What a bunch of killjoys. Just when the entire nation needed cheering up, look what’s happened: Royal Bank of Scotland’s irate shareholders have only gone and settled their legal action over April 2008’s dodgy rights issue.
The upshot? Pretty much no chance of a court appearance from Fred Goodwin, the man who blew up the bank with his ABN Amro antics. Shred will now get to stay on the golf course, free from all obligations to explain what he knew when he was tapping up investors for £12 billion just months before RBS went pop. No chance either, m’lud, of seeing him squirm over that £45.5 billion taxpayer bailout.
And that’s just for starters. What about the historical detail that the trial would have thrown up, what with the rights issue being sandwiched between March 2008’s fall of Bear Stearns and Lehman’s collapse in September that year?
How, for example, Mr Goodwin’s domineering style extended to designing the company Christmas card. Or how he personally selected the colour of the RBS executive cars — a Pantone 281 Mercedes S-Class — to match the bank’s corporate blue, with their interiors the exact beige of the office carpets. Or how boring banking stuff, such as risk and credit, wasn’t really his thing.
And, of course, no one can blame the bulk of the 9,000 retail investors in the RBS Shareholders Action Group for caving in at 82p a share: a settlement worth £200 million. Represented by Signature Litigation, they were part of the final 13 per cent of disgruntled shareholders holding out for compo. Four other investor groups have already settled for much less, most at just 41.2p. And the 82p would have been off the table once the case came to trial.
Advertisement
No, the main reason Fred’s almost certainly off the hook is the actions of the present management, led by RBS chief Ross McEwan. He’s spent an obscene sum in legal fees, ensuring that hardly anyone could afford to take on the bank — pretty rum for a lender 72 per cent-owned by the taxpayer.
RBS’s legal costs already top £100 million. And they weren’t going to stop there, as the bank gleefully put about. It was ready to spend another £29 million merely on part one of the three-phase trial. So, if shareholders had lost, incurring RBS’s costs in the process, they’d be in for a gargantuan bill. Indeed, RBS’s tactics were designed to deter action from individual investors who still don’t want to settle, such as Neil Mitchell of Torex fame.
True, the case was complex, apparently involving 25 million documents. And Mr McEwan, who set aside £800 million for the rights issue litigation, must protect the interests of all shareholders. Yet the result is that the biggest failure in UK banking history doesn’t get the proper legal interrogation it deserves, instead having to make do with 2011’s bland report from the now-defunct Financial Services Authority. Moreover, Mr Goodwin emerges as the main winner. No wonder people are cross.
Stuck on spin cycle
Who needs a washing machine when you’ve got Steve Caunce? The AO World boss is an expert in spin cycles, at least to judge by his summing up of the latest 12 months: “another year of great progress”. Really? Well, how come the shares fell 11 per cent to 129½p?
Yes, maybe it was mainly due to his warnings about the “challenging trading environment”, not least Brexit Britain’s slowing housing market. Yet investors who paid 285p a share at March 2014’s float deserve more than all the froth about “doing business the AO way”.
Advertisement
Sooner or later AO must deliver some decent results — and the last lot weren’t it. Despite the 17 per cent rise in sales to £701 million, even AO admits it missed “internal expectations”. And while it is sacrificing UK profits to fund expansion in Germany and the Netherlands, no one will get rich on a 46.2 per cent cut in “adjusted” ebitda losses to £2.1 million. The adjustments to a metric already adjusted enough included a £3.6 million bonus for non-board staff.
Neither is AO generating enough cash: viz the £50 million fundraiser after the year-end. And, with the group refusing to disclose the figures, the suspicion remains that profitability largely depends on selling pricey warranties consumers don’t need. It’s rare, too, you find an insurance company trading on a 2019 earnings multiple of 95 times.
True, Mr Caunce, who took over from founder John Roberts last year, has the sort of enthusiasm for AO you don’t always find in a man who pocketed £53 million at a float. But he can’t keep rinsing investors.
Five’s not a crowd
And then there were five. As if losing three directors in four days wasn’t enough, Genel Energy’s warring investors have just voted another off the board: Umit Tolga Bilgin, who only joined in March after buying a 15 per cent stake in 2016. His exit completes the trio who voted against the £1.52 million pay packet of chief executive Murat Ozgul, what with co-founder Nat Rothschild and Simon Lockett stepping down before the meeting. At this rate, there’ll be no directors left by next week. Perhaps Mr Rothschild’s mother’s horse, Nathaniel, would like to join.
Starting young
Here’s the latest from Tech Will Save Us: “British children more employable than their parents.” How come? Well, when asked can your child use coding languages such as Python or Javascript, 28 per cent of parents with kids under the grand age of four answered yes. Contrast the parents themselves: just 24 per cent. Who’s going to employ parents like that? They’re all obviously liars.