What you need to know about the top executives of engineering support firm Babcock International Group PLC (LON: BAB).
Management can make all the difference to a company's success and thus its share price.
The best companies are those run by talented and experienced leaders with strong vested interests in the success of the business, held in check by a board with sound financial and business acumen. Some of the worst investments to hold are those run by executives collecting fat rewards as the underlying business goes to pot.
In this series, I'm assessing the boardrooms of companies within the FTSE 100 (UKX). I hope to separate the management teams that are worth following from those that are not. Today I am looking at Babcock (LSE: BAB), the outsourcing and engineering company that earns over half its sales from the Ministry of Defence.
Here are the key directors:
|Mike Turner||(non-exec) Chairman|
|Peter Rogers||Chief Executive|
|Bill Tame||Finance Director|
|Kevin Thomas||CEO, Support Services Division|
|Archie Bethel||CEO, Marine and Technology Division|
|John Davies||CEO, Defence and Security Division|
Mike Turner became chairman in 2008, shortly after stepping down as CEO of BAE Systems, a role he held from 2002. His executive career was spent exclusively with BAE, having joined predecessor company Hawker Sidley's apprenticeship scheme in 1966. He had previously been a non-executive of Babcock from 1996 until 2005, a period in which the business transformed itself from a manufacturing company to a service provider.
Peter Rogers joined Babcock as chief operating officer in 2002 and became CEO in 2003. A chartered accountant, he spent his early career with Ford Motor Company and then Courtaulds, where he was a main board director. Whilst Babcock had largely moved out of manufacturing before Mr Rogers took the helm, he has grown the company significantly, both organically and through acquisitions, including the purchase of VT Group.
During Mr Rogers' tenure Babcock's market cap has risen from £150m to £4bn, with revenues up from £400m to £3bn. The shares have increased nearly ten times.
Accountant, surveyor, engineer, lawyer
Finance director Bill Thame joined in 2002 as well. A chartered accountant, Mr Tame worked for Courtaulds for 15 years in various finance roles, before serving as finance director of Scapa group from 1999 to 2001.
A chartered surveyor, Kevin Thomas also joined Babcock in 2002, after 12 years in facilities management including Serco and local government. A chartered mechanical engineer, Archie Bethel joined in 2004. He had previously worked in engineering roles in the Scottish oil industry, and also as CEO of the Lanarkshire Development Agency. Both Mr Thomas and Mr Bethel stepped up to the main board of Babcock in 2010.
John Davies joined Babcock as CEO of the defence and security division in 2010 when it acquired VT Group, stepping up to the main board this year. Qualified as a lawyer, Mr Davies has worked exclusively in the defence industry, with BAE Systems and subsequently Bombardier Defence, which was acquired by VT Group in 2000.
There are five non-execs, giving the chairman the balance of power. They include Sir David Omand, former Director of GCHQ and UK Government Security and Intelligence Coordinator.
40% of shareholders objected to a new share bonus scheme in 2012, but generally Babcock's remuneration policies are uncontroversial.
I analyse management teams from five different angles to help work out a verdict. Here's my assessment:
|1. Reputation. Management CVs and track record.|
Good, exceptionally qualified execs.
|2. Performance. Success at the company.|
|3. Board Composition. Skills, experience, balance|
Slightly executive dominated.
|4. Remuneration. Fairness of pay, link to performance.|
|5. Directors’ Holdings, compared to their pay.|
CEO £8m-worth, FD £4m, Bethel & Thomas £1m.
Overall, Babcock scores 20 out of 25, a good result. Babcock's executives are especially well qualified for the markets it serves, whilst a former CEO of BAE and Director of GCHQ add weight to the board.
I've collated all my FTSE 100 boardroom verdicts on this summary page.
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> Tony owns shares in BAE Systems but no other shares mentioned in this article.