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A double-edged sword
Page 26
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Operating in a new arena provides both companies, to a certain extent, with access to finance that can help them grow and consolidate as they see fit.
That funding can also have an impact on their long-term strategies since shareholders demand to see short-term results. Sarah Chambers, Datamonitor's senior analyst, explains: The companies are exposed to perceptions in the stock market, whereas, if you are privately owned, you can consider long-term goals as a high priority.'
But does their recent substantial growth reflect a need to keep up with — and compete against — huge multinationals such as DHL while making sure they're not the focus of a takeover target?
"It's not the only way to go about surviving," answers Simon Hodson, Datamonitor's director. "The trend is, without a doubt, towards consolidation. Small independent operators will find it much harder to survive; they will go out of business or be swallowed up. But big isn't always beautiful. There is space for small operators," Plimsoll Publishing's senior analyst David Pattison agrees, but adds there is a growing need to offer value-added or specialist services. "If a company is ambitious, it needs to take risks, but it must be able to finance those risks," he says. Hodson thinks Stobart's and Wincanton's main risk is overstretching themselves with debt. If they do, they will be forced to go cap-in-hand to shareholders, who could be prepared to fund future growth, but less keen to finance historical debt.
However, Hodson warns there is always risk, no matter the size of the company. "They are no more protected than they were previously" he points out. 'The businesses are an attractive prospect for an investor prepared to relinquish the high debt." None of the Stobart Group's or Wincanton's major shareholders was willing to comment.