Brunel famously grumbled that he made more money out of his shares in projects on which he worked, than through the fees he earned. This could perhaps also be true for some in engineering today.
The Consultants' File reveals a wealth of information that the market analysts in the City will digest along with company reports in anticipation of spotting a winner. In the office we use The Consultants' File to collate a table of information on a range of companies.
From this, among other things, we calculate their turnover per head by averaging the number of staff through the year and dividing it into the declared turnover. We can then benchmark ourselves alongside our competitors and identify the rising stars. I imagine that everybody else must do the same.
Every Christmas for the last few years I've taken home a bundle of annual reports and looked at how listed engineering companies were performing. Two or three years ago I identified Ernest Green as a company that was solvent, had potential and also offered a private company an easy entry to the stock market in the form of a reverse takeover.
Immediately on returning to work we bought a number of their shares, knowing at least that if this became public there was a good chance of a rise in the share price. Shortly afterwards the chief executive bought us a very good supper, which I have yet to return, and not long after the shares tripled in value. We had got it right as they were taken over by White Young to become White Young Green.
Last year I took a similar package home and realised that WSP were seriously undervalued. I knew from The Consultants' File that they had managed to move upmarket, substantially increasing their turnover per head from the previous year. However, despite a number of conversations with their directors that confirmed my reading of them, I failed to buy any shares. Since then they too tripled in value.
There is nothing arcane about this. Turnover per head is one of the critical ways of evaluating a company's performance. However, one has to be careful in applying it as some companies post a turnover figure that lags considerably behind the number of staff they report. Nonetheless, there are some worrying statistics within The Consultants' File which show that, while the best achieve just over £60,000 per head, some are lower than £30,000 per head.
Clearly the former may be investing in IT and subcontracting much low value work, while the latter may be concentrating on just this sort of work, which may account for the spread. But for the potential investor and the budding Brunel the low turnover carries a potential health warning. The clever money must be on the high value firms, which, incidentally, probably also carry the best job prospects and salaries.
While we wonder how we compare with each other it would also be interesting to know the average for the industry and compare it with other professions, such as architecture. We may be pleasantly surprised by the result.
Mark Whitby is a partner at Whitby Bird & Partners