN'S MOST ADMIRED COMPANIES - THE ROUTE TO HIGH REPUTE.

UK: BRITAIN'S MOST ADMIRED COMPANIES - THE ROUTE TO HIGH REPUTE. - How does a company rise in the estimation of its peers? How much of that regard is based on financial virtue, on product or management quality? The 1995 survey gives managements another o

by Nick Hasell.
Last Updated: 31 Aug 2010

How does a company rise in the estimation of its peers? How much of that regard is based on financial virtue, on product or management quality? The 1995 survey gives managements another opportunity to assess their direct competitors.

Look carefully and you could almost see it coming. Go back to the beginning, to 1989, and it was there in the first-ever poll, in 18th place, tucked between M&G and Pilkington, both long since eclipsed. Pick up the trail again a year later and you'll find it one notch up, just behind Wellcome and a step ahead of Reuters. Two years further on and it has pushed three places ahead, to 14th position, next to the Body Shop. But here it speeds up. Look again last year and suddenly it has surged to seventh place. And somehow this year it repeats its feat such that, after another long leap, it finally arrives. The 18-point haul is over. Cadbury Schweppes, part Quaker chocolate-maker, part You Know Who, is voted by its peers to be Britain's Most Admired Company 1995.

It is exactly this upward arc of admiration, as traced by Cadbury Schweppes over the past six years, that our annual survey aims to chart. What is it that makes a corporate reputation? How does a company rise in the estimation of its peers? How much of that admiration is based on financial virtue, the quality of management and products, or the less tangible aspects of corporate image? And why is it that some companies, having made their names, then proceed to break them?

In search of answers Management Today picked up where it left off last year and commissioned the same research team - headed by Michael Brown from Nottingham Business School, and including Stuart Laverick of Derby University and Professor John Saunders of Loughborough University Business School - to seek out Britain's corporate paragons. The premise of their study, like that of its four predecessors, can be simply stated: that those best qualified to assess a company's strengths and weaknesses are the senior management of its direct competitors. Accordingly, our survey is based on the views of senior directors at 250 of Britain's largest companies, together with those of leading investment analysts in the relevant industry sectors (see methodology box above). This year's poll stands out on two counts; first, for the record response from both companies and analysts; and, second, as the first year in which a 100% response was received from an entire sector (health and household).

Even at first glance, the results of this year's survey seem to confirm the thesis of previous years: that at the very top of the table there is a consistent, stable core of genuinely world-class companies. The top 20 this year, for example, contains 13 companies that were among the top 20 last year. Further, 11 of these 13 appeared in the top 20 in 1992, while 10 were present in 1990. As might be expected, the winners of all five surveys to date - Shell, Marks & Spencer, the pre-merger Glaxo, Rentokil, and Cadbury Schweppes - are common to all three groupings. To their number add Reuters, Unilever, SmithKline Beecham, Guinness, Sainsbury and Tesco.

So what do these companies have in common? Size, longevity and visibility, for a start. All, bar Rentokil, are undisputed blue chips, with a market capitalisation that puts them in the upper reaches of the FTSE-100 and an annual average turnover of around £7 billion. It also goes without saying that all operate on a global scale. Most are undoubted survivors, too, with long, often distinguished histories: Reuters, for example, was founded in 1851, Sainsbury in 1869, Marks & Spencer in 1884. Equally, many have a strong corporate brand, which, in itself, tends to overshadow any of the company's individual products or services; here, the corporate whole is arguably greater than the sum of its parts.

But any analysis of reputation must sooner or later return to the numbers; to the share price, balance sheet and profit and loss account. According to Geoff Smith of independent consultants VI Group, the correlation between financial performance and admiration is indisputable. Smith's view is based on a study in which a portfolio of the top 25 most admired companies is compared to the FTSE-100 as a whole (excluding banks and companies in insurance, financial and commodity sectors). Over the past three years, calculates Smith, the former group has generated sales growth of 31.9%, as against an equivalent 16.8% for the FTSE-100 companies. Further, the market value of the 'most admired' portfolio works out at £3.00 for every £1.00 of invested capital (defined as net debt plus book value of equity), as against £2.10 for the second grouping.

Yet a further look at both this year's and previous years' rankings shows that admiration cannot be explained in terms of the financial facts alone. The perceived strengths of Cadbury Schweppes, for example, are management and marketing, together with product quality and innovation. A previous winner, meanwhile, Glaxo, was notably buoyed by its strong showing in three measures; financial soundness, value as a long-term investment and, most critically, the capacity to innovate. And several companies at the very top of the table seem to do everything exceptionally well: Rentokil, Shell and Whitbread stand out as the three exemplars which register the highest scores in their sectors in all nine characteristics.

Indeed, a study of the individual scores proves instructive. Property company Land Securities, currently sitting on a portfolio valued at £5.1 billion, lives up to the solidity of its name and is judged the most financially sound of all 250 companies. Eurotunnel, meanwhile, which continues to languish in an £8 billion hole, is awarded the single worst financial score - even lower than last year. It also receives the worst rating for its long-term investment value; unsurprising, perhaps, given that its shares now stand at less than a quarter of their 1987 launch price.

Once again this year, British Land is lauded by its peers for its capacity to innovate, an honour readily explained by its record for exploring increasingly original financial arrangements. Examples abound: its property sale and leaseback deals with Tesco and Sainsbury in 1990; the formation of a joint venture with Scottish & Newcastle to buy freehold interest in over 300 pubs; last year's Quantum partnership with George Soros, since bought out; and the raising of £210 million in March through a placing and open offer of new shares.

The reason for Tesco's appearance in second place in the same category can be largely ascribed to just one innovation; the Clubcard, its nationwide loyalty scheme rolled out in February. In the six months following its introduction, Tesco experienced the fastest sales growth of any British food retailer. It also forced rivals Sainsbury and Argyll, owner of Safeway, to follow its lead and rush out their own schemes. Having stolen a march on its competitors, Tesco is also given the fourth-highest score of any company for the quality of its marketing.

Property group Burford, which has recently announced its partnership with Japanese games group Sega to build a virtual reality theme park in central London, similarly scores highly for innovation. Under the direction of its entrepreneurial chairman Nigel Wray and chief executive Nick Leslau, Burford has built a reputation for making shrewd property investments using cheap borrowed money; accordingly, their deal-making skills propel it to fourth place in the rankings for quality of management.

Other notable innovators include Unilever (somewhat ironic, perhaps, after the debacle over Persil Power, its all-too innovative detergent) and Dorling Kindersley, the reference book and CD-ROM publisher, which, having already invested heavily in multimedia, now plans to launch on-line services with Microsoft and Compuserve. The long-suffering Fisons, meanwhile, (now in the hands of Rhone Poulenc Rorer), receives the worst score of any company for innovation - by any standards, an unfortunate accolade for a business whose success once stemmed from its strength in pharmaceuticals and scientific instruments. It is also given one of the worst ratings of all 250 companies for the quality of its products.

In the category of community and environmental responsibility BT leaps over Rentokil, last year's winner, to gain first place. BT here seems to reap the rewards of its virtue on two separate counts: as one of the first major British companies to publish a comprehensive environmental audit alongside its report and accounts; and for its extensive programme of community involvement. Less explicable is the large number of companies in the upper reaches of the same category whose activities have often made them the target of environmental campaigners; Shell, for example, or ICI, BOC, BICC (for its roadbuilding subsidiary) and papermakers Arjo Wiggins Appleton and Rexam. Yet the real offenders, according to our respondents, are those in the extractive industries - English China Clays, Lonrho and RJB - all of which receive some of the worst scores in this category for any company. T&N similarly seems to suffer from its historic links with asbestos, still the subject of litigation, while Hickson International appears plagued by a past record of pollution.

The record level of takeover activity in the UK over the last year has a clear effect on the table, with some 18 companies in all - the bulk in either the pharmaceutical, electricity distribution or financial services sectors - involved in a major bid or defence. The most notable absentee through acquisition is Wellcome, which, perhaps in an early indication of its fate, plummeted in last year's table from 11th to 108th place. Its takeover by Glaxo for £9.1 billion earlier this year clearly takes its toll on the financial soundness of the buyer and sends the newly-combined entity down from second place to 13th place.

Other acquisitions, either completed or still in progress, produce a series of instructive comparisons; in each case it seems a matter of a highly-placed company making a play for lower-placed prey. In the year's second largest deal, for example, Lloyds, at 36th, takes over the ignominiously-ranked TSB (at 213th place). Similarly, National Power (99) bids for Southern Electric(166), Hanson (72) for Eastern Group (139) and PowerGen (65) for Midlands Electricity(167). The only merger activity between comparably placed companies is Greenall's acquisition of rival pub-owner Boddington, which are ranked just two places apart at 161st and 159th respectively.

Two of the newly-acquired regional electricity companies also figure among the table's heaviest fallers: Eastern Group, which drops from 33rd to 139th, and Midlands Electricity, from 50th to 167th. Their slide appears slight, however, beside that of SG Warburg, which after last year's abortive deal with Morgan Stanley, eventually fell into the hands of Swiss Bank Corporation. The outcome is a precipitous fall from first to 10th in its sector and from 19th to 236th place overall. The collapse in its score for the ability to attract, retain and develop top staff is perhaps to be expected, given the defection of many of its brightest and best prior to the takeover. The rating for its quality of management similarly plummets.

Other newcomers to the lower end of the table include RJB Mining, which last year outbid its rivals and paid £815 million for 80% of British Coal's assets ( in the form of its 31 still working mines). The price, which left RJB with nearly £500 million in debt, seems to have been pitched too high in the eyes of its peers, who award the buyer one of the table's lowest scores for financial soundness. RJB also suffers from an estimation of its long-term investment value so low that it puts it third from bottom in that category, only just above ADT and Eurotunnel.

It is joined in the lower ranks by London International Group, the condom and surgical glove-maker, which failed to make the table last year due to its much reduced market capitalisation. Though its immediate financial troubles now seem to have receded, thanks to the disposal last year of its loss-making film-processing business and a £114 million rights issue, it still has a long way to go to gain the respect of rivals. It receives the worst score in its sector for financial soundness, long-term investment value and use of assets and re-emerges in 243rd place.

The reasons for Saatchi & Saatchi's plight - which, now renamed as Cordiant, drops from 221nd to 244th place - have been exhaustively documented: a restive overseas investor, a boardroom coup and the departure of its chairman last December followed by key clients Mars, BA and Dixons. Like SG Warburg, Cordiant noticeably scores low in its ability to keep hold of its talented staff - which presumably includes founder Maurice Saatchi. Its rating for quality of management similarly falls, as does that for financial soundness in the face of its mounting debt and accompanying punitive interest charges.

From Cordiant it is just a few short hops down to the bottom of the table, to the apparent permanent resting place of Eurotunnel and the new residence of the recently-disgraced Trafalgar House. Failing some form of financial miracle, Eurotunnel must surely resign itself to being one of Britain's least admired companies for many years to come. Despite two rights issues and three re-financing exercises it remains mired in the massive debt owing to its 225 banks and unable to bring in enough revenue to dig its way out. Trafalgar House, meanwhile, which this year becomes the least admired of all 250 companies, earns some form of distinction by recording the lowest-ever score of any company for the quality of its management. Little cheer, perhaps, for its chairman Simon Keswick, who first bought into the once-mighty group in 1993 through Jardine Matheson in the hope of finding a vehicle to escape Hong Kong's future rulers. The fate that has met him here has, by any standards, been far worse: an abortive bid for Northern Electric, the public relations disaster of last year's now-infamous QE2 cruise, and the group's ever-worsening finances. The result: a collapsed share price and a reputation in tatters. A share, of course, can always rise. The praise of peers, once lost, is harder won. The full results of the survey, including detailed analysis of each sector, are contained in the report Britain's Most Admired Companies 1995, available from Management Today for £39. Please contact Valerie Robertson (tel: 0171-413 4203).

The most admired

1 7 Cadbury Schweppes 7.92

2 5 Unilever 7.85

3 18 Smiths Industries 7.72

4 31 Tesco 7.70

5 25 Whitbread 7.67

6 12 Vodafone 7.57

7 3 Marks & Spencer 7.54

8 9 Shell Transport & Trading 7.48

9 16 J Sainsbury 7.44

10 6 Reuters Holdings 7.42

11 1 Rentokil 7.27

12 40 GKN 7.26

... And the least admired

239 227 AAH 4.19

240 252 Fisons 4.19

241 230 Lasmo 4.16

242 237 Hickson International 4.16

243 - London International 4.10

244 221 Cordiant 4.05

245 212 Dawson International 4.02

246 - RJB 3.87

247 259 Lonrho 3.79

248 233 Nurdin & Peacock 3.67

249 258 Eurotunnel 3.66

250 245 Trafalgar House 3.58

Bigger means better at Cadbury Schweppes

The arrival of a truly global oeprator

It can be no coincidence that Cadbury Schweppes's rise to the top of the table comes in the same year as it made its largest-ever acquisition. That buy - of the remaining 77% of US drinks giant Dr Pepper/ Seven-Up which it did not already own - was described at the time by chairman Dominic Cadbury as the most important step for the group since the merger of Cadbury and Schweppes in 1969. Its significance, however, goes beyond the high price tag (£1.1 billion) or the time it took to catch (eight years in all). Rather, it marks the transformation of Cadbury Schweppes from a big British business to a truly global operator.

With Dr Pepper to its name, Cadbury has tripled its US market share to become the third-largest player in the world's largest soft drinks market. More important, it now vies for title of world leader in non-cola carbonated drinks.

Cadbury's current strength is the product of a strategy determined over a decade ago. In the early 1980s, it was one of the first major UK companies to reverse the drive towards diversity and focus instead on its core strengths; confectionery and non-cola fizzy drinks. Out went its interests in a broad spread of groceries and in came a stream of acquisitions - from chocolate in France to mineral water in Mexico. In the intervening years it has invested heavily in a host of burgeoning markets - Argentina, China, Poland and Russia, in particular.

At home, too, there is much to admire. Sales of its branded range of soft drinks have continued to rise and record profits have flowed from CCSB, its UK bottling joint-venture, while its stake in lottery operator Camelot is starting to yield strong returns. But acclaim can draw unwanted attention. In October, Cadbury was whispered to be prey to a hostile bid. The rumoured bidder? Food manufacturing rival Unilever, Britain's Most Admired Company number two.

Methodology

In conjunction with Loughborough University Business School, Management Today approached Britain's 10 largest companies in 25 industrial sectors and asked their chairmen, managing directors and selected main board directors to evaluate their peers.

-Participants were asked to rate each company in their sectors (excluding themselves) on a scale of zero (poor) to 10 (excellent) for their performance in nine criteria: quality of management; financial soundness; ability to attract, develop and retain top talent; quality of products/services; value as a long-term investment; capacity to innovate; quality of marketing; community and environmental responsibility and use of corporate assets. Analysts at 10 leading investment companies were also polled. 70% of the companies and 90% of the analysts approached responded.

-On the basis of the individual scores assigned to a company for each of the nine characteristics, three separate analyses were produced: a ranking of the 10 companies in each sector; a list of all 250 companies, from which the overall most admired are drawn; and the top 10 for each characteristic.

THE TOP THREE IN EACH SECTOR

Sector First

1 Banks Lloyds

2 Building Materials & Merchants Wolseley

3 Business Services Rentokil

4 Chemical & Plastics BOC

5 Conglomerates BTR

6 Drinks Whitbread

7 Electricals Vodafone

8 Electricity PowerGen

9 Engineering Auto & Aero Smiths Industries

10 Engineering & Metals Siebe

11 Financial Schroders

12 Food Manufacturers Cadbury Schweppes

13 Food Retailers Tesco

14 Health & Household Glaxo Wellcome

15 Insurance Prudential Corporation

16 Leisure Thorn EMI

17 Media Capital Radio

18 News & Publishers Reuters Holdings

19 Oil, Gas & Extractive Shell Transport & Trading

20 Paper & Printing Rexam

21 Property Burford

22 Retail Stores Marks & Spencer

23 Textiles Coats Viyella

24 Transport BAA

25 Water Wessex Water

Sector Second

1 Banks Bank of Scotland

2 Building Materials & Merchants RMC Group

3 Business Services Hays

4 Chemical & Plastics Allied Colloids Group

5 Conglomerates Williams Holdings

6 Drinks Guinness

7 Electricals BT

8 Electricity National Power

9 Engineering Auto & Aero GKN

10 Engineering & Metals Cookson Group

11 Financial M&G Group

12 Food Manufacturers Unilever

13 Food Retailers J Sainsbury

14 Health & Household SmithKline Beecham

15 Insurance Commercial Union

16 Leisure Granada Group

17 Media Carlton Communications

18 News & Publishers Daily Mail & General Trust

19 Oil, Gas & Extractive British Petroleum

20 Paper & Printing De La Rue

21 Property Land Securities

22 Retail Stores Boots

23 Textiles Dewhirst Group

24 Transport British Airways

25 Water Southern Water

Sector Third Sector average

1 Banks Royal Bank of Scotland 5.89

2 Building Materials & Merchants Caradon MB 6.14

3 Business Services Electrocomponents 5.69

4 Chemical & Plastics ICI 5.93

5 Conglomerates Tomkins 5.66

6 Drinks Grand Metropolitan 6.04

7 Electricals Bowthorpe 6.32

8 Electricity Scottish Power 5.62

9 Engineering Auto & Aero Rolls-Royce 6.21

10 Engineering & Metals TI Group 5.73

11 Financial MAI 5.62

12 Food Manufacturers Tate & Lyle 6.10

13 Food Retailers Wm Morrison 5.56

14 Health & Household Zeneca 5.72

15 Insurance General Accident 5.47

16 Leisure First Leisure 5.69

17 Media HTV 5.36

18 News & Publishers Pearson 6.35

19 Oil, Gas & Extractive RTZ 5.40

20 Paper & Printing St. Ives 5.97

21 Property British Land Co 5.81

22 Retail Stores Argos 5.88

23 Textiles Claremont Garments 5.72

24 Transport P&O 5.45

25 Water Severn Trent Water 5.74

Only 10 companies which ranked at the head of their category last year manage to repeat the trick this year. In what seems like an almost ritual exchange between first and second place, several of last year's sector leaders now trade positions with their closest rivals; hence Guinness gives way to Whitbread, Unilever to Cadbury Schweppes, Sainsbury to Tesco, Commercial Union to Prudential, De La Rue to the re-named Rexam and British Airways to BAA. Elsewhere, the re-classification of several highly-placed companies has had a marked effect. Thorn-EMI, for example, benefits from its switch from electricals (where last year it ranked seventh) to leisure, where it now displaces Granada from the top slot. Similarly, RTZ, formerly sixth in engineering and extractive, re-emerges in oil, gas and extractive in third place. Others suffer, notably Electrocomponents, which slips from first to third on its re-allocation from electricals to business services. Electricity is now dominated by the large, newly acquisitive generators, while in banking, the disappearance of Abbey National and HSBC from the table's upper reaches makes room for the advance of Scotland's clearers. The one new arrival, Zeneca, at third place in health and household, neatly echoes the position of its equally-placed peer, ICI, in chemicals.

MANAGEMENT QUALITY

1 Cadbury Schweppes 8.65

2 Smiths Industries 8.50

3 Tesco 8.44

4 Burford 8.38

5 Unilever 8.35

6 Marks & Spencer 8.28

7 Whitbread 8.23

8 Rentokil 8.10

9 RMC Group 7.95

10 GKN 7.92

RECRUIT/RETAIN STAFF

1 Vodafone 8.50

2 Unilever 8.04

3 Cadbury Schweppes 8.02

4 Shell Transport & Trading 8.00

5 Rexam 7.88

6 Whitbread 7.77

7 Marks & Spencer 7.72

8 Rentokil 7.70

9 J Sainsbury 7.56

10 SmithKline Beecham 7.55

QUALITY OF MARKETING

1 Cadbury Schweppes 8.58

2 Vodafone 8.17

3 Whitbread 7.96

4 Tesco 7.94

5 British Airways 7.90

6 Guinness 7.72

7 Unilever 7.65

8 Capital Radio 7.57

9 Grand Metropolitan 7.46

10 Arjo Wiggins Appleton 7.40

FINANCIAL SOUNDNESS

1 Land Securities 9.38

2 Marks & Spencer 9.06

3 Smiths Industries 9.00

4 GEC 9.00

5 Reuters Holdings 9.00

6 Unilever 8.88

7 Great Universal Stores 8.85

8 Shell Transport & Trading 8.81

9 BTR 8.75

10 Tomkins 8.71

LONG-TERM VALUE

1 Unilever 8.31

2 Marks & Spencer 8.17

3 Smiths Industries 8.08

4 J Sainsbury 8.00

5 Cadbury Schweppes 7.98

6 Reuters Holdings 7.94

7 BT 7.89

8 Land Securities 7.88

9 RMC Group 7.85

10 Tesco 7.75

COMMUNITY/ENVIRONMENT

1 BT 7.56

2 ICI 7.22

3 J Sainsbury 7.19

4 BOC 6.94

5 Unilever 6.90

6 BICC 6.88

7 Shell Transport & Trading 6.88

8 Arjo Wiggins Appleton 6.80

9 Rexam 6.80

10 Wessex Water 6.78

PRODUCT/SERVICE QUALITY

1 Whitbread 8.59

2 Cadbury Schweppes 8.44

3 Vodafone 8.33

4 Glaxo Wellcome 8.20

5 Reuters Holdings 8.11

6 Guinness 8.03

7 De La Rue 8.00

8 Marks & Spencer 7.94

9 BAA 7.92

10 SmithKline Beecham 7.90

CAPACITY TO INNOVATE

1 British Land Co 8.25

2 Tesco 8.19

3 Burford 8.00

4 Cadbury Schweppes 7.90

5 Rolls-Royce 7.71

6 Dorling Kindersley 7.69

7 Smiths Industries 7.67

8 Next 7.56

9 Unilever 7.40

10 Glaxo Wellcome 7.35

USE OF CORPORATE ASSETS

1 Smiths Industries 8.17

2 BTR 8.00

3 Hanson 7.93

4 RMC Group 7.85

5 GKN 7.75

6 Unilever 7.73

7 Wassall 7.67

8 Cadbury Schweppes 7.58

9 Vodafone 7.50

10 Tomkins 7.43

Britain's most admired companies - Stamina as much as star quality tells in the slow grind to the top

Cadbury Schweppes is perhaps the best example of a company that has managed to hike its relative standing in survey after survey.

Others have shown themselves equally adept, though so far to much lesser effect.

In 1990, for example, the newly-privatised airports operator BAA was rated second worst in its sector for both its quality of management and service and ranked 162nd in a field of what was then 210 companies. In the following survey it moved up to 129th, from there to 56th, and this year reaches 29th place. It now also registers the highest scores in its sector in the same two categories where it was once judged weak. Part of its turnround can be ascribed to an unhappy early history, especially its ill-timed foray into hotels and non-airport retailing, together with a change in management. The larger part, however, seems to have come from a belated appreciation among its peers of BAA's effective monopoly; in particular, of its ability as both retailer and property owner to draw ever larger amounts of money from the captive air traveller.

Whitbread's climb - from 161st to 5th place - shows equal stamina. In 1992 it was judged the worst of its peers for its long-term investment value, second worst for its financial soundness, use of assets and quality of management and third worst for the quality of its products. Now it ranks first across the board in all nine characteristics. In the interim it has successfully diversified away from brewing and now stands as a broadly based leisure group.

Some of the most notable long-term improvements in ranking appear in the automotive and aerospace engineering sector, where a rise in the scores of all constituent companies pushes more of their number further up the table. In 1992, for example, the average score for the sector was 5.5. This year it stands at 6.2. GKN and Smiths Industries are its two undoubted stars, both of which have moved successfully away from their one-time reliance on car components. In GKN's case this shift has entailed the disposal of its steel interests in favour of a new tripartite structure based on automotive, a joint-venture in pallet hire and defence. As a result it has moved from 123rd in 1992 to its current 12th place Smiths, meanwhile, has shown both adaptability and remarkable timing, having reduced its dependence on automotive and then aerospace just as both sectors were entering recession. Now it derives the bulk of its income from medical instruments and, unlike many in its sector, has a profits record that has held up throughout the cycle. It has also had a strong enough cashflow to finance acquisitions from its own funds. Elsewhere, Southern Water is one of the few utilities to have substantially improved its standing over the past three surveys - as does plasterboard maker BPB and retailer Asda. All, however, have far to go to make their mark on the top of the table.

ON THE WAY UP

Smiths Industries 38 18 3

Whitbread 161 25 5

Vodafone 23 12 6

GKN 123 40 12

BAA 129 56 29

Lloyds 130 113 36

BPB Industries 143 93 54

Southern Water 165 142 62

Asda 239 198 173

Britain's Most Admired Companies - The utilities come down to earth with the heaviest thud of all.

Some companies earn admiration and then hang on to it for year upon year. For others - as can be seen from the table - it is a more elusive commodity, enjoyed once and then steadily lost.

Take Dawson International, the Edinburgh-based textiles group best known as the maker of Pringle cashmere. In 1990 it was judged to have the best products and marketing of its peers, was ranked second in its sector and came out in 48th position overall. By 1992 it had dropped to 84th place and, this year, after a collapse in its ratings in 1992, stands at a lowly 245th (a fall of some 197 places in the space of five years). Ironically, its marketing is now seen as the worst in its sector.

Little surprise, perhaps, that in March Dawson's leading shareholders incited a boardroom coup in which its chairman and managing director were ousted. It came too late, however, to have any effect on this year's rating.

The fall of retail group Kingfisher is equally sharp, though achieved in markedly shorter time - down from 33rd to 235th place in just three years. As recently as 1992 it was judged to be second only in financial soundness to high street paragon Marks & Spencer. This year, with its franchise increasingly under threat from both specialists and supermarkets alike, it scored the lowest of its peers in five out of nine characteristics. As might be expected for the worst performer in the FTSE-100 last year, its value as a long-term investment was among them. Even the resignation of four directors in January after its first fall in profits in 13 years did little to revive its dire score for quality of management.

Six of the table's heaviest long-term falls are among the utilities. Yorkshire Electricity, for example, a recurring target of bid speculation, shows a fall of 182 places in three years. This drop is eclipsed by that of compatriot Yorkshire Water, now 178th, but a respectable 35th in 1990.

British Gas's ills, meanwhile, have been well-dissected; a continuing large-scale restructuring programme, the current and future erosion of its market share through domestic deregulation, consumer unrest over patchy standards of service, falling natural gas prices. And, of course, that matter of its chief executive's 75% pay rise. On the evidence here it is undeserved: British Gas's score this year for quality of management is by far the lowest among its peers.

The reasons behind the decline of building materials group Redland are less easy to ascertain. Here, after all, is a company that came out sixth overall in 1990 but now lies at 117th. Then it was judged to be the best in its sector for marketing, innovation and the quality of it products. Unless it rediscovers these characteristics - and quickly-it will surely fall yet further.

ON THE WAY DOWN

Courtaulds 22 55 70

Redland 10 82 117

United Biscuits 26 74 147

Southern Electric 25 81 166

Yorkshire Water 63 122 178

Thames Water 52 112 185

East Midlands Electricity 37 117 188

Yorkshire Electricity 17 132 199

Inchcape 60 88 200

British Gas 48 127 216

Kingfisher 33 151 235

Dawson International 84 212 245

Britain's most admired companies - A hard core of six keep a stranglehold on the top in the free-for-all

This year, as last, our respondents were asked to step outside the bounds of their sector and answer a second, broader question: putting size, ownership and industrial category aside, which British companies did they most admire on the basis of the same nine characteristics?

Again the verdict was clear. For the third successive year, Marks & Spencer, Britain's most profitable large retailer, maintained its place at the top. And though this year its share of the vote was slightly reduced - from near 18% to 14% - this pales besides the eight-point lead it still holds on the rest of the field.

next to this gap, the shifts in position among its peers seems like the jostling of also-rans. Here, the merger of Glaxo and Wellcome appears to meet with approval and sends the group into second place. British Airways and Sainsbury similarly rise. BT, Shell and Unilever all head the other way.

The fall of the latter two is most easily pinned on bad publicity: Unilever's over clothes-shredding detergents, for example, and Shell's over its proposed sinking of the still-buoyant Brent Spar. Yet rival BP, though untarnished by such events, fares even worse and drops out of the table altogether. GEC, last year's number eight, meets a similar fate. Their place is taken by two newcomers - one genuine (Virgin, which, as a private company, fails to qualify for the overall ranking) and one, ICI, a temporary absentee.

What does emerge from the "free vote" in poll after poll is the sheer inertia in opinion as to what constitutes an admired company. In the four surveys since it first began, a hard core of six seemingly untouchable businesses - Glaxo, Hanson, M&S, Sainsbury, Shell and Unilever - has figured in every list. Similarly, again with the exception of last year (when Unilever stepped in and disrupted their stranglehold), Glaxo, M&S and Hanson have merely traded positions within the top three.

But why Hanson? How is is that a company that rates third in the free vote receives such little respect from its peers? This year it falls to fifth in its sector and comes out 72nd in the overall poll. The answer seems partly a lingering respect for its past financial record and partly a matter of high public profile. Unlike most conglomerates - and very much like most of its free-vote peers - Hanson has built and nurtured a strong corporate bond. It also has the advantage of a chairman who, in many minds, is still the epitome of the charismatic entrepreneur.

It's easy to argue that the more a company appears in rankings such as this, the more its reputation is enhanced - and the more likely it is to appear in the same or similar leagues the next time.

Consider: last year, Rentokil, the winner in the main poll, made only one appearance in the free vote - for its "value as a long-term investment". This year, by contrast, it is well placed in three separate categories. By the same measure the 1995 victor, Cadbury Schweppes, appears in just two of nine free-vote categories. If Rentokil is taken as a reliable guide, it might expect three times that number next year.

THE FREE VOTE

1 1 Marks & Spencer 14.0

2 4 Glaxo Wellcome 5.8

3 2 Hanson 4.9

4 9 British Airways 4.3

5 7 J Sainsbury 4.1

6 3 Unilever 3.9

7 - Virgin 3.8

8 5 BT 3.7

9 5 Shell Transport & Trading 3.5

10 - ICI 3.4.

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