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Monday 20th June 2005
Shaking up your board
Floating your business means you will have new investors to satisfy, public forecasts to meet and relationships with advisers, regulators and the press to manage. These changes may well mean you need to look at your management team and directors.
Accident Exchange, which hires luxury cars to drivers involved in accidents, joined AIM in April 2004. Its shares have risen nearly 700 per cent since then, after earnings doubled over the past year. The company was founded by chief executive Steve Evans, who retains a 51 per cent stake in the business, but former Tory Trade Secretary Lord Young of Graffham, himself a serial entrepreneur, occupies the chairman’s seat.
This is in line with recommended practice, although Evans doesn’t believe the City is that bothered by such guidelines. ‘I think the strength and reputation of our chairman helps answer any questions before they arise. But the strength of the share price was solely down to our ratcheted forecasts and delivering against those expectations.’
Non-executive directors can be useful to a listed company though, admits Evans. ‘The strength of the non-execs helps convince people of the credibility of the message. As well as Lord Young, we benefit from the fact Jock Worsley, another non-exec, is a former President of the Institute of Chartered Accountants.’
Accident Exchange’s other non-executive director is David Lees, an accountant with bags of public company experience who also chairs Deal Group Media and acts as finance director of Triple Plate Junction.
‘David and Jock were brought in to strengthen the board during what we knew would be a challenging commercial time in a new and more rigorous environment,’ recounts Evans. ‘And together with Lord Young, our chairman, the non-execs represent a significant counterbalance to my 51 per cent equity position.’ But despite all these heavyweights, Evans admits that ‘it’s really business performance that drives the markets perception of us.’
Sort out your executive team
Even before you worry about non-executive directors though, Phil Adams, managing director of investment bank Altium Capital, believes: ‘The most important thing is to get your management team sorted out, specifically your chief executive and finance director.’
He comes across many private businesses, particularly those run by ‘strong founders’, that have been able to manage without a full-time finance person. A significant number of quoted companies also survive without a dedicated finance director.
Business XL’s recent survey of all 1,098 AIM companies, as of the end of March, found that 303 (27.6 per cent) had no finance director. This may be because a significant number of AIM companies are “cash shells” with no trading business or are ventures still at an early stage of development.
Budding factoring company Ultimate Finance, which joined AIM in June 2002, was like this. ‘Brian Sumner, who had built up two similar businesses in this space and sold them on, came to us and we decided to back him,’ says Richard Lee of broker WH Ireland. ‘However, at that stage the business was very young and only had a financial controller. So our own finance director worked part time for the business until the financial controller could step up to that role.’
Lee admits this is quite rare practice though. Because of the extra demands of maintaining investor relations and other regulatory aspects of being a quoted company, the founder will probably not have time to look after financial matters as well. So, appointing a finance director might be the first step to consider.
Christopher Spink
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