Private Investor: Memo to Mr Souter: show M&S how to rescue a business
Saturday 26 June 2004
Do you ever have the feeling that you've missed the bus? I certainly did when I heard last week that the
Stagecoach bus company was going to return some serious capital to shareholders. The issue of redeemable "B" shares amounts to the equivalent of a special dividend of 18p per share, against a current share price of about 85p. More to the point, that is a return of 18p per share on each of the shares I bought last year at 15p and 22p. When they rose to 30p, however, I decided to take my profits.
Do you ever have the feeling that you've missed the bus? I certainly did when I heard last week that the Stagecoach bus company was going to return some serious capital to shareholders. The issue of redeemable "B" shares amounts to the equivalent of a special dividend of 18p per share, against a current share price of about 85p. More to the point, that is a return of 18p per share on each of the shares I bought last year at 15p and 22p. When they rose to 30p, however, I decided to take my profits.
So, although the shares had doubled, I missed out on the subsequent tripling of the share price. What's worse, I decided to plough the proceeds into Marks & Spencer which I was then keen on, although of course I now know that the pleasing news coming out of the organisation then was but another false dawn. I bought M&S at 317p, and it is only thanks to the intervention of Philip Green that they are much above that level today. Had they kept up with Stagecoach's pace they'd be around £10 and not even the most energetic bidding war for control of the group is going to see them there any time soon.
All of which has to set me thinking about recoveries. Brian Souter, the co-founder of Stagecoach, started his business from scratch in 1981, buying an old bus and running a few routes in Scotland just as bus deregulation was getting under way. It cannot have been an easy way to make a living, but his adventurous way of doing business, which his critics regard as a little too aggressive, brought him, his co-founder and sister, Ann Gloag, and his company to a stock market flotation in 1994. That was when I clambered aboard, one of, I believe, 60,000 small shareholders who have since been treated to quite a rocky ride.
I still have the original shares, which I bought then, although they are now parked in an Isa and they are worth a lot more than their notional flotation price of about 13p (adjusting for share recapitalisations, rights and suchlike). However, they are also worth a lot less than their peak of 227p or so. That was before Mr Souter got into trouble with some of his overseas adventures, notably Coach USA. It did seem for a time that it was all going to be over for the company and that even its profitable UK buses and South West trains businesses would be overwhelmed by the mess in the US. Hence the shares' collapse to near penny shares levels when I threw caution to the wind and bought some more.
Fortunately for me, Mr Souter and his team managed to stabilise the business by selling virtually everything they ran outside the UK, including one quixotic operation in Malawi, where I suppose Mr Souter was following in a long tradition of Scottish explorers and missionaries.
In any case, Stagecoach has now achieved such a turnaround that it can happily redistribute more than £60m to its owners, although it's safe to say my share of that will be rather less than the £33m (from a 13.5 per cent stake) Mr Souter will receive or the £27m (from 11.1 per cent of the business) that Ms Gloag will see coming through the letterbox of her castle.
I don't know what Mr Souter would do with Marks & Spencer, but I hope he will treat this as an informal request for him to drop a line to Baker Street with a few tips on how to rescue a business from disaster.
It does make me wonder, though, as a taxpayer as well as a shareholder, about how an industry that is supposed to be in crisis can provide quite such healthy returns. I appreciate that, post-Hatfield, the industry was bound to bounce back and that the Government and London's Mayor, Ken Livingstone, have done wonders for the buses, but I do wonder precisely how much of that £60m came from the pockets of hard-working taxpayers in the first place. Still, it's nice to be able to find a way of making the most of the chaos that is the British public transport system. If I was Alastair Darling, the Secretary of State for Transport and Scotland, I would ask my fellow Scot Brian Souter some searching questions about how his business is going.
What else? Well, Vodafone is proving as disappointing as it heads down to 120p. Just as well that I'd started buying into BT, nudging 200p for the first time in recent memory.
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