Founded as an African trading outpost by George Paterson and George Zochonis in 1879, toiletries manufacturer PZ Cussons is still 29 per cent owned by the Zochonis family, while chairman Anthony Green, nephew of Sir John Zochonis, remains chairman. He has announced plans to step down this year, but has followed family business best practice and recruited very capable outside talent over the years. The management team has kept the business on an upward trajectory through the downturn, despite the increased tendency of consumers to trade down to supermarket own-label products, by investing heavily in manufacturing and product development. Its Nigerian operation offers exposure to one of the world’s fastest growing and underdeveloped economies.
With annual sales of nearly £10bn and a market cap of £8bn, food producer and retailer ABF is a true giant among UK family businesses. The owner of power-brands from Primark to Patak's and leading sugar and agricultural products producer is still 55 per cent owned by Ireland's Weston family, who can trace their ownership of the business back to 1935 when the business was founded by Willard Garfield Weston. His grandson, George Weston, is now chief executive, and his brother Guy Weston is chairman of Wittington Investments, which hold the majority shareholding in ABF as well as the family's other interests such as Fortnum and Mason. The success of Primark and stabilising trading in its food businesses has seen the shares climb 68 per cent in the past year.
Dairies have long been at the heart of British society – my own village, for example, has expanded around the former dairy owned by Essex peer Lord Rayleigh. Although his business has long since passed into the hands of new owners, Denmark's Arla, the UK's largest listed dairy business, Robert Wiseman, is in fact still largely family owned and run. The Scottish group, founded by Sir Robert Wiseman in 1947, has grown to deliver 30 per cent of UK milk. It does so very efficiently, too, thanks to £430m of investment in its dairies and distribution operation since 1994 – but prudential financial management means net debt stands at just £25m, in stark contrast to some industry rivals. The Wiseman family still owns a third of the company, while the founder's sons, Alan and Robert Wiseman, are chairman and chief executive respectively.
R Goodwin & Sons Engineers was founded by Ralph Goodwin and his family in 1883 – 127 years later and the founding family still owns 53 per cent of the group, and three of the five-strong board are blood relations. The steel casting business has been a publicly listed company since 1958, and the highly specialised nature of its expertise means its products are used in activities such as shipbuilding, nuclear power and civil infrastructure. That's translated into pretty spectacular returns over the years. An investment 20 years ago would have returned 1,900 per cent in absolute terms, and tight cash control has helped dividends increase steadily over the years, culminating in a bumper special dividend in 2009.
Unfortunately for us, we picked Renishaw as one of our tips of the year in 2009, just before the global manufacturing economy went into meltdown. Its precision measuring equipment is used extensively in the automotive industry, which saw global car production slump last year. Renishaw – still run and 37 per cent owned by founder Dr David McMurty – provides a neat example of the fact that not even family businesses are immune to wider economic pressures; it had to cut back staff working hours, and was forced to make some redundancies. But financial prudence over the years meant ultimately Renishaw has come out of the other side of the slump strongly – a net cash position meant it had no financing issues, and its shares have recovered 177 per cent since hitting March 2009 lows.
Bill Adderley and his wife founded out-of-town home furnishings group Dunelm back in 1979 from a market stall in Leicester, but it took more than a quarter of a century before the family decided to float the business. After a shaky start to public life which saw the shares drift below their offer price, it’s been uphill all the way since – the shares have nearly quadrupled since their mid-2008 lows, and the group opened its hundredth Dunelm Mill superstore last December, halfway towards its nationwide target. Like many business with strong family interests, prudent financial management is the order of the day at Dunelm, which is 34 per cent owned by its founders – despite its rapid expansion and recent special dividend distribution the group still has a healthy chunk of cash in the bank.
Family companies data
| Name | TIDM | Family Holding (%) | Price | Market Cap | Performance since flotation |
|---|---|---|---|---|---|
| Ted Baker | TBK | 40 | 517p | £215m | 270% |
| Renishaw | RSW | 37 | 688p | £501m | 450% |
| PZ Cussons | PZC | 29 | 282p | £1.21bn | 903% |
| Associated Brit. Foods | ABF | 55 | 1023p | £8.1bn | 535% |
| Dunelm | DNLM | 34 | 392p | £787m | 145% |
| SuperGroup | SGP | 33 | 605p | £478m | 21% |
| Goodwin | GDWN | 53 | 1178p | £85m | 2256% |
| Robert Wiseman | RWD | 34 | 470p | £331m | 370% |
| N Brown | BWNG | 36 | 274p | £764m | 552% |
Happy Birthday
Investors Chronicle is 150 years old this year, which makes us just a year younger than catalogue and internet clothing retailer N Brown. Although the company is no longer owned by the descendents of its founder, James David Williams, it passed into the hands of another controlling family, the Alliances, in 1963. Life peer Lord Alliance of Manchester remains non-executive chairman while his brother, Nigel Alliance, is a non-executive – between them they own 36 per cent of the shares. The business caters to the outsized market, and the expanding waistlines of the UK population means business is booming – the shares have climbed more than 500 per cent in the last 20 years, including a 20 per cent gain a month ago.
Family fashions
Fashion retail has always been an industry centred around a few influential individuals, so it should come as no surprise to see many listed retail groups which are still tightly controlled by their founders.
The newest addition to this pack is SuperGroup, the fashion chain floated in March. The group is still a third owned and run by its founder, Julian Dunkerton, who launched the business from a market stall in Cheltenham in 1985. His avoidance of leverage and calculated risk-taking is typical of family enterprises, and is part of the reason why the City snapped up his IPO, when that of heavily geared rival New Look struggled.
No doubt Mr Dunkerton will be hoping to emulate the success of Ted Baker, run by chief executive Ray Kelvin, who still owns 40 per cent of the business he founded in 1988. Its shares have climbed 270 per cent since it floated in the mid-1990s, and part of that success must surely be down to Kelvin's 'family' approach to management. In a rare interview with trade journal Retail Week last year, he revealed his simple but effective ethos of building a tight team and a trusted network of suppliers.
One family firm that's lost its way over the years is French Connection. Founded by Stephen Marks in 1972, the company rose to global prominence in the late 1990s as a result of the infamous FCUK branding campaign. But its shares have plummeted since hitting highs of 485p in the mid 1990s – more than 10 times the current price – putting a dent in the fortune of Mr Marks, who holds 42 per cent of the shares and remains chairman. But it does offer recovery potential. The company has been withdrawing from underperforming overseas markets, and will sell the loss-making Nicole Farhi brand, the eponymous label run by Mr Marks' former wife.
Unhappy families
Of course, like any market segment, there are good and bad family businesses. And, as anyone who's ever found themselves caught up in a family feud can testify, if there are problems they can often become utterly intractable.
Take chocolatier Thorntons, for example, which has seen its share price melt away since flotation.Peter Thornton, one of the four sons of the founding brothers, describes the dysfunctional relationships that saw most of the family forced out over the years. None of the family is now involved in the running of the company, or has any major shareholdings.
And sometimes, founding shareholders still involved in large listed family businesses can take a glib approach to corporate governance. Strangely, the UK's sportswear industry has proved a particularly contentious hotspot for such issues. Sports Direct, in particular, 71 per cent controlled by founder Mike Ashley, has frequently invoked the wrath of the City for his disregard for governance guidelines.
Extended families: the European landscape
Unlike the UK, Germany has managed to retain a significant manufacturing base in the face of cheap competition from the Far East. That's partly thanks to the presence of a large group of small and medium-sized family enterprises, known as the Mittelstand. These companies employ more than two-thirds of Germany's working population, and account for 41.5 per cent of its turnover, according to the Institut für Mittelstandsforschung. The Mittelstand is seen by many as one of the reasons why Germany was better able to withstand the ravages of the credit crisis. Its conservative management style and long-term approach meant it did not need to slash jobs during the downturn, because business would eventually recover and those skills were best retained in the business.
In fact, family businesses are an important feature of the European business landscape. Overall, there may be a lower proportion than in the UK, but there is a much more significant base of large family enterprises. The largest of the UK's family business, ABF, is dwarfed by some of Europe's family giants, which include BMW in Germany and companies such as Lagardere, LVMH and L'Oreal in France.
That's partly due to the influence of financial services within the UK economy, which means that there is a much greater market for corporate control than elsewhere in Europe.
That means family businesses coming to market to seek funding for growth are also much more likely to be taken over. According to research from the London Business School, family firms in the UK have over the past 10 years proved more than twice as likely to cede control of the business to outside ownership. "In the UK, family firms naturally evolve into widely-held firms as they grow bigger and older. This does not happen in Continental Europe: there, keeping control is priority even at cost of losing growth opportunities. The default choice for the typical long-term successful family business is not to go to the market," says Mr Gordon.
