Skip over a few details in Sports Direct’s full-year results statement and you can almost think the founder and chief executive, Mike Ashley, wants to turn the business into a conventional public company a decade after its arrival on the stock exchange.
Look, he’s finally hired a permanent finance director, one Jon Kempster, after three years of stand-ins. Following a year in which profits fell almost 60%, Ashley is also making an investor-pleasing forecast of improvements in the pipeline: top-line earnings are predicted to improve 5-15% this year.
And, just like a regular boss, he’s got a misleading corporate slogan – “the Selfridges of sport”.
The problem with the normalisation pitch, however, is that the details matter. The first problem is Sport Direct’s habit of punting on other companies’ shares. Why does it need a 17% stake in Debenhams, for example?
The argument that the holding provides leverage to obtain square footage in the department stores is laughable. And the 26% stake in video games firm Game Digital is just baffling.
There there’s the impossible-to-ignore continuing presence of Keith Hellawell as chairman. Independent shareholders, angry after years of governance mishaps, voted against Hellawell last September. Ashley then rolled out his majority stake to save him in a binding vote in January, while saying he hoped Hellawell would renege on his pledge to stand down if outsiders deliver a second thumbs-down.
Thus Hellawell is now obliged to plead for support and hope “the progress” Sports Direct has made in the past 12 months “will be taken into account” by shareholders when voting this year.
A confident chairman of a conventional company wouldn’t have to sound so desperate. It is also hard to understand why outsiders should now back him.
Hellawell has had eight years in post and a firmer chairman would have persuaded Ashley that it was in his own interests to address the shocking working practices earlier.
Has there been progress in the past year, though? The efforts to improve working conditions can only be judged over time. The £300m-a-year splurge on property baffles many outsiders. Attempting to conquer the US, while Sports Direct is struggling in continental Europe, looks dangerous.
But, yes, making the new stores smarter, which is all that is really implied by the “Selfridges” strategy, sounds like a reasonable idea to move with the market, or least follow better-performing JD Sports.
But, if Ashley truly wants to herald a new era, he should let Hellawell go and avoid another showdown in September. The corporate boast about the £420m in corporation tax that has been paid in 10 years as a public company is fair. But, even when one person owns 62% of the shares, the chairman should still command the respect of other shareholders.
Sky’s the limit?
Are the Murdochs getting rattled by the delays to their takeover bid for Sky?
Certainly some of the dispatches from 21st Century Fox, and from Sky itself, are deploying some odd arguments. For example, there’s the whinge that all jurisdictions apart from the UK have already given a thumbs-up.
But what did they expect? The deal could plainly have more impact in the UK than in Italy or Germany. Besides, the general election caused one delay to the regulatory process and elections are a risk even Murdochs must accept.
There there’s the plea that “businesses require a level of certainty in order to plan and invest.” Well, yes, but Sky’s strategy department hasn’t been asleep. Only last month, the company announced a major shake-up of its sports packages and pricing structure.
Summoning their lawyers, the Murdochs argued that the culture secretary, Karen Bradley, had a duty to make up her mind on whether to refer the deal to the Competition and Market Authority (CMA) before the parliamentary summer break.
Bradley agreed on Thursday that she should move quickly but wants more time to consider the “tens of the thousands” of submissions. What’s wrong with that?
Some submissions may be copycat petitions. Some – like the letter from Ed Miliband, the former Labour leader, and Sir Vince Cable, the new leader of the Liberal Democrats – have infuriated a Murdoch camp that wants to see “political interference” at every turn.
But, when there’s a whiff of judicial review in the air, it is surely reasonable for Bradley to insist on time to do her job thoroughly.
The most likely eventual outcome remains the same: Bradley will ask the CMA to investigate and approval will probably be given early next year. But the Murdochs’ twitchiness suggests they are more nervous than they were a few weeks ago.
