Sports Direct shareholders urge fair play as the Ashley rollercoaster continues
legalisation of brothels and drawing confessions out of the Yorkshire Ripper, Peter Sutcliffe. His time as Tony Blair’s drug tsar ended in a row over the weakening of marijuana’s classification. However, while he has spent the past 40 years in public life, his seven years at Sports Direct have been some of his most uncomfortable.
Last week he barely survived another shareholder revolt with 47pc of independent investors voting against his re-election. After two previous rebellions against him, where he was only saved by Ashley’s controlling stake, he had promised to step down if the majority of independents rebelled once more.
However, this time he clinched support from 53.2pc of independent shareholders. “He got away with it,” was how one shareholder characterised the narrow vote.
Even after poll results declared that he had escaped a toppling, Hellawell refused to make any comments about his future at Sports Direct. That didn’t stop his detractors from questioning whether he was a sufficient check on Ashley’s controlling influence at the company. “It is clear that the reelection of Keith Hellawell is far from a ringing endorsement,” said Paul Lee, head of corporate governance at Aberdeen Standard Investments. “The company hasn’t made good on its previous promises and we do not yet have confidence that the chairman and board are holding the chief executive to account in the way that they should.” When Hellawell was asked two years ago whether he could keep the tycoon in check, he said: “As a policeman I’ve controlled people from serial killers to rapists and Mike Ashley doesn’t need controlling.” Meanwhile, Ashley, who jokingly calls the former policeman “Plod”, has said of Hellawell: “He knows my strengths, he knows my weaknesses.”
While Aberdeen Standard Investments, Royal London, Fidelity, Legal & General and Hermes voted against Hellawell, their opposition was diluted by Standard Life, one of his fiercest critics, having sold its 6pc stake in the past year. That margin could have boosted the rebels’ cause.
The effort to remove Hellawell was also lacking influential support from the Investor Forum – the body specifically set up to push recalcitrant companies into better behaviour. The Investor Forum had campaigned vigorously last year for “an independent review of the company’s entire corporate governance framework”. It even added that, if directors were unwilling to implement the review, “serious questions will be raised as to whether they truly represent the interests of all shareholders and, therefore, whether they are meeting their statutory director duties”. But since that feisty message there has been deafening silence from the Investor Forum, despite Sports Direct reneging on its promise of an independent review.
Despite its initial best efforts, the forum has proved to be just another toothless body.
Sports Direct claimed an independent review was ditched because of two potentials turning down the chairman post. Instead it hired law firm RPC, which the forum had already publicly said it did not believe was independent due to its long-standing relationship with Sports Direct and Ashley.
Last week Hellawell said that the corporate governance review was “ongoing” and had raised five areas of concern, without detailing what they were. This was hardly the “very open” ethos that Sports Direct had promised in its 2016 presentation to investors.
Last year Sports Direct threw the doors open to its annual meeting and took the unusual step of employing Eventbrite, a ticketing company normally employed by music festivals, to encourage droves of interested pundits to make the trip to Shirebrook. As well as a tour around the vast Shirebrook warehouse led by Ashley, the company issued a bold presentation that promised “time for change”. It was an explicit effort to draw a line under a scandal-ridden period. This year, there were fewer than 15 investors in attendance, no open day and no Ashley. The trainers and tracksuits tycoon said he had other business commitments that meant he couldn’t attend the once-ayear event with the fellow owners of the company. “He’s given up with rapidly elevate Sports Direct’s customers and products after missing out on the booming athleisurewear trend.
The company splashed out more than £300m last year on property as part of its strategy to improve relationships with brands like Nike and adidas. Sports Direct now has 25 “new generation stores”, of which 13 are deemed to be “flagship” worthy. Ashley reckons this number can grow to between 75 and 160 over the next five to 10 years.
However, while the 25 new generation stores have been beating expectations, they are in the minority as Sports Direct’s retail estate of 232 shops continues to be littered with tired, old stores. “The job is still very far from done but the early signs from Sports Direct’s flagship stores are visually very positive,” says Jonathan Pritchard, an analyst at Peel Hunt. However, for Pritchard the key test will be whether Sports Direct can convince “quality branded products [to return to] the non-flagship stores, and that will take a while to re-emerge as Sports Direct has yet to be fully allowed off the manufacturers’ naughty step”.
Ashley’s attempt to turn Sports Direct into Selfridges has also been the driving force behind his scattergun acquisition spree. The tycoon has used various means to acquire upmarket lingerie firm Agent Provocateur, and stakes in French Connection, Game Digital, Debenhams, Goals Soccer, and US retailers Finish Line and Dick’s Sporting Goods. However, recent efforts to take full ownership of designer retail chain Flannels are the most explicit demonstration of his ambition to move upmarket. His daughter Matilda’s make-up business, Sportfx, is already stocked in Sports Direct shops but could be rolled out across Flannels shops in an attempt to recreate Selfridges’ renowned beauty halls.
After all, Ashley knows that the best way to silence dissenting investors is to turn sales and profits around.