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Elixirr International is one of very few management consultancies listed on the London Stock Exchange. Such companies typically avoid the public market because it is difficult to balance shareholder demands with those of partners, who are hungry for big pay packets and a say over how things are run.
Elixirr thinks it has found a way of striking this balance. Although cash remuneration is lower at the Aim-traded group than at industry giants like McKinsey and Bain, it encourages all consultants to build a stake in the company via share options schemes and an employee stock purchase plan. The latter involves staff investing a chunk of their salary in shares and the business matching a certain number of them.
Assuming Elixirr’s share price rises — a big assumption — these schemes can provide a generous boost to total remuneration.
For investors, however, share dilution is a worry. Elixirr has attempted to tackle this by buying stock back off company bigwigs rather than issuing more. This month, the group’s employee benefit trust purchased over 700,000 shares from directors and partners for 565p each — roughly £4mn in total. Together with stock bought from employees and other shareholders, this will ensure it has sufficient shares to satisfy options and to reward new partners, it said.
Chair Gavin Patterson, formerly chief executive of BT, sold £1mn worth of stock, as did executive director Ian Ferguson. Seven other directors and partners participated, but founder and chief executive Stephen Newton retained his 28 per cent stake.
In 2023, Elixirr grew its organic revenue by 15 per cent and operating profit rose by a third to £22.6mn. The environment for the consulting industry as a whole is tough, however, as clients delay projects and seek to cut costs. This is reflected in Elixirr’s share price, which has fallen by 7 per cent since the start of the year.
Directors respond to solid demand
Solid State shares are in demand. The company, which makes durable computers, servers and other electrical equipment designed for use in harsh environments, saw its share price tick up to hit an all-time high of 1,540p last month, from 655p at the start of 2020.
It’s achieved this by growing its top line over the past five years at a compound annual rate of 25 per cent, and its bottom line by 35 per cent. Over the same period, its cumulative total return to shareholders has compounded at 30 per cent a year.
The company, which counts the Ministry of Defence, Nato and GCHQ among its clients, has benefited from the uptick in global defence spending — security and defence customers contribute 44 per cent of its revenue.
Chief executive Gary Marsh and director John Macmichael have both cashed in a chunk of shares to “satisfy institutional demand”, the company said. Marsh sold almost £500,000 of shares and Macmichael over £420,000 worth. Following the sales, Marsh still holds over 250,000 shares, or a stake of around 2.2 per cent. Macmichael has a stake of 0.9 per cent.
Whether these institutions are buying in at the right time or not remains to be seen. The company’s order book dropped by 26 per cent in the year to March to £88.4mn, which it said was due to some destocking and a normalisation of demand in its components arm following an “exceptional” previous year. House broker Cavendish is forecasting that adjusted earnings per share will be around a third lower this year, meaning the shares currently trade at almost 23-times forecast earnings — well above their five-year average of 16 times.
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