By Andy Silvester
Talk about not ringing the changes. Vodafone’s decision to appoint its former finance chief and long-time company veteran Margherita Della Valle as its new chief executive was arguably the least likely outcome when its search kicked off formally five months ago.
Institutional shareholders had been clamouring for fresh blood as they fumed at Vodafone’s stuttering performance under Nick Read, its CEO since 2018. Only an outsider could override the telecoms giant’s oft-derided bureaucracy and inject vigour, particularly into its dealmaking, the theory went.
So opting for Della Valle represents a gamble for Jean-Francois van Boxmeer, the former Heineken boss who has chaired Vodafone for long enough to have a sense of its shareholders’ biggest complaints.
Chief among those has been a lack of decisiveness from its executive team. Merger talks with Three UK have been dragging on for many months, typifying the cumbersome way in which Vodafone has been run for many years. Given the inevitability of an in-depth competition probe into a tie-up, the companies should have pressed the button on an outline agreement long ago.
Similarly, the FTSE-100 group is said to be exploring ways to consolidate its position in Della Valle’s native Italy, where telecoms tycoon Xavier Niel – himself now a Vodafone shareholder – is a key player. It needs to move fast, both there and in Germany.
Offloading or reducing its stakes in key European markets may feel like an ongoing admission of defeat for some at Vodafone, which grew into a sprawling behemoth which promised customers a unified and high-quality performance wherever in the world they were able to access its network.
There is little chance of a honeymoon period
In reality, the last decade has given the lie to that promise, with weak returns and a confused web of international operations sending telecoms investors looking elsewhere.
Yet Vodafone’s share register now looks very different. E&, the Gulf-based telecoms group, owns a big stake; Niel holds a smaller position; and Liberty Global, the US-based telecoms company, also owns a chunk – a move described in February by the buyer’s chief executive, Mike Fries, as “an opportunistic and financial investment”.
It seems logical that van Boxmeer will at least have attempted to sound out his strategic investors before appointing Della Valle last week. She is said to have impressed Vodafone’s board and shareholders with a hitherto-absent sense of urgency. Nevertheless, with full-year results less than a fortnight away, she will know there is little chance of a honeymoon period in one of the toughest leadership roles in corporate Britain.
ARGA argy-bargy
1596: that’s the number of days since Sir John Kingman, the former Treasury mandarin, published his independent review of the Financial Reporting Council, Britain’s audit watchdog. Given how long ago that is, it’s worth refreshing your memory that Kingman recommended scrapping the FRC and replacing it with a statutory regulator, the Audit, Reporting and Governance Authority.
But for ARGA, read saga, as the new body makes – at best – painstaking progress towards its apotheosis. This week, the government will begin advertising for a new chief executive for the FRC as it then transitions into its successor organisation.
The chosen candidate will replace Sir Jon Thompson, who is stepping down after a transition period to become the new chair of HS2. Thompson, the former boss of HM Revenue & Customs, is regarded to have done a capable job paving the way for the swathe of reforms which is heading the way of the big four accountancy firms and the rest of corporate Britain.
Yet the legislative timetable for creating ARGA remains mired in uncertainty, and with a general election probably just 18 months away, there seems no guarantee that a 2024 target for having it up and running is achievable. That’s unacceptable for a government which talked about audit reform being an economic priority after the collapses of Carillion and BHS, both of which had questionable accounting practises at the heart of their demise.
It’s also unhelpful in terms of attracting a high-calibre successor to Thompson, with or without a £330,000 salary.
Labour’s front bench team has been asking a conspicuous number of questions on this issue in parliament in recent times. Don’t be surprised if Rachel Reeves, Labour’s shadow chancellor, swoops in to take the credit for implementing a long-promised overhaul of audit regulation if her party forms a government next year.
The taxman strikes back
Beware the taxman. Nasmyth Group, a supplier of precision engineering services to the aerospace and defence industries, saw a mechanism called a restructuring plan that would have involved ‘cramming down’ creditors blocked by a court after HMRC objected to the proposals. The company has been owned for just over a year by Rcapital, the private equity firm which specialises in trying to turn around troubled companies.
Stuck, it has now filed a notice of intention to appoint administrators to Nasmyth Group Limited, an intermediate holding company. People close to the situation say it will have a chilling effect on the ability of small and medium-sized companies to implement formal financial restructurings.
Elsewhere, Fitness First, the gym chain, and Prezzo, the casual dining group, are also turning to restructuring plans to force through overhauls involving site closures, rent cuts and job losses.
A trio of these processes arriving simultaneously looks like more than a coincidence – a deluge of painful restructurings is on the way.
Mark Kleinman is Sky News’ City Editor and writes a fortnightly column for City A.M.
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