Michael Harrison's Outlook: McGowan sweeps as he cleans at Rentokil

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The Independent Online

The revolving door spun again yesterday at Rentokil and out fell the ratcatcher's chief executive James Wilde, clutching a cheque for £650,000. The group's ragbag of pest control, security, potted plant and parcel delivery businesses may be ex-growth, but never let it be said that life inside company headquarters is dull.

The revolving door spun again yesterday at Rentokil and out fell the ratcatcher's chief executive James Wilde, clutching a cheque for £650,000. The group's ragbag of pest control, security, potted plant and parcel delivery businesses may be ex-growth, but never let it be said that life inside company headquarters is dull.

Two months ago, while he was busily dispatching Rentokil's founder Sir Clive Thompson, the new chairman Brian McGowan said he had "absolute confidence" in Mr Wilde. Alas, it turned out to be the sort of confidence football club chairman voice in their managers just before the P45 is handed over.

It might have been more clinical to eradicate both men at the same time but, coupled with the profit warning which sent Sir Clive on his way, that really would have smacked of panic.

Mr McGowan insists that back in May he had faith in Mr Wilde - it was just that, the more he spoke to other people inside and outside the business, the less he found his views being shared.

If the ousting of Sir Clive "liberated Rentokil from its past", as Mr McGowan put it at the time, then the departure of Mr Wilde could open up a whole new future. The old guard was criticised for placing too much emphasis on short-term profit targets and too little on the long-term health of the business. Ironically, it was the belated attempt to do just this, by investing more in staff training and improving service levels, that led to the margin erosion which prompted May's profits warning.

Mr McGowan now has the task not only of reviewing Rentokil from top to bottom but finding a new chief executive who buys into whatever new strategy he comes up with.

Hiring the right candidate may take a little time. But investors have only a month to wait before Mr McGowan's strategic review is unveiled, and if his management style is any guide then shareholders should expect fireworks.

Unlike May's upheaval, the culling of the chief executive left Rentokil's share price unmoved, mainly because the profit guidance for the year remained intact. Mr McGowan may be shifting Rentokil away from short-term targets but there is one which it absolutely has to meet and that is a full-year profit of £350m. Anything less and he is as dead as a rat in a trap as well.

WH Smith

WH Smith is returning to its core retailing roots by, er, opening coffee shops in its 20 largest outlets. If you thought the store was all about supplying staples such as stationery, cards, books and magazines, then think again. Would madam care for a cappuccino to go with that Clinton biography?

The City has lost track of the number of times a new management has tried to re-invent WH Smith, going all the way back to the ill-fated Project Enliven which accompanied Bill Cockburn's brief and unhappy time on the high street. Now, free of the distractions of the Permira bid, it is Kate Swann's turn.

Fresh from Argos, well almost, where they pile 'em high and sell 'em cheap, she has decided that what Smith's needs is more stock, better-focused promotions, and cheaper suppliers. The store does not lack customers - seven in ten of us have visited a WH Smith in the past 12 months - but it does lack sales. The average amount spent by each customer who crosses the threshold is now so embarrassingly small that Smith's no longer publishes the figures.

What the new team has therefore decided to do is provide more of what customers want to buy in Smith's stores. In the jargon of the retailing world, it is known as strengthening "product authority". What, in practice, it means is making sure that anyone who wants to buy a given book or DVD can walk into their local W H Smith in the knowledge that it is almost certainly in stock.

By a retailing sleight of hand, more stock will be displayed in a smaller area by piling the shelves higher in order to free up space for more in-store concessions - heel-bars, tattoo parlours, who knows what next.

The increased volumes of books and stationery ought to improve Smith's buying power. Coupled with increased use of Far East suppliers that should give Ms Swann more scope to cut prices at the same time as maintaining margins. That, at any rate, is the theory.

Whether this will work in an age when the big supermarkets have already stolen Smith's tea, as well as its breakfast and lunch, and specialist retailers can still outstock it when it comes to every one of the staples, is anyone's guess. With 550 stores located almost entirely in prime retail locations, the business inherited by Ms Swann ought to be good for something. Perhaps she can finally answer the question which has defeated so many of her predecessors: what is the point of WH Smith?

Long-term savings

While it would be unfair to smear the Prudential as an example of a grasping, sales-driven financial services industry, it was an unfortunate coincidence that that group should announce unexpectedly good profits on the day that both the Financial Services Authority and the Treasury Select Committee published highly critical reports on the industry.

In this country at least, Prudential's margins have been squeezed by having to ditch the much-derided with-profits policies in favour of less profitable unit-linked products. The abandonment of with-profits, where annual bonuses have largely vanished, was itself the result of long and loud criticism.

But for every battle consumer groups and the media win, the industry exhibits a near-genius for finding other ways to scalp the poor old punter. Precipice bonds and split-capital investment trusts have been more recent scandals that have shown providers at their most cynical.

The industry's defensiveness was shown yesterday by the timid responses of trade bodies such as the Association of British Insurers and the Investment Management Association to the twin onslaught from regulators and MPs. Some of their members may feel that these bodies are losing the stomach for the never-ending fight.

The fact is that, for every reasonable public response to criticism of the savings industry, there are a hundred private mutterings about not being able to make a decent profit, and how subscriptions to trade bodies are simply money down the drain. A strong lobby is on the war-path against the Financial Ombudsman Service for coming down too heavily in favour of consumers. No question of contrition at being found out, just a smouldering resentment at having to rein in rip-off products.

It is high time that financial product providers and sellers shed the attitude that savings is a cat-and-mouse game in which the object is to fleece the consumer to the greatest extent possible. The FSA and some of the more enlightened souls in the industry have recognised that a well-informed audience, able to pick the good from the bad, is more likely to place its money with savings providers. But that takes more patience that many in the business can muster.

However, until the industry shakes off its instinct to snatch the fast buck rather than spend time and money restoring public confidence, today's criticisms are likely to be repeated many times over.

m.harrison@independent.co.uk

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