Tuesday, 13 February 2018

Pep isn't all right

I was fascinated to read a recent quote by Juventus defender Giorgio Chiellini. Chiellini is famous as the defender bitten by Luis Suarez in the last World Cup. Suarez of course went on to repeat the Hannibal Lecter act at Liverpool. Chiellini's team has let in only one goal their last 16 games and they face Spurs and Harry Kane in the Champions League tonight. The Juve goalkeeper, Buffon, is over 40. His longevity is well on the way to matching that of Dino Zoff. Except that Zoff won the world cup at that age. Buffon won't because Italy didn't qualify for this summer's finals. Chiellini is 33 and two of the other Juve defenders are aged 34 and 36. Italian defenders know how to defend and seem to get better with age.

Except Chiellini thinks the Europe-wide trend to follow Pep Guardiola's lead - he has railed against "tiki taka" play before - has meant that young Italian defenders have lost the essence of playing in the Italian style.

With Manchester City turning this year's premier league into a procession, playing lovely, easy on the eye football and scoring so many fabulous goals, now might not seem the right time to ask whether the emperor is, while obviously not naked,  entirely fully clothed.

I loved Guardiola's reaction to a Raheem Sterling miss recently. If you didn't see it, after Sterling created an opening for himself and did everything right until hitting the ball just over the bar from close range, Guardiola jumped up and down in frustration. But then, realising Sterling had probably seen that, he called him over and basically gave him a kiss. Spot on - coaches shouldn't undermine a striker for missing as they all do it.

But I've been stewing over a journalist's praise for another bit of play last month - when City were losing 0-1 at home to Bristol City in the Carabao Cup - Football League Cup to oldies. It was the semi-final first leg. The City no 2 goalie, Claudio Bravo, was playing. He plays well with his feet and was brought in to replace Joe Hart, who doesn't, but wasn't a good enough keeper, hence the signing of Ederson, which has very much been a factor in City's serene progression towards the Premier League title. Bravo, receiving a back pass and faced with several Bristol players in front of him, didn't knock the ball long but calmly slid a pass between them, taking several opponents out of the game. City equalised from that move, which they probably wouldn't have done had Bravo just hoofed it. The journalist was in ecstasy about this piece of play, which he said turned the game, which City went on to win. It was cited as an example of why Guardiola is right to insist on having a goalie who can pass as well as any other player on the pitch.

And yet..... it was only just after half time in the first leg of a semi-final. With more than 2 hours of football to go, Manchester City were still strong favourites to come out on top. My concern is about the balance of risk and reward. To state the obvious, football isn't like basketball. It's a low scoring sport. Each goal therefore has huge potential value. If it had not been a two leg match, going 2-0 down at that point could have been decisive. My problem, which it looks as if I share with Chiellini, is about the amount of risk taken by playing too much football near your own goal.

Witness the Manchester City 4-3 defeat a few weeks later at Anfield. In the decisive section of the match City went from 2-1 to 4-1 down in 7 minutes through two catastrophic defensive errors, both caused by taking too much risk. Firstly John Stones, who had already been muscled off the ball rather too easily by Roberto Firmino for Liverpool's second goal, tried to hit a pass forward when a Liverpool player was bearing down on him and getting very close. The ball cannoned off the Liverpool player towards the City goal and from that break Liverpool scored.  Secondly, City's first choice goalkeeper Ederson came out of his penalty area to intercept a through ball and tried to knock a low pass forward, only succeeding in hitting it straight to a Liverpool player, leaving himself hopelessly stranded. And not just any Liverpool player, Mo Salah, who naturally scored. Although City came back strongly late on to make it 4-3, the game was all but done and dusted at 4-1.

The Stones incident made me wince for another reason. It came after City had made too many passes in a tight area of their own half. Liverpool, masters of the pressing game, had someone bearing down on Stones before the ball was even hit to him. He had no-one other than the keeper to play it back to and the pace of the pass would have made it risky for him to let the ball run and turn, given Salah - lightning fast anyway - was already motoring. So it was understandable that he tried to play it forward. But he miscalculated how much time he had before Salah was on top of him. When the ball ricochets behind you off a player running at you at full tilt the likeliest outcome is that you are left on your heels trying to turn while your opponent runs on to a ball already ten yards behind you, putting you out of the game. I know this only too well because it happened to me in an important match. Well, important at the standard I played at - a Warrington and District League Rylands Cup quarter final in 1978, a day which I can unfortunately remember as if it was yesterday. We had a good team at the time - we'd won our division the previous season - and were fancied in this cup. I had been playing centre back for a bit more than a season by then. There was a howling gale blowing straight down the pitch at our host's ground and we kicked with it in the first half, taking a 3-0 lead. Just before half time I did exactly what John Stones did, just inside my own half and the opponent ran onto the ball and scored. Turning round into the wind at 3-1 rather than 3-0 proved decisive. In a second half resembling the Alamo we held out at 3-3 into the final minutes, but lost it near the end. The goal against the wind was critical psychologically as much as anything. Jammed in someone's very full car on the way back I can recall Elvis Costello's Oliver's Army coming on the radio - "and I would rather be anywhere else but here today". The team that we lost to went on to win the cup and, in 17 years of playing schoolboy and men's football, I never got to play in a cup final. It was pretty much my own fault.

But the thing is, I never made that mistake again, even if the only option available to me was a rather lame hoof sideways to avoid the ball being charged down, which was John Stones's only realistic alternative to the forward pass. Remember City were losing but only by one goal with plenty of time to go. Now I'm a fan of Stones, who I think should be an automatic inclusion in England's World Cup Finals squad. I admire his calmness on the ball, but he does over do it. On one occasion notorious among Everton fans he executed three turns in his own penalty area, one of them a "Cruyff" turn and one adjacent to the six yard box. He got away with it, that time. I  thought Manchester City was the right move for him as he would be encouraged to play but I also thought Guardiola would help him get the balance right.

The thing about catastrophic errors is whether you learn from them. I recall what a very good golfer said not long after I had started playing and was marvelling at the the skills of the professionals. "Well you see, Phil, by the time you were 30 just think how many hours you spent working for your O-levels, A-levels, degree and then at work. They spend that time and more on golf". And so it is with a professional footballer. It beggars belief that Stones hasn't learned this lesson before. And of course, he must have. But he knows his coach expects him to play football, all the time.

For several years the goalkeeper I played in front of was a man mountain known as Herbie. He was a great 5 a side goalscorer too, so he could play. As a schoolboy winger converted via midfield and right back into a ball playing centre half I liked to pass the ball out whenever I could. And if not that, then a daring back pass (in those days the keeper could pick it up) gave me a buzz. In the best I ever pulled off  I was under pressure in the penalty area and facing my own goal, but still chipped a pass over a second opponent between me and Herbie into his hands. Not enough on it and I would have presented it to the other forward. Too much and it would have sailed over Herbie into my own net. I can still remember the daggers he glared at me before launching the ball up the pitch as he realised a quick break was on. I think Pep would have liked that. But I can still hear Herbie growling "too much football",  "not across your own box"  and "get rid" when he wasn't happy with what we were doing in front of him.

Sure Manchester City can get away with it against Bristol City. But they didn't against Liverpool. And I don't know if Pep pays any attention to that difference.

OK so Guardiola is at least 80% right, which is still very right. Yes they will win the Premier League at a canter. But to win clusters of trophies - they could still win all four this season, a feat never achieved by an English team before - they will need to win crunch one off cup ties. If I was a City fan, I would worry that big one off games like the one at Anfield or maybe in the future a Champions League final could be lost in the blink of an eye by "too much football".

Guardiola wants City to be the best club team in Europe, if not the world. And they might do it. But the thing is the best club side in the Europe isn't ever going to be that much better than the next half a dozen. So when you come up against one of them in a Champions League final you really can't afford mistakes near your own goal.

Interesting that Liverpool, whose goals on Sunday at Southampton were footballing beauty just as much as anything conjured by City this season, can also be flaky in defence. But it did make for a fabulous match in that head to head game at Anfield. So I suppose I'm happy for City to carry on doing what they do. It's great to watch and it gives the other team a chance.

P.S. My mate Herbie's a good guy. We also did all the finance and administration for the club between us for 5 or 6 years, leaving the team managers to get on with the football. Now in his 60s he has been coaching football for many years at one of Liverpool's pre-eminent sports and social clubs. I'm not for a moment suggesting he's as good as Pep Guardiola, but I'm a firm believer that everyone can learn something from someone else....


Monday, 12 February 2018

Shock, horror - private companies can go bust

What a lot of tosh has been spouted about the collapse of construction company Carillion last month. So much that I thought I ought to join in (sorry it's taken a while).

The saga will rumble on for a long time - the appearance of the former Carillion board members before a joint session of the House of Commons Work and Pensions and Business committees this week being just the latest round.

I was driving on the Monday that the news broke and listened to an enormous dollop of tripe on BBC 5Live, some of it from Lord Adonis who really should know better. Actually, he probably does but was trying to make political capital for Labour out of it.

The two biggest concerns while I listened that day were for the jobs of 19,000+ people in the UK (Carillion employed at least as many in other countries by the way) and why the government had awarded contracts to a struggling company. The point about the risk to companies that supplied Carillion started to be made later in the day when I'd got back in the car.

Companies going bust isn't fun and is very unsettling for everyone concerned. But if the work is needed then other companies will pick it up and, as there really isn't much spare capacity anywhere in the economy at the moment, those 19,000 people will essentially all be needed. After all, if they aren't, then there wasn't enough work for them anyway and there was a different problem. So I can empathise but most of these worries will turn out to be no big deal. (Apart from pensions - see below). The "creative destruction" of capitalism acts here to place the work with better managed companies. The people who lose their jobs are the directors. Mind, it looks as if they'd done the best they could to soften that blow in advance, including paying themselves some fancy bonuses having removed clawback terms in the event of the company going bust, but recently departed directors will find that there is no company left to complete payment of their golden goodbyes. Still, this is an area the government may well usefully look into.

The question of why Carillion continued to win contracts when it had issued profits warnings started to be asked immediately. I'm not up to date with the latest interpretation of stock exchange rules but when I was with a FTSE 250 plc the rule was that a profits warning should be issued if the company's forecast profit for the next period (half year for our company, quarter for the largest plcs) deteriorated by more than 10%. So though a profits warning might mean a company has tilted into loss (as Carillion had) it doesn't necessarily mean that - it can simply mean that a company is going to make a smaller profit than expected.  Moreover, just because a company makes a loss in a financial period that doesn't mean it is about to go under. These rules exist to ensure that all investors have the benefit of a fair market, reducing the risk of insiders knowing share price sensitive information not available to everyone. Companies hate making profits warnings because the market reaction is predictable and brutal - the share price typically halves in an instant; witness the impact of the latest profit warning by Capita last week which had almost exactly that impact, even though the company is still expected to make nearly £300M profit in the year (the forecast had been £400M).

It doesn't take much to hit profit - generally a small difference between two big numbers - by 10%. I recall nervous days in the run up to a half or full year result when the company couldn't be certain it would meet the expected profit having decided a warning wasn't necessary. And the difficult days following a warning when investors were understandably apoplectic. And the attempts to talk down the market expectation of the company's performance, in an attempt to avoid the need for a profits warning, while not frightening the horses. And the opprobrium when the result fell just short of 10% below forecast, meaning that there should have been a profit warning when one hadn't been issued. ("You have destroyed sentiment" was the term the a major shareholder used, I seem to recall).

I recall the advice given to the company the first time it had to give a profits warning - the "rule of two". This was to get all of the bad news out into the open because the market reaction wouldn't be any worse. But it was coupled with a comment "of course managements never do admit to all the problems". So it was with the company I was with: eventually, over a period of years there were several profits warnings but the second did follow the first quite quickly. Just as Carillion had two very close together last year, only two months apart (which does seem careless).

Anyway, the point is that a profits warning is a long way from meaning that a company is about to go bust, though it's very uncomfortable for the management and often leads to changes in senior personnel, usually the CEO or the finance director.

So I was gobsmacked that Jeremy Corbyn was dumb enough to run with this point in PMQs two days later, saying that because there had been profits warnings then further contracts shouldn't have been let to Carillion. Theresa May simply made the same point that I had been saying to anyone who would listen (ok, that would be Mrs H who has no choice): not proceeding to let the contracts to Carillion would probably have sunk the company sooner.

Indeed, if Carillion had put in the best bid and had convinced the people responsible for letting the contract that they were a sound, going concern then they probably would have sued if the contract had been let to another supplier. Yes, I know it turned out that the company was on the edge but that isn't always easy to tell: reputable auditors hadn't challenged the going concern issue. The government might have been briefed that Carillion was flaky but that it was better to take the risk on them surviving by continuing to place contracts with the company rather than being accused of driving the company under by not giving it the contracts when it had bid the best price. You can just imagine the headlines in that scenario. And Corbyn's reaction.

So who really does lose out as a result of Carillion's collapse? Well firstly, the shareholders, but that's a risk shareholders knowingly take. As well as those evil speculators casually disparaged by the left, Carillion was a large company so quite a few pension schemes may well have held Carillion shares. They ought to have been sufficiently diversified for the hit to be slight, but I suspect some invest in all major companies without too much analysis, like tracker funds do.

Secondly, all the members of the Carillion final salary pension scheme will lose out under the rules of the PPF, the Pension Protection Fund lifeboat for bust final salary pension schemes. Most existing pensioners will continue to get 100% of their pension but will generally get smaller increases in future: service before 1997 doesn't get indexed and post 1997 service can only be increased by a maximum of 2.5% a year, even if the scheme rules provided for higher increases. Current employees and employees who have left the company in the past (so-called deferred members of the scheme) will get 90% of their expected final pension if they were due to retire at 65 and also reduced increases thereafter. There is a "but". The scheme won't pay out to anyone above a cap, which is currently £38,505 for people taking their pension at age 65. If they were due to retire earlier the cap is lower, £32,770 at 60 for example. And they only get 90% of the cap. The cap applies to people drawing their pension, so someone who has retired aged say 60 would find their pension reduced to £29,493 even if the pension they had been receiving was much higher. Cases like that have been highlighted in the press previously.

Now I accept the cap affects people with substantial levels of occupational pension, requiring the employees or ex-employees to have final salaries of around £70k p.a. or more. While that's a pretty good wedge, to put it in context it's only what a train driver earns. There will be a significant number of  managers and technical experts whose pay would have exceeded that. (I'm not talking about directors or the most senior managers here, whose pay would have been much higher again). It will be a very unpleasant shock to a number of current and former senior project managers for example. The Telegraph gave examples last year, including a former accountant with Turner and Newall who was one month from retiring on a pension of £50k p.a. when the company went bust. His capped pension from the PPF is £20k.

There are knock on victims of the Carillion pension fund collapsing.  The collapse of yet another final salary scheme means a smaller pool of active final salary schemes will have to carry the burden of higher premiums for the PPF. The PPF was created by the government but is funded by a levy on companies with final salary schemes. Bigger PPF premiums  will hit companies already feeling pain from having to make increased contributions into their pension scheme. These companies already pay a PPF levy of over £600M a year, as well as having the additional cost compared to some of their competitors of funding their final salary schemes. And, as more and more of these schemes expire - BHS and Carillion have been biggies but there have been plenty of others - the point may come where the PPF isn't viable and pressure would fall on the government (and taxpayers) to bail out any further schemes going under. This isn't close at the moment - the PPF is sitting on a few billion quid - but as more companies subscribing to the PPF fail and fewer pay in I can't see any other than that one day the money will run out, or the scheme will become completely unaffordable to the remaining companies.

The third group of losers are the companies who were suppliers to Carillion, many of whom will have had invoices outstanding and so will not get paid for goods or services which have been supplied. This could cause serious problems for small companies especially.  In a case I had personal experience of, the company was offered an important chunk of work sub-contracting to a prime contractor on a large construction project. The prime contractor had a reputation for paying late and we had other reasons reason to believe it was dodgy. We made representations to the end customer, a quasi-governmental body who had effectively made us a nominated supplier, asking to work directly for them. We failed, so plan B was to front load the payments profile so that we weren't owed money at any point. Fortunately our initial milestone payment, to cover equipment we had to buy up front (which we didn't actually need to do) was plausible and was not challenged. The prime contractor did indeed go bust during the contract. Without our gambit to protect ourselves our company's annual profit would have been hit by 10% at a stroke. Very few companies are in a position to insulate themselves this way.

Of course, companies can insure against bad debts. Premiums for a whole business can be steep but, while more affordable on an invoice by invoice basis, the simple fact is that Carillion's smaller suppliers will have had neither the negotiating muscle to get advantageous terms nor feel that they could afford to insure against a large customer defaulting. It seems likely that some companies will be dragged under with Carillion, though the government has arranged for credit for small Carillion suppliers with banks.

A fourth group of losers are the customers for the facilities Carillion was building, like the Royal Liverpool Hospital, which will be delayed for a year. Mind, it was going to be delayed anyway because Carillion had found that eight cracked beams were going to need to be replaced, adding £20M to costs. This discovery has been described as tipping Carillion over the edge**, coming on top of delays to the £550M Aberdeen by-pass contract and difficulties in convincing the Qataris that 2022 world cup related building work had progressed enough for the next payment to be made. This last item had £200M of cash trapped. So Carillion had what I recall being called a "WIP mountain" because of contract delays, WIP being work in progress, i.e. work done and money spent but not yet able to be invoiced and collected as income. Carillion had become notroious for this - it had £1.7bn of "receivables" - work done but either not yet invoiced or invoiced and not paid - in 2016, up from £1bn in 2011. This wasn't the only warning sign - Carillion had specialised in over-paying for acquisitions and then having to make write-downs, for example. And it had been getting increasingly bad at paying its suppliers, though it had eased that and massaged its balance sheet at the same time by implementing an early payment facility, which allowed suppliers to get paid early in return for a small fee to the bank, shifting the debt Carillion owed its suppliers to the banks. This facility had swelled by a factor of over 3 between 2013 and 2016 - another warning sign.

So there were plenty of signs. When Frank Field and his select committee colleagues grilled the former Carillion executives this week they clearly could not understand how the board was asleep at the wheel. But the thing is, the company was at great risk of going under for many years: one industry expert was quoted in the Sunday Times*** as saying that Carillion had been "a slow motion train crash for the last 10 to 12 years". The board had always found a way to avoid disaster. And they probably would have done so again if they could have got the Qataris to agree to make a payment against the work done. The directors will always strive to the very end to keep the ship afloat and will only throw in the towel when at risk of trading insolvently.  Arguably, it is their duty to the shareholders to do so. And so, when these crashes happen, they are big ones, the analogy being a train on a collision course thundering towards the last set of points which could still move up to the last moment. This time they didn't.

The select committee asked the obvious question about why large dividends continued to be paid to shareholders instead of  making up the pension fund deficit. But that would have weakened the company's share price which can have undesirable knock on effects. The Daily Mail's Alex Brummer admirably summarised the problems this causes companies:

A serious problem for sinking firms like Capita is that as the share price tanks, so the covenant to the pension fund becomes less valuable, the debt to equity ratio soars and bank lenders seek to renegotiate agreements. The ground shifts further beneath their feet and recovery retreats ever further into the distance."

Although the select committee tried to give the former Carillion directors a tough ride, I don't think many politicians - and certainly not the admirable Frank Field who was asked to "think the unthinkable" by Tony Blair (but then got sacked) - have the first clue about the issues facing directors of large companies and their so their criticism rang hollow. I accept that the Institute of Directors accused the directors of failing to provide appropriate oversight and said the collapse suggested "that effective corporate governance was lacking at Carillion" but this is very easy to say with hindsight. Yes the directors were paid a lot - the IoD referred to "highly inappropriate" pay packets but so are the directors of every similar company - they are all paid too much. Richard Howson, the Carillion CEO who stepped down last year was paid £1.6M in 2016 including £591k of bonuses. That is less than the preposterous £1.7M that the boss of Motability is getting for sitting on a £2.4bn cash pile and not much else. Unlike Carillion in Motability's case it's ALL public money.

While not claiming to be an expert on how companies fail, I did have experience at group executive level, one rung down from the main board in a substantial plc which had to issue a number of profits warnings and had a very large pension deficit. So I suspect I know a lot more than most MPs would about the problems of managing a struggling company. In such a situation, even if the company is still profitable, suppliers immediately seek to renegotiate terms and banks change their terms of lending. I can recall having difficult discussions with major suppliers who wanted payment up front, which would immediately have drained millions from the company's already under pressure bank account. And those suppliers who have taken out insurance against non-payment find the insurers pull the cover if they think it might actually happen. This has happened recently to House of Fraser and was a contributory factor to the demise of Woolworths, Comet and BhS. When things get really bad the banks send in teams to vet the company - for which privilege the company has to pay at a handsome hourly rate of course - before they will decide to renew the overdraft at higher interest rates.  All, in our case, because the company was saying it would make maybe half the profit that it had forecast a few months earlier. All sorts of problems rain down on management and it is easy to see why the directors try to keep the show on the road, expressing confidence until the very last moment.

One thing you can guarantee - the directors and senior managers at a struggling company will be working harder than almost anyone else as they get besieged by one problem after another.

The company I was with got through these traumas, that time at least. But several years after I had left it did go into administration, due to the pension fund becoming an unsustainable burden. Once free of that (it went into the PPF) a large part of the company is now continuing as a profitable business, albeit with lots of trauma for pension scheme members. But until the final crunch it was a high wire act for many years, just like Carillion. Even as the signs were getting more negative, only the directors (and maybe not all of them when it gets really hairy) know the full situation and how close the company was to failing on previous occasions. I can quite believe that the Carillion directors felt that, with a bit of help to tide them over until the Qatari money came through, they could escape once again. Not that I am suggesting the government should have done that.

So the chap who was CEO until a year ago really couldn't be blamed that much - he wouldn't know anything of what had happened subsequently. And the FD who had been there a few months clearly came into a difficult situation. No wonder these chaps and their colleagues sat in glum silence while the MPs threw the equivalent of rotten tomatoes at them. It was their duty to the shareholders, the employees and the pension fund to keep the show on the road as long as they could, while hoping that the Qatari money turned up, allowing them to live for another day, week or maybe year. Remember they had tried to secure the future by merging with Balfour Beatty (good decision tgat by the Balfour board, by the way), but something else might have turned up. The one thing they couldn't do was say to the world "if we don't get that cash by the weekend we are sunk" else sunk would immediately become a self-fulfilling prophesy. The whole spectacle of the select committee grilling was somewhat unedifying and didn't help to understand how better to deal with these situations in the future.

Isn't there a fifth group, the taxpayer, I hear you say. Surely the exchequer will now have to pay a lot more to complete the contracts? Maybe, though not necessarily. If, as I suspect, Carillion were bidding low, then the eventual cost may not necessarily be any more than if Carillion had not been given the contracts and they had been awarded to other, higher price bidders at the outset. This won't be known for some time, though whether we ever get told I rather doubt.

Jeremy Corbyn has of course tried to make hay from the collapse, in his ususal spectacularly economically ignorant way, saying " if these are public contracts we should be the manager and not have a middleman like Carillion creaming off the profits"*. One doesn't really know where to start with Jeremy as he is so far off the planet he is hardly in the solar system. But Carillion obviously wasn't charging enough for its services or it wouldn't have gone under. And given the fancy salaries that university vice-chancellors and council chief executives pay themselves, the pay levels of senior people probably wouldn't be materially different if the contracts were managed by the public sector.  And public sector procurement, for example the Ministry of Defence or Network Rail, has an outstanding record on delivery to cost and time - outstandingly bad. Given the notorious inefficiency of the public sector (see The Not For Prophet, 27 October 2017), there is no reason to believe the total cost would be anything other than a lot higher.

Indeed, PFI deals involving construction, like many of Carillion's, are proving so risky that few companies will bid for them any more. The operational phase of a PFI contract is generally low risk and so is a cash machine for the companies who run them. But companies will be even less inclined to bid for the risky construction phase if there isn't an operational phase afterwards to pretty well guarantee getting their money back. Why should they take that risk, Jeremy?

I despair of the Tories who don't seem willing, let alone able to defend capitalism from Corbyn's nonsense. It was left to the Sun to say " Jeremy Corbyn’s clueless on Carillion because he despises job-creating private firms"; "the Labour leader sees the private sector, which feeds the families and pays the rents and mortgages of 84 per cent of all UK workers, as the tool of a wicked capitalist conspiracy" and "Labour's failure to land a glove on the Government over the Carillion collapse exposes its utter cluelessness. Its more sensible MPs support private firms running public services because they generally do so efficiently, which is why Labour once encouraged it."

Quite. However, I suspect Jeremy's childlike diatribes probably go down well with a large chunk of younger folk. Us oldies may have to relive the 1970s in order that the youngsters can experience the fact that full blooded socialism never (as in never, ever, anywhere in the world) works for any other than a brief period of time before everything inevitably goes to rats. Then maybe they will understand like we do.


P.S. Carillion was formed when Tarmac demerged into two companies in the 1990s. At the time I was on the board of a joint venture company with Tarmac being one of the other players. The Tarmac technical director (who I remember telling a wicked joke about Joan Collins definitely not appropriate for here) explained to me the logic of the split: Tarmac were going to keep doing the long, straight flat things like roads while Carillion were going to do the things that got built upwards, like buildings and bridges. So the fact that Carillion built Liverpool FC's new main stand fits. But not the fact that, when I joined a railway business I found Carillion was a major player on the railways.....

I recall telling the JV partners about my company's first profit warning, in confidence after the markets had closed the day before the announcement was to be made. The Tarmac guy, soon to be with Carillion, said "no big deal, we've had lots of those...."

Sources:
https://www.theguardian.com/politics/2018/jan/18/corbyn-on-carillion-well-end-outsourcing-racket-in-rule-change
http://www.constructionenquirer.com/2018/02/06/cracked-beams-at-liverpool-hospital-sparked-carillion-collapse/
The great Carillion con trick: Sunday Times Business, 21 January 2018
Alex Brummer, City Editor, Daily Mail 1 Feb 2018
https://www.thesun.co.uk/news/5366796/corbyn-clueless-on-carillion-opinion-sun-says/
Carillion's 'highly inappropriate' pay packets criticised:  https://www.theguardian.com/business/2018/jan/15/carillion-highly-inappropriate-pay-packets-criticised
Former Carillion directors branded delusional at MPs Q&A: https://www.theguardian.com/business/2018/feb/06/carillion-director-mp-executives-collapse
http://www.dailymail.co.uk/news/article-5355225/Boss-car-scheme-disabled-1-7million.html
House of Fraser faces cash squeeze, Sunday Times Business 4 Feb 2018
My company pension paid £70,000 - now it pays just £17,500. The Telegraph 16 March 2016

Saturday, 10 February 2018

But change the DoF first?

I've just been reading a post on the Everton fans website Grand Old Team from someone even more disenchanted than I am - and just as numbers driven, given that he starts by remarking that the 5-1 hammering at Arsenal was the ninth 3+ goal defeat of the season and "simply unacceptable".

While it's implicit that the author is no fan of Allardyce, he delves more deeply into the problems of the club, from majority shareholder Farhad Moshiri downwards.

After many years of stability under Kenwright and Moyes - and what could reasonably be called success apart from the obvious (i.e. not actually winning a trophy) - change has happened under Moshiri. Without his backing would Koeman have arrived, or the head of recruitment from the then champions (Leicester)? Would Lukaku have extended his stay by a year or the Welsh captain (Williams) have chosen Everton for his move, or Palace's best player (Bolassie)?

Maybe not but the author argues convincingly that these have all been bad decisions. Recruitment has been erratic. Bolassie was unlucky to pick up a bad injury but always looked expensive at the price - and Palace fans warned us that he flattered to deceive with little end product. Williams had peaked and is looking old and slow. Klassen was a big disappointment, though arguably wasn't given much chance. I would add that no-one outside the inner circle knows who really wanted Rooney. It hasn't all been bad as Ademola Lookman and Dominic Calvert-Lewin are youngsters with great potential - though as Calvert-Lewin arrived only a month after Walsh it's not clear how much he had to do with it. And promising youngsters is one category Everton weren't short of anyway.

I observe that it isn't getting any better judging by the centre forward fiasco. The replacement for Lukaku didn't arrive in August when needed and the January signing, Cenk Tosun, has been left out in favour of the limited and previously deemed inadequate Oumar Niasse on at least 2 occasions already, so it looks like Allardyce either doesn't fancy him or doesn't think he's ready for the premier league.

Everton have lost the air of sound and competent management that was present for more than a decade. And, for all the reputation of Walsh, the wisdom behind the recruitment of the Moyes era - yes there were expensive mistakes like James Beattie and Per Kroldrup but there was huge success with modest priced signings like Baines, Cahill, Pienaar, Stones and Coleman - has not been continued.

The solution advocated in the Grand Old Team piece is that Everton have to change the manager, but change the director of football first. And others are predicting the latter: the Daily Mail says today that "Everton's transfer flops may get Steve Walsh the sack as director of football after the Toffees experience dismal returns on £239m recruitment drive"

Everton wouldn't be the first club spoiled by a new owner arriving with the promise of money, only for the money to be spent badly followed by decline. But the author's punchline is a concern that, without change, Everton could be on the way to becoming the next Sunderland.....

This analysis has much to commend it and you can read it at https://www.grandoldteam.com/2018/02/08/brave-new-world/

The Mail piece is at http://www.dailymail.co.uk/sport/football/article-5374059/Steve-Walsh-faces-sack-Evertons-director-football.html#ixzz56hxWEdUm

Thursday, 8 February 2018

Next Everton manager?

Readers will know that I was doubtful about Everton recruiting Sam Allardyce. While he seemed to have an initial impact, the team now seems to be nearly as clueless as when he arrived. If a Big Sam team can't defend (witness the 5-1 defeat at Arsenal not long after the 4-0 defeat at Spurs), then just what is he for?

I also wonder about Allardyce's state of mind. Less than a fortnight ago he said that Wayne Rooney and Gylfi Sigurdsson could not play in the same team*. Tell us something we didn't already know: Evertonians were asking back in September why we had signed three number 10s (the aforementioned two and Klassen), the implication being that they were too similar and couldn't be accommodated in the same team. In some matches Allardyce had success with a 4-3-3 formation, Rooney playing deeper in the midfield 3 and Sigurdsson on the left at the front. But this got found out at Spurs, with Sigurdsson leaving the hapless Martina totally exposed at left back. So no surprise that Sam said the two are "too slow" for him to accommodate both and "are very talented but covering ground is not their strength". Allardyce made these comments in explaining why he included Sigurdsson but left Rooney on the bench for the 1-1 home draw against West Brom on 20 January, though Rooney did come on after an hour to join Sigurdsson. So why did he pick both of them in the rather fortunate 2-1 win at home to Leicester (quite a quick team by the way!) in the next match? And then leave them both on the bench in the debacle at Arsenal a few days later? Do you know what you are talking about Sam or have you just decided not to listen to yourself?

A further concern about Allardyce is his selection policy. Not so much rotation as give people a run and then leave them out for no apparent reason. Holgate being a case in point but Gueye, always reliable previously has been in then out and seems to have gone backwards. I have been wondering if Allardyce is assessing his squad for a summer cull and new faces. After all, he needs a good showing next season if he is to have his 18 month contract extended. But his selections seem almost random.

But not quite random. I was very concerned that Allardyce wouldn't play the youngsters, like Tom Davies, Calvert Lewin and Mason Holgate, all part of a very strong crop of talented young players currently in the squad. At first my doubts were assuaged, Allardyce waxing lyrical about Kenny and Holgate in particular. And Calvert Lewin figured as a starter or sub in just about every game. But the youngsters now seem to be getting less game time. Even though Kenny, Calvert-Lewin and Davies all appeared at Arsenal, Martin Samuel noted**

In Everton's 4-0 win over West Ham in November, the final match before Sam Allardyce took over, four players aged 21 or under started and three came on as substitutes, playing a total of 366 minutes. Losing 5-1 at Arsenal on Saturday the number of young starters had dropped to one and the minutes played to 164. Tom Davies was given the second half but one imagines only because, by then, Everton were 4-0 down."

Samuel went on to note that when the loan transfer of the promising Ademola Lookman (aged 20), Everton's best player at the recent Anfield derby, was mentioned Allardyce began reciting the transfer fees of the players he was using, like Theo Walcott (£20M) and Yannick Bolassie (£30M). As Samuel went on to say:

This is why, from the start, he was wrong for Everton. Allardyce is very good at what he does, but what he does isn't what Everton require. Allardyce's teams aren't top 4 contenders, which is where Everton hope to be and he doesn't trust youth, which is what has fed Everton's soul for years. He keeps teams up, which is hardly the greatest feat at Everton, considering that they haven't been relegated since 1951. Plenty of managers have done that and nurtured the famous youth system too."

Allardyce wasn't Everton's first choice, of course, that was Marco Silva whose promising start at Watford then evaporated, getting him the sack. I wouldn't have gone for him, nor would I next time.  So who should Everton have gone for and who should they try to get next time? 

Well, why not go for a proven Premier League manager who also happens to be the only manager in history to win the UEFA Champions League, UEFA Europa League, UEFA Super Cup and the FIFA Club World Cup? 
I know, in advocating Rafa Benitez, with his strong Liverpool connections, I may appear inconsistent given my anatagonism to Allardyce bringing in Sammy Lee as one of his number 2s. But Lee was Liverpool man and boy and is a journeyman assistant manager who, while he might play a useful role, isn't going to transform Everton. Whereas Benitez is an astute manager who can set a team up for a one off game, is flexible in his approach and has as deep an understanding of the game as anyone.

And he still, from back when he was at Liverpool, has his house on the Wirral, keeping his family there through his last 8 years at Inter, Chelsea, Napoli, Real Madrid and his current uncomfortable perch at Newcastle.

Benitez is so passionate about football that, when he was back at his Wirral home between jobs, he went out to watch boys football and within 2 weeks was coaching a team. "It was hilarious" his wife said. "He stood there on the touchline and shouted at them as if it was the first division". Benitez made a tactical change in a match: he moved a tall, quick player to face a small defender (a favourite tactic of mine when coaching boys, that one!) and his side won. After they won their next match parents of the opposing teams started complaining "not fair - you have a professional manager!". Benitez says his family often ask "haven't you had enough?" Then, when he starts moving the plates and glasses around into football formations (another habit of mine when I was playing and coaching) they say "Go!" Would he like to be a manager in 13 years time at 70, like Roy Hodgson? "At the moment I have to say yes, obviously. The main thing is to have health, if you are healthy you can continue and I am fine, touch wood."***

"Touch wood" tells you everything you need to know about his command of English, something Arsene Wenger, for all his years here, still seems to find alien.

Benitez's 3 year deal at Newcastle ends in March 2019. Allardyce's at Everton runs to June 2019. Even if I have to put up with Sam at Everton for next season, I know who I would want there by summer 2019.

Everton were contending for the top four when Rafael Beneathus, as he was called when Everton finished 4th in 2005, was at Liverpool. Indeed that was the last time Everton did finish above Liverpool. But Benitez is capable of getting Everton back in contention, which I don't believe Allardyce is.

*https://www.theguardian.com/football/2018/jan/21/sam-allardyce-everton-wayne-rooney-gylfi-sigurdsson-too-slow-play-together
** Martin Samuel's column was in the Daily Mail on 6 Feb 2018
***The material on Benitez is from the Sunday Times article "Coaching is child's play for Benitez", 4 Feb 2018


Monday, 29 January 2018

Second referendum? There's no question, it's madness

In the sporadic debate about a second referendum, Wolfgang Munchau has made some valuable points. Firstly*, he notes that what Simon Jenkins calls the "second referendum adventists" are "as mad as the the flat-earth leavers" and goes on to quote Andrew Duff**, who says 


"The EU would not simply say: "great, come back, all is forgiven". Time has moved on. The European Commission has an action plan until 2025. David Cameron's deal will not be revived. On the contrary, the EU will want the UK to recommit to the principle of ever closer union. The UK would need to accept an end to the British rebate, and an end to several opt-outs (Munchau agrees with Duff that this would probably not affect the opt-outs on the euro or Schengen). But the various opt-outs on the charter of fundamental rights, and on a common immigration policy, would all have to go. Oh yes, the UK would be under pressure to join the banking union, too. All these things would have to happen for the European Council and the European Parliament to accept a British revocation."
I've been saying much the same in my posts. Moreover, second referendum advocates seem to assume that the UK could just revoke article 50 unilaterally, but Munchau notes that formal assent of the EU would be required. The UK could appeal to the European Court of Justice, which would probably stop the clock while it ruled, but 
"In normal circumstances, stopping the EU clock is an honourable practice and often leads to crisis resolution. When it comes to Brexit, however, almost anything could happen. A hypothetical British decision to stop Brexit in its tracks would be a highly calculated risk."
So none of that is going to happen. While Munchau thinks a second referendum is a total non-starter anyway, he has identified a specific reason he claims only he seems to have pointed out -  there can't be one because there isn't a way of drafting a simple question with a yes-no answer:
"The question proposed by advocates of a second referendum - do you accept the withdrawal agreement or do we you want to stay in the EU - does not qualify as people can logically reject both."
Munchau notes that it is impossible to ask a question that is binary, not a repeat of the last one, and that keeps the UK in the EU. Giving more than two options is never considered in a referendum. It's not that the electorate is too dumb for multiple choice, it's more a matter of how the result could be implemented if, as likely, there was no overall majority for the most popular choice. Sure, you could have a single transferable vote system. I was quite a fan of that system when I was a student. But I realised the downsides when I gave my wife and her parents, along with myself, STV ballot papers for us to decide which snack we were going to open: crisps, hoola hoops or quavers I think was the choice (this was the 1970s or 80s youngsters, pringles and doritos didn't exist). The outcome of this real ballot was that no-one got what they really wanted and the scales fell from my eyes.
The real threat to Brexit isn't a second referendum, of course. It's the Lords/Commons but, even more likely, the fact that there isn't a concensus in the Tory party about what the future beyond the transition should look like.

I do worry about the perfect storm of a Brexit collapse and a Corbyn government. Project Fear? Project Apocalypse Now more like!

*The Brexit Revocation Madness, eurointelligence.com, 19 Jan 2018
**Andrew Duff's discussion paper "Brexit: what if Britain changed it's mind?" is published by the EU-funded European Policy Centre at http://www.epc.eu/documents/uploads/pub_8208_brexitwhatifbritainchangesitsmind.pdf?file=pub_8208_brexitwhatifbritainchangesitsmind.pdf
***On The Real Hurdles For Brexit Revocation, eurointelligence.com, 22 Jan 2018

Friday, 19 January 2018

Now Allardyce HAS improved Everton (probably)

Signing Theo Walcott would appear to materially strengthen Everton's squad. It has been reported that Walcott chose Everton because of Sam Allardyce: Walcott was selected in Allardyce's only England match in charge. (Remember, Everton is the only club whose manager has a 100% record in internationals).

Walcott has not fulfilled the promise that got him a (then) quite big money move to Arsenal aged 16, followed by a call up for England's 2006 World Cup Squad aged 17 a few months later. But he has 47 England caps and over 100 career goals for Arsenal. To put that in context, in Everton's long and glorious  history* they have only had five players who have scored over 100 goals while playing for the club. Walcott was Arsenal's 18th. So he is very much a proven Premier League forward.

Yes, Everton have Wayne Rooney, with even more stellar career numbers. But Rooney is 32 and, though both he and Walcott started out young, Rooney has a lot more miles on the clock and never had explosive pace, an important attribute the current Everton squad was pretty well devoid of.

At 28 Walcott could have few good years left. His goal return from games played is significantly better than the departed Kevin Mirallas and the remaining Yannick Bolasie and Aaron Lennon, who have latterly filled the berth most likely for Walcott in the team.

Whether Walcott will improve Everton in practice we shall see, but it is a good acquisition on paper. The fee of around £20 million doesn't seem high for an English player in these times of stratospheric fees. And if it doesn't work out a decent proportion might be recouped, so low risk on the face of it.

So this might well be the first really significant change made by Allardyce since his arrival.

And here's an off the wall idea for further improvement  - bring back Jack "The Lad" Rodwell, currently languishing at Sunderland, excluded from the first team squad and training alone 3 times a day, while pocketing his crippling £70k a week wedge which Sunderland would dearly love not to pay - and are only doing so because they failed to insert a relegation clause when they bought him from Manchester City. Sunderland can't cancel Rodwell's contract and can't get anyone to take him off their hands.

Rodwell, who hails from Birkdale and was with Everton from the age of 7 to 21, is still only 26 and was the youngest player to play for Everton in Europe aged 16. He was capped by England at 20 and was spoken of as a future England captain. He moved to Manchester City in 2012 in a big money move which blighted his career, much as the move to Arsenal did for Franny Jeffers and as, I fear, will Ross Barkley's move to Chelsea.

In Everton's academy Rodwell was always seen as a central defender, but he got in the first team very young playing in midfield. He now thinks central defence would be the right role for him. Well, here's my idea. Offer to take him on loan from Sunderland for half his current wages, with a view to taking over his contract by the end of the season if he does well. Play him as a holding midfield player, much as Eric Dier at Tottenham. After all, he can't possibly be any worse than Morgan Schneiderlin. If it does work he provides back up for the centre backs (you need lots of them if you want to play three). We could get him for nothing and offload Schneiderlin for worthwhile bucks. If it didn't work the cost would have been trivial for Everton. And I note that Rodwell appeared a lot for Sunderland when Sam Allardyce was their manager.

And here's another controversial proposal: if Everton can't get either of their preferred target left backs, Aaron Cresswell from West Ham or Luke Shaw from Manchester United, make a deadline offer to take Jon Flanagan from Liverpool for a handful of peanuts. Flanagan has just been sentenced to a 12 month community order for egregiously attacking his girlfriend, has 5 months left on his Anfield contract and is persona non grata there judging by Liverpool's statement after the court hearing. While all this is unsavoury and can't really be excused, Flanagan clearly does not deserve to lose his right to earn a living over it. I've never quite understood why professional sports people are regarded as role models for anything other than their ability to play sport. And so few of them do anything to deserve their unasked for status as role models. Rare exceptions are Juan Mata, who donates one percent of his salary to a global charity and Steven Naismith who, while at Everton, regularly paid out of his own pocket for unemployed fans to have a seat at Goodison.

Before things went off the rails, Flanagan had made 40 appearances for Liverpool, mainly in the season when they so nearly won the league and won one cap for England.

The only problem I see with this idea is that it might be better for Flanagan to make his way somewhere other than Merseyside. But where better to earn redemption? After all Everton's pioneering Everton In The Community programme, which has 140 staff involved full-time in community projects, does a lot of work with young offenders and claims a 76% non-reoffending rate in the first year compared with the national average of 26%. They also run 26 disability sports teams, a free school, a programme to tackle dementia and look after children whose lives have been affected by crime**. A perfect opportunity for a  young man who has gone astray to make amends? And again, if it didn't work, by taking him now the cost would be tiny.

*Don't smirk: when I left school no team had won the league more often than Everton and it was only in the mid 1990s that Arsenal and Manchester United joined Liverpool in having materially more league titles. Everton still have 9 league wins to Chelsea's 6 and Manchester City's 4.
**http://www.telegraph.co.uk/sport/football/teams/everton/11337745/Everton-are-a-shining-beacon-for-football-as-a-force-for-good-in-the-community.html

Wednesday, 17 January 2018

Death of the second referendum

The day after Donald Tusk came over all soppy ("Our hearts are still open for you" - oh, do give over! - and stop making mischief) the pro-European academic's blog I am addicted to reading, eurointelligence, carries a good summary today of the status of the debate over a second referendum in a post titled "Labour smashes No Brexit dreams"*. They pick up on what Keir Starmer, Labour's Brexit spokesperson, has said:

“But there are a number of obvious difficulties [with a second referendum]. I don’t think we’re going to know what 'out' looks like [until] 2021 at the earliest. And therefore the only point you’ll be able to measure out is in several years’ time, but we will have exited the EU in 2019; and therefore 'in' is no longer an option.”

And they remind us that the still to come Commons vote is essentially academic:

Many trade-related issues will be left open by the time the UK parliament has its "meaningful vote" on Brexit, a euphemism since the real meaningful decision was to trigger Article 50. The vote cannot undo Brexit - all it can do is trigger the nuclear option of a no-deal Brexit. 

However, there is still a debate in Labour about what I call the Hotel California (checked out but never leaving, in the single market and customs union) Norway option, with some MPs arguing that, if Labour came out in favour, it would have a majority in the Commons and country. I'm not sure about that and neither is eurointelligence. They recommend that, to understand "the deeper politics" behind Labour's Brexit endorsement, a blog by "working class academic" Lisa McKenzie is helpful**. It summarises a paper she published in the British Journal of Sociology based on extensive research into working class opinion. In it, she noted that people followed the EU debate in much greater detail than is widely acknowledged. And she comments:

"Working-class Leavers were derided as turkeys voting for Christmas, but it is the middle-class Remainers who have been running around like headless chickens since the vote. Like Henny Penny, they think the sky is falling in, but whether the sky falls in or not, Brexit has made a difference to working-class people dubbed ‘the left behind’. They have become visible for the first time in generations, and to some extent feared."

The working class votes for Brexit in the referendum have certainly made the Labour party think hard at every turn about how to hold its constituency together. Their preference to stay at least half way on the fence about what Brexit should look like means that both the major parties are influenced more by holding themselves together and maximising their chances in the next election, even if it means avoiding serious debate on some of the largest issues the country has faced in our lifetimes.

Never mind - the LibDems, bless them, are prepared to say what they mean. Even if it commands next to no support. That is surely what the other parties fear. So we are left with a government and opposition who won't come clean and are both trying hard not to blink first.

That is actually easier for the government as there is no point in them spelling out something that time proves to be impossible to negotiate with the EU. So they keep taking baby steps forward, feeling their way as they go. To be fair, that's probably all they can do. I once asked a boss of mine, who was in the midst of a fiendishly complex company merger negotiation, how you could ever plot your way through it. "You can't" he said. "All you can do is bear in mind where you are trying to get to in the long term and try make progress in the right general direction in the short term." I thought this sounded very wise and pragmatic at the time, though later I thought it risked leaving "showstoppers" to emerge and kill the deal. Which is why, the EU would say, they identified the showstopper issues for resolution first. Except the Irish issue was fudged - d'oh!

P.S. in case you were wondering (ok, I know you weren't) how did my boss's fiendishly complicated negotiation pan out? After more than a year of negotiations, it collapsed, of course. There was some benefit because not only did I get a major chunk of his responsibilities after he left, I was able to sell our chunk of the proposed merged outfit to the other party. However, it took another 18 months as was total pain of a transaction. When I think about my opposite number in the negotiations I empathise with and have significant sympathy for David Davies....  But the good news was that, despite a lot of scepticism, it worked out well for the employees, just as Brexit can work out well for British citizens in our de-merger. 

*http://www.eurointelligence.com/public/?t=1&cn=ZmxleGlibGVfcmVjc18y&refsrc=email&iid=23d79f1135894c3ea6da6b72ccd8d997&uid=247826759&nid=244+272699400
**Lisa McKenzie's LSE blog is at http://blogs.lse.ac.uk/europpblog/2018/01/16/we-dont-exist-to-them-do-we-why-working-class-people-voted-for-brexit/