The Sunday Times - UK (2022-04-03)

The Sunday Times April 3, 2022 3

ROLLERCOASTER

RIDE OF AD MASTER

MAY 1985

Martin Sorrell takes charge of WPP

and rapidly turns it from a wire basket

maker into an ad powerhouse.

MAY 1989

WPP seals takeover of rival Ogilvy.

MAY 2000

WPP buys Madison Avenue giant

Young & Rubicam in a $6 billion deal.

APRIL 2018

Sir Martin Sorrell exits WPP after an

internal investigation into claims of

misconduct, which he denies. He

departed as a “good leaver”.

MAY 2018

Sorrell launches a sensational stock

market comeback via a reverse

takeover by a listed cash shell. S4

Capital is born out of Derriston

Capital.

JULY 2018

S4 makes its first acquisition, buying

Dutch digital production company

MediaMonks for €300 million.

DECEMBER 2018

S4 buys US-based ad

firm MightyHive

(right) for $150

million.

MARCH 2021

Sorrell hails

“outstandingly

successful” annual

results and boasts of

having secured five

“whoppers” — big ad clients.

SEPTEMBER 2021

S4 warns margins will be hit by

increased spending.

MARCH 1, 2022

S4 delays results because auditor

PwC says it needs more time.

MARCH 30, 2022

Results are delayed for a second

time, triggering a big share sell-off.

consternation internally among senior

managers not included in it.

But Sorrell was never a fan of corpo-

rate governance. Last year he warned

that reforms to the audit industry and

corporate governance risked putting

entrepreneurs off listing in London. He

has a golden share in the firm that stops it

from joining indices such as the FTSE.

Rupert Faure Walker, a veteran finan-

cier who helped Sorrell finance deals at

WPP, chairs S4’s audit and risk commit-

tee. Two other ex-WPP allies, Spirit and

Miles Young, are also on the board.

“Martin doesn’t take this stuff — gov-

ernance and control — very seriously. He

just thinks it’s all a bit of a waste of

money,” said a source. Sorrell said he

takes corporate governance seriously.

In recent years, Sorrell’s barbs have

often been aimed at Read, whom he said

should resign over WPP’s performance.

“The way he talks about Mark Read is

crazy,” said a rival. “He was his servant

for years, the only employee on the board

of WPP — that was the respect he had for

Mark. And then to shit all over him is just

wrong.”

Sorrell said of his scrapes: “It is worth

having a fight if you think it’s the right

thing to do or if you think the conclusion

is you’ll end up in a better position.”

Elsewhere, his enemies are revelling in

his misery from the sidelines. A source

said: “It couldn’t happen to a nicer guy.”

When Peter Hebblethwaite

gave his first address to crews

at P&O Ferries a few months

after becoming their boss, he

did not instil much

confidence. As one senior

seaman put it, the former

pub operator opened by

admitting he “didn’t know

much about ships”.

Hebblethwaite, who had

worked for Greene King

previously, went on to

confirm his ignorance amply.

He had been looking at charts

of the routes they took to

cross from Dover to Calais, he

said, and noticed they often

travel in wonky lines rather

than heading straight there.

Was this to save fuel by

“catching the tides?”

In an awkward scene, the

ship’s master explained that,

no, Dover-Calais is one of the

world’s busiest waterways. It

has strictly regulated traffic

routes to prevent collisions.

Catching a free wave to save

fuel is not an option.

Hebblethwaite, who

became chief executive late

last year, went on to ask the

assembled seafarers for their

ideas — but of those

forthcoming, none suggested

he fire 800 of them without

consultation. But that was

what he did.

Such was the brutality, or

incompetence, of the

sackings last month that

transport secretary Grant

Shapps has sought for him to

be banned from operating as

a director, and a criminal

investigation is now under

way into the company’s

actions. P&O faces a

consumer boycott, and the

authorities have refused to

allow many ships to sail due

to concerns over the

P&O’s dog lounges, wonky

routes and booze bungles

Poor decisions

may be to blame

for ferry firm’s

claims of losses

fewer families taking their

pets abroad due to new

red tape.

“The timing seemed

crazy,” one consultant said.

Another oddly timed

decision around Brexit was its

move to contract out its duty

free operation to World Duty

Free, the Swiss-owned retail

giant. One of the tangible

benefits of leaving the EU was

that ferry operators would

once again be able to offer

significant discounts on

tobacco and alcohol.

The promise of £11.50 off a

litre of spirits heralded a

return of the lucrative “booze

cruises” of the 1980s and

1990s, reaping rich rewards

for ferry operators. Yet P&O

decided to outsource the

contract in 2018 — two years

after the Brexit referendum.

A source at a rival operator

said that, on one of its routes

alone, its duty free service is

now reaping sales of

£1 million a month.

Even with the outsourcing

deal, P&O should still be

seeing a major increase in

takings from its share of

World Duty Free’s sales. It is

one reason why rivals are so

bemused at the claim of huge

losses, particularly for last

year. They say that, since

Covid travel lockdowns were

eased, they have seen

resurgent bookings.

Just seven days before P&O

fired its staff last month, Irish

Ferries owner Irish

Continental Group reported a

competence of the

replacement crews.

The company has said it

had no option but to lay off

the staff without consultation

due to its critically loss-

making position. It said it had

lost £100 million for each of

the past two years. With the

arrival of low-cost rival Irish

Ferries on its Dover-Calais

route last year, there was no

alternative, it claimed.

Yet many in the industry

question whether the plight

of the Dubai-owned company

was quite so extreme. For

starters, the fact that it placed

an order for two gleaming

new ships with a Chinese

shipbuilder for a reputed

€260 million (£219 million) in

2019 does not suggest a

company on the brink.

Besides, some employees

and rivals cite years of

management incompetence

for its woes. There was the

time when it was decided the

company should install “dog

lounges” on ships at huge

expense. The idea was that

customers could have their

pets with them on deck

rather than locked in their

vehicles. Some staff were

concerned that, in an

emergency, dogs would run

amok and owners would

refuse to board liferafts

without their pooches.

But rivals were more

baffled by the business case.

The plan was launched after

the Brexit referendum, which

was expected to result in far

P&O Ferries’ firing of 800 staff has sparked protests

King of restaurants exiled from the Wolseley

Diners tucking in to their

lobster or schnitzels on

Friday evening might have

expected to see a tall, urbane

figure gliding between tables

and greeting guests in a grand

former car showroom on

London’s Piccadilly.

But by the time the

Wolseley welcomed the first

evening guest, Jeremy King,

the veteran restaurateur, was

nowhere to be seen.

Hours earlier, Thai hotel

group Minor International

had won control of Corbin &

King — the restaurant group

behind the Wolseley, the

Delaunay and Brasserie Zédel

— after a bitter dispute over

debts and the future direction

of the company. Minor had

previously owned 74 per cent

of the company, while King

had remained in charge of

day-to-day operations.

Staff said its new owners

had banned King from the

restaurant he founded in

2003. It is understood he was
      asked to hand over his phone.
      After winning an overnight
      auction that began on
      Thursday evening, Dillip
      Rajakarier, Minor’s chief
      executive, was triumphant.
      “We are delighted that our
      offer was accepted, and we
      can now look forward to

building on the existing

strong foundations to drive

growth in the UK and

internationally,” he said.

The auction for one of

London’s most prestigious

restaurant groups capped a

torrid period in which Corbin

& King was pushed into

administration by the Thai

hotel giant, which has owned

the majority of its shares

since 2017. Minor, founded by

American-born Thai

businessman William

Heinecke in 1978, has venues

across the Far East and

Europe, including

restaurants such as Zuma and

Benihana in London.

Corbin and King first

worked together in 1981,

when they ran Le Caprice,

and later took over The Ivy

and J Sheekey. They sold this

collection to the PizzaExpress

tycoon Luke Johnson’s

Signature Restaurants, then

launched the Wolseley in

2003 with the backing of the

billionaire Pears family.

In 2006 the financial

services group Dawnay Day

took a 50 per cent stake in the

duo’s Corbin & King group.

Then came Graphite Capital

in 2012, before Minor

invested in 2017.

At the time, Minor

announced plans to expand

the group overseas — but such

Sabah Meddings

ambitions were never

realised. King told The

Sunday Times this year that

Minor had wanted him to

franchise. “My issue was that

if we were going to take the

Wolseley outside London, we

had to have really strong

control over it,” he said.

The relationship soured

during the pandemic and

erupted into open hostilities,

with King declaring on

YouTube he was “under

siege”. Minor, which owned

74 per cent of the business,

always had the upper hand. It

declared it had appointed

advisers from FRP after

Corbin & King “was unable to

meet its financial obligations”

and “contrary to the picture

Mr King was trying to paint,

had become insolvent”.

King, 67, sent an email to

Jim Armitage

four-fold increase in car

travel. Its profits beat

analysts’ expectations. Much

of that gain was due to new

routes to compete with P&O

on Dover-Calais, but it was

still a healthy bounceback.

Danish-owned DFDS

Ferries also reported a strong

rebound in the past year. It

acknowledged that the arrival

of Irish Ferries on the Dover-

Calais route would hurt, but

said its newfound duty free

revenues “are expected to

mitigate these effects”.

On cargo, too, P&O Ferries

seems to be trading healthily.

Internal industry data shows

that in the year to February, it

carried 137,708 lorries on the

Dover-Calais route — up 3 per

cent on the year despite 6 per

cent fewer crossings. Its

nearest rival on the route,

DFDS, carried 92,692, with

far fewer per ship. In the year

to June 2019, before Covid

struck, P&O carried 630,000,

suggesting huge scope for

growth as economies recover.

There are further reasons

to question its claim to have

lost £100 million in the past

two years. Accounts for 2020

show P&O Ferries Division

Holdings did indeed lose

£105 million, but that was in

the thick of the pandemic and

included a one-off bill of

£38 million for 1,100

redundancies.

Accounts for the second of

those two years are not yet

available, but between 2017

and 2019 it made profits of

£40.6 million, £4.2 million

and £870,000. The arrival of

Irish Ferries on its key cross-

Channel route last year may

make a return to such levels

harder, but not impossible.

And it certainly does not seem

to justify the brutal treatment

of the workforce.

Besides, the backlash —

and the resulting time it is

taking to get sailing again —

mean most of its crossings

remain cancelled just as it

enters the busy Easter

holiday period. Hardly the

way to refloat a sinking ship.

customers on Friday

morning, declaring that he no

longer had any equity interest

in the business, before

signing off. “I assume Minor

will take immediate control of

the restaurants,” he said. King

spent the morning with staff

before leaving.

A source suggested a

“devastated” King would

retreat for a while before

returning with a new venture.

“We shouldn’t expect him

back inside six months,” the

source said.

Staff appeared to wage a

small rebellion on social

media, with Corbin & King’s

Twitter accounts posting an

image of King with his

business partner Chris

Corbin with the caption:

“THIS is Corbin & King.”

The news spread. Tom

Parker Bowles posted that he

was “very sad” and “Corbin

and King are restaurant

masters”. Restaurant critic Jay

Rayner said it was “very sad

news indeed”. King would say

only: “I can’t talk about it.”

Minor’s plans for Corbin &

King are unknown, although

international expansion will

certainly be on the menu.

“We have exciting growth

plans for the business and are

delighted to embark on this

journey with our outstanding

New broom: the Wolseley employees,” Rajakarier said.

MAY JAMES/REUTERS

known for its Tory party election cam-

paigns such as the “Labour isn’t working”

posters that helped Thatcher to power in

1979. Sorrell worked so closely with Mau-
      rice and Charles Saatchi that he was
      referred to as the third brother. But he
      earned a reputation — one he dislikes — as
      a beancounter and not part of the crea-
      tive clan. He built WPP up through hun-
      dreds of acquisitions rather than any cre-
      ative genius, critics argue. At its peak, he
      struck 50 deals in a single year.
      Only recently, he had his eye on M&C
      Saatchi, the ad company founded by his
      former colleagues. Sources said he had
      been circling M&C after the firm suffered
      its own accounting scandal.
      However, new acquisitions will be a
      hard sell to founders and shareholders.
      Most are given shares in S4 as their
      reward — and these are now worth much
      less than they were before.

S

orrell’s comeback with S4 was

meant to be his grand retour and

grand finale rolled into one — a way

to round off his career on his own

terms and stick two fingers up at his

critics, both at WPP and elsewhere. It

would be a fresh start — a digital ad ven-

ture without the old-fashioned systems

and bureaucracy at WPP’s HQ in the giant

Sea Containers building on the Thames.

There was a makeover to boot. It was

out with the suit and tie and in with the

jeans, t-shirt and laid-back look — com-

plete with funky artwork in his new but

much smaller office in London’s upmar-

ket St James’s district where his red set-

ter, Ferus, roams freely, greeting guests.

In July 2018, Sorrell was back with a

bang with his first deal. He splashed out

€300 million (£253 million) on Media-

Monks, a Dutch digital advertising busi-

ness. Soon after, S4 joined the London

Stock Exchange via a reverse acquisition,

before a deal for MightyHive, a California

digital media consultancy.

Soon Sorrell was boasting customers

such as Google, Apple, Facebook and

Netflix: companies turning their backs on

the cumbersome WPP, whose brands

and agencies include GroupM, Ogilvy

and Wunderman Thompson. All was

going well — and not just in business.

After splitting from his second wife, Cris-

tiana Falcone, he has found love again

with the literary agent Caroline Michel.

Since those early deals, he has repli-

cated the WPP model with nearly 30

acquisitions. In the first three years of

trading, the shares soared. By September

last year, S4 was valued at £4.5 billion. It

was a staggering achievement for a busi-

ness launched just a few years earlier and

especially for one with underlying profits

of about £60 million. The comeback was

complete — or so it seemed.

But then the bubble burst. The com-

pany warned margins were falling, which

it said was due to hiring staff. Then a tech

sell-off gripped markets as interest rates

began to rise, sweeping S4 along with it.

After last week’s lurch further south, the

company is now valued at £1.8 billion.

Kepler Cheuvreux’s O’Shea said Sor-

rell would buy a company for a price

based on two or three times its annual

sales and investors in S4 would value

them at ten times sales via the share

price. “It didn’t seem like a house of

cards, but the valuation was a house of

cards,” O’Shea said.

The share slump is a big blow for Sor-

rell himself — not just because the value of

his holding tumbled by £90 million on

Wednesday. He and S4’s chief growth offi-

cer Scott Spirit will share 15 per cent of

any increase in S4’s value over five years.

Sorrell gets two thirds of the shares and

Spirit the other third. At September’s

peak, the pair were in line to share nearly

£500 million — £320 million for Sorrell

and £160 million for Spirit, who was dis-

missed by WPP as chief digital officer in

2018, although the reasons why are

unclear. But after last week’s col-

lapse, those “incentive shares”

are now worth about £80 mil-

lion after taking into account

the £1.25 billion of capital

invested.

The only condition

tied to the scheme is a

6 per cent compound

annual growth rate.

There is no way of

clawing back the

bonus in the event of a

serious accounting

error and the remu-

neration committee

cannot change the

terms. Similar

schemes at buyout

company Melrose and

housebuilder Persim-

mon have caused anger.

The bonus scheme is

said to be a source of

The way

he talks

about

Mark

Read is

crazy

Sorrell has found

love again with

the literary agent

Caroline Michel