As cynical miscarriages of justice go, it is hard to think of anything that quite matches up to the Post Office’s sustained persecution of thousands of its sub-postmasters, which was finally overcome this week. The war of attrition against these men and women was a howitzer against an army of pea-shooters, and was prosecuted in the face of the facts despite a devastating campaign over many years in Private Eye.
The affair has produced an unlikely hero to stand alongside the 550 wronged sub-postmasters, in the shape of an obscure legal firm called Therium. Please don’t call us ambulance chasers, we provide “litigation finance and arbitration funding”. They take on cases for little or no fee and a share of the proceeds if they win in court. This process is ferociously expensive. In an earlier hearing against the Post Office, the court awarded £58m, but only £12m filtered through to the claimants.
However, this whole saga is so shocking that case, and the 39 whose convictions for theft were overturned this week, are likely to be only the start of the price the Post Office, and ultimately the taxpayer, is going to have to pay to restore some element of sanity to the ruined lives of those persecuted by the bosses of the business. The price will run into hundreds of millions of pounds.
Perhaps the most shocking aspect of the whole affair is the purblind refusal of those executives, under chairman Tim Parker and CEO Paula Vennells, to take a step back and ask themselves what on earth they thought they were doing. Vennells has since retired to the modern equivalent of a nunnery, but is unlikely to stay out of the limelight as the gruesome blame game gets going. She and her colleagues will need a better explanation than “we were following legal advice” to avoid retribution.
Which brings us back to Therium. Litigation financing is a growth business which allows a shot at justice for those who cannot afford it. However, it also contributes to the inflation which has taken legal action far beyond the reach of ordinary mortals in recent years. Meanwhile, the courts get ever more expensive and sclerotic. The practice has undoubtedly been a force for good against the Post office, but not every case will see such a helpful co-incidence of justice and result.
Dart in for a quick fag
Kenneth Dart has not spoken to the media since 1993, reports the New York Times. Some of us would like to hear from him now that the reclusive billionaire investor from the Cayman Islands has been obliged to declare a stake in one of the UK’s biggest and least loved companies. Mr Dart’s Spring Mountain Investments owns 7 per cent of British American Tobacco, accumulated as socially-sensitive investors have been dumping the stock.
Dumping is le mot juste, since on any conventional measure of value, the shares are very cheap. This week’s annual meeting confirmed the previous guidance of another year of steady growth in the value of sales (on falling volume, as usual) and a similar rise in earnings. At £26.40 the yield is 8 per cent, even if the dividend is only maintained.
The reasons for this are well known. Tobacco kills, and the addiction is waning in the west. Governments everywhere are hostile, class-action lawsuits are never far away, and the US president is threatening to ban the menthol cigarettes which are a key BAT brand. Mr Dart will understand all this. He might also have read a perceptive analysis last year from the suitably-named Ash Park Capital group.
The paper highlighted the wonderful cash flow from tobacco, the lack of new competitors of any size, and the contrast between the valuation of the shares and the rating of the company’s long-term debt. Last September, for example, BAT raised $1.75bn in long-dated bonds, paying less than 4 per cent for the money. The buyers of those bonds, which mostly end up with long-term institutional investors, clearly do not think the business is dying any time soon.
However, given the rating accorded to the shares and this week’s grumblings about executive pay, it’s clear that dividends are wasted on us shareholders. As Ash Park suggests, there is a powerful case for suspending payments and instead borrowing more, using the cash to buy back shares. In theory, were the price to stay unchanged, the whole of the share capital would be bought back in less than a decade, leaving the business in the ownership of the few hold-out shareholders. This is a silly calculation, but shows the scope for radical action. Perhaps Mr Park can see the opportunity. We don’t know. After all, he hasn’t talked to the press for 28 years.
No vowels, please, we’re Brtsh
The week’s light entertainment has been helpfully provided by Standard Life Aberdeen. This pantomime horse of a company is changing its name, but rather than go for Staberdeen, as it’s dubbed in the markets, it has plumped for Abrdn, pronounced “stupid.” No, sorry, pronounced “Aberdeen”. A change of name was inevitable after the horse was dismembered, with the Standard Life business sold off to Phoenix, while Aberdeen Asset Management (the back half of the horse) is considered too long a name for today’s busy world. Those canny Scots in Aberdeen city are said to have snaffled all the obvious domain names.
The ‘orrible merger, which produced an unmatching pair of chief executives, has not been a success, and it will be some time before we know whether the business can prosper as a pure asset management company. The history of name changes, meanwhile, is not encouraging. The most recent disaster is Intu, whose management decided that Capital Shopping Centres was just too dull. Besides, customers went “Intu” their centres. The business failed spectacularly last year.
Reckitt Benckiser changed its name to RB a few years ago, but nobody noticed, so the board has changed it back to plain Reckitt. If a coruscating analysis in this week’s FT turns out to be right, this latest name change signals trouble ahead. Other examples include Aviva – the insurance group now trying to reinvent itself (again). It is “targeting meaningful growth” according to its newly-appointed boss of UK savings. At least that’s better than striving for meaningless growth, so we should be grateful for small mercies.