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Why it was good to give peace a chance at Gus
(Daily Mail (London) (KRT) Via Thomson Dialog NewsEdge) Apr. 13--Fifteen minutes into our interview and GUS chief executive John Peace is talking about disintermediation. "Cutting out the middleman," he explains, sounding out every word like a patient schoolteacher, after realising ordinary people do not use such language. He is describing why the next wave of internet ventures is likely to be more successful than the bubble stocks of the 1990s.
Peace loves talking about this kind of thing, perhaps because he started his career "as a techie" writing computer programs. He appears to apply logical methodology to every aspect of his life. He could talk for England about topics most people prefer to leave to textbooks, though I suspect this is a deliberate ploy to discourage small talk about himself. "If I can just take you back to the business," is his mantra if he is in danger of revealing tidbits of personal information.
Peace shuns publicity -- this is his first interview in years. Yet his low profile and quiet demeanour have not stopped him from being hailed as one of the most successful retailers of the decade.
Since he took the helm at GUS -- formerly Great Universal Stores -- in 1999, the share price has trebled and it has been the third best-performing FTSE 100 stock.
GUS is one of the last remaining successful conglomerates. It owns retailers Argos and Homebase and was the parent of luxury brand Burberry. But the hidden jewel and future growth engine is financial services business Experian, which holds data on the credit rating of almost everyone in Britain.
Having built an 11bn empire, Peace now wants to dismantle it, meaning that the GUS name will disappear after 106 years.
In September, Argos and Homebase will be floated off as one, while Experian will be given its own listing. Burberry, spun off in 2002, is already proving a solo success story.
In the process, Peace, who earned 1.6m last year, will do himself out of a job. He will remain part-time chairman of Experian and Burberry, though surely, aged just 57, he could easily take on another FTSE 100 chief executive role.
"Yes," he says, refusing to elaborate, except to say it could involve private equity or the public arena. The only ambition he will discuss is his desire to get some of his mares -- he has 14 horses -- to compete in the 2008 Olympics in Beijing "or failing that in London in 2012."
It would be no mean achievement for Peace, son of a "staunch socialist" coalminer, who grew up in a cash- strapped household in Nottinghamshire, though his soft voice reveals no hint of a regional accent. He looks every bit the slick businessman, dressed head to toe in Burberry, but there is a hidden steeliness beneath his ultra-polite persona.
"Being poor inspired me not to be poor," he says. "Money was tight, absolutely. I was 12 before I saw a television. I had a wonderful mother and father -- we just did not have any money."
Admitting to being "quite good academically," Peace originally wanted to be a pilot. But he was persuaded to join the Sandhurst military academy, better known now for Royal recruits Princes William and Harry. Peace says of his stint: "Believe you me, that was hard. Just imagine having no money and arriving at a very prestigious institution like Sandhurst."
Did the toffs make fun of his background? "No one takes the mickey out of me," Peace responds curtly, his grandfatherly air vanishing. He does, however, admit that military life taught him the value of humility, having received a stern dressing-down. "I used to be quite cocky in those days," he says.
After a couple of years at Sandhurst, "I decided, at that time, the army did not offer any particularly great opportunities -- or money for that matter -- so I pursued a technology career."
He joined GUS in 1970, aged 21, working in IT. He co-founded the CCN information business that became the forerunner to Experian and worked his way to the very top.
Peace has the unique distinction of being the only "non-family" boss of the GUS empire, which was built up by Sir Isaac Wolfson and his son Leonard.
Running GUS is not like a typical chief executive's job, because the divisions operate with autonomy. Peace guides, rather than gets his hands dirty. Managing egos and channelling enthusiasm is more important than day-today direction, though he says his grass-roots experience in computing means: "I know bullshit when I hear it."
"Humility is very important when you work with very talented people," he added. "If you are very arrogant or full of yourself, it is not the best way of motivating people. If you respect people, they will respect you. I am polite, but equally, I can be firm."
The final break-up of GUS should benefit both strands of the business, though Argos and Homebase are facing a gloomy retail climate. Despite the fact he will stick with Experian rather than Argos, Peace insists: "I do not have a favourite. What I have is a great deal of pride in each one."
Analysts suspect Argos may embark on another retail deal, since a stock market listing brings greater financial flexibility. But Peace plays down the prospect of a foray into clothing. "Every acquisition we make has to have clear synergy. Otherwise you are not really using shareholders" money in an appropriate way." He thinks there is "a lot of truth" in reports that most takeovers destroy shareholder value, but believes those that do it well generate superior returns. "I prefer medium- sized acquisitions, because they are easier to integrate."
He is not surprised that private equity firms are running the slide rule over much of the retail sector, eager to spend their cash piles. "You have very difficult market conditions. As a result, the value of some retail stocks is relatively low. Private equity can probably see a lot of opportunity to benefit from the upside potential when the market starts to recover."
"But you hear more talk than you see action. I think the day is gone when there were lots of retailers with property portfolios that were undervalued -- there were some easy pickings out there several years ago. But there are still retailers with good cashflows."
He adds: "What private equity is able to do -- that public companies find more difficult -- is to put in a load of debt, like Philip [Green] when he took his special dividend."
Whether such heavy gearing is such a good thing is "exactly the question" that needs answering, he says. Peace is glad that the new pension fund regulator will be protecting retired workers, but does not want governments to dictate the financial structure of firms.
Already, he is fearful that Gordon Brown has meddled too much in the tax and accounting regimes. "China and India are the competitive markets of the future and they do not have anything like the regulation and shackles we have in Europe. We are tilting more towards the French and German model than is necessarily good for us."
Nor will he lend his voice to the chorus of disapproval over the increasing power of hedge funds. He believes they "often focus on a smaller number of businesses and get to know them more intimately" -- meaning they are better placed to have a view on strategy than pension fund managers who religiously track the FTSE 100 index.
Perhaps such views are not surprising. A man with his impeccable record is unlikely to experience investors breathing down his neck. And if he is not snapped up to lead the next government task force on regulation, there will definitely be a few job offers coming his way.
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