Citycomment

Lomax might be more credible without the millstone of M& S

SO DO we now know why software company Misys suddenly withdrew its controversial £1.2m bonus plans to two senior executives last Friday? Up popped executive chairman Kevin Lomax at yesterday’s annual meeting with a nasty profits warning, prompting its shares to tumble almost 18pc, making it easily the biggest faller in the FTSE 250.

Instead of bowing to his revolting shareholders, it now looks as if even the strong-willed Mr Lomax saw that he simply couldn’t persuade them to approve the “retention” bonuses at the same time as revealing such ghastly news. Astonishingly, Mr Lomax claims the two things aren’t connected. Not a bit, he insisted. Indeed, he attempted to cheer up investors by arguing lots of revenue will soon be pouring in. Apparently its software projects are bigger and more complex, so it’s just taking a bit longer to get the money in than before.

The City’s number crunchers weren’t convinced, slashing their forecasts and mumbling how Mr Lomax’s credibility is now horribly dented. If he isn’t careful, Mr Lomax may fi nd that Tom Skelton or Ivan Martin replaces him as chief executive rather sooner than planned. At least, Misys wouldn’t have to pay them a retention bonus.

Still, every cloud has a silver lining and his misery caused a touch of Schadenfreude among some of his board colleagues at Marks & Spencer. Having led the fight against Paul Myners staying on as M&S chairman, it seems unfortunate that Mr Lomax found himself in a muddle over corporate governance. Indeed, one private shareholder asked yesterday whether the squabbling in the M&S boardroom had taken his eye off the ball at Misys. Not at all, he says. His priority is Misys. Quite so. How long before he follows Bunzl’s chairman Anthony Habgood in deciding that being an M&S non-executive isn’t worth the bother?

Sir Ken and the board are all over the shop

OH DEAR. Sometimes life is never simple, and so it is at Wm Morrison where the internecine strife in the board room matches only M&S in its viciousness. Yesterday, Morrisons’ non-executive directors said that a search is on to fi nd a replacement for 62-year-old chief executive Bob Stott, confirming our story of last Saturday. Headhunters will shortly be appointed after a meeting of the non-execs at the end of this month.

Fine. The trouble is that the company’s executive chairman Sir Ken Morrison seems to disagree. The 73-year-old told the Financial Times that Mr Stott would stay on until 2007, insisting that succession plans set out in May haven’t changed. Sir Ken also claimed that he hasn’t spoken to nonexecutives about replacing Mr Stott within nine months, though several of his colleagues disagree.

All this goes to show that the acrimony in Morrisons’ boardroom hasn’t gone away; indeed it looks as if it might be getting worse. That Sir Ken appears to be openly disagreeing with his nonexecutives is unlikely to lengthen his tenure as chairman, particularly with the prospect of a damaging strike at the company’s depots.

If this resulted in empty shelves at Morrisons’ supermarkets, then both Sir Ken and Mr Stott are unlikely to survive. It is all very sad. Once regarded as a brilliant retailer, Sir Ken must wish he’d never walked into a Safeway store, let alone bought the company.

Governor knows Opec is not the villain of this piece

GORDON Brown has lost no time fi nding a foreign scapegoat for yesterday’s jump in CPI inflation to 2.4pc, the highest since Labour came to office. He pointed an accusing fi nger at Opec, as if we wouldn’t notice that the ageing cartel is already producing as much as it can. But if oil alone is behind the relentless upward creep in our inflation, how does the Chancellor account for the remarkably calm CPI figures from France and Germany yesterday – both below 2pc? Britain and Europe have gone their separate ways on inflation over the past six months and reassuring talk of better “ core” inflation cannot change that fact, so something else must be at work.

Tim Congdon, never one to tolerate monetary backsliding, says the country is awash with money. The broad money supply – that fierce old watchdog, remembered with respect by those old enough to witness the last cycle of inflation – has been fi zzing at 11pc for a year now, setting off a nice mini-boom in stocks and commercial property, and now inevitably leaking into everything else.

Prof Congdon says there is a serious risk that the CPI will break through the Bank of England’s hallowed and as yet untested limit of 3pc in September or October as the full effects of Hurricane Katrina feed through into petrol prices, and British Gas does its worst on utility bills.

Mervyn King, the Bank’s hawkish Governor, will then have to write a letter to Mr Brown explaining his wild overshoot. It would be a useful occasion to ask whether the rampant growth of public sector pay, now running at 8pc, or the highest budget deficit in Europe adjusted for the cycle, or the growing tangle of taxes and red tape might not have something to do with this ominous rise in inflation.

Mr King did his best to offset the Chancellor’s fiscal spree by voting for monetary rigour in August but the cult of easy money that seems to have invaded most of the world’s central banks is now settling into Threadneedle Street as well. Still, Mr King’s minority rigour on the MPC is looking better judged by the day.