Management can make all the difference to a company’s success and thus its share price.
The best companies are those run by talented and experienced leaders with strong vested interests in the success of the business, held in check by a board with sound financial and business acumen. Some of the worst investments to hold are those run by executives collecting fat rewards as the underlying business goes to pot.
In this series, I’m assessing the boardrooms of companies within the FTSE 100. I hope to separate the management teams that are worth following from those that are not. Today I am looking at William Hill (LSE: WMH), the UK’s leading bookmaker.
Here are the key directors:
| Director | Position |
|---|---|
| Gareth Davies | (non-exec) Chairman |
| Ralph Topping | Chief Executive |
| Neil Cooper | Finance Director |
Gareth Davies has been chairman since 2010. In his executive career he spent 37 years at Imperial Tobacco, leading it as chief executive for 14 years from its demerger from Hanson until 2010. He has since become chairman of FTSE 100 plumbing distributor Wolseley in 2011 and FTSE 250 packaging firm D S Smith in 2012.
Unconventional
If Ralph Topping is not the only FTSE 100 CEO with a personal blog, ralphtopping.com must surely be the most entertaining. Until recently chairman of the Scottish Premier Football League, Mr Topping is outspoken and unconventional. He has spent his entire career with William Hill, starting as a casual Saturday betting shop worker after dropping out of university, and rising to become CEO in 2008.
As CEO Mr Topping has overseen William Hill’s successful expansion overseas and online, culminating in the buy-out of its online partner Playtech. Growth and a right issue brought the company into the FTSE 100 last May, re-entering for the first time since 2005. Over the duration of Mr Topping’s tenure the company’s shares have lost 9% against a 3% rise for the FTSE 100. However since 2011 they have raced ahead, up 175% against the FTSE’s 11%.
Retirement
Mr Topping’s retirement is much-anticipated. In 2011 he committed to staying until at least the end of 2013, receiving a retention bonus that was voted against by 49.9% of shareholders. At this year’s AGM he rolled the date forward to the end of 2015. However he sold 70% of his shareholding last month. The firm has said it will initially look internally for candidates to replace him.
Neil Cooper joined the firm as finance director in 2010. A chartered management accountant who qualified working for Reckitt Benckiser, he was finance director of FTSE 250 Bovis Homes for three years. He previously spent eight years in finance roles with Whitbread.
William Hill’s five non-execs bring a variety of backgrounds including media, finance, IT and HR, though it has the feel of a FTSE 250 board and notably the only cross-directorships are with FTSE 250 and small cap firms.
I analyse management teams from five different angles to help work out a verdict. Here’s my assessment:
|
1. Reputation. Management CVs and track record. Now excellent. |
Score 4/5 |
|
2. Performance. Success at the company. Excellent in past two years. |
Score 4/5 |
|
3. Board Composition. Skills, experience, balance. A little lightweight. |
Score 2/5 |
|
4. Remuneration. Fairness of pay, link to performance. Retention payment contentious. |
Score 2/5 |
|
5. Directors’ Holdings, compared to their pay. Large disposals. |
Score 2/5 |
Overall, William Hill scores 14 out of 25, a poor result. That may seem surprising for a stock that has performed so well in recent years, but a heavy dependence on one man who is on his way out throws into relief the challenge of succession, a multi-tasking chairman and somewhat lightweight board.
I’ve collated all my FTSE 100 boardroom verdicts on this summary page.
Buffett’s favourite FTSE share
Legendary investor Warren Buffett has always looked for impressive management teams when picking stocks. His recent acquisition, Heinz, has long had a reputation for strong management. Indeed Mr Buffett praised its “excellent management” alongside its high quality products and continuous innovation.
So I think it’s important to tell you about the FTSE 100 company in which the billionaire stock-picker has a substantial stake. A special free report from The Motley Fool — “The One UK Share Warren Buffett Loves” — explains Mr Buffett’s purchase and investing logic in full.
Mr Buffett rarely invests outside his native United States, which makes this British blue chip — and its management — all the more attractive. So why not download the report today? It’s totally free and comes with no further obligation.
> Tony owns shares in William Hill and Reckitt Benckiser, but no other shares mentioned in this article,
