Back in March 1999, I reflected on the tripling in value of WSP's and White Young Green's share value, suggesting that much could be learned from analysing the year on year improvement in the turnover-tostaff ratio, gleaned from the NCE 's Consultant's File. Soon afterwards, we sold our White Young Green shares on the basis of some insider knowledge.
How wrong we were. WYG shares repeated their previous two years' performance. In WSP's case, I failed to follow my own advice and have watched those shares go from 140p to 480p; over the same four year period the FTSE 100 grew by 47%. Clearly, well managed engineering consultancies have a stock value with all the shareholders benefiting including, one hopes, many of the staff.
In today's knowledge economy, these staff shareholdings, whether the company is private or public, carry new tax advantages and can, for many, be a significant bonus. For my own practice, this was one of the major reasons for our recent incorporation.
There are a number of business ownership models ranging from partnerships through cooperative partnerships, along the John Lewis and Arup lines, to private businesses and public companies. Our own experience of partnership was that it was very successful up to a certain size, but it frustrated the devolution of ownership and profit share that were becoming the norm in modern businesses.
While the co-operative model addresses the latter, in not addressing the value of the business it failed to offer the advantage of share ownership.
Conversely, while public companies enjoy higher valuations than private firms, the issue of outside share ownership, as appreciated by Virgin and others, can have its drawbacks.
What businesses like engineering consultancies are recognising nowadays is that their prime asset is their staff.
To motivate them, management needs to give them a share not only in the profits of the business but also the increasing value of the business that their co-operative success delivers.
The Government has underpinned this with changes to the law which encourage and incentivise the devolution of company ownership. These changes have at their heart a progressive socialist agenda which will have a long term impact on society and the new economy.
For engineers, the implication is the possibility that at least 20% of their earnings over their careers may be derived from share benefits, some of it realisable tax free within the capital gains limits on an annual basis. For the business, this reduces salary demands, PAYE and National Insurance, while boosting the bottom line and consequently the share value.
In short, it has meant that, like the directors of the listed businesses I have quoted, we have all had to become a little bit more worldly wise and to join our love for the profession with a need to develop a financial intelligence.
In the case of Whitby Bird, this was coupled with the need to recruit a financial director.
The top drawer agency we went to were certain of one of the characteristics of such a role. . .
he/she would definitely have studied engineering.