Interview: Former Tesco CFO and non exec Andrew Higginson

IF THE DEPARTING finance director of supermarket Morrisons wanted a template on how to build a portfolio career, he could do a lot worse than following in the steps of one-time rival Andrew Higginson.

Like Higginson, who spent 14 years as finance and strategy director at Tesco before resigning after being passed over for the top job, Richard Pennycook was overlooked as candidate for the chief executive role at Morrisons in 2010 and is now leaving to build a portfolio career.

Pennycook has said he wants his portfolio to include a chairmanship, and in this respect his former opposite number at Tesco would be a good act to follow.

Higginson’s current non-executive portfolio reads better than many finance directors’ career biographies, and when added to his previous executive experience – including stints at Laura Ashley and The Burton Group – to list the jobs and companies in full would leave little room for much else.

For a man who lost out on the top job at Tesco, a company he effectively helped turn into the world’s third-largest retailer, Higginson has made the most of that setback and has instead chosen to build one of the most impressive non-executive portfolios around.

The 14 months since he announced he was to leave the retailer – he actually stepped down in June this year – has seen Higginson take non-executive roles at the Rugby Football Union, BSkyB and McCurrach as well as non-executive chairmanships at Poundland and N Brown, the fashion business behind Jacamo.

In order to understand why Higginson is so well suited to juggling such a disparate collection of roles – they range from broadcasting and digital media, sporting bodies, retail and financial services – it is worth recapping some of his successes at Tesco.

Back in November of 2008, for example, Higginson was engaged in not one, but three jobs. That year marked his eleventh year as Tesco’s group finance and strategy director, the tenth as chairman of Tesco Personal Finance and the first as chief executive of Tesco Retailing Services.

Pound for pound

Since Higginson’s resignation in August last year – when Phillip Clark was preferred for the top job – the fortunes of his erstwhile employer have been mixed at best. The company’s share price has fallen 15.9% from 377.30p a share, on the day he announced his departure, to 317.35 a share at the time of writing.

The grocer stunned investors in January with its first profit warning in more than 20 years, and in April launched a recovery plan to reverse a decline in UK market share. As a result, it has managed to stem declining sales with a 0.1% rise in underlying second-quarter revenues, but the costs of its £1bn investment in its domestic operations meant profits fell by more than 10% in the first half of 2012, the first decline in almost two decades.

Given Higginson had been widely tipped as Sir Terry Leahy’s successor as chief executive, he could be forgiven a moment of Schadenfreude. Such thoughts, however, could not be further from the truth. Higginson insists there are no sour grapes associated with missing out to Clark.

“I didn’t get the job, and that’s fair enough. Phil got it and I genuinely wish him all the best,” he says.

Nor does he agree with critics of Tesco’s performance or with claims it is ‘losing touch’ with British customers.

“It has just made £3.8bn [for the year ended 25 February 2012] and has grown 5% in the fifth year of a major recession. The recession is hitting everyone hard. It is tough for everyone,” he says.

Yet it is tougher for some, more than others. Despite Higginson’s magnanimity towards Tesco, there is no denying that discount stores such as Aldi, Lidl and Poundland, which Higginson joined as non-executive chairman in July, have been gaining market share as a result of an influx of squeezed middle-class shoppers.

Poundland, which sells everything from Jammie Dodgers to paper cups for £1, now serves more than four million customers every week and recently opened its 400th store. The company has grown rapidly since it was acquired by private equity house Warburg Pincus in 2010 for £200m. In the year to 1 April, sales climbed 21.6% to £780m, while underlying earnings rose 26.5% to £40.1m.

Notable success

While some retailers such as HMV are struggling with online competition and changing customer buying patterns, and the likes of Mary Portas, who authored the Portas Review, warning of the death of the high street, Poundland is a notable success story.

“You have businesses on the high street that are doing very well – Poundland being one and coffee shops another,” Higginson says.

“Music and entertainment has been badly hit because customers are moving to downloads. They have been left with high rents to pay and have struggled as their products have become commoditised.”

Where others have struggled, Poundland has benefited from discount stores becoming mainstream retailers, which was never more apparent than the moment when a star from reality show Made in Chelsea told Alan Carr on national TV that they shopped in Poundland.

“Poundland is now ingrained in the way people shop. It was a fledgling business at the start of the recession and has gained traction,” Higginson says, adding that it should not be viewed solely as a “recession business”.

“It is now in people’s shopping repertoire. People will still like the value it provides,” he says.

But what does Higginson specifically bring to Poundland, alongside his extensive experience? One skill would be his international knowhow, in leading Tesco’s charge into the US – despite its subsequent travails. This will be key, given Poundland has opened 13 stores in Ireland and is plotting a foray into Europe next year.

He is also a heavyweight name, which has increased speculation that the company is preparing for a flotation. Higginson won’t be drawn on talk of a market listing, but says that there are “other growth opportunities” which it hopes to explore.

There is no denying Tesco looms large in Higginson’s career, but it should not blot out valuable retail experience he picked up in his earlier days. For instance, his fashion experience from Laura Ashley, where he led a financial restructuring, will prove invaluable at N Brown.

The chairmanship at N Brown came seemingly in tandem with that of Poundland and marked a busy summer for Higginson. His appointment was preceded by the announced departure of chief executive Alan White and of chairman and major shareholder Lord Alliance, who built the company from a mail order business he bought in 1963 into a business with sales of £753m and pre-tax profits of £97m.

Interestingly for someone of Higginson’s calibre, he is somewhat in awe of his predecessor in the role.

“When you have these amazing entrepreneurs – I don’t pretend I am a David Alliance – the business is not always run on traditional governance grounds,” says Higginson. “It was appropriate in the days when he built the business to run it the way he did. As it goes to the next phase, it needs to conform to more standard governance.”

Going plural

Many finance directors, Higginson included, aspire to becoming the boss. But in Higginson’s case, hindsight has proved that going plural is the more suitable option.

“FDs make quite good chairmen, better than chief executives,” he says. “The alternative was to get a chief executive job elsewhere, but it would be hard to get the same buzz. At 55, I still wanted to be reasonably hands on and a chairmanship keeps me involved.”

Given the multitude of roles he has taken on, Higginson says he is still working five days a week – something he “wanted to do” – but happily accepts that he can now take time out. “I didn’t really ever take all my holiday when I was working full-time,” he remembers.

But while the board work is keeping him busy, he denies that taking on so many roles has him over-stretched.

“The biggest challenge is managing the board meetings. People tend to want you on the same day,” he says. “One of the benefits of being chairman is that you can set the dates.”

Higginson says the “intellectual challenge” and diversity of a portfolio career is interesting, but that the same principles can be applied regardless of whether he is working with Sky, Poundland or the RFU.

“The most important thing as a non-executive director is focusing on the bigger picture – you are not the one running the business. To that extent, you are adding value in a different way,” he says.

“If you have that ability to see across the business and understand the strategy, then you are half-way there. But if you want to dive into the detail, being a non-executive will not be for you. Where you get problems is when people try to do the same job.”

Peace and quiet

Being involved in something you enjoy also helps. Such is the case with his independent board role at the RFU. Drafted into the governing body in October 2011, Higginson brought some much-needed boardroom credibility to the union. He joined at a tempestuous time that saw chief executive John Steele ousted from the organisation following a botched search for an elite performance director.

With chairman Martyn Thomas stepping down a month after Higginson’s appointment, he says the job of a non-executive director in such a situation is to help the new management team “bed in” and help bring about a “period of peace and quiet”.

The combustions at the RFU have since died down, leaving Higginson – as a Wasps season ticket holder – free to enjoy the rugby.