Jeremy Warner's Outlook: Rose would be a fool to declare the M&S turnaround complete, but he's made a start

Trouble brews again in Murdoch towers; Burberry acts on the succession
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The Independent Online

To the contrary, what yesterday's surprisingly upbeat trading statement demonstrates is that Marks & Spencer no longer needs Mr Davies's Per Una flair; it is once more beginning to drive the business forward on its own. If the Next founder's intention had been to undermine this showcase of renewed success, he failed. His action in resigning looked only like a childish display of petulance.

M&S's recruitment of Mr Davies four years ago was a recognition of failure - tantamount to admitting that it was both out of date and out of ideas. The Per Una range fast established itself as an oasis of colour and fashion amid the regimented dreariness of M&S's clothing ranges, and the one bright spot in its sales figures.

Yet Mr Davies was too greedy and having first persuaded Mr Rose to pay him £125m for a two-year contract, he was demanding another £150m to stay on board, as well as more influence over other parts of the business. It makes even Gerry Robinson look cheap. Mr Davies, brilliant entrepreneur and design impresario that he is, had plainly outlived his usefulness.

With the shares briefly breaking the £4 barrier yesterday, Mr Rose can afford to give himself a well-deserved pat on the back. One of the promises he made when he saw off Philip Green a year and a bit ago - that he'd get the share price back to the £4 Mr Green said he was prepared to offer - has been achieved. Those who said he'd never do it are being made to eat humble pie earlier than even Mr Rose could have imagined. As this column, almost alone in the press, argued at the time, the board was right to reject the Green shilling, and the point has now been proved.

Even so, one quarter of sales growth is hardly evidence of a turnaround. The mistake made by Luc Vandevelde and Roger Holmes, Mr Rose's two predecessors as chief executive, was to think just that, and then sit back and declare the job complete. In the latest numbers, M&S is up against very weak comparitors, and though the performance is better than others on Britain's beleaguered high street, there's still no growth restored to clothes sales. Rather, it comes entirely from foods.

Still, Mr Rose is proving himself a much better retailer than many of his detractors predicted. There's more to buy, the prices are again competitive, and there's once more a spring in the old gal's step. The look of the stores is in the main still drab and unappealing, while the row upon row of beige and plain black trousers that came to stand for the very worst of M&S has not yet been wholly exorcised.

Yet these remaining throwbacks to a bygone age are also evidence of the enormous potential for improvement this company still has. M&S is already confident enough to say it no longer needs Mr Davies. Mr Green is still there, waiting for M&S to stumble, but I fear he may have missed his chance for good. Publicly, Mr Green claims he had a lucky escape. Privately he must wish he'd paid up when he had the opportunity.

Trouble brews again in Murdoch towers

Rupert Murdoch has an old fashioned and simplistic view of corporate governance. Roughly summarised, it goes like this; if you don't like the way I run my companies, then sell the shares and find something more to your liking. Regrettably, it doesn't work like that in these days of index tracking investment. Many fund managers have no option but to be invested in BSkyB whether they like it or not. As one of the FTSE 100's biggest companies, Sky must remain a core portfolio investment.

This has long been a cause of friction between Mr Murdoch and his outside investors, and true to form, it's about to flair up again at the company's annual general meeting on 4 November. Last time it was about the appointment by Mr Murdoch of his still youthful son, James, as chief executive. This time it is about the company's share buyback programme. Hermes, manager of the British Telecom and Royal Mail pension funds, has put the company on notice that it intends to vote against the proposals because it no longer trusts Mr Murdoch to behave as he says he will.

Actually, the dispute is not really about Sky at all, but Mr Murdoch's master company, News Corp. Here, Mr Murdoch's one-time ally now turned arch enemy, John Malone, has built up a sizeable stake which he threatens to use to challenge Mr Murdoch's grip on the company's affairs.

To the fury of outside shareholders, Mr Murdoch set about thwarting any ambitions Mr Malone might have by putting in place a "poison pill" which would massively dilute Mr Malone if he further added to his stake. The arrangement was meant to last only a year. Instead Mr Murdoch, having failed to resolve his differences with Mr Malone, is extending it. This all goes to show, says Hermes, that you cannot trust Mr Murdoch. In pursuit of his own interests, which is to retain control of this extraordinary media empire so that he can hand it on to his children, he rides roughshod over everyone else's.

Sky is in a sense just a proxy for the bigger beef Hermes has with News Corp, yet there are issues with BSkyB too. Having already bought back nearly 5 per cent of its shares, Sky is seeking authority to buy a further 5 per cent. The effect of the buybacks is further to increase New Corp's economic interest in Sky. News Corp has signed a legally binding agreement to limit its voting interest to 37.2 per cent, but this doesn't satisfy Hermes. Again, it says, you just cannot trust Mr Murdoch.

Well maybe, but what does Hermes expect? Mr Murdoch wouldn't have survived as long as he has had he not been straight and honest in the way he conducts his business, yet he also shares many of the characteristics of Asia's leading tycoons in believing that investors and bankers are there not to be served but to be bent to his own purpose.If they don't like the ride, then they can go elsewhere. The general convention is that if you avail yourself of the benefits of the capital markets then you should be prepared to play by its rules. NewsCorp sometimes struggles with this concept.

Mr Murdoch has created something remarkable by refusing throughout his business career to compromise, yet though he may for now get away with running his business like a private fiefdom, his outside shareholders will eventually have their revenge. The sadness of his position is that all these efforts to shore up the business dynasty for future generations of Murdochs will ultimately profit him nothing.

Even Mr Murdoch is mortal, and if the family isn't already at war, it soon will be the moment he dies. Siblings from three different marriages do not make for harmony and a tidy succession. Other than Mr Murdoch's force of will, there is little that holds this media conglomerate together. Within 10 years of his death it will be split asunder, with the family and outside shareholders squabbling over the scraps. Yet as long as he's alive, Mr Murdoch will continue to divide and rule. Like it or lump it; that's the way he is.

Burberry acts on the succession

Burberry seems to have made an inspired choice in hiring Angela Ahrendts to succeed Rose Marie Bravo as chief executive. She's almost unheard of in this country, but was recently identified by Time magazine as one of the most influential women in American fashion. By all accounts, Burberry was lucky to get her. Ms Bravo, who reinvented Burberry as an international brand, is going to be a tough act to follow. A change of management regime after such success is generally the signal to sell. Yet Ms Ahrendts would seem to stand a better chance than most of building on Ms Bravo's achievement.

j.warner@independent.co.uk

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