If you want to wind up Dave Lewis, point to Tesco’s share price. It was 230p when he arrived in September 2014 and, after five years of effort that have prompted the chief executive to want to “recharge my batteries”, it has reached only 240p. All that struggle to go sideways?
Lewis resents the share price comparison as much as he dislikes his “Drastic Dave” label and, actually, he has a point. The full horror of Tesco’s accounting scandal hadn’t emerged when he walked into Tesco HQ, so, as he suggests, 170p, seen a few weeks later, is probably a fairer starting point. In lean times in supermarket-land, Tesco investors have done OK. Lewis hit all his cost-saving and cash-generation targets, which is what he was paid to do.
He also inflicted some grinding management-speak on us, but his one big acquisition, of wholesaler Booker, looks less over-priced at the distance of a year. And, yes, it’s not a bad idea to jump now. Chief executives are thrown big pay packages (£4.5m-£5m a year in Lewis’s case) on the basis that it’s essential to retain their services, but one effect is that too many stay too long. If the batteries are running low, get out.
The surprise is that the Tesco chairman, John Allan, couldn’t find a replacement within the ranks. One can’t judge Ken Murphy until he arrives, but a 20-year career at Boots and its US-based parent may not be ideal preparation for a scrap with Aldi et al. If Murphy has survived under Stefano Pessina, Walgreens Boots Alliance’s hard-as-nails billionaire boss, one shouldn’t underestimate him. Yet Boots in the UK is widely seen as underinvested, tired, and nowhere near Tesco’s class in terms of retailing nous.
Back in 2014, Drastic Dave, then a senior Unilever executive, was an obvious pick; Ken the Unknown is not, a few Tesco executives may feel.
Metro Bank founder to spend more time with the dog
“I founded Metro Bank in 2010, and I’ll probably die there,” said Vernon Hill three months ago. Actually, probably not. Frustrated colleagues, belatedly irate shareholders and a funding crisis have forced a rethink. Hill will “step down” from Metro’s board by the end of the year, presumably to spend more time with his dog, the Yorkshire terrier that he irritatingly insisted on shoving into every photoshoot.
Congratulations, of a sort, are due to Sir Michael Snyder, Metro’s senior independent director for getting the deed done – finally. Hill had previously agreed to give up the chairmanship but had stubbornly wanted to linger in the boardroom with the grandiose title of “founder and president”. That token gesture would have deterred serious candidates for the chairing job.
Last week’s funding flop, in which Metro failed to find enough takers for a bond with a juicy-looking interest rate of 7.5%, brought the governance worries to a head. In Wednesday’s rejigged effort, Metro had to offer 9.5%, which is a nose-bleed rate, but news of Hill’s exit was the other factor behind the suddenly plentiful demand for £350m-worth of bonds.
Meanwhile, the share price shot up 27% to 228p, although the one-day move requires context. Metro stood at £40 only 18 months ago, before January’s catastrophic confession that £900m-worth of loans had been placed into the wrong risk bracket. Its chief executive, Craig Donaldson, survived that fiasco thanks to Hill’s backing but will now have to await the verdict of a new chairman. Metro has a lot of credibility to restore.
But one can view the founder’s exit, and the mini-drama with the bonds, as a triumph for market pressure. Hill had to concede, in effect, that he had become the problem. About time too.
A Flutter/Stars merger would give them too big a hand
They love deal-making in the betting industry, and one can see why. Flutter Entertainment, the combination of Betfair and Paddy Power, is now a £6bn company with a share price that is sufficiently strong to make an all-share offer for The Stars Group, the Canadian firm that owns online poker giant Pokerstars plus SkyBet in the UK. The result would be a group worth £10bn-plus.
Meanwhile, poor old William Hill, which once aspired to combine with Stars’ predecessor company, has been left on the shelf. It is worth just £1.7bn after a halving of its share price since 2015.
Let’s hope, though, that competition authorities are watching. Never mind the giddy boardroom talk about global opportunities, a merged Flutter/Stars group would have a third of the online sports betting market in the UK, and as much as 40% on some measures. Too much. Divestments required.
