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Out of sight, out of mind or powerhouse in its own right? John Edwards, director at Wenham Major, considers the prospects for the smaller quoted company sector in the West Midlands.

Byline: John Edwards

Although directors of smaller quoted companies tend, by nature, to be in control of operational issues, they often need to rely on their advisors for assistance in dealing with the constantly changing regulatory environment in which they operate.

By their nature, SQCs are generally highly entrepreneurial and often lack the degree of in house expertise of the larger listed companies.

The Quoted Companies Alliance's remit is to lobby on behalf of smaller quoted companies, to promote the sector within the investment community, at the same time offering advice and information on the regulatory aspects of running a quoted company and providing a forum for such companies to network with one another and share their experiences.

Its member companies are listed in London on the main list, Aim or the Plus Markets, but are outside the FTSE 350.

I have sat on the QCA's accounting standards committee for a number of years, and have benefited from a unique insight into the workings of this fascinating business sector.

Not only through discussing issues of concern with members, but also through a series of regular meetings with those that determine the legislative framework in within which SCQs have to operate, including the IASB, ASB, FRC, DTI and European standard setters.

It is critical that regional contributors to the work of QCA provide reminders to the wider business community that QCA's members and its constituents are represented across the UK and not only in the South-east.

One of the criticisms sometimes unfairly levelled at the organisation, is that it is Londoncentric and does not have a regional perspective.

To give it its due, QCA does recognise the importance of engaging with constituents across the UK and has tried with varying success to engage Midlands SQCs through a variety of events.

Earlier this month, Wenham Major hosted a round table lunch at Opus restaurant in Birmingham where QCA chief executive John Pierce met with directors from ten West Midlands-based smaller quoted companies.

It was a a chance to listen at first hand to their thoughts and concerns, and to understand how the QCA might support them to ensure they continue to thrive and attract the levels of investment they require.

The discussion was chaired by John Crabtree, executive chairman of Investbx, and was joined by Sue Summers, chief executive of Investbx, the first regional virtual stock exchange.

The Investbx brief is to assist in plugging a widely acknowledged equity gap, enabling businesses to raise equity finance of up to pounds 2 million by connecting them with investors.

The discussion was based on a central theme in order to provide John Pierce with some specific points to address: Midlands plc - out of sight, out of mind or a powerhouse in its own right?

A number of common threads emerged from a lively discussion over lunch.

Many of the views will not be of surprise to the advisor community but served to demonstrate the tension experienced by entrepreneurs who find themselves torn between developing their businesses and developing relationships with the investment community.

Furthermore, it was clear that, despite close geographical proximity, many felt that the City of London and the West Midlands were, in terms of perception, as far apart as they had ever been.

Key points were:

Flotation is a huge step for any company to take and if company motivation to float is solely to raise capital, this is a costly and time-consuming way to raise finance. More companies are going to the markets to raise funding because venture capitalists are becoming more risk averse. The tax framework needs to be redressed to respond to these constraints.

Proactive relations with the City remain essential to raising capital, but building up an investment following is hard work when conducted from the Midlands. Some companies reluctantly believed that they had to use London financial PR agencies to help support capital raising objectives.

Midlands directors do not have the time to spend weeks on end in London meetings with stockbrokers and other potential investors, and need to limit such activities to one or two weeks' in the space of year, usually at times when the company has made key announcements. The directors who attended our lunch felt that regional marketing efforts were as important as efforts in the capital city. The Birmingham Post and Birmingham Mail were mentioned as being important vehicles for announcing corporate news, as many Midlands smaller quoted companies have built up a loyal investment following in their own geographic locations.

A lot could be learned from US counterparts, who are light years ahead of the UK not only in terms of investment PR, deploying efficiency tools such as online investment conference calls and so-called webinars but also in their attitude to risk and the availability of start-up funding.

Aim is the envy of the European investment community- both the French and the Germans wished they had started their on alternative investment markets many years ago and so we shouldn't beat ourselves up about its shortcoming.

There has been a perceived decline in the number of brokers specifically serving the Midlands' investment community, with organisation such as Albert E Sharpe having disappeared from the investment landscape.

A reluctant admission, despite misgivings over perceived independence, that independently commissioned research plays an important role in generating interest in investment.

Competition in the shape of Investbx is welcomed as it provides access to new investment opportunities. At the same time, it offers companies a less onerous, more innovative market environment compared to the longer established markets, at a vital stage of their development. Investbx will serve as a pipeline for companies to markets like Aim.

It is clear that there is a thriving West Midlands SQC sector that is keen to retain its regional identity despite the complications of having to promote itself both regionally and nationally through the City of London.

It was also apparent that, by and large, participants felt well served by the region's advisors both in terms of choice and quality of advice offered.

While it is early days, Investbx brings a much-needed new dimension to the investment landscape at a time when the equity gap could otherwise have thwart the growth potential of our regional rising stars.

Finally, I would urge any Midlands SQC not yet a member of QCA to join. Lobbying organisations like QCA depend on the weight of members to make a mark.

QCA chief executive John Pierce has done an enormous amount to raise the profile of the UK SQC both at home and abroad to such an extent that the organisation's views are widely canvassed from government to national press. Increasing the proportion of Midlands members can only be of benefit to Midlands business.


Wenham Major smaller quoted company lunch: left to right are chair of discussion John Crabtree, Wenham Major's John Edwards, who sits on the accounting standards committee of the QCA, and alliance chief executive John Pierce at Opus restaurant in Birmingham
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Title Annotation:Features
Publication:The Birmingham Post (England)
Date:Oct 18, 2007
Previous Article:Safeguarding future of our SQCs; Stamp duty - time for a change? John Pierce, chief executive of the Quoted Companies Alliance, argues that it is...
Next Article:Impact of credit crunch on Aim IPOs; WH Ireland executive director Tim Cofman considers prospects for smaller companies thinking about going public.

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