TechnologyNothing last minute about it

Nothing last minute about it

David Howell had to think long and hard when he was offered the job of finance director at e-retailer in the summer of 2001.

Not only had the company’s share price taken a severe beating after thedotcom collapse, but online retailing had traditionally been a young man’s game and Howell was already the wrong side of 50. He is also not the sort of finance director who would readily change his suit and tie for a pair of chinos.

Moreover, Howell was looking forward to a well-deserved break after an eventful tenure at tour operator First Choice. After fighting off a hostile takeover from its rival Airtours, challenging Customs & Excise over VAT payments on discounted holidays and failing to persuade shareholders that a merger with Kuoni was in the company’s best interests, he had enough and resigned from the company.

‘I was quite looking forward to having the summer off as I had had three-and-a-half years bloody hard work at First Choice,’ he says. ‘I wasn’t particularly fussed about looking for anything at that point, but when my departure was announced I was approached by I had previously met Martha Lane Fox at a conference in Paris.’

One of 53-year-old Howell’s main reservations was that he was unsure whether or not he wanted to take on another executive position at any company. Instead, he considered building a portfolio of non-executive directorships. But Lane Fox, co-founder and chief operating officer of, won him over.

‘My background over the past 17 years has been helping companies out of difficulties. For instance, Central Transport Rental (previously called Tiphook) was going through a major debt-for-equity swap and then I went to First Choice … was going to be a challenge, a huge challenge. Martha convinced me I would enjoy it and I have,’ he says.

Being the cautious sort of finance director, Howell did his homework The company had suffered from a lot of negative publicity since its flotation in March 2000 had valued the company at just under £600m. Its share price had nose-dived from a high of over 500p at its flotation to just 20p in late 2001. ‘Many people believed that wouldn’t survive,’ he says.

But after ‘a lot of due diligence’ Howell was so convinced by what he saw that he took a substantial salary cut to come on board. Although a large dangling carrot in the form of one million share options exercisable at 34p must have helped him make up his mind.

‘I came to the conclusion that would survive and, not only that, it would thrive. Just look at what has happened in the US with online retailers like Expedia. They are trading on huge margins and have very good secure businesses,’ he says.

Howell replaced 35-year-old Julian Culhane – a self-confessed deal-maker who decided that he wanted to move back into mergers and acquisitions.

‘He came from a banking environment and he didn’t particularly enjoy running the finance function,’ says Howell. ‘I enjoy running the finance function, working with a young team and getting it to perform.’

Notably Howell’s appointment is one of the few recent FD moves that has involved an older finance director taking over from a much younger one.

Blue-chip companies such as Abbey National, BT and Dixons have all appointed FDs over the past year who are in their late thirties or early forties.

But he says that in the context of, where the management team is spearheaded by twenty-somethings Lane Fox and chief executive Brent Hoberman, it’s important to have some experienced directors on the board. ‘Brent and Martha are incredibly bright people who formed and grew a business very successfully. The only thing they lacked was experience.

So I bring that.’

Another high-profile appointment, that of Allan ‘ten jobs’ Leighton’s chairman six months before Howell joined, was also an important step in convincing the City that the company has the necessary savvy to survive and grow. ‘Allan is very important because he is a great chairman of the business and has great retailing experience … The whole purpose of having people like Allan and myself come on board is to add to the management depth. If we want to be a FTSE-350 company we have to have that,’ says Howell.

Since he joined’s share price has made steady progress, climbing to around £1 by the end of 2002, and culminating in the company’s readmission into the FTSE-250 in December of last year. ‘2002 was a very good year for the company,’ says Howell. ‘We moved forward greatly, doubling total transaction value from £124m to £246m. We also saw 100% organic growth in the UK supplemented by key acquisitions in the UK and Europe.’

Howell wants to turn into a £1bn corporation in a few years’ time. ‘That’s £1bn of TTV (total transaction value), the gross value of transactions that go throughout the shop front,’ says Howell.

TTV differs from turnover as for many of the flights and holidays the company sells, it only receives a commission.’s turnover is therefore only the cash that it’s paid by the airlines etc, while TTV is the total value of all goods sold through its website.

Eventually the aim is to replicate what online travel company Expedia has done in the maturer US market. ‘It turns over $1bn a quarter, generates significant profits and has in excess of $500m in its balance sheet. Expedia does lots of good things,’ Howell says.

And is starting to make some headway. ‘This year on a pro forma basis, with all the acquisitions we made last year plus growth, the forecasts are that we will be in excess of £500m TTV. We are growing organically at 55% as well. So its not that far away before we pass the billion mark if you thrown in some acquisitions as well.’

Although was never troubled by the profligacy of dotcom disasters such as failed clothing retailer, Howell has reinforced a culture of prudence and tight financial management throughout the company. Acquisitions, for example, are always paid for with equity rather than cash. ‘Cash is king. It’s precious. And we quite enjoyed the £50m of it we had in the bank at the end of last year,’ he says.

It certainly helps that is not just spending investors’ cash these days – as a first step to profitability, the company posted its first cash-generative quarter in September of last year. ‘We generated £343,000 of cash income in Q4,’ Howell says. ‘We have explained to the market that Q1 2003 – October to December – is our weakest quarter and we will see cash leave the company to the tune of about £7m-to-£8m, plus exceptional costs of integrating the European businesses. But after that quarters 2, 3 and 4 will all be positive, as will be the year 2003 as a whole.’

Crucially, has never issued a profit warning or missed performance targets, despite the precipitous fall in its share price.

Howell points out that its massively over-valued share price at its flotation had nothing to do with the true value of the company – it was all about sentiment. ‘Investment principles were put to one side and people were buying on multiples of turnover,’ he says.

Of course Howell isn’t complaining too much about the £125m Lastminute.comraised from the float. ‘It was great because we raised sufficient cash to see us through to profitability, where we need to be,’ he says

And when anti-dotcom sentiment pulled’s share price to its lowest point in 2001, Howell says that investors were following the herd rather than using their own heads. ‘When the share price went down to 20p the value of the company was less than the net cash in the business – that was obviously a complete nonsense.’

Howell still checks’s share price every day. ‘I have no real influence on the price as all I can do is continue to deliver results.

But what I am interested in seeing is how many shares are traded, and who the buyers and sellers are,’ he says.

Since he joined, his key focus has been on sorting out the company’s investor base – encouraging more institutions to take a stake in the company.

‘I spend more time than I probably should at the moment talking to shareholders,’ he says. Re-admission into the FTSE-250 should help Howell with some of the hard work, though. ‘We still only have four analysts that cover us, but in the space of the next two-or-three months I hope we will add another four. This is purely a function of moving into the FTSE-250 because people are becoming more interested in the stock.’

Much of Howell’s work with investors is a direct result of the ludicrousdecision to restrict allocation of shares at flotation to just 35 per retail investor. The feeding frenzy that ensued means that while only 4% of the company’s shares are held by retail investors, there are 150,000 of them to service, each with such a small holding that it is not in their interests to go to the expense of selling their shares.

‘It’s very expensive to service retail investors. Would I have done the same if I was here at the flotation? No,’ Howell says. On the bright side Howell jokes that Allan Leighton, who is also chairman of the Royal Mail is happy: ‘We have to send out 150,000 paper annual reports – all by post.’

Howell was reluctant to make wholesale, knee-jerk changes to the company’soperations when he joined, claiming it is more important for a FD ‘to get to know the business first’. But he has gone some way to beat into a shape befitting a FTSE-350 company. ‘There was very little infrastructure here when I joined. There wasn’t a company secretary, for instance. We have to report every quarter because we have a NASDAQ listing, but also because we came to the London market without a track record. So we put in a process to make sure that the reporting cycle happens in a timely and accurate way,’ he says.

Linklaters, the company’s previous law firm, was ‘perhaps more appropriatefor a FTSE-100 company’ so Howell replaced it with Herbert Smith. He also felt ‘it was time to move on’ from the company’s relationship with publicrelations agency Citigate Dewe Rogerson and replaced it with Hudson Sandler.

Howell also scrapped all the disparate financial systems used by subsidiary companies in Europe and moved the whole group over to Oracle Financials.

‘Oracle Lite is great for a business that’s growing as fast as we are because it will still be there in five years’ time when we are a business with in excess of £1bn turnover.’

He has also started to cut some of the dead wood out of the business.

‘We have outsourced some of our data entry and post-sales customer supportto a company called Seven Seas which is based in Liverpool, India and Italy. There’s £2m of savings to be had there. We have also integrated our three travel businesses –, and Destination Group – to a single site in Farringdon. That will produce another £2m of savings in the full financial year 2003. And there are further cost savings to come.’

The one important thing that Howell has left unchanged is the company culture. ‘I said that I wasn’t going to try and alter the culture because it’s very good … We are also not going to drop the dotcom from our name because the internet, or ‘electronic selling’ is our business.’

But, importantly for Howell, if the company culture, long-term plan and faith in online retail aren’t going to change, neither will he. ‘I’m too long in the tooth. I’m the only person that wears a suit and tie. When I put them on it tells me I’m going to work. What the rest of the organisation does is up to them,’ he says.

And experience, a few grey hairs and some natural caution are highly prized assets. ‘This year could well see a recession environment that many young finance directors would not have seen before,’ he says. ‘You always have advisors there to help you but some of them are quite young as well. Experience is a great leveller. Maybe that’s why I enjoy challenging companies more as I get older.’


Name: David Howell

Age: 53

Qualifications: FCA


2001- Chief financial officer,

1997-2001: Group finance director, First Choice Holidays

1996-1997: Group finance director, Central Transport Rental

1996: Interim manager, Guildhall University

1992-1995: Chief executive, GN Comtext

1990-1992: Finance director, GN Comtext

1984-1989: Finance director, Lydiastar Ltd.

Biggest challenge in your job?

Coping with a business that’s growing 55% organically from a fairly high base. Throw a number of acquisitions on top of that and the challenge is to make sure it works without any surprises.

Biggest hassle?

Sometimes I could do without quarterly reporting – every 12 or 13 weeks,for instance!

What other company would you like to be FD of?

Companies like BA and Cable & Wireless could be quite fun. I enjoy the challenge of a company that has some issues associated with it. BT wouldalso be fun.

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