The_Times__6_March_2020

40 2GM Friday March 6 2020 | the times

Business

Behind the story

D

ame Sharon

White had an

open goal

when it came

to the bonus (Ashley

Armstrong writes).

Partners were braced

to expect nothing

after being warned

that profits had fallen

sharply and

speculation emerged

about the retailer’s

strained balance

sheet.

While a 2 per cent

bonus is the lowest in

67 years, the 80,000

partners will welcome

the crumbs they are

given in this tough

retail climate. It

would have been hard

for Dame Sharon to

preach her passion for

partnership values

while denying the

cash boost many shop

workers rely on.

Amid the

challenges she faces,

sinking staff morale is

a pressing issue,

particularly when she

needs to galvanise the

troops if she wants to

restore John Lewis’s

reputation for service.

The critical

problem is how to fix

its department store

division. Closures may

be the only way

forward unless Dame

Sharon, who has no

retail experience,

unearths the much

sought-after secret to

making shops as

attractive as they

were before the rise of

online shopping.

Everything is under

review, the chairman

said, apart from the

“partnership model or

the sale of either of

our brands”. This

probably means that

John Lewis’s never

knowingly undersold

price-match promise

is headed for the

scrapheap.

Dame Sharon said

that its “fair value”

proposition could be

“modernised”. Not

competing with

House of Fraser and

Debenhams, whose

misfortunes meant

they have been on

near-constant

discount for the past

two years, would give

some much-needed

breathing space.

MPs have expressed “serious concerns”
about the “culture and operations” of
the City regulator that they said must
be addressed to restore public trust.
The Treasury committee unani-
mously approved the appointment of
Andrew Bailey, the outgoing chief
executive of the Financial Conduct
Authority, as the governor of the Bank
of England but said the regulator had
performed poorly both before and dur-
ing his tenure.
There is a “gap between public expec-
tations and the current powers and per-
formance” of the watchdog, MPs said,
saying the committee had a duty to

Bailey rebuked for leading ‘poorly performing’ City regulator

“support the government and the insti-

tution of the FCA in a process of im-

provement”.

Mr Bailey’s time leading the regula-

tor was blighted by a series of scandals,

including a decision not to punish

Royal Bank of Scotland for mistreating

thousands of businesses, the collapse of

the minibond company London Capi-

tal & Finance at the expense of thou-

sands of ordinary investors and the

freezing of Neil Woodford’s funds.

In a hearing with Mr Bailey on

Wednesday, Steve Baker, a Tory MP,

questioned his leadership qualities and

said people had been left with a sense

that “crimes have gone unpunished”

because of inaction by the regulator,

while Rushanara Ali, the Labour MP,

said that rogue finance firms “don’t fear

you”. Despite the criticism, the commit-

tee said it was satisfied with the “profes-

sional competence and personal inde-

pendence” of Mr Bailey to lead the

Bank of England.

MPs said they would be keeping a

close eye on issues such as the “speed

and transparency with which the FCA

acts” and the so-called perimeter of

regulation, which determines what falls

under the authority’s remit.

Thousands of private investors and

small and medium-sized companies

have been angered in recent years

when the FCA has said it was powerless

to act over misconduct and negligence

that was outside its “perimeter”, which

many had assumed the regulator would

be able to tackle.

Mr Bailey has expressed concerns

that some firms may take advantage of

a grey area between what is and what is

not regulated and the authority has in-

dicated it would support calls for more

powers from the government.

However, ministers have resisted this

and have rejected calls from the Trea-

sury committee, that were supported

by Mr Bailey, for small business lending

to be regulated.

Mel Stride, chairman of the commit-

tee, said concerns about the FCA’s

“culture, transparency and insufficient

speed of action” would be scrutinised.

James Hurley Enterprise Editor

The Treasury committee approved

Andrew Bailey’s Bank of England job

The John Lewis Partnership has given
staff a token 2 per cent bonus, the low-
est award since 1953, after profits fell by
a quarter and the new chairman said
that a turnaround could take three to
five years.
The retail group has more than
80,000 staff, with 50 John Lewis shops
and 338 Waitrose supermarkets and
convenience stores.
Despite speculation that the partner-
ship could axe the bonus, Dame Sharon
White, the chairman, said that the re-
tailer’s constitution “requires us to
make sufficient profit to keep the part-
nership going, not the highest amount
possible, and to put our customers and
our partners ahead of profit”.
The former Ofcom boss, who took
over from Sir Charlie Mayfield only last
month, has inherited a restructuring
plan to merge Waitrose and John Lewis
operations to save costs. She has
already told partners that there would
be “adjustments” to the overhaul.
Dame Sharon declined to talk about
the past when asked the extent she was
consulted on about the reforms an-
nounced before her arrival. She said her
strategic review into reversing three
years of falling profits would conclude
in September but warned that a trans-
formation of the partnership “could
take three to five years to show results”.
She said she planned to “serve cus-
tomers better” by making improve-
ments to John Lewis’s online business
and its homewares range while also sig-
nificantly investing in Waitrose.com
before September, when its longstand-
ing relationship with Ocado ends.
In addition, she plans to “rightsize”
the shop estate for both retail brands,
with three immediate Waitrose clo-
sures this year in Helensburgh, Dun-
bartonshire; Four Oaks, Sutton Cold-
field; and Waterlooville, Hampshire.
Dame Sharon said that she would
slim the retailer’s head office functions
and promote closer working between
Waitrose and John Lewis to cut costs
and make it easier for customers to
shop across the two brands. About 40
per cent of Waitrose shoppers also shop
at John Lewis.
“These are the most challenging but
exciting times in retail for a genera-
tion,” Dame Sharon said. “Together we
have the opportunity to secure the
partnership, not just for the next five
years but for the next 100.”
The John Lewis Partnership made
pre-tax profits of £146 million, 24.8 per
cent lower than a year earlier, on the
back of a significant decline in its de-
partment store business. Profits before

bonus, tax,

exceptional

items and new ac-

counting measures were £123 million,

23 per cent lower than last year. Total

sales fell by 1.5 per cent to £11.5 billion.

Operating profits at John Lewis

slumped to £40 million after a £110 mil-

lion writedown on the value of its stores

and weak sales. Waitrose profits rose by

£10 million to £213 million on the back

of the sale of unwanted stores.

The 2 per cent staff bonus, down from

last year’s 3 per cent and a steep fall

from the 24 per cent paid in the 1980s,

will cost the partnership £30.9 million,

with the average worker receiving

about a week’s pay.

A recent letter to The Gazette, the in-

house magazine, called on the business

to “always share our profit” with staff

and highlighted low morale and job sat-

isfaction within the partnership, which

was founded by Spedan Lewis on the

principles of “worthwhile and satisfy-

ing employment in a successful busi-

ness.”

Nick Bubb, a retail analyst, said it

would have been “dangerously demoti-

vating” to have scrapped the bonus.

John Lewis staff bonus shrinks to

just 2% as profits fall by quarter

The 2 per cent bonus for staff pales in comparison with past years such as 2008, right

RUSSELL BOYCE/REUTERS

Pollen Street

in threat to

sue manager

Ben Martin Senior City Correspondent

Pollen Street Secured Lending has

threatened legal action against its own

investment manager in an escalation of

the battle raging over its future.

The investment trust is locked in a

fight with Pollen Street Capital, its out-

side manager, which it sacked last week

by serving 12 months’ notice.

The trust, which is a member of the

FTSE 250, has received a 900p-a-share

bid approach from the New York-based

Waterfall Asset Management.

But it has accused its manager of

frustrating the takeover talks by failing

to provide information that its suitor

can use to undertake due diligence.

The board of PSSL told its sharehold-

ers in a letter yesterday: “If the manager

continues to fail to produce the docu-

mentation and other information re-

quested, then the board anticipates that

it will need to commence legal proceed-

ings to enforce its rights, including

potentially issuing a court claim to

obtain due diligence materials.”

The trust also noted that Pol-

len Street Capital was conflicted

by the potential £668 million

takeover as it would result in

the manager losing its invest-

ment mandate, which generat-

ed £13.9 million in fees last year.

Pollen Street Secured Lend-

ing focuses on investing in loans

made by peer-to-peer lending

platforms and listed on the stock

market six years ago.

Pollen Street Capital, its manager,

runs about £2.6 billion of private equity

and credit assets and was spun out of

Royal Bank of Scotland in 2013.

PSSL’s board is chaired by Simon

King. Lindsey McMurray, a veteran

private equity investor, is the managing

partner of Pollen Street Capital.

Ms McMurray said: “We stand ready

to move this forward at any time. We

will continue to act in the best interests

of all shareholders.”

Pollen Street Capital had said this

week that it had made more than 2,000

documents available in a secure data

room for due diligence. However, PSSL

argued that the documents “are heavily

redacted” and that “a significant num-

ber are historic and/or irrelevant”.

Waterfall said it was “hopeful of re-

ceiving the requested information from

the company to complete confirmatory

due diligence”.

Last week Pollen Street Capital re-

sponded to its sacking by saying it was

“deeply disappointed” by the decision

to end the relationship.

PSSL’s shares fell 24p, or 2.75 per cent,

to close at 848p.

Ashley Armstrong Retail Editor

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