Comment: Let’s raise a glass to Walsh for a job well done

Martin Flanagan
Martin Flanagan
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VERY few FTSE 100 chief executives after a 13-year tenure leave a legacy as impressive as Paul Walsh will at spirits giant Diageo this summer.

In fact, very few chief executives have the stamina to keep going in a pressured Footsie job for that long, anyway. Five to seven years is a more normal timespan.

But Walsh will bequeath to his successor Ivan Menezes a business in robust financial health, with global financial reach and a firm purchase on the aspirational middle classes in emerging markets that are the driver for the sector’s growth.

Perhaps most impressive about Walsh is that, although he is a big-picture man, he does not mind letting organic growth flow quietly if there is nothing transformational in the offing. He has been the opposite of machismo management, a most nuanced operator.

Under his watch, Diageo made the most transformational drinks deal of the noughties with the $8.2 billion (£5.3bn) carve-up with Pernod Ricard of the Seagram drinks empire.

When he judged Diageo’s food interests were perhaps taking the company’s eye off the drinks ball, Walsh unceremoniously flogged off the Burger King and Pillsbury businesses to private equity.

He has also always had an eye when a good brand becomes available, snapping up Bushmills from Pernod, for instance, and much improving its performance.

Walsh got a reputation for not over-paying, however, most recently walking away from talks to acquire tequila brand Jose Cuervo and earning City plaudits in response.

And, when nothing has been on the acquisition horizon, he has not been afraid to return many billions of pounds to shareholders via a progressive dividend and share buyback policy.

Some business people are frightened of buybacks because they can be interpreted as a lack of boardroom imagination on how to develop a business. But Walsh has been too confident of himself to need the prop of constant merger and acquisition activity as a false image of dynamism.

Instead, in such times he has concentrated on taking Diageo relentlessly upmarket, and steadily improving margins and returns.

The performance puts Walsh up there along the likes of Sir Terry Leahy at Tesco and Sir Martin Sorrell at WPP in terms of longevity and delivery. Menezes,the current chief operating officer, has a class act to follow, and one worthy of more than one glass being raised.

Despite big profits, HSBC faces pressures

HSBC has announced more than doubled quarterly profits, but has not ruled out further job cuts to add to the 3,000 announced in the UK last week.

Cost savings remain as big a priority for the bank as profitability, as the sector faces continued pressures from bank regulation and a mixed global economic backcloth.

HSBC boss Stuart Gulliver has already sold more than 50 non-core businesses. In short, profitability for the banks remains one component of a more uncertain whole.