Racal makes the right connections.
Few companies have fared better from the "Thatcher years" than Racal Telecom. The break-up of the telecommunications monopoly and the advent of the mobile phone have proved highly lucrative to Racal, which is 80% owned by its namesake, Racal Electronics, and this is amply demonstrated by its outstanding PPE figure of £101,210 - well over two and a half times that of its closest rival, Guinness.
As the mobile phone became synonymous with the '80s and the yuppie, so Racal, which runs the Vodafone network, prospered accordingly. Profits this year stand at £164.8 million (a rise of 45% on last year) and, with much of the initial investment required to establish the system already made, analysts' predictions for the future are bullish.
The March announcement by the Secretary of State for Trade and Industry, Peter Lilley, that the British Telecom/Mercury duopoly is to end further boosts the company's prospects and it has already announced its intention to apply for a new telecommunications licence, extending its interests from mobile phones to terrestrial lines.
But the news is not all rosy. The company was rocked by the Budget when the Chancellor, Norman Lamont, announced a £200 standard income charge on mobile phones. This, and the recession generally, are certain to put an unfortunate, if incomplete, brake on future profits growth.
Profits pour into the private sector.
Privatisation has treated the water companies well. The depressed economy has encouraged many investors to turn to "recession-proof" companies. Water, with its comparatively fixed demand and assured income (calculated on a fixed formula by the regulatory Ofwat) has seemed a good bet. Indeed, many of the companies have positively benefited from the building industry's recession and have been able to force down capital costs by driving hard bargains when tendering for contracts.
None of the water companies is typical, but Anglian Water may perhaps be taken as a good example of the broken-up former Water Board. With a PPE of £19,890, it is the 10th most profitable company per employee in our survey and is beaten only by Thames Water in the league table of water companies. Many privatisation sceptics believed that Anglian would prove a poor investment, pointing to the region's nitrate pollution problems and the cost of complying with European Community regulations on water purity. Anglian is tackling these however, with the construction of six purification plants in the worst affected areas at a cost of £42.5 million and, as prospects for the economy remain depressed, its future continues to look much better than many other firms in the service sector.