FTAV Q&A: Lorna Tilbian

Lorna Tilbian co-founded Numis in 2001, where she ran the media investment banking franchise until her retirement in 2018. She was voted No.1 media analyst for 25 consecutive years.

In 2019, Tilbian and some former Numis colleagues founded Dowgate Capital, a corporate broker and adviser whose clients include Sir Martin Sorrell’s S4 Capital and National World, David Montgomery’s newspaper roll-up.

Tilbian is executive chair of Dowgate Capital and vice-chair of the Dowgate Group — which includes a wealth management company — as well as being on the boards of Rightmove, Premier Foods, ProVen VCT and Finsbury Growth & Income Trust. The transcript has been edited for clarity.

FTAV: So, how’s business?

Bad. In 40 years, this is the worst I’ve ever known it. We’re in the fourth year of a protracted bear market . . . it’s bad. There’s no question, it’s just bad.

In the old days, whenever we were up the creek, there were hopes of interest rates coming back rapidly. Well, between inflation and geopolitics there’s not much hope of that. We’ve got a government here that’s tax, spend and borrow. We’ve got a man in America who, god knows what he’s going to wake up and do tomorrow. We have uncertainty, and where’s the growth hiding? It’s bad.

Given a magic wand, what’s the one thing you would change about the London market?

The London market’s a function of the UK economy, and if the economy’s growing the market will grow. So don’t kill aspiration and don’t take away incentives. I would change incentives and tax. I certainly wouldn’t confiscate people’s pensions, and I wouldn’t put IHT on the non-doms.

Between income tax and IHT [the removal of pensions from preferential inheritance tax treatment from April 2027] people are facing 67 per cent tax. That’s confiscation. The lowest CGT doesn’t offset it. The rich aren’t busy trying to cash in their chips, they’re trying to grow them. What really matters is what you take at the end of the day. They don’t want their life’s work being funnelled back to somewhere that isn’t their homeland. So that’s what I’d do. Give people incentives to work hard, create growth and not take it off them at the end. Seems quite basic, doesn’t it?

Yep. Does the IPO venue still matter?

I think it does. When I started, people would be proud to be the CEO or the chairman of a PLC, until private equity came in and said ‘look, you can be richer than Croesus, with a complete lack of transparency. Why do you want to be accountable to the market?’

But certainly, some of the proven entrepreneurs I’ve backed employ the public markets because they feel they’ve done them well before, they’ve done them well again, they have a bit of a fan club or a following. I think the London market just has to reassert itself as a venue where you’re going to be treated well if you deliver.

Are there enough UK small-cap active fund managers left to keep the show on the road?

Well, that’s been the other thing. Back in the day, you’d go up to Glasgow, there’d be 20 fund managers. Now there are only about a dozen small-cap managers in the whole UK. The sector’s contracted, you’ve had all the redemptions, and now you’ve had all these takeovers but I can’t see where they’ve been reallocating the capital.

That’s what I’m really frightened about. Looking back, fund allocations were more than 50 per cent UK, before Gordon Brown [abolished pension fund] dividend tax credits. Now I think the pensions confiscation will be the same. They’ll look back in 20 years and there will be no pension funds, because the man in the street’s facing 67 per cent tax. What’s he going to do? He’s going to spend every last penny.

How’s Dowgate different to other smaller-company brokers?

Dowgate’s all about us doing what we really enjoyed. When we left Numis it had 220 corporate clients, average market cap £1.5bn. All the firms we’d left, I don’t want to call them factories . . . but the idea here was to have a tenth of that and be a mile deep rather than a mile wide. We’d back companies we’d believe in. We’d co-invest, so we were aligned, and we’d drink the soup we were making.

We’re backing proven entrepreneurs and have a team of analysts who’ve been round the block three or four times, so are able to spot the valuable nuggets. But against that we’ve built Dowgate Wealth, which has just over a couple of billion [pounds] under management. That gives us the resilience to never be forced into doing a deal we don’t want to do, just to pay the salaries and keep the lights on. It was the same at Numis. I only did things I believed in, which you can’t say about all banks. There’s nothing I backed that I wouldn’t put my granny into. I wasn’t in a hurry. I guess a lot of people are in a hurry.

Your own background and way into the City were atypical . . . [Born in Cyprus, a descendant of Armenian refugees, Tilbian was sent to boarding school in England aged 12. She went on to study History and English at Southampton University.]

I was a failed journalist! I wanted to work in Campaign. Haymarket [Media Group] hired me then said, ‘actually, we’ve got people writing, can you sell classified ads?’ I wanted to write stories!
[Former FT reporter] Fiona McEwan used to write half a page on marcomms [marketing and communications] every Thursday, in the days we had ads below. I saw that Sheppards & Chase was looking for an analyst to cover Audits of Great Britain, the big market research business, and Geers Gross, the first [UK] ad agency to float and then go to Madison Avenue.

So in the interview, they asked: ‘what margin do you think an ad agency should command?’ I said, if you tell me what a margin is, I’ll try and work backwards. The senior partner afterwards said to me: ‘we can teach you how to use a calculator, but we can’t teach you how to tell stories. You’re hired.’ And I’ve been telling stories for 40 years.

Your approach to being an analyst was never really about nailing the forecasts every quarter . . .

It was always about the investment case. That’s with words. The numbers just back it up. And don’t forget, when I started, spreadsheets were on graph paper and written in pencil. If you were going to change your bloody numbers every day you’d have to rub them all out and add them all up again. I was No.1 on the Institutional Investor survey because I never changed my numbers, and investors like that constant. It might’ve been laziness but I just couldn’t bear to rub everything out and recreate it all.

Has the skill of storytelling left the sell-side?

I think it started with Excel, and the analysts became masters of the universe and just put numbers, and project them forward into some unbelievable future. You don’t know what’s going to happen tomorrow yet you’re forecasting three years out, and that has undermined the storytelling because it’s built on sand.

If I had a good idea, the fund manager would give me the order — and it was 3.5 per cent, none of this five basis points or less — and your company would keep buying the position until they had everything they wanted. It all changed with Big Bang.

We hear often that Mifid fatally wounded sell-side research, and that AI is going to bury it. Do you agree with either of those statements?

I left [Numis] just before Mifid II, because the writing was on the wall in ‘18. I was hoping that things would now change with the review [Rachel Kent’s Investment Research review published in 2023]. But it looks like it’s CSA, which means small-cap research is dead and buried.

My friend Katie Potts [of Herald Investment Management] reminds me that she was buying Microsoft when it was at a $58mn market cap, it’s never raised a penny since. You’re not going to be able to do that because no one is going to be able to write on the $58mn market-cap companies. So I think they’ve killed it. And as for AI, I guess it’s going to be robots talking to other robots? The robots are going to write the research and the other robots are going to buy it.

Is there anything you miss about Numis?

Not really. After 18 years I think I’d got my fill.

The day we started, I was quoted by the FT on Mariah Carey’s $80mn contract with EMI, saying it wasn’t a good commercial decision. And I remember it said ‘Lorna Tilbian, of the minuscule bank Numis’. I took it as a compliment! No one even knew we existed. Then, at the very end, 18 years later, there was an article saying I was leaving ‘the pre-eminent bank’ and I thought, you know what? My work is done. After pre-eminent, the only way is down.

So no. I don’t miss it, but was it the best business journey of my life. No one thought we could be the Cazenove of our generation, but we were getting some respect by the time we’d finished.

Do you think Deutsche Bank understood the business they were buying, and do you think they understand it now? [Deutsche bought Numis for £410mn in 2023.]

Gosh . . . I think it’s difficult because over the years I’ve watched them buy Morgan Grenfell, I watched them buy Alex Brown. They bought some great brands. I don’t know if they were the best custodians to these great brands, but I guess they wanted entry to relationships and corporates.

Germans don’t have a great record buying UK brokers. Weren’t you at Panmure Gordon when WestLB took over?

I was! I’d been the first female director of SG Warburg, so was very proud of that. Then they got taken over by Swiss Bank and the culture changed overnight.

So we filtered the four brokers that survived the great crash of ‘74 in which we could make a difference. One was Hoare Govett, but at the time it was owned by Security Pacific, a bunch of west coast guys. Cazenove was Cazenove, who said you might be rated but we won’t pay you because it’s all about us. Warburg owned Rowe & Pitman. That left good old Panmure, which at the time was owned by NationsBank of North Carolina. But they became Bank of America, who made them sell it to WestLB, who decided they were going to be the new Goldman . . .

Then suddenly we got these 120 bag carriers from UBS, who by then had reversed into Swiss Bank, all on these big guarantees. It was awful. We had to get out.

This all sounds a bit like newspapers. Is media in any better a state than broking?

We’re in a similar situation. But the more social media and fake news you get, the proper curated, trusted and authoritative media will have more value.

Were you involved in Dowgate’s buyout of Johnston Press [publisher of local papers including The Scotsman and the Yorkshire Post] from administration?

We did that the same day as Boris did Brexit, December 2020, and we had better results. Bought it for £10mn, and we made £10mn out of it every year since.

In a funny sort of way, Covid made everyone realise that we all live in a 5.7 mile radius. And we were going online because we were stuck at home, it has created a real opportunity. [Publishers] are very aware now that now the platforms have nicked the advertising, we can’t let AI nick the content.

I like my mental health, so I don’t do social media. I still read curated, proper stuff. And when I retire I’ll want to know everything in my local patch. I think there’s a real place for it.

[National World took control of the Johnston Press assets from the buyout consortium in 2022. Media Concierge agreed to buy National World for £65mn earlier this year.]

What’s the thing you wish you’d known 30 years ago?

Ugh. If I’d known it, it would’ve only held me back. I had so many wise heads saying ‘what are you doing, going to Raphael Zorn Hemsley’s bucket shop?’ [Fellow co-founder and former CEO Oliver Hemsley grew Numis from his quoted stockbroking business, Raphael Zorn Hemsley.]

There’s a time in our industry that you have to retire, because you’ve seen it all before. You can’t think: ‘oh, Klarna’s worth $45bn’ . . . You become a liability to a business. The less you know, the better you are at the beginning.

And finally, any tips for Wimbledon?