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Steve Rowe’s warts and all M&S farewell just enhances credibility for investors | Nils Pratley


Compare and contrast. Here’s Marks & Spencer’s previous chief executive Marc Bolland giving himself a pat on the back when he checked out in 2016: “I have done the heavy lifting that was needed. I am very pleased with what I have done over the last years and think I have built the foundations.”

The declaration of a weightlifting triumph wasn’t convincing at the time, and Bolland’s efforts were soon exposed as a light limbering-up exercise at best. Familiar problems – in fashion, logistics and overseas – re-emerged because they never went away. By 2018, Steve Rowe, the successor now departing himself, launched a “facing the facts” strategy that was plainly overdue.

In that context, Rowe’s farewell assessment on Wednesday was infinitely better because it was nuanced. Yes, he also said M&S had “fundamentally changed” on his watch, which is true thanks to store closures, a retreat from France, the online food partnership with Ocado and the axing of tired in-house fashion brands. But Rowe also spelled out the items left undone.

His list wasn’t short. Core technology in the clothing and home department needs an upgrade. Both sides of the business need to invest in their supply chains – the food operation was described as “less efficient” than rivals’. Some of the stores are still “out of date and poorly located”. The reduction in floor space dedicated to clothes hasn’t kept pace with shift in demand towards online. Top marks for honesty.

Rowe has been unlucky on his last lap because the looming cost of living squeeze has almost halved the M&S share price since January. The two profit upgrades last autumn have almost been forgotten.

But M&S is clearly in better shape than in the recent past, not least because cash is flowing again, even if shareholders’ dividends aren’t yet. The point is that credibility is enhanced if you don’t airbrush the blemishes. Others should try the approach.

Fuller account needed after inelegant JD Sport exit

And here’s how not to communicate with shareholders, courtesy of JD Sports: put out a statement 11 minutes before the stock market shuts for the day that says the executive chair, a man in post since 2004, is out “with immediate effect” as a result of an “ongoing review of internal governance and controls”.

JD’s share price plunged 10% in the remaining minutes of trading, hardly surprising since the statement raised more questions than it answered. Peter Cowgill had been the architect of JD’s ascent to the FTSE 100 index, a period in which the company has eclipsed Sports Direct and gone global. Now he was being exited inelegantly.

One part of the backdrop is the company’s £4.3m fine in February from the Competition and Markets Authority for sharing commercially sensitive information with Footasylum, a business it had bought but was supposed to be running separately in the pre-clearance period. Another part, though, seems to be JD’s slowness in executing a plan, announced last summer, to split Cowgill’s roles.

If the man himself was blocking reform, then, yes, an instant departure is one way to solve the problem. And since Stephen Rubin’s Pentland Group owns 52% of shares, it can get its way.

Minority shareholders, however, may fairly expect a fuller account of the showdown. For example: what will the well-remunerated Cowgill collect on the way out?

Windfall tax aside, SSE still seems to be in a safe spot

Business secretaries don’t normally inject themselves into companies’ full-year results announcements, so it was odd to see Kwasi Kwarteng pop up at SSE to hail the company’s £24bn UK investment programme for the next decade as “a huge vote of confidence in our energy security plans”.

What was Kwarteng signalling? That he’s opposed – still – to energy windfall taxes? That SSE should get an A* in any “show us your investment” exam that Rishi Sunak sets? That, whatever the chancellor does, the government will continue to get along with constructors of windfarms in a spirit of peace, love and mutually-advantageous contracts?

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It could be any of the above. In the meantime, SSE investors can probably feel more relaxed about the windfall threat, even if it extends to generators. The group’s adjusted operating profits rose 15% to £1.5bn last year but the wind in the sails came from the upgrade to earnings growth out to 2026. Instead of 5%-7%, SSE now sees 7%-10%. Given that the rate is a compound one, the improvement is significant.

SSE credited higher inflation, more volatility in the energy market and better prospects for its thermal and hydro assets, where flexibility in generation is suddenly a great virtue.

After Tuesday’s little wobble, the shares are back within 3% of their all-time high. The self-styled “clean energy champion” for the UK still looks to be a safe spot.



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