The Hilary Clarke Interview: An East End boy pulls Rank
Hilary Clarke meets Mike Smith, the leisure giant's boss, who has inherited a mountain of debt
Sunday 08 August 1999
Almost every business the leisure giant owns, from the Tom Cobleigh pub chain and Odeon cinemas to Butlins holiday camps, has been the target of sale speculation over the past few months as the group looks to slash its pounds 1.26bn debt pile.
"Don't expect me to say anything, for a whole variety of reasons - not least because nothing is set in stone yet," he says.
"Whatever I say publicly can only be damaging. It either upsets my management, upsets my employees, upsets my customers or undermines my negotiating position," he adds.
In fact, he denies any of the companies has the definitive "for sale" sign attached.
Even so, Smith had some bad news to deliver when he faced investors for the first time last week since he joined the company in April. The company cut its interim dividend by a third and announced a pounds 50m cost-cutting program.
Pre-tax profits for the group fell from pounds 82m to pounds 30m after pounds 50m of exceptional costs.
When I meet him, Smith is dressed casually in beige cotton trousers and a blue shirt. He puts a tie on for the photographer, bringing in three and asking me to choose. He says he keeps a few suits in the office, just in case he needs to wear one. The interview's in the office soon to be occupied by the new finance director, Ian Dyson, formerly financial controller at Hilton hotels, where Smith's on the board. Smith will not let me see his office. "It's a working office, its a mess," he says.
In fact, he doesn't spend much time shuffling paper, preferring to be on the road visiting Rank's businesses around the country. "It's much better if I deliver the message face-to-face. It's more effective like that," he says.
Dyson's appointment, and the departure of the two men whom he replaces - Nigel Turnbull and commercial director Douglas Yates - represents Rank's final purge of the old regime.
It was in a room downstairs a couple of days earlier that Smith informed his staff of imminent job cuts - 465 in all, mainly in the middle management strata or, as he puts it: "Any one who doesn't work in a cafe."
You couldn't get a more contrasting background and management style that those of Smith, Rank's third chief executive in four years, and those of his predecessor Andrew Teare. Teare, who resigned amid criticism of a poor performance and a falling share price, was very much in the public school-boy mould, infinitely more comfortable at the opera than at a sing-along in a holiday camp.
Smith's working-class credentials, on the other hand, are about as bona fide as they get - even though he admits to going to Pontin's not Butlins as a boy where he "used to chase the girls along the cliffs". He grew up in Plaistow, in east London, the son of a printer: "You were either in the docks or in the print." As it happens, the young Smith was taken under the wing of the other big employer of the area - the local benevolent dictator at the time - Ford Motor company.
"I'm a Ford man. Ford took me off the streets," he says bursting into laughter. He went to the local secondary modern school, Lister, for which he is full of praise. That was in the Sixties "when education was the big thing". He was practically head-hunted by Ford. "They took a boy from the school onto a management course a couple of years before me and he did very well. So they came back and asked for another one."
He spent six years at Ford before moving to British Leyland in 1971. "I love the car industry. I still love cars," says Smith, who drives a Jaguar.
Later he went to Cranfield School of Management where he studied for an MBA before returning to Leyland. In 1984 he made his biggest career change when he joined Grand Metropolitan where he held a number of senior positions including managing director of Express Dairy.
It was at Grand Metropolitan that Smith first got a taste for the leisure industry when he oversaw William Hill, the company's bookmakers division.
Then he took up his first chief executive role at Bowater, the printing company, before moving to Ladbrokes to fill the top slot there in 1994. His time at Ladbrokes was seen as steady, with Smith only hitting the headlines when he was awarded a 98 per cent pay rise.
Things couldn't be more different at Rank. This son of the East End has been in Los Angeles a lot lately, mixing with the stars. Rank owns the Hard Rock Cafe chain and half of Universal Studios. One of his first assignments was an exclusive preview of Universal's new $2bn Florida theme park, "Island of Adventure". There he rubbed shoulders with the likes of Steven Spielberg and Michael Douglas. I can't imagine Smith is the type to be phased by the glitterati though.
"A lot of my mates are still in the East End and, er, perhaps I should go off the record here, I still prefer having a drink in low-life bars," he confides.
Smith is reluctant to say anything about his private life. He won't even tell me how many children he has, although I find out later he has two daughters and a son. I also manage to extract from him the fact that his sister and mother live in Essex, and that he lives in the "London area". "I'm very protective of the people in my orbit," he says.
He is going to find it tough staying out of the limelight over the next few months. A big restructuring of the company is inevitable. While most of the speculation so far has hinted at the sale of Rank's smaller assets, most analysts believe he will have to let go of a big fish if he is to succeed in injecting a new glow into Rank's financial health.
Some have suggested he might opt to sell the group's video duplication arm, Deluxe Entertainment Services. Yet despite its notorious failure to cope with demand for the blockbuster Titanic last year, Smith seems impressed with the business. The man who heads the company, Phil Clement wandered in during our interview.
"I have to be nice to him. He's an important man," jokes Smith. Deluxe probably has the biggest growth potential of all the groups assets. More likely to be on the market soon is the company's 50 per cent stake in Universal Studios, Florida. Seagram, the drinks-to-movies conglomerate, owns the other half.
"The existing agreement with Seagram foresees that in May 2001 we can part if we wish," says Smith. "We are working with Seagram now to see if there is a way of unlocking cash, be it by divesting or whatever. That's not to say it will happen tomorrow." Rank's stake is valued by analysts at pounds 440m.
With a 28 per cent share in a growing market, the Odeon cinema chain is unlikely to come on the market for a while too. As for Hard Rock, isn't the brand becoming a little jaded?
"Everyone has a view on Hard Rock. I would say it has seen off the other brands: look at the trouble Planet Hollywood is in. Music is a huge attraction to people: I think music will see out the Rain Forest," he says, referring to the rain forest-themed cafe in Shaftesbury Avenue.
He'll have done his job if he sees off the company's debt.
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