Off at a Tangent or seeking Parity?
The parallels are eerie. Both companies, Tangent plc and Parity plc are AIM listed, both have single digit share prices, which resolutely refuse to do anything positive, and market capitalisations are £9M and £9.5m respectively. They also have dominant figures (indeed industry grandees) at the top of the organisations – at Tangent Michael Green (he of Carlton fame) may be listed as a non-executive chairman but wields significant power as might be expected from someone who owns 29.9 per cent of the stock – as much as the 4 largest institutional shareholders put together.
At Parity Philip Swinstead, who founded the business, left and then rejoined in 2010 is currently the executive chairman, and the enormous influence he wields is backed by a 13 per cent shareholding.
However the other common link for both businesses is that they have played out, very publicly, ill-fated forays into the marketing services sector. Tangent, whose core business has a print heritage, acquired Snowball as a direct, digital and CRM agency in 2009.
In 2013 they hired Steve Grout as CEO – someone with strong agency credentials gained from time at TBCH, Rapp & Carlson to ramp up the company performance and growth. At Parity the vehicle for a move away from their IT roots was initially via Parity Digital, which became a more turbocharged entity, Supercommunications, headed by none other than Andy Law (left) architect of that great disruptive agency St Lukes.
The final link between the two businesses however is that it has not gone well for either initiative, leading Parity to abandon their aspirations in digital – Supercommunications will remain but with a niche focus on virtual reality technology and big data. A stock market announcement in the last few days clearly demonstrated Swinstead’s frustration at having to take this step. Tangent has not abandoned its digital aspirations, but has recently been forced to issue a profits warning, with profits at Snowball likely to be £500,000 below market expectations. As a consequence Steve Grout was removed and Tim Green, nephew of Michael has taken over as CEO.
It is not impossible for companies operating in traditional sectors to make a successful push into digital markets. St Ives has proved by a sure-footed and highly targeted acquisition program that shareholders can be rewarded and a cohesive division established. In the case of both Tangent and Parity the hiring of smart operators with proven track records as CEOs could have worked. However the fact that as undercapitalised business, operating in ill-liquid markets, they were unable to support their strategic vision, means that anyone following this path needs to operate in a very smart fashion indeed to have a chance of succeeding.
Gordon Montgomery is head of executive search at advertising and media consultancy Ciesco.