Archive for June, 2011

A good day to bury big news

Posted in business, Media, PR with tags , , , , , on June 30, 2011 by Tom Leatherbarrow

What is today’s big news story? Most will argue that the one day strike by public sector workers is the leading story today and it looks like the Government would be desperate to agree with you.

Francis Maude, architect of public sector pension reform, was all over my TV this morning and I notice that his name, along with Mark Serwotka of the Public & Commercial Services Union, is currently trending on Twitter.

But hang on what’s this? An alert hits my inbox with news about the BskyB bid from Rupert Murdoch’s News Corporation which many believe is a distinct threat to media plurality. Apparently, “Jeremy Hunt gives green light to takeover”.

Would this be the same BskyB bid that generated more than 40,000 submissions for the Department of Culture, Media & Sport consultation; the same deal that has already seen off Business Secretary Vince Cable and embarrassed Cameron with tales of horse riding in the Cotswolds and cosy Christmas dinners with Rebekah Wade Chief Executive of News International?

Is this the same deal that hundreds of thousands of people have signed petitions about calling for a full independent investigation and a the deal that is opposed by Trinity Mirror, BBC, Guardian Media Group, Telegraph Media Group and Daily Mail publisher Associated News and Media?

The Government wouldn’t be trying to bury this story would it?

Wear your thriftyness with pride!

Posted in business, economics with tags , , , , , , , on June 28, 2011 by Tom Leatherbarrow

Is thriftyness the new favourite dinner party topic of conversation? Well, that’s the theory of one of my clients, a Chief Executive no less, who regaled me yesterday with tales of shopping at Aldi!

He is not alone. I too have recently shopped at Aldi (£24 for a loft ladder compared to £44.98 in B&Q) and I am quite prepared to shout it from the rooftops. In fact I currently have my eye on a very niftily priced garden hose reel for £10.99 compared to £19.98 in B&Q (if anyone from B&Q is reading this, I’m sorry but you are getting mullered by Aldi on certain products).

My client’s point is that people are looking for value at the moment and old prejudices and loyalties are fast falling by the wayside. In his words, “if you’re even a little bit off with your business plan on the High Street at the moment, the competition and the consumer will clobber you.”

What is interesting is that online sales are holding up. The value of retail sales in May 2011 showed an increase of 3.8 per cent compared with May 2010, driven by non-store retailing (in other words e-commerce) which can offer the consumer low prices driven by lower cost base and “offers’ such as Nectar points and other loyalty schemes which are effectively cash.

Let me give you an example. I’m told that if you sign up for an Amazon co-branded credit card and then go into the site via Nectar you get double points – one lot from Nectar and another lot from shopping with Amazon.

Now that’s a deal.

Too little, too late for sly shareholders

Posted in business, Media with tags , , , , , , , on June 23, 2011 by Tom Leatherbarrow

The news that Sly Bailey, Chief Executive of Trinity Mirror, is facing calls from shareholders for her to halve her £750,000 base salary is a clear sign that shareholder activism continues unabated. But don’t hold your breath waiting for Executive pay to tumble – we’ve been down this road before.

To be fair to shareholders in Trinity Mirror their central argument is a worthy one – namely that Bailey is now running a much smaller company compared to when she joined eight years ago and her remuneration should reflect that. Market sentiment towards Trinity Mirror can be gauged from the above one year share graph which bears a striking resemblance to the North Face of the Eiger!

However, on the flip side, Bailey will no doubt argue that the reason for the drop in market value of the shares is due to the economic downturn and slump in advertising and nothing to do with her stewardship of the company, so why should she take a pay cut?

In truth I have some sympathies for both positions but, always one to court controversy, I am siding with Sly on this one. My own view is that institutional shareholders have been asleep at the wheel on remuneration issues during the good times, allowing the horses marked ‘Executive Pay’, ‘Bonus Scheme’ and ‘Share Options’ to bolt out of the stables and off into the sunset. For them now to be stamping their feet up and down when they should have clamped down years ago is a bit rich.

I have much more sympathy with WPP shareholders who last week tried to vote down the entire WPP remuneration report at the Annual General Meeting, despite an excellent performance by the company. The reason for shareholder anger was the proposed 42% increase in salary for the head of WPP Digital, a certain Mr Mark Read. Explaining that his current £872,000 salary was “uncompetitive”, Jeffrey Rosen, chairman of the compensation committee, said: “Given the increased importance of digital strategy to the group and Mr Read’s personal development, an increase to his remuneration was in order.”

The Gravy Train rolls on!

UK Economy: tales from the front line

Posted in economics with tags , , , , , , , , on June 17, 2011 by Tom Leatherbarrow

In a sort of 21st Century version of Cobbett’s Rural Rides I have been meeting senior managers at companies across the UK. Some were clients, others were suppliers to clients, some were merely acquaintances, but the common denominator amongst them all was an almost desperate desire to talk about the state of the UK economy. Unlike Cobbett my trusty steed was a Seat Altea and my rides were more urban than rural but you get the gist – I’ve been out a lot.

I personally have three tests of economic vibrancy, namely traffic levels, “sold” signs and skips on my street. All three have been giving off conflicting messages recently, hence my interest in gauging the opinion of those on the front line with real P&L responsibility.

So what is going on out there? My first conversation was with a managing director of a premium priced organic healthcare products company which sells directly to consumers and through retailers. In his words, “we’ve dropped off a cliff”. Ahhh not good then!

In Solihull a chief executive of a financial services company which is strongly aligned to consumer spending patterns, admitted to me last week that things had slackened off but he remains optimistic, despite some inflationary fears. “The thing I have noticed is the price of eating out” he told me. “I draw the line at £25 for a steak. I told the wife to get the BBQ out instead.” However his view is that, rather than not buying at all due to increasing prices or concerns over the economy, consumers will take advantage of the vast range of different price points for products and trade down to cheaper items.

That’s the down-ish side, but a trip to Bedfordshire to meet the managing director of a drainage products company with strong ties to the construction sector painted a different picture. I naively offered the opinion that things were presumably difficult at the moment. “Oh no” he said, “we’ve just had a record-breaking 2010 and we are ahead of target for this year.” Noticing my double-take he went on, “we supply to commercial developments and they’re doing fine.”

I finished my grand tour in Worcestershire at a global machine tool builders which manufactures metal cutting machines for anything from £60k through to £2 million (big ticket items then!). Rarely have I seen a factory so busy. In the words of the harassed looking production manager, “we can’t make ’em fast enough.”

And this is not just a result of the weak pound sucking out exports. I’m told that UK sales are going great guns as well. One of his colleagues in sales offered this opinion: “I think a lot of our customers are taking the view “let’s just get on with it!”

What is clear is that the closer you are to the consumer the more difficult life is likely to be at the moment. If the UK economy is to stop flat-lining and return to growth we need more of that can-do attitude I saw in Worcestershire.

Phone hacking: The Telegraph opens a second front

Posted in Media with tags , , , , , on June 9, 2011 by Tom Leatherbarrow

More woe for News International this morning with reports that a whole host of new (and very prominent) VIPs have allegedly been hacked, most notably Tony Blair and Kate Middleton.

Old news? It looks it at first sight but there are a number of key points to quickly make.

Firstly, if the reports are true we have a new private investigator in question, a certain Mr Jonathan Rees. The News International defence that this was all the work of a rogue reporter (Clive Goodman) aided by a lone investigator (Glenn Mulcaire) has already proved risible, but this is further embarrassment.

More importantly, the news that Kate Middleton’s bank account has been hacked in 2005 demolishes the News International defence that all hacking was undertaken between 2002 and 2004.

Perhaps most importantly, the Telegraph’s running of the story so prominently is a clear opening of a second front in the hacking scandal. Up until now The Guardian, and to a lesser extent the BBC, has made the running with this story with other media organisations tending to shun it. The cynics would suggest that those in glasshouses were wary of throwing stones!

However, the Telegraph in its role as protector of all things Royal and Establishment is clearly going into bat on this one. That’s more bad news for News International because as this story gets more a public airing the more the pressure builds on senior management and the louder the calls for a full Public Inquiry.

My favourite story this week

Posted in Banking with tags , , , , on June 3, 2011 by Tom Leatherbarrow

In a sort of divine confluence of the inept and the stupid, Goldman Sachs has lost $1.3 billion dollars of Colonel Gaddafi’s money. It really couldn’t happen to two nicer bunches of people – Goldman Sachs traders and the Gaddafi family.

Apparently, Goldmans lost the money – which it invested between January and June of 2008 – in a range of options to buy currencies and shares at a future date for a stipulated price (in other words futures trading of the like which brought down Barings).

According to the Wall Street Journal the investments, in a basket of currencies and the shares of six energy, utility and banking companies including Citigroup, amounted to a bet on a rise in the underlying value of the assets. Unfortunately for the Colonel, the collapse of Lehman Brothers sent values plummeting leaving his holding virtually worthless. Ah diddums!

I smell a rat, are Goldmans secretly working for the CIA?

It gets better. Goldmans in a rare fit of remorse (very, very rare in my experience) have made three separate offers to the Gaddafi family to compensate for their cock-up by allowing the Gaddafi’s to invest in their firm for a knock-down price.

Unfortunately, the Colonel has turned down all offers which robbed us all of the sight of NATO warplanes bombing the largest single shareholder in America’s leading investment bank.

Oh why couldn’t this have happened? Why, why?

Anyway for seasoned Goldman Sachs watchers this has been an absorbing week. Alongside news of Gaddafi-gate (yes it’s not only journalists who get to put ‘gate’ after things) came reports that the New York District Attorney has issued subpoenas to a whole host of Goldman Sachs’ employees asking them to explain why the firm exited the mortgage CDO market in early 2008 when it was still encouraging clients to pile in.

Expect further bland statements from the Goldmans PR machine to try and explain all this away.

What was it Alexander Pope said? “At ev’ry word a reputation’s lost”!