A splash in the Financial Times today is all the confirmation needed that the publicity skills of Peter Scott, chairman and joint-chief executive of marketing services group Engine Group, remain as undimmed by time as his financial engineering expertise.
Taken at face value, it’s a non-story cleverly placed at the nether-end of the silly season. But what an interesting non-story. So, Engine won’t be launching itself onto the market this autumn? Struth, knock me sideways with a feather! Scott and his City audience will have known that an IPO wasn’t a goer this year by May at the latest; and the unfortunate Ocado experience should have sobered up the precious few bulls who remained.
The subtext of what Scott is saying is very different. He still very much intends to go to market – at the first moment conditions will allow. City commentators take that to mean next spring: for the moment, fears of a double-dip recession have been banished and some pundits are predicting the FTSE 100 will coast to 6000 by the year end. Here, in the FT, we can read Scott’s warm-up report for a spring launch, favourably comparing Engine’s performance with similarly sized Chime (already quoted), and delivering some knockabout stuff at WPP’s and Aegis’s expense (easy to do, because they are bigger, and their growth rates correspondingly more sluggish).
Scott, however, is treading a tightrope. Engine’s momentum is fueled by debt, which it must begin to repay by 2013. At one time he was clearly hoping to acquire a media buyer (Booth Lockett Makin, as it happened), which would offer better cash generation and richer margins. Walker Media, for example, is a major part of the M&C Saatchi success story. But Engine has been less lucky: decent media independents these days are few and far between. So the sooner Engine can tap into public market funds the better.
Not only that, nearly 80% of Engine is owned by its employees, who will be keenly following Scott’s every market utterance: their fortune depends upon his hunch being right. They will not wish to believe they have delivered themselves into the hands of a latter-day Pied Piper of Hamlin. A trade sale, with a lowly valuation attached, does not even bear thinking about.
No pressure, then, Peter.
UPDATE 16/12/10: It’s now clear I was too cynical in dismissing Peter Scott’s gloom over the prospects of an Engine IPO as verbal legerdemain. The group has gone on to plug its medium-term debt gap by raising £32.5m from private equity fund HIG Capital. Quite a lot of the initial proceeds (£22.5m in fact) is being used to buy back shares from existing holders. Not entirely coincidentally, a number of them – including Engine chairman Robin Wight, Adele Biss, Leon Jaume, Ed Escandarian and Julian Hough – have stepped down from the main board. That will relieve some of the pressure on Scott – for now. More on Scott’s Plan B can be found at Bob Willott’s Marketing Services Financial Intelligence.