Mark Kleinman: Come in Houston, just as UK audit reforms bite
Talk about a hospital pass. Richard Houston, Deloitte’s consulting chief, might be forgiven for feeling a bit like Theresa May this week.
Houston’s is the solitary name on a ballot open to partners at the Big Four accountancy firm’s UK operation as it seeks to elect a successor to David Sproul, its chief executive for the last seven-and-a-half years.
Sources say that Houston was the unanimous recommendation of Deloitte’s board, with Panos Kakoullis withdrawing his candidacy in the last fortnight. For Kakoullis, a senior audit partner, that was a sensible decision given the current scrutiny on the practice area in which he operates.
Next week, the Competition and Markets Authority will deliver the preliminary conclusions of its whirlwind study of the audit market. While they won’t represent armageddon for the profession’s leading quartet, they will potentially have profound implications for its future.
I understand that while the option of a full break-up of the Big Four will be left on the table for ministers to consider as a reserve option, that will not be the preferred course for reform.
Instead, industry sources tell me that the CMA is likely to propose a package of measures including a market share cap and joint audits in a bid to bolster competition without causing too much disruption to the provision of an essential corporate service.
In addition, audit committees will be imbued with greater accountability, while the parallel review of the Financial Reporting Council being undertaken by Sir John Kingman is likely to call for its reconstitution as a statutory body with powers to sanction companies, and not only auditors and accountants.
Overall, it looks like a sensible reform agenda, although the threat of a broader split between audit and non-audit firms will not be removed entirely. Given the global nature of the audit market, pursuing such a move on a unilateral basis would be a mistake.
Avanti’s clouds clear
Getting into orbit is a tricky business – just ask Sir Richard Branson, whose Virgin Galactic spacecraft finally made it to the edge of the Earth’s atmosphere yesterday after more than a decade of trying. The same struggle for a rocket-fuelled boost has plagued shares in Avanti Communications, the satellite operator, for much of that period.
That may be about to change. With new leadership and an overhauled balance sheet, Avanti might finally be well-placed to generate meaningful revenue and profit growth.
I understand that the company is likely to announce before the end of the year that Paul Walsh, the former Diageo boss and current chairman of Compass Group, will step down in the coming months as Avanti’s chairman. His successor will be Alan Harper, who recently became deputy chairman and who will inherit a business which, if not yet heading for orbit, at least looks to be heading free of such unremitting cloud cover.
BMI passes health check
It looks like being an unhappy festive season for many of Britain’s embattled healthcare providers.
So there will be a reason today for some cheer when BMI Healthcare, the private hospital operator, announces that it has completed a major recapitalisation programme.
The deal, agreed in outline during the summer, involves a £60m capital injection from Hospital Topco, a £65m rent reduction at 35 hospitals, an extension of £135m of bank facilities, and £500m of liabilities being erased from its balance sheet.
The rent reduction will create significant room for a £250m capital expenditure programme over the next three years, which people close to the company believe will provide a platform for growth.
It won’t be the last such restructuring in a sector feeling a growing economic strain.
Mark Kleinman is the City Editor of Sky News. @MarkKleinmanSky