IT IS a no-brainer, surely. Shares in the Royal Household company would occupy a cornerstone role in any sensibly diversified investment portfolio. Wouldn’t they?
The Royal Household has brand value to die for. It is, admittedly, difficult to attach a hard and fast value.
But the British monarchy is known around the globe. It is not as big as McDonald’s, Hollywood, Coca-Cola or David Beckham. But most fast-moving consumer goods companies would settle for recognition even half way approaching that enjoyed by the House of Windsor. It has cachet that could hand the Royal Household its first £1.5 billion of net worth. The merchandising opportunities also bestow a handsome capacity on the brand to generate good income. Revenues might reasonably be expected to aggregate at high single digit percentage rates. Even low double digit earnings growth could come from this source.
Moreover, the Royal Household is about much more than a global brand. Its extensive property interests mean that it has solid net asset backing. The property portfolio comprises countless castles, palaces and parks. This portfolio would swell the value of the RH plc by another £4.5 billion.
Advertisement
In assets such as Regent Street, one of the finest retail developments in Europe, the Household also has the capacity to generate attractive and reliable rental incomes.
The Royal Household operating overheads may appear extravagant. Investors could raise legitimate concerns about certain non-core individuals hovering on the fringes of the enterprise. But the returns on the human capital employed is no worse than that borne by a typical City of London-based merchant bank, or a top-flight football club. A close eye needs to be kept on royal support staff. But the potential for delayering the below-stairs headcount raises hope of future earnings enhancing efficiency gains.
The Royal Household could, therefore, be worth £6 billion. If its shares were listed on the stock exchange at such a level, the company would catapult into the FTSE 100 index of blue chips.
It would come in a long way behind BP, the oil giant, which with its £120 billion value is the biggest stock market company.But it would pip PartyGaming, the online poker firm that is currently seeking a stock market listing in London to such widespread consternation. But in reality — or even this odd twilight world of imagined reality — Royal Household plc would struggle to find investors willing to ascribe it £6 billion of value. For one thing the Royal Household gets only a fraction of the total merchandising income. Any Tom, Dick or Hooray Henry can knock out some extruded plastic Buckingham Palaces and flog them as souvenirs.
Corporate governance concerns, meanwhile, are legion. The putative chairman — Elizabeth Windsor — might also serve as the chief executive, creating an uncomfortable concentration of power at the top of the organisation.
Advertisement
There is a clearly defined succession strategy, which is welcome, but it is hard to avoid the conclusion that it errs towards the nepotistic. Companies with lords on the board are often treated with suspicion by investors. This one would have lords, dukes and princes. Perhaps most critically, none of the revenues from the property portfolio goes to the Royal Household. It is snaffled by the Chancellor of the Exchequer in return for much more modest Civil List payments. The structure of the rents-for-Civil List deal suggests that the board of Windsors have precious little leverage over the market in which they operate. Either that or their commercial acumen is shot to pieces.
But the Civil List arrangement also relegates the Royal Household to the position of a tightly regulated utility. The likes of Ofwat, the water and sewerage regulator, is taking a decidedly more liberal stance with its charges. Her Majesty’s Government, on the other hand, has Her Majesty on an exceedingly short leash. For all its challenges the Royal Household is an attractive asset. With income last year totalling only £36.7 million, it would be hard pressed to sustain a value much above £300 million. In light of the huge public excitement created by a royal flotation, the shares might soar above that level. If they did, astute investors would sell.