Carphone Warehouse Group boss Roger Taylor will collect £34m in cash and shares after company was forced to close 11 UK stores
Carphone Warehouse Group chief executive Roger Taylor will collect an estimated £34m in cash and shares this year despite the failure of the Best Buy UK retail chain whose creation he oversaw.
Taylor will receive shares from a number of bonus schemes, according to the annual report published on Thursday , the largest of which were designed to reward executives for the Best Buy Europe venture and the demerger of the company’s telecoms and TV arm TalkTalk.
In a bumper year for management at both companies, TalkTalk chief executive Dido Harding will in September be handed shares worth an estimated £5m.
An unspecified number of executives have already shared £51m in cash and shares because the Best Buy scheme paid out early after Carphone decided to exit its US joint venture and return £813m in profits to shareholders. Management are not allowed to sell until June 2015, and borrowed a total of £5.8m to pay for the shares.
The payout comes after founder Charles Dunstone’s strategy of creating a transatlantic retail empire through a joint venture with American electricals powerhouse Best Buy went into reverse.
Carphone was forced to close 11 stores in the UK with the loss of 1,100 jobs, and simultaneously pulled out of its successful Best Buy Mobile joint venture in the US, which had seen the two companies join forces to create a chain of 190 standalone outlets and franchises in more than 1,000 stores. The US group retains a 50% joint venture in Carphone’s European retail business.
“They threw a lot of money away on a poorly conceived and poorly executed big box idea, but on the other side of the coin they probably sold the US business at the top,” said independent retail analyst Nick Bubb, describing the last 12 months as a period of “swings and roundabouts” for the company.
In addition to his £440,000 salary, Taylor was awarded 8.4m shares from the Best Buy Europe scheme, netting him £14m in cash from the special dividend paid to all shareholders in January, plus a shareholding which is currently worth £12m. Taylor paid £4m for the shares.
He has waived a £220,000 annual bonus, giving the money directly to Cancer Research UK. But his September reward for overseeing TalkTalk’s demerger will more than make up the difference, netting him an estimated £8m in shares at today’s prices.
The company said in a statement: “There are no free rides at Carphone. These incentive schemes are totally aligned with shareholder interests; they involve senior management buying shares at market price and running personal risk if the share price dropped. The fact they are showing profits reflects the value created in the business, the separation of Carphone and TalkTalk and the disposal of Carphone’s interest in BestBuy Mobile US.”
From a notional start point of around 70p in April 2009, TalkTalk’s share price has increased to £1.89 today, creating roughly £1bn in value as the company’s market capitalisation rose to £1.65bn. Harding and her management team are entitled to share in around 7% of that increase, and Taylor just over 2%.
They will receive 60% of their rewards in the form of TalkTalk shares this September, and the balance in September 2013. At today’s prices, the scheme would pay out £100m over two years.
Harding’s share could be £4.6m this year alone. The Tesco and Sainsbury’s veteran, who joined in February 2010, is also entitled to an estimated £420,000 from a second share option scheme in September.
A former jockey and owner of Cheltenham Gold Cup winner Cool Dawn, Harding has steered TalkTalk through choppy waters. Telecoms watchdog Ofcom last year fined the company a record £3m, for wrongly billing 65,000 customers for services they had not received. The rate of defections slowed in May, and the share price was boosted after Harding doubled pre-tax profits and raised forecasts.
However, the TalkTalk management team will be able to collect a significant portion of their rewards before investors have had an opportunity to judge whether the long delayed YouView TV on demand service, currently in testing, has been a success.