Remember Keith Hellawell’s solemn vow, delivered to TV cameras only last September, that he would stand down if outside shareholders didn’t back him in a year’s time?
He spoke more in sorrow than in anger, having seen a 53% vote against his re-election, which was repeated in Thursday’s non-binding poll. He understood investors’ frustrations. Lessons had been learned. He had offered to resign but Mike Ashley had asked him to stay. He would prove his worth over the next 12 months. If outside shareholders still wanted him out next September, he’d go without a quibble.
Four months later, Ashley would like Hellawell to ignore everything he said and carry on regardless. In other words, Ashley was so alarmed by Thursday’s result – which, unsurprisingly, showed outsiders’ views haven’t softened one jot – that he thinks Hellawell is a dead man walking if he intends to honour his pledge. Thus the solution, in Ashley’s eyes, is to ask Hellawell to renege on his promise.
Perhaps we shouldn’t be surprised. If Ashley, owner of 55% of Sports Direct, really wanted to share his boardroom with a strong and independent chairman who would hold him to account, he would have appointed one years ago.
The list of Hellawell’s slip-ups is long. He gave a lamentable performance in front of a committee of MPs in March 2015 when questioned about Sports Direct’s behaviour during the collapse of a Scottish subsidiary, USC, and subsequent purchase of the stores from the administrator after 200 people had lost their jobs at 15 minutes’ notice. Hellawell said he had not known about the administration until the day before it happened and had not read the administrator’s report. Would any other chairman of a FTSE 100 company, as Sports Direct was at the time, be so incurious or unprepared?
Lack of curiosity seems to be a hallmark. In the Shirebrook fall-out, Hellawell blamed some shortcomings on duff intelligence. “One of the biggest disappointments is we found that information was not correct,” he said. But, come on, the Unite union and the media had been raising the alarm for years. A former chief constable of West Yorkshire could surely have turned over a few stones himself.
Or consider Hellawell’s claim to have engaged regularly with shareholders, one of the first duties of a chairman of a public company. Standard Life – in the vanguard of those calling for Hellawell to go – said last September that the board’s responses to its inquiries had been “unconvincing or non-existent”.
After that record, and after two votes of no confidence by outside shareholders, the only honourable course for Hellawell is to stick to his pledge to quit if he gets a third thumbs-down. Maybe, at the final hour, he’ll summon the courage to say no to Ashley. He would salvage a scrap of dignity if he does, but don’t bet a penny on that outcome.
Homes sweet homes for Persimmon
“We expect our gross margin in the second half [of 2016] will have improved further,” said housebuilder Persimmon in its end-of-year update, without stating what the new figure will be. Here’s a guess: the profit margin was 23.8% in the first half of the year so Persimmon may now be converting £1 in every £4 of revenue into gross profit.
Few companies run on 25% profit margins and fewer enjoy a return on capital employed of 35.6%, which was Persimmon’s half-time score. One could congratulate the company on running a tight ship but do not be surprised if Sajid Javid, the communities secretary, takes a different line. He has a white paper on housing in the offing and hasn’t been shy in saying life for big housebuilders is too cushy. Build more houses, and build them faster, argues Javid, because current volumes are “nowhere near good enough”.
Up to a point, Javid’s frustration is fair. Persimmon sold 599 more homes in 2016 than in 2015, an increase of 4%, which doesn’t obviously suggest it is busting a gut. On the other hand, what weapons does Javid hold? Persimmon says it is building on every plot where it has planning permission and would argue that skilled builders are in short supply (and maybe shorter still post-Brexit).
Javid will have enough problems selling his planning reforms to those Tory MPs who detect a policy for more urban sprawl, as opposed to intelligent city regeneration. When the dust settles, one suspects the white paper will hold few terrors for big housebuilders. Persimmon’s shares rose 7%, lifting the whole sector. Life is indeed (too) gentle for the big boys, but it’s hard to argue with the market’s view that it can continue for a while yet.
