ALEX BRUMMER: When apologies from proprietors who have grown mega-rich on the back of innocent savers fall short
The air is fizzing with apologies at present. Neil Woodford has apologised again to clients in his shrunken and temporarily closed Woodford Equity Income fund.
He told independent financial advisers that he is ‘sorry for putting clients in this situation’.
Luke Johnson, executive chairman of Patisserie Valerie, expresses shock and disbelief at what happened when the firm blew up and tells of how he flirted with the possibility of moving overseas.
Alex Brummer says ‘the air is fizzing with apologies at present’, with Neil Woodford apologising again to clients in his temporarily closed Woodford Equity Income fund
Things do go wrong in business, but when the proprietors in those enterprises have grown mega-rich on the back of public shareholders and innocent savers, it is hard to have much sympathy.
Johnson wasn’t a spectator at Pat Val, which collapsed into administration – he was executive chairman and his hand-picked colleagues ran the show. In his 12 years at the helm, Johnson extracted £20 million in dividends. Shareholders, employees and suppliers were left hanging out to dry.
Woodford and his colleague Craig Newman have earned £97.7 million in dividends between them over the past five years. By the standards of ordinary investors, these are huge, incomprehensible sums. Moreover, the reverberations of poor governance standards at the Woodford funds has spread far and wide.
It badly damaged the shares and reputations of Hargreaves Lansdown and St James’s Place. It shattered the confidence of investors who supported the idea of backing UK start-ups and innovation through Patient Capital only to find it became a dumping ground for waste products from other funds.
Doubtless it has been a terrible period for Johnson, but not so half as difficult for the losers at Pat Val and minority holders in other Johnson enterprises such as Brighton Pier, where the shares capsized. They might find reading Johnson’s business column in a national newspaper hard to swallow.
It is a reminder of how parts of the press dubbed Sir Philip Green ‘King of the High Street’ as he shipped £1.3 billion in dividends offshore. Happily, some £220 million is coming back from Lady Green to help Arcadia being spared from the knacker’s yard.
As well as suspending fees to savers, Woodford could consider putting some personal liquidity into the funds. Eventually he should sack himself, after a debacle which brings shame on the investment community. And Johnson should perhaps reconsider his emigration plan.
Reckitt looked outside for a replacement, settling on the commercial director of Pepsico, Laxman Narasimhan (pictured)
The guard is changing elsewhere among listed companies. Lance Batchelor is leaving Saga after a disastrous period at the top which has seen the share price pummelled by two-thirds this year. How much the problems are his fault or those of its chairman, Andrew Goodsell, who helped float the firm after private equity ownership, is a moot point.
Why investors should have to wait until January to wave Batchelor goodbye is something of a mystery, given profit warnings and sub-optimal performance. Another chief executive on his way out is Reckitt Benckiser’s Rakesh Kapoor after a turbulent period at the top, which included a disinfectant disaster in South Korea that resulted in many deaths. This time around, Reckitt looked outside for a replacement, settling on the commercial director of Pepsico, Laxman Narasimhan.
In the Reckitt tradition of fat cat pay, the new boss looks as if his remuneration could be in excess of £16.6 million. And that is before investors buy out his Pepsi contract.
The next big decision for Narasimhan, having settled his wages, will be to decide whether to press ahead with the proposed split of healthcare from household products into separate companies. That might be a trifle tricky while the company awaits the outcome of a battle with the US Department of Justice over the alleged fraudulent marketing of an opioid addiction treatment by former subsidiary Indivior in 2014. Quite an unfortunate legacy.
Sky’s the limit
New owner Comcast is putting its money where its mouth is by doubling the current £500 million budget of Sky Studios to more than £1 billion by 2024. Following on from the unalloyed triumph of its Chernobyl drama, filming is soon to start with HBO on a new series, The Third Day, featuring Jude Law. Catherine The Great is scheduled for the autumn. Onwards and upwards for creative Britain.