Worldwide: Profit Track 100: Thriving Sectors Suggest Recovery Has Real Depth

Last Updated: 18 June 2015
Article by BDO LLP

If you glance at the top of The Sunday Times BDO Profit Track 100 league table this year you'd be forgiven for believing that to make profits quickly you have to be operating online.

The Hut Group, and Skyscanner hold the top three places; all high performing digital companies at the top of their game.

The Hut has secured number one for the second year in a row, illustrating how effectively this Cheshire-based business has evolved from its roots as an online entertainment goods retailer, through investment in its proprietary e-commerce platform alongside significant brand acquisitions in higher-margin categories such as food supplements and fashion, whilst attracting top talent to its board and investor roll.

However, delve deeper into the league table and the wide diversity of the UK mid-market becomes clear, displaying businesses across the country, from house builders and construction firms like City & Country (No 48) and Strata Homes (No 51) featuring alongside services providers such as print specialist Xeretec (No 60), and intelligence firm Control Risks (No 92). Retailers such as The White Company (No 96) appear with Paulton's Park (No 18), a theme park operator and home to Peppa Pig World, and Nimax Theatres (No 91), known for its famous West End and Broadway theatres like The Lyric.

Recent research by BDO found that since 2009 Britain's mid-market companies – the newly-named 'Brittelstand' – have outgrown their German 'Mittelstand' equivalents. Irrespective of their sector, the Brittelstand is thriving.  Among the characteristics that unite them are the advantages offered by their size – they are often more productive than smaller businesses and more innovative than the largest firms.

This engine room for the UK economy is also a national success story; only 27 of the league table are based in London and four of the top five ranked companies have their head offices outside London and the southeast.

With the economy on the mend and benefitting from falling energy prices, businesses have a greater opportunity to grow their profits, as well as their sales, by managing their cost bases while maintaining the prices they charge, strengthening margins and their long-term sustainability. Collectively the companies featuring on the league table have increased profits from £340m to £1.5bn over the last three years.

Overseas expansion is also a key element to a number of the success stories. One company that we work with is Tangle Teezer (No 14). Founded by hair colourist Shaun Pulfrey in 2005, it entered Holland first and China has become one of its top three overseas markets. Matt Lumb, chief executive, says overseas expansion has been "of huge importance" to the company's rapid growth.

He said: "We expect China to be our largest overseas account by the end of 2016. Many hairbrush manufacturers have their products made in China whereas we've done things completely differently as we manufacture everything in the UK and export to China. The Chinese consumer associates 'Made in GB' with quality and premium products, which certainly gave us the confidence to begin exporting there."

Tangle Teezer is not alone. Of the 23 manufacturers on the table many are selling their wares around the world. For instance, buses made by Glasgow's Alexander Dennis (No 99) transport 4m Hong Kong commuters each day. It is great to see our manufacturers making hay.

Britain's mid-market companies will look to the new government to provide the stability that will help them create the new jobs, wealth and tax receipts that the country needs. There was very little in last month's Budget in the way of support for mid-sized companies, particularly those exporting and whoever wins the General Election in May must ensure that Britain's tax regime does more to encourage exports, innovation and capital investment.

Hampshire-based Captec (No 93) is doing just that. Founded and run by Max Toti, the company takes existing computer technologies and 'ruggedises' them to protect them from extreme weather and unauthorised access. It credits its investment in R&D and marketing for helping to raise its profits and has set its sights on a stock market flotation.

Toti tells me: "I am excited by the prospect of scaling Captec for an IPO.  It's a scary journey, but my vision to build an international brand is my burning passion. Too often SMEs are frightened to be ambitious and to take a big leap. Sure, there are daunting skill gaps and the support is not there. More often than not, what's available is directed at supporting thousands of mediocre companies to go nowhere, rather than one good company to go somewhere substantial."

All those achieving a place on the league table this year have built substantial businesses and should be congratulated. I look forward to celebrating their success at the Profit Track 100 awards dinner in June.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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