In­vest­ment firm chiefs give up bonuses over Wood­ford fund

As cor­po­rate vul­tures swoop on aero­space gi­ant ...

Daily Mail - - News - By Matt Oliver

BOSSeS at in­vest­ment com­pany Har­g­reaves Lans­down are to give up their mul­ti­mil­lion-pound bonuses over the Neil Wood­ford fi­asco.

the firm was the fund man­ager’s big­gest cham­pion be­fore he barred savers from pulling their cash out of his flag­ship eq­uity In­come fund two months ago.

the move trig­gered a flood of phone calls from an­gry cus­tomers to Har­g­reaves Lans­down’s Bris­tol head­quar­ters. there were also de­mands for its bosses to give up their lu­cra­tive bonuses – and to­day they are ex­pected to bow to pres­sure.

As the in­vest­ment com­pany pub­lishes its yearly fi­nan­cial re­sults, it is un­der­stood the firm will also re­veal that chief ex­ec­u­tive Chris Hill, fi­nance chief Philip John­son, re­search di­rec­tor Mark Dampier and in­vest­ment boss Lee Gard­house are tak­ing no bonus this year.

Mr Hill was in line for up to £2.1mil­lion and Mr John­son as much as £1.5mil­lion, with Mr Dampier’s and Mr Gard­house’s pay not dis­closed.

the un­der-fire ex­ec­u­tives had pre­vi­ously only com­mit­ted to de­lay­ing any bonus pay­ments un­til af­ter savers could get their money back from Mr Wood­ford’s fund.

But a source said Mr Hill, 48, has since de­cided he will in­stead forgo his bonus en­tirely, prompt­ing his col­leagues to fol­low suit.

the chief ex­ec­u­tive has al­ready is­sued a grov­el­ling apol­ogy to Har­g­reaves Lans­down clients, say­ing the firm shared their ‘dis­ap­point­ment and frus­tra­tion’. Yes­ter­day a source said the de­ci­sion to give up the bonuses was an at­tempt to ac­knowl­edge the im­pact of Mr Wood­ford’s fund clo­sure on 300,000 Har­g­reaves Lans­down cus­tomers.

the source added: ‘Chris be­lieves this is the right thing to do.’ Mr Wood­ford blocked with­drawals from the fund on June 3. He made the dras­tic move af­ter pump­ing bil­lions of pounds into risky in­vest­ments that were hard to sell in a hurry. He said he needed more time to drum up cash that could be used for re­funds.

How­ever, the scandal has prompted crit­i­cism of Har­g­reaves Lans­down, which stood by Mr Wood­ford right up un­til the sus­pen­sion.

the in­vest­ment plat­form kept Mr Wood­ford’s eq­uity In­come fund on a ‘Wealth 50’ list of rec­om­mended in­vest­ments – a cru­cial guide used by Har­g­reaves Lans­down’s 1.1mil­lion cus­tomers – up un­til the point where with­drawals were blocked.

Mr Dampier, 62, and Mr Gard­house, 45, have come un­der par­tic­u­lar scru­tiny for their roles in the fi­asco.

the Mail pre­vi­ously re­vealed that Mr Dampier has known Mr Wood­ford for 25 years and pro­moted his in­ter­ests by post­ing in­ter­views with him on­line.

Just weeks be­fore the eq­uity In­come fund was closed, Mr Dampier told Har­g­reaves cus­tomers: ‘this isn’t the first time... Neil Wood­ford’s un­der­per­formed. We think he’s still got the skill to de­liver ex­cel­lent long-term per­for­mance.’

Mr Gard­house is re­spon­si­ble for the part of Har­g­reaves Lans­down that has helped to chan­nel its clients’ money into Mr Wood­ford’s in­vest­ments through so- called mul­ti­man­ager funds.

AN ES­TI­MATED one mil­lion peo­ple watched as an in­trepid avi­a­tor landed his plane on the River Thames in 1926, hav­ing trav­elled to Lon­don ‘by way of Aus­tralia’.

Alan Cob­ham was re­warded with a knight­hood from George V, set up an aero­space and de­fence group and is be­lieved to have been a model for the fic­tional char­ac­ter Big­gles.

To­day, al­most 100 years later, the open­ing pages of the an­nual re­port for thriv­ing Dorset- based com­pany Cob­ham cap­ture that ex­hil­a­rat­ing sense of der­ring- do as well as more re­cent space mis­sions to the Moon, Mars and be­yond.

The firm is at the heart of a UK aero­space sec­tor recog­nised glob­ally for its avion­ics, tech­no­log­i­cal ex­per­tise and in­no­va­tion — and, par­tic­u­larly, its mid- flight re­fu­elling sys­tems. From Amer­ica’s F-35 fighter jets to Air­bus air­lin­ers, there is scarcely an air­craft not fit­ted with equip­ment in­vented or de­signed by Cob­ham.

Vi­tal

But the com­pany’s fu­ture is un­der se­ri­ous threat af­ter a £ 4 bil­lion bid from a U. S. pri­vate eq­uity con­sor­tium.

It is an is­sue of huge na­tional im­por­tance, at a time when Brexit is in the bal­ance and Bri­tain’s in­dus­trial fu­ture is said to be in jeop­ardy.

Cru­cially, all ma­jor anal­y­sis of this coun­try’s com­pet­i­tive­ness shows that aero­space, fi­nance, phar­ma­ceu­ti­cals and the cre­ative in­dus­tries ought to be vi­tal drivers of Bri­tain’s pros­per­ity.

Cob­ham holds a spe­cial place in this pan­theon.

The firm was launched by Alan Cob­ham, an RAF ace pi­lot, when, eight years af­ter land­ing on the Thames, he founded Flight Re­fu­elling in Sus­sex, fa­cil­i­tat­ing the first non- stop flights across the At­lantic on the eve of World War II.

Cob­ham’s air-to-air re­fu­elling equip­ment was in­te­gral dur­ing the Falk­lands War.

Re­cently, the com­pany has had its trou­bles. But be­cause of its key role in the aero­space in­dus­try and the value of its patents, re­search, de­vel­op­ment and sci­ence, in­vestors in­jected £500 mil­lion of new cap­i­tal two years ago. Now, the £4 bil­lion takeover bid will test the John­son gov­ern­ment’s will­ing­ness to pro­tect this jewel in Bri­tain’s in­dus­trial crown from a for­eign preda­tor.

At a mo­ment when con­fi­dence in the pound is low and share prices on the Lon­don Stock Ex­change lag be­hind other ma­jor mar­kets be­cause of Brexit un­cer­tainty, pri­vate eq­uity fund Ad­vent has pounced. It has reached a closed-door agree­ment with a spine­less Cob­ham board.

The pro­posed deal is hit­ting heavy tur­bu­lence. The com­pany’s big­gest in­vestor op­poses it. But most sig­nif­i­cantly, the Cob­ham fam­ily, which still has a stake in the group, fe­ro­ciously de­fends its her­itage and is in open re­volt against the sell-out.

Na­dine Cob­ham, wife of for­mer chief ex­ec­u­tive Michael Cob­ham, who used to run the group and is the son of the leg­endary Alan, has writ­ten to De­fence Sec­re­tary Ben Wallace and Busi­ness Sec­re­tary An­drea Lead­som de­mand­ing they stop the bid on the grounds of ‘na­tional in­ter­est’.

Lady Cob­ham, who owns a 1.5 per cent stake worth a po­ten­tial £60 mil­lion, ar­gues the com­pany has ‘ turned around’ and de­scribed the of­fer by the pri­vate eq­uity vul­tures as ‘op­por­tunist.’

For his part, Cob­ham chief ex­ec­u­tive David Lock­wood de­nies his firm has rolled over.

He says: ‘The UK is the most open de­fence mar­ket in the world. Not only do we have for­eign-owned com­pa­nies but the Air Force is largely equipped with for­eign equip­ment.’

He failed to men­tion that the UK’s big­gest de­fence con­trac­tor, BAE Sys­tems, and civil avi­a­tion gi­ant Rolls-Royce, are for­mally in­su­lated from over­seas own­er­ship.

Make no mis­take, Ad­vent’s bid to snatch Cob­ham is a se­ri­ous threat to the firm’s fu­ture as a global aero­space cham­pion.

Pri­vate eq­uity has a ter­ri­ble record of tak­ing on well-run com­pa­nies, ax­e­ing jobs, clos­ing head­quar­ters, cut­ting re­search and de­vel­op­ment bud­gets and build­ing up debt as they seek to ex­tract as much value as quickly as pos­si­ble.

It is no sur­prise that the ADS Group, which rep­re­sents more than 1,000 UK aero­space, de­fence, se­cu­rity and space sec­tor busi­nesses, is call­ing for the Gov­ern­ment to in­ter­vene.

This is­sue does not just af­fect the aero­space in­dus­try.

Pri­vate eq­uity firms are run­ning — or ‘run­ning down’ — a host of busi­nesses and are in­suf­fi­ciently mon­i­tored by stock mar­ket au­thor­i­ties or the Gov­ern­ment.

A no­to­ri­ous ex­am­ple of how things can go wrong was when Bri­tish Steel col­lapsed un­der its owner, in­vest­ment firm Grey­bull — which had a rep­u­ta­tion for buy­ing com­pa­nies cheaply, milk­ing them for cash, then aban­don­ing them.

Un­sur­pris­ingly, there has been wide­spread crit­i­cism of Cob­ham chair­man Jamie Pike, who is renowned for sell­ing com­pa­nies he heads, af­ter he com­pli­antly signed up to the Ad­vent deal be­fore re­veal­ing it to the stock mar­ket.

Cob­ham’s big­gest share­holder, Mayfair-based Silch­ester In­ter­na­tional In­vestors, has been par­tic­u­larly vo­cal, say­ing the firm is be­ing sold too quickly and too cheaply.

Pow­er­ful

There is a very pow­er­ful case for gov­ern­ment in­ter­ven­tion.

Cob­ham’s im­por­tance to Bri­tain’s in­dus­trial in­fra­struc­ture is sim­i­lar to that of GKN, the coun­try’s old­est engi­neer­ing firm, which was bought last year by Mel­rose In­dus­tries, a firm with a rep­u­ta­tion for as­set-strip­ping.

Mel­rose was only al­lowed to buy GKN af­ter agree­ing with the Gov­ern­ment that it would not sell any of the aero­space oper­a­tions for at least five years. This was a recog­ni­tion of the for­mer Spit­fire man­u­fac­turer’s im­por­tance to the UK’s thriv­ing aero­space in­dus­try.

In the case of Cob­ham, Ad­vent, with the sup­port of pri­vate eq­uity out­fit Black­stone, set about woo­ing the Wim­borne-based com­pany with a PR cam­paign.

It swooned about how Cob­ham’s ‘ tech­no­log­i­cal ex­cel­lence, prod­uct in­no­va­tion and its trusted part­ner sta­tus has es­tab­lished it as a mar­ket leader in its de­fence, aero­space and space mar­kets.’

The truth is Cob­ham’s ‘tech­no­log­i­cal ex­cel­lence’ is the very rea­son why its sell-off would be a dev­as­tat­ing blow. For there would be no guar­an­tee that new for­eign own­ers would not sell it off piece­meal.

Cob­ham em­ploys 10,000 skilled peo­ple across the globe and has cus­tomers and part­ners in more than 100 com­pa­nies world­wide. It works closely with the Min­istry of De­fence and the Pen­tagon.

As is al­most al­ways the case with such takeovers, big fi­nan­cial car­rots have been dan­gled in front of the in­cum­bent man­age­ment to sell.

Haz­ardous

Chief ex­ec­u­tive David Lock­wood stands to col­lect up to £6.4 mil­lion if the deal goes ahead. Fi­nance di­rec­tor David Mel­lors would be in line for £3.9 mil­lion.

The fu­ture should be very bright for Cob­ham as an in­de­pen­dent com­pany.

It is the trusted provider of com­mu­ni­ca­tions tech­nol­ogy that makes con­nec­tions in the most com­plex, harsh and haz­ardous cir­cum­stances.

Its Flite­line ra­dio sys­tems are used by the U.S. Coast­guard, the U. S. De­part­ment of Home­land Se­cu­rity and search- and- res­cue ser­vices across the world.

Cob­ham has also pro­vided the mi­cro­elec­tron­ics for space ex­plo­ration for the past three decades, in­clud­ing the In­sight mis­sion, which has trav­elled to Mars.

Much of the avion­ics on the Air­bus A320 air­liner — in­clud­ing ra­dio and au­dio sys­tems, clocks, lights and com­mu­ni­ca­tion equip­ment — is sup­plied by Cob­ham.

Al­low­ing Cob­ham to fall into the hands of pri­vate eq­uity preda­tors, with lit­tle un­der­stand­ing of its ven­er­a­ble his­tory, would be a dis­grace­ful act of na­tional cor­po­rate van­dal­ism.

This is a bat­tle that Big­gles, who de­feated the Ger­mans in two World Wars and foiled a Russian in­va­sion, would have rel­ished.

Cham­pi­oned: Neil Wood­ford

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