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Mike Ashley is “transitioning” out of the job of chief executive at Frasers and handing the gig to his prospective son-in-law, Michael Murray. That, at least, was the Sports Direct firm’s summary of next year’s switch. The critical line, though, was the one at the end. Ashley will “remain on the board as an executive director”. He isn’t even adopting the formal back-seat role of a non-executive.
So who will be making the big decisions? And, if there’s a disagreement, who will prevail? Will it be the 31-year-old who has worked for the company only for a few years as a consultant? Or could it – just possibly – be the 56-year-old who founded the business in 1982 and still controls 64% of the shares? This looks a transfer of power in name only, at least until Ashley decides otherwise, which could be years away.
Indeed, for most of Sports Direct’s life as a public company, Ashley didn’t have the title of chief executive. He was the executive deputy chairman and Dave Forsey was the loyal chief executive until his resignation in 2017, soon after this newspaper’s revelations about working practices at the company’s Shirebrook warehouse.
Ashley said at the time that Forsey’s exit was like “losing my right arm”. He likes to have a sidekick to push into the spotlight, but it doesn’t alter who is the real boss. If a family member could be a replacement limb, it’s no surprise that Ashley likes the arrangement. Despite being listed on the stock market since 2007, Frasers is a private company in spirit.
The main shock is that Murray has been pushed up the ladder so soon. Who knows, he may prove to be a talented executive and a breath of fresh air but, at the moment, he is an unknown quantity who hasn’t even been warmed up with a spell on the board, the usual way to groom a chief executive-in-waiting.
Yes, Frasers likes to give him credit for “elevating” some of Sports Direct’s stores so they look more like JD Sports’ shiny outlets, but the main thing outside investors know about Murray is that he has been spectacularly rewarded in his role as consultant on property deals: £9.7m in total over 2019 and 2020.
If promotion to chief executive is a way to hand him even larger sums, or just cement his pay at abnormal levels for a FTSE 250 company, there will be protests from non-Ashley shareholders. “Any reward and remuneration package will be subject to any requisite shareholder approval,” said Frasers. Possible translation: Ashley will ignore complaints because he has most of the votes.
Rolls-Royce should get back on course for recovery
Slight turbulence, nothing to be alarmed about. That was the gist of Rolls-Royce’s first-half numbers, the first for ages that have carried a few points of cheer for the aerospace and defence group, including the reappearance of profits – £307m at an operating level on an underlying basis.
The wobble came in the free cashflow projections. Rolls had indicated £750m would be possible next year, but it’ll take longer. International travel is recovering slower than expected, a problem for a group whose service contracts require the airplane engines to fly.
But it’s a delay, nothing more. Rolls still expects cashflow to turn positive at some point in the second half of this year. Frantic cost-cutting and job losses have lowered the cost base in civil aerospace by a third and the parts of the group that generated a fraction of the headlines – defence and power systems – are stable. A full post-Covid recovery still looks a long-haul affair, but an emergency has been averted.
Notes on a KPMG scandal
A £13m fine for KPMG from the accounting watchdog wasn’t (quite) a record, but it’s hard to know what else the firm could have done to make its offences more shocking. KPMG was found to have failed to act solely in the interests of its client, Silentnight, rather than those of HIG, the private equity firm trying to buy the struggling mattress company. And the aggravating factor was a pension fund dumped on the industry lifeboat scheme.
For a change, KPMG can’t simply cough up and call events from 2010 and 2011 ancient history. It has also been told to appoint an independent reviewer to examine the “root causes” of the collapse of internal objectivity and check for more failures. KPMG initially resisted such a review but now says it welcomes it. One should hope so: a “deeply troubling” case is regulator-speak for a scandal.