Criticism mounts over operations

By THIS IS MONEY
Updated:

 

TODAY sees the inaugural flight of Virgin Atlantic's route from London to Toronto and the great, the good and the journalists on board will no doubt be splendidly entertained by Sir Richard Branson, who certainly knows how to throw a party. But even as they down the complimentary champagne they may wonder at the significance of the report in The Observer on Sunday that Branson's remaining half-share in the airline has been mortgaged to Lloyds TSB.

Anyone who has read Tom Bower's unflattering biography of Branson will have gained the impression that financial ups and downs are not uncommon at Virgin and that at any one time only a few of the dozens of projects being pursued are making serious money.

But the true picture will always be a matter of guesswork. The vast number of interlocking companies, many of which ultimately link into trusts in the British Virgin Islands, make it difficult to gain an accurate financial snapshot of the group and to separate out the different strands of the empire.

However, most of this is lost on Branson's admiring customers, if only because Virgin tries to counter any hint of bad news with a positive announcement about something else. Thus the cataloguing of the airline's alleged woes in The Observer coincided with a story of a possible deal on American mobile phones in the Sunday Telegraph.

It would be no surprise if Virgin is under pressure. Most North Atlantic carriers have faced tumbling profits and Virgin Atlantic is not immune. Elsewhere, the group's half-owned rail business has suffered since Hatfield, compounded by diminishing subsidies.

The Our Price record chain has a mountain of debt, was making no real money when WH Smith sold it back to Virgin three years ago and has yet to prove itself. Virgin's rivals in financial services cannot see how that division is making much profit, as most of them are not either. Virgin Express, the cut-price carrier operating on the Continent, has not made much impact - and nor have Virgin Cola and Virgin Vodka. There have been reports that the internet business might be sold, and if it is true that the mobile business is to be launched in America, one might wish Branson was tackling a market where competition was less ferocious.

Virgin has weathered past troubles because there has always been an outside investor or a big money-spinner to provide cashflow. Or there has been something to sell. This time, only the airline is of sufficient scale to carry the group's ambitions and that is a tall order.

No one should bet against Branson's ability to do transforming deals. But if he has an ace up the sleeve of that woolly sweater, this is the time to produce it. If not, he may find it hard to silence his critics.

Johnny cleared

I AM happy to report that Johnny Townsend, the corporate broker at ABN Amro who faced a charge of insider dealing at Blackfriars Crown Court earlier this year and was found to have no case to answer, has now been totally exonerated by the Financial Services Authority.

The regulator has not only given him a clean bill of financial health but in a generous gesture has wished him good luck and success in his efforts to return to his City career - though this does rather raise the question of how the case against him was allowed to get so far in the first place.

Well-wishers and potential clients can now find Townsend at Nabarro Wells, a private partnership specialising in corporate broking and advisory services for small to medium-sized companies - where, incidentally, a former chairman of the Stock Exchange listings committee, Nigel Atkinson, is chairman.

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