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CENTRAL SOUTH MID MARKET JOINT VENTURES STRATEGY
Central South mid market – going for growth?
Britain may have endured the longest recession in the G7, but we are now bouncing back strongly, and this is very evident within the resilient Central South mid-market
BDO’s analysis of strongly growing companies in the region indicates that, regardless of sector, growth is being driven by these medium-sized businesses.
Growth is coming from grasping opportunities in national and regional markets, international expansion, from innovation, and also from the recovering M&A market.
Confidence is also helping to drive this trend. BDO’s recent Business Trends report revealed that business optimism is at its highest point since the coalition government came into power.
Ironically, part of that optimism has come about because the recession caused companies to get to know themselves better; to seek professional advice; to truly understand their core strengths
and costs; to realign their operations and objectives.
Critically, there are also far more opportunities to gain financial support for growth. The banking environment, private equity funders, and the stock markets, both AIM and the main market, are now looking increasingly supportive of funding growth and deal activity.
It’s clear that Central South mid- market companies have become leaner and their management teams more focused over recent years, and are now positioned to take advantage of the upswing. Some are doing it, achieving growth, whilst others recognise they need to move into new, potentially uncertain, territory.
As Helen O’Kane (pictured), corporate finance director at BDO Southampton, explains: “What is noticeable in 2014 is the increasing number of local businesses who want to discuss how they can grow more rapidly.
“The key for any business is to get the right advice on making a critical evaluation of what will work for them, whether that is M&A or R&D, recruitment of talent or expansion into international markets, and maybe a mix of several such aspects.
“It is important to consider all the options and the related requirements and implications; which may include the most appropriate form of funding and related timescales, costs, tax, structuring, working capital, reporting requirements, etc.“
As part of this focus on the Central South mid-market, we have identified the leading companies in the region who are already achieving sustained profit growth. We asked two of these top growth companies, to tell us how they are doing it …
DRILLING SYSTEMS: . .. successful ’state-of-the-ART’ training
Based at Bournemouth Airport, Drilling Systems designs, develops and manufactures innovative simulation training technology for the international oil, gas and crane industry.
Profitable growth: Turnover: £8 million to £13.4m (2010-2012 figures). Adjusted profit: compound annual growth rate (CAGR) 79% (2010-2012).
Staff: Increase from 25 to 70 over past 10 years.
History: Privately-owned company founded in 1988 by Julian Jones, who having worked in the oil and gas industry “saw a gap in the market.“
The ’ART’ of Drilling Systems is in producing advanced rig technology training solutions using simulation equipment; giving trainee drilling, rig and crane operators “the look and feel of their work“ in countless scenarios, without the risks.
Robin Carter, joint MD (commercial) admits it is a specialist market, but that doesn’t make it any less competitive. “The product we supply is fairly niche, but the customer base is global and represents
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various different levels, from sole-trader trainers and technical institutes to household name multinationals and state oil companies.“
Drilling Systems currently supplies leading edge simulation technology, ranging from PC-based solutions costing thousands to full-size ART simulators at six-figure prices, to customers in 60 countries – 90% of its products are exported.
Software upgrades and new scenarios provide valuable repeat business. Contracts for dedicated 24/7 technical support ensures client operational downtime is kept to a minimum and provide another income stream for the company.
Profitable growth has been achieved for various reasons. Firstly, over its 25 years in business Drilling Systems has established a reputation for proven quality products and reliable service, which has resulted in a steady increase in its customer base.
It has also benefited from the increasing requirement to ensure on-site operators are properly trained, driven by world events such as the BP Macondo Deepwater Horizon oil spill disaster in the Gulf of Mexico in 2010.
Here, the important factor is that Drilling Systems provides learning solutions that enable competency assessment, by meeting self- regulated industry standards certificated by the internationally recognised IADC and IWCF industry forums. “Since Macondo, there has been a greater need for the industry to demonstrate its quality of training and regard for safety,“ says Carter.
Fresh work for Drilling Systems has also come from changes in areas of exploration and types of drilling rigs, each requiring new simulation scenarios.
Despite, its impressive results over the past three to four years, Drilling Systems is not complacent about its position as a global market leader in a niche sector. Profits continue to be invested back into the company and further market opportunities are being exploited. Simulation for crane operation on oil-rigs, for example, was developed by Drilling Systems around the turn of the millennium. Under its KraneSIM range, the company has recently developed a lightweight simulator that can be folded into a large suitcase.
Continued ... THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – JUNE 2014
INCREASE GROWTH
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