Pearson's unknown insiders may surprise us
COMMENT: 'What is certainly true is that Pearson has avoided the "safe pair of hands" approach it was all too likely to adopt. For that it should be congratulated'
Friday 18 October 1996
The City may in time come to accept these two "inside" appointments. Dennis Stevenson, while he has been on the board for years as a non exec, is not in truth an "insidery" sort of person. He has always hovered on the fringes of corporate power, a valued adviser, confidant and troubleshooter, but never a member of the old-school tie corporate establishment. Pearson has at last given him the "big job" he craved. The downside is that he's never headed a big organisation before. The Tate Gallery, though its contents may bear a more than passing resemblance to Pearson's hotch potch of multi- media interests, hardly counts. But then again, there's no reason to believe he won't be up to the task. As a tenacious, independent thinker and executioner, he's second to none.
Marjorie Scardino is a rather more difficult cookie to assess, mainly because so little is known about her. Nobody has a bad word to say about her at the Economist Group, where she is said to have worked wonders, and it is, of course, about time a woman rose to the ranks of chief executive of a FTSE 100 company. That doesn't necessarily make her the right choice, however, and all that can really be said about her for the moment is that only time will tell.
What is certainly true is that Pearson has avoided the "safe pair of hands" approach it was all too likely to adopt. For that it should be congratulated. Both these characters are unknown quantities, and it may well be that they surprise us all in unlocking the value so many in the City believe lies hidden just beneath the surface of this extraordinary company. Certainly they talk the language of change.
In the meantime, let's not be too hard on Lord Blakenham and Mr Barlow. Their reputations may have been soured by the disastrous Mindscape acquisition but there have been some spectacular successes along the way too. And let's not forget that Pearson has outperformed the rest of the stock market by nearly 100 per cent since Lord Blakenham took up the reins. Nobody's going to mind having that as their epitaph.
The Tories won't heed King's words of wisdom
If the Clarke boom is indeed under way, the Chancellor can hardly complain he had no warning. Yesterday brought new strictures from the monetarist camp, or what some have begun to call the sado-monetarist camp, represented on the one hand by the Treasury "wise person" Tim Congdon, and on the other by the Bank of England's chief economist, Mervyn King.
The former has published an analysis of all the economic indicators which have begun pointing towards a surge in demand and above-target inflation down the line. His culprits - monetary growth, asset prices and consumer demand - are precisely those the Treasury used to take most seriously as evidence of inflationary pressure a decade ago, but monetarism has fallen so completely out of fashion in Whitehall that they no longer seem to count for much.
Economic indicators are always mixed, and many, like manufacturing output, are still pointing the other way. But as the months pass, the evidence of a bout of serious growth seems to mount.
Meanwhile, the Bank of England has eloquently warned about the complacency that surrounds this situation. It accepts that anti-inflationary vigilance has a cost in terms of lower growth, at least in the short run. Hence the charge of sado-monetarism from people who, very understandably, think that jobs and output are more important than a small increase in inflation.
But the Bank is right to say a price has to be paid to re-establish the credibility of monetary policy. Prices have risen 20-fold in Britain over the past 50 years, an increase without any historical precedent. That appalling record cannot painlessly be corrected. A year or two of modest national masochism now would establish the policy credibility without which the Government's real commitment to the cause of low inflation will always be in doubt. Mr King is right to say these things; he would, however, be naive to believe that politicians with an election to win are ever going to take any notice of him.
Thomas the Tank Engine goes to the stock market
"What is a character licensing proposition with international appeal?" Thomas asked the Fat Controller one day. "Why, my boy, that's you," came the reply. "Oh, I thought I was just a train like James and Gordon and the rest," said Thomas, looking just a little disappointed. "That's right," said the Fat Controller, "but you are much more than that. You are 'a stable of properties'."
"Is that good?" asked Thomas. "You bet," replied the Fat Controller. "Sales in Japan were up 120 per cent in the year to June and cash flow from operating activities is a very chunky pounds 3.6m."
"Does that mean I can have Sunday off?" ventured Thomas. "Sadly not," said the Fat Controller. "We're off to Germany for a meeting with your merchandising promoter followed by a tour of the satellite TV stations."
"It all sounds very exciting, but I'm still confused," said Thomas. "Don't worry," said the Fat Controller. "Just remember this simple little phrase - 'We make our name by making magic. We make our living by exploiting rights'."
"That sounds like a rather fatuous piece of management-speak," said Edward, the grumpy engine, who had just returned from pulling the coaches.
"It is," confided the Fat Controller. "But it's the kind of stuff the City likes to hear. You see, we are all going to be floated on the stock market and everyone will be rich beyond their wildest dreams."
"Isn't our trading record a little patchy?" replied Edward. "I know the Japs can't get enough of us, but look how sharply our US sales fell in 1995 and they have yet to recover."
The Fat Controller looked at him sternly. "If I've told you once, I've told you a thousand times. That is the classic revenue cycle. We hit the market, saturate it with merchandise, consolidate around the core video products, refocus the range and expand again."
"Sorry," said Edward. "Do you think the institutions will understand that?"
"Who cares?" said the Fat Controller. "This is the biggest bull market for a decade and if Bernerd Elliot can raise the money to start a Russian lottery, then we can sure as hell get our issue safely away."
"Will the Reverend be coming with us?" asked Thomas. "Sadly not," smiled the Fat Controller. "He sold out a long time ago."
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