19 December 2019 10:31
Private companies can do things differently. Bet365 can, for example, step outside its traditional reporting schedule and file its accounts at Companies House a month later than usual. That proved helpful this year. It prevented the latest mega payday for the founder and chief executive, Denise Coates – £277m in salary plus £46m in dividends – from becoming a flashpoint in a general election campaign in which billionaire-bashing was a theme. Mind you, Coates' aversion to the spotlight might have been welcomed by Jeremy Corbyn.
She is not a straightforward case. Bet365 is a UK-domiciled company and Coates, by collecting her winnings in plain-vanilla payroll fashion, pays an awful lot of personal tax. The company also makes hefty charitable donations and her father, Peter Coates, used to be a big donor to Labour. There are easier targets to whack. For the financial world, and rival gambling companies, the intriguing detail about Bet365 is not Coates' annual jackpot. The fascination is about how the company has been so successful. Or, more precisely, where? The accounts state Bet365 holds licences in 14 countries from Australia to Sweden. But then you read this careful sentence: "A geographical analysis of turnover has not been given, as in the opinion of the directors, such disclosure would be severely prejudicial to the interests of the group." Severely prejudicial? A UK stock exchange-listed gambling company would not get away with that. Investors demand a geographic breakdown because they worry profits from unregulated, or "grey", markets could dry up if local legislators launch a crackdown. "You know that we take bets from grey markets," said a Bet365 spokesman, but he would not comment on the specific question of whether the company accepts wagers from China, where individuals risk prison sentences by placing online bets. Thus, the annual mystery regarding the makeup of Bet365's revenues rolls on, with no expectation that it will be solved soon. The company is clearly brilliant at what it does and, unless there is an upset in one of those unidentified "grey" markets, expect Coates' annual pot to keep rising. It is probably odds-on that the Bet365 chief executive will pass £365m next year. Government must act on audit report "Audit is not broken but it has lost its way," said Sir Donald Brydon in the introduction to his government-commissioned review. He's being generous. His formula for how to improve auditing is not a gentle prod back towards the path of virtue. It reads more like a radical rewiring. After Carillion, Patisserie Valerie and all the other familiar corporate failures, so it had to be. Brydon's list of recommendations is long and one can highlight three of the best. First, auditing should be separated from accounting. Good idea: if company auditors are seen – and see themselves – as mere number-crunchers, they are less likely to challenge managements and exercise independent judgment. A statutory regulator for a separate auditing profession sounds like progress. Second, audit reports should be more ambitious. "In hiding behind the need only to confirm and verify, many auditors have failed to grasp the opportunity to make their reports more informative," said Brydon. So stop thinking in terms of "true and fair" assessments and start making more subtle and graded statements about a company's resilience. Yes, that sounds more useful. Investors might even start to read audit reports. They might also take up another Brydon idea that they should be able to propose matters for the audit to cover. Third, make the directors, when proposing a dividend, vouch that the payment "in no way threatens the existence of the company in the ensuing, say, two years". Absolutely right. Dividends have been treated as a virility symbol by managements; more caution might be exercised if, in extreme cases, the threat of legal action were to exist. Remember that Carillion, which went bust in January 2018, declared a £54m dividend in May 2017. Brydon's full 138-page report is worth a read. It's more important the government acts on it – and fast. NMC seemingly not in rude health When Muddy Waters launches one of its blistering short-selling reports, the script normally runs like this. On day one, the target's share pride plunges as investors take fright. On day two, the company defends itself robustly and the shares bounce. In the case of NMC Health, the FTSE 100 private hospital company, the sharp fall of 32% happened on Tuesday. The fightback, though, was a limp affair: a short stock exchange statement with the promise of a longer one to follow. A brief rally fizzled out and the shares closed down another 1%. That is not a good sign.