It was never going to be easy to announce that the chief executive who had transformed the company’s fortunes was leaving, but travel group Thomas Cook (TCG) made a particularly cack-handed job of it. Why don’t directors learn that it is better to be frank and open than try to stage a cover up?
Harriet Green ranks alongside Kate Swann, formerly of WH Smith, for joining a long standing but ailing British institution at its lowest ebb and reviving it against all odds. Thomas Cook shares were at 14p when she arrived. When her departure was announced this week they were ten times that and they had been as high as 180p.
I for one regret doubting her ability to achieve so much in such a difficult market as package holidays. Well done to any investors who backed her at the bottom. You are still sitting on a hefty profit even after news of her departure hit the shares hard.
The initial 30p drop would surely have been less severe if Thomas Cook had not presented the news in such a confusing manner. Green was quoted as saying that she had always intended to stay for a comparatively short time, which was true, but she went on supposedly to claim that the job was done and she was moving on to the next challenge. That was not the impression she gave in a press interview only a week earlier.
The job is clearly not done. Results issued at the same time showed Cook still making a first half loss, albeit a smaller one, and growth is slowing in tough trading conditions.
How about this: “Our work to transform Thomas Cook continues. We are just two years into our major change programmes and, whilst the transformation has already delivered substantial benefits to the business and its stakeholders, there is more to do.”
Does that sound as if the job is completed? And why is there to be no handover period? Green will stay on the board for another month but her successor, chief operating officer Peter Fankhauser, takes the reins immediately. This was labelled as a “transition” to a new chief executive. It sounds more like an execution.
And why did the company say subsequently that the board had decided unanimously to make the change? That sounds like an ousting rather than a resignation. They were hardly in a position to vote to reject Green’s resignation.
Why is the board so desperate to stop her working somewhere else that they have imposed gardening leave until next June? Has there been a falling out, such that she might seek her revenge elsewhere? Is there a disagreement over strategy? There are so many unanswered questions.
The shares rebounded a little the next day but I am not tempted to buy. Fankhauser will be hard pushed to live up to his predecessor. I hope he proves me wrong, as Green did, but I view any rise in the share price as a chance to sell.
Oil Price isn’t Well
I lived through 1973/74, when the price of crude oil quadrupled as OPEC – the Organization of the Petroleum Exporting Countries - demonstrated its strength, and now we’ve lived through a collapse in the oil price as OPEC displays its weakness. I know which I prefer.
Although the UK’s Brent oil is selling for less, and further exploration in the North Sea has become uneconomic, we now import more oil than we export so a fall in crude prices is on balance good news for British businesses, especially our re-emerging manufacturing sector.
I am more relaxed than most other commentators about the possibility of modest deflation in Europe, especially if prices are supressed by cheaper oil. We have coped with massive deflation in technology prices and have welcomed periods of deflation in food prices. The only worry is spiralling deflation, but then we can say the same about inflation.
The US is growing strongly, so is the UK, and so is China, though not as quickly as before. Stay optimistic and stay invested in equities – apart from oil related stocks that probably have further to fall. If you are thinking of buying into this sector on the cheap, wait for the dust to settle.
