Profile: Dick Steele, Portmeirion group chairman

Being the last line of defence against the worst excesses of a wilful board of directors takes a strong character. Keeping auditors on their toes while handling high-maintenance investors and regulators demands even more of an iron will.

Dick Steele, non-executive director of listed china maker Portmeirion, relishes the challenge. “You can think of the chairman’s job as like the safety features in a car,” says Steele.

“Airbag, electronic traction control, anti-lock brakes and seat belts. I’m only there if something goes wrong. You don’t actually do anything most of the time, but the car can run a bit quicker and safer – plus the law says you’ve got to be there.”

That’s the theory anyway but, as Steele points out: “You shouldn’t have to do much, but in reality, that just isn’t the case.”

And bringing the analogy to life, the qualified accountant has a classic Morgan motor car to help him blow off steam when he’s not keeping companies on track.

His car was no doubt kept busy during the credit crunch, in helping to keep Portmeirion’s head above water while well-known rivals Waterford Wedgwood, Royal Worcester and Spode collapsed.

But it was by no means easy, especially with the banks attitude to lending, he recalls. “I get vitriolic about this. The banks shut up shop. If UK manufacturing had shut down the way that the banks had shut down, we’d all be up shit creek. It was grossly irresponsible.”

Finding finance

In April 2009, Portmeirion bought Royal Worcester and Spode from their administrators. The company didn’t need cash to buy Spode, but it needed the working capital facilities in place to sell the stock under the brand name.

“We went to our main clearing bank [HSBC] and they didn’t stump up – they were just closed for business. We went for asset-based finance with Burdale but it just didn’t feel right after we’d been such a good credit risk for HSBC for so many years.

“I was very angry about that at the time.”

The company’s biggest market is across the Atlantic. Around 40% of sales are in the US and Canada and key warning signs coming from there helped Portmeirion plan for the impending storm.

In Easter 2008, Steele says he could see the credit crunch coming. He witnessed US retailers starting to destock for Christmas. “That is usually their busiest buying period, so we knew there was trouble and prepared ourselves,” recalls Steele.

“We had a hard time, but we entered the crunch with a strong brand and cash in the balance sheet and we took cost-cutting action before many other companies.”

Portmeirion is now doing well, with its share price four times higher than the same time last year. It has also increased its dividend to shareholders.

Steele can rightly be proud of his achievements with Portmeirion and, looking at his career, he has come a long way since starting in finance before settling on multiple roles as a non-executive chairman.

He qualified with Peat Marwick Mitchell in the late 1970s and he says things have moved on, almost unrecognisably, in terms of career paths.

“In those days, you got married, you had a mortgage and you had kids – it was seamless.

“It’s different now. Today you can have gap years – some people even have gap lives,” he quips.

He could have continued a stellar career as an FD, with roles at Next and club operator Midsummer Leisure before it was taken over by a rival.

“I was young and ballsy enough to say if you don’t give me a main board position I’m not stopping with you, but they said ‘you’re not getting a board position’.”

This was in the days before big payoffs, so he had three months to find another job with a young family and school fees to pay – a “scary” time, he recalls.

He secured an FD role at Lloyds Chemists (now Lloyds Pharmacy), which saw him help build the brand into one of the UK’s best known chains.

But then another role at Storehouse, the precursor of BHS and Mothercare, saw him reassess what he wanted to do.

“I had a tree-hugging moment, thinking what the hell am I going to do with my life?” he says.

“I was still only 42 and felt both overpaid and underpaid. Some nights I thought I’m being paid too much for this, and other nights I thought they’re not paying me enough.

“It didn’t appeal to me. I was bored and I was stressed.”

Change of scene

Steele then decided to forge a career in the little-known role of non-executive chairman because he enjoyed advising and mentoring the boards, as well as the M&A side of company operations. He has been snowed under ever since.

“What sucks your time is the fact you’ve got to be available for firing or hiring a director, if you’ve got a problem with the bank or a problem with the auditor.”

“If a company has an emergency, they want you there tomorrow and then you’re busy for two or three days in a row.”

Six or seven roles is the maximum a non-exec chairman can take on, says Steele.

He describes his main tasks as strategy, resources, monitoring progress through management accounts, and “keeping out of jail”. “There are so many ways you can go to jail as a director these days.”

Steele comes across as a person unafraid to go against the grain, and his views on audit reflect that.

Portmeirion’s current auditor is Mazars, the mid-tier firm which Steele describes as “brilliant”. The company decided Mazars was a better fit than previous auditor Deloitte.
“Sometimes you just need a change,” Steele says diplomatically. “Mazars are brilliant.

For a company of our size, yes they are better than the Big Four. You get more personal attention. Mid-tier firms are better value for money.”

On the wider issues of audit and the role of auditors, Steele doesn’t pull his punches. “An audit is a tick that the company’s figures are right. Despite what all of the accountancy firms might say, it’s very difficult for them to add value above and beyond that tick.”

As Accountancy Age talks to Steele, the dust is just starting to settle from the election, which saw tax high on the nation’s agenda.

“I’ve never felt more angry and interested about the outcome,” he says. “They’ve got to sort out the budget deficit and we need less regulation.”

The fudge on National Insurance was a particular bugbear for Portmeirion’s chairman.
“It would be better if it were done away with and put on income tax,” Steele says. “It’s a tax by any other name. It looks like a duck, walks like a duck and talks like a duck. It’s a huge complication.”

Being CIoT qualified, Steele takes a keen interest in Portmeirion’s tax position, which takes some sorting out, because of its US operations.

“You have to be very careful on transfer pricing. If you’re too careful one way you make HMRC unhappy – if you’re too careful the other way you make the IRS unhappy. So, we work very hard to get it right and strike the right balance.”

Steele concludes that the profession is not just about the cold hard science of numbers, but more about being able to make the figures come alive in the minds of the management.

“Accountancy is not about maths, it’s about communication. A good accountant paints a financial picture which represents the business. The numbers look like the business and vice versa. It’s really important that you paint the detail and paint a different picture every month.”

Cracks in the market

Some of the biggest names in pottery collapsed in 2009. Waterford Wedgwood, Spode and Royal Worcester, plus US giant Lennox, all ran into difficulty. “It wasn’t plain sailing for us, but we came through it when they didn’t,” says Steele.

He remembers the day well when the deal for Spode was completed. 23 April 2009, St George’s Day – and his birthday.

After a conference call with Portmeirion’s chief executive based in US, and the FD based in the UK, things moved fast.

“Within three hours of that, the US guys were in our offices signing up an order for £4m to £5m of Christmas stock. It was brilliant.”

However, buying the company from the receivers was far from straightforward, Steele says.

“[Former cabinet minister} David Blunkett made a quip about the Lib Dems acting like every harlot in history and that’s what the receiver was doing to us. He was trying to play us off against other buyers,” Steele says.

Despite this sticking point he still describes the Spode purchase as “the best corporate finance deal I have ever been involved in my career.”

Portmeirion paid £2.5m for the company, plus £1m for stock in the US.

Portmeirion even beat its £7m sales forecast to the City, racking up £8.5m. It is now predicting sales of £12m from Spode in its first full year.

“That is a very good return,” Steele says.

Further reading:

portmeirion.co.uk