“Mum of five trousers obscene pile of dosh”, shout the newspapers of choice in Bournemouth and Islington. They are outraged that Denise Coates, Ms Big in the world of online betting and chief executive of Bet365, was paid £220m and took home another £45m in dividends last year. What could anyone want with all that cash?

True, £220m is a humungous number. It is possibly the biggest boss-bung this year and way above the pay packages of listed company executives. That includes the £75m paid to Jeff Fairburn, Persimmon chief executive, which was eventually deemed so damaging to the builder’s reputation that the board shooed him out.

However, Bet365 is a private company almost entirely owned by Ms Coates and the two other board members who share her surname. She is not simply staff. She founded the business on family money. As a private group, the company has no public market obligations and is not answerable to external shareholders. If the directors choose to increase Ms Coates’ pay by a tenth to £220m, or boost contributions to her charity from £50m to £75m, as they did last year, that is their business. 

Also, Bet365 operates in an uber-competitive industry, yet still managed to increase its revenue by 26 per cent in the year to March, and its pre-tax profit by 28 per cent. That was even after a £21m loss made by the football club it owns: Stoke City. Cash also rose 28 per cent to £1.8bn, even after the dividend payout more than doubled from £36.5m to £90m. 

A century ago, US satirist Ambrose Bierce noted how the gambling known as business sniffed at the business known as gambling. That sniffing is louder now with politicians seeking to tackle the evils of addiction. It does not help that Bet365 will not provide a geographical breakdown of where and how it achieves such sector-beating performance. Still, Bet 365’s filings are remarkably transparent about Ms Coates’ pay. You can’t take that away from the group, any more than the citizens of Bournemouth and Islington can take away her pay.

Babcock: a pig of a job

A Pig’s Ear — according to dictionaries of naval slang — is a piece of on-deck plumbing used by sailors on watch to answer the call of nature, writes Matthew Vincent. This may explain its adoption as a synonym for a terrible mess. Naval contractor Babcock is doubtless familiar with both meanings — having been accused of making the latter for some time. And, judging by the reaction to its half-year results, it is now doing so into the wind.

On Wednesday, Babcock reported underlying operating profit ahead of expectations, at £279.6m, an improved margin of 10.9 per cent — unheard of at other outsourcers — net debt falling to 1.4 times earnings, and a dividend up 3.6 per cent on stronger cash flow. But the market blew all of this back in its face. Babcock shares fell 11 per cent in early trading. On the face of it, it was easy to see why. 

A £120m exceptional charge, mainly relating to an impairment of the group’s oil rig business, was higher than the £100m flagged — cutting statutory pre-tax profit 64 per cent to £65.1m. One analyst noted that the “yawning gap between stated and adjusted numbers does not automatically mean that Babcock is sailing close to the wind in terms of its accounting policies . . . although the year to 2018 did raise some question marks.”

A new warning that revenue from Babcock’s nuclear decommissioning work would be £250m lower, not £100m as previously guided, came completely out of the blue. 

However, Babcock’s stickier problem is not insufficient flagging — it is scrubbing away the lingering mess on deck. Babcock says it cannot clear up stories about problems with submarine refits because of national security considerations. Nor can it do more than rebut claims about its relationship with the Ministry of Defence, because its anonymous accuser, Boatman Capital, is yet to surface.

That leaves it, according to one of those analysts, with numbers that “are a mess . . . cementing the sector’s toxic reputation”. It may take further margin strength, and alignment of statutory and reported numbers, to win back confidence. Until then, some investors will want to stay upwind of its shares.

PatVal: an inspector calls

A full six weeks after café chain Patisserie Holdings revealed “potentially fraudulent” accounting irregularities, the Financial Reporting Council reckons an investigation is in orderwrites Matthew Vincent. Initially, the regulator had said it would only consider action “as more facts become available”. But none would appear to have done so since October 22. That leaves two possibilities: a) the FRC is now in possession of facts not being disclosed to shareholders; or b) it really is as quick on the uptake as Inspectors Lestrade, Clouseau and Knacker.



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