Best Served Cold

The Rise, Fall and Rise Again of Malcolm Walker - CEO of Iceland Foods

Malcolm Walker

• Publisher: Icon Books
• Year: 2013
• ISBN:
  9781848317017
• Topic: Business
• Subtopic: Entrepreneurship
• Index: Business

This is the dramatic story of the ups and downs of a born entrepreneur.Malcolm Walker was born in the West Riding of Yorkshire in 1946. With fellow Woolworth's trainee manager Peter Hinchcliffe, Walker opened a small frozen food shop called Iceland in the Shropshire town of Oswestry in 1970. Iceland became a public company 14 years later, through one of Britain's most successful stock exchange flotations of all time, and by 1999 it had grown into a £2 billion turnover business with 760 stores.In August 2000, Iceland merged with the Booker cash and carry business and Walker announced that he would step down as CEO in March 2001. In preparation for his retirement, he sold half his shares in the company and left for the holiday of a lifetime in the Maldives. However, while he was away the new management of the company slashed profit expectations, plunging Iceland into a £26m loss rather than the £130m profit the City had been expecting. Walker was fired and spent three years under investigation by the authorities before being cleared of any wrongdoing.In Walker's absence, Iceland's sales collapsed as customers deserted the company – and, almost exactly four years after he had left the business, he returned as its boss. His amazing revival of Iceland has seen like-for-like sales grow by more than 50% and the business winning the accolade of Best Big Company To Work For In the UK. In March 2012 Walker led a £1.5bn management buyout of the company and is now personally worth over £200m.The incredible story of Walker's life – which he tells here for the first time – is as dramatic as any you will find in business, and it serves as a model for how, through hard work and intelligent risk-taking, it is possible from a relatively modest upbringing to build a national enterprise and a household name known to millions.

1

Prologue

‘Happy birthday, Ranny.’ Rhianydd looked at Debbie, and the two of them started crying again. It was 30 January 2001 and we were in the bar at the Four Seasons Hotel in London. Andy Pritchard and I raised our glasses and glanced at each other without embarrassment.

My mobile phone rang. The Four Seasons is a business hotel so there were no hostile looks from the staff. John Berry, our Company Secretary, was calling from his room upstairs. He said he was going to have room service and wouldn’t be joining us for dinner and please would I understand how difficult it was for him. ‘Christ almighty, what’s his problem?’ I thought aloud. I’d taken the guy on eighteen years ago and had seen him every day since.

‘Aren’t you even going to have a drink with us? It’s Ranny’s birthday.’

‘No, I can’t,’ he said. ‘But I think it will be OK to bump into you at breakfast.’

‘Bloody wimp,’ I mumbled.

Apparently the two Bills, Grimsey and Hoskins, were making a point of staying in some cheap hotel and had already told John that this would be the last time he would be staying at the Four Seasons. I suppose he had conflicting emotions. I’m sure he felt a great loyalty or maybe just sympathy for me, but he had the rest of his career to think of. Already Andy and I were bad news in the new Iceland regime. We finished the champagne and moved into the dining room.

I couldn’t decide how I felt. On the one hand there was great relief at being out of the company, which I’d been trying to achieve for the past two years but, on the other, bewilderment and even anger at how it had happened. Ranny was in emotional turmoil. I kept reminding her of our son Richard’s words the night before: ‘Don’t worry about it,’ he said, ‘happy endings only happen in fairy tales!’

Debbie was worried for different reasons: how were they going to make a living? What were Andy’s chances of ever getting another top job after this?

Although I stayed in the Four Seasons whenever I was in London, I never ate there. The food was too fussy for my liking and the meal always took too long. Tonight was different. It was certainly going to be a memorable occasion. It was also the last meal on expenses and Andy, ever the wine connoisseur, decided to sting the Bills for a couple of bottles of Palmer ’86.

Throughout the evening we kept churning it all over. ‘I’ve only had two jobs and I’ve been fired from them both!’ I thought this was a great line but the girls kept asking how it could happen and why we hadn’t stopped it.

‘Because I couldn’t,’ said Andy.

‘Because I didn’t want to,’ I said, more than once.

‘But it’s your company, you started it, you are Iceland,’ the girls reminded me.

‘Ranny, Grimsey is welcome to it,’ I said.

The press had been horrific over the past week and I knew over the next couple of days it would get a lot worse. That made it impossible for any of us to draw a line under things. Not unnaturally, the girls thought about their friends and their Mums and what people would think. For myself, I had got used to the idea over the past week and persuaded myself I didn’t care.

The board meeting had lasted until lunchtime; nineteen people around a long table at our lawyer Herbert Smith’s offices. Iceland directors, advisers and professionals – friends, too, I thought, but impotent while the charade was played out. Some of the advisers were already negotiating with their own consciences about where their loyalties lay and where their continuing fees would come from. I just wanted to get it over with. It would have been ludicrous for me to try to take the meeting as Chairman, so I handed over to David Price, our senior non-executive director.

David did a good job in trying to give Andy a fair hearing, even though Bill Grimsey didn’t want Andy to present papers to defend himself. I made a short speech first and then said that, much as I wanted to, I didn’t propose to resign unless the board asked me to. Edward Walker-Arnott, the much respected and now retired senior partner of Herbert Smith, had advised me not to resign when I consulted him privately, as a friend, three days earlier. ‘It will look as if you have done something wrong. Under no circumstances should you resign for at least a couple of months,’ he had told me. At the lunchtime break the non-executives did ask me to resign, so I was delighted to oblige. Andy and I both resigned as directors of the company but not as employees. We all agreed we should stay on the payroll until March to give us time to decide on our respective positions. I asked David Price if he would take over as Chairman and he said he would, but only until a permanent replacement could be found.

My recent share sale had now become a potential issue. Before my resignation, Tim Steadman of Herbert Smith agreed that I had followed the correct procedure, but had said that in view of all the bad press an investigation by the United Kingdom Listing Authority (UKLA) was almost inevitable. He also said there wouldn’t be any conflict in his firm advising me personally despite their connection with Iceland. I couldn’t get used to that idea as I had first used them in 1984 and felt that they worked for me. After lunch, Tim suggested I should spend some time with Stephen Gate, their compliance expert, and review all the events around my share sale. Gate worried me. I explained to him how I had telephoned each non-executive director in turn and asked their permission to sell shares.

I’d also asked several of our advisers and no one had had a problem.

‘What did you say when you spoke to the non-execs?’ he asked.

‘Well, I said I wanted to sell some shares and was that OK?’

‘Yes, but what were your exact words, what exactly did you say?’

‘I can’t remember but I asked their permission to sell and asked if they had any problems with that, and they didn’t. David Price even remarked that shares weren’t family heirlooms to be kept for ever.’ I was certain I had followed the correct procedure. I couldn’t understand what he was getting at.

The red wine was relaxing me as I repeated the conversation. ‘That guy is not on this planet. You won’t believe what he said next. He said, “When you asked the non-execs for permission to sell, did you say, ‘I am ringing pursuant to paragraph 5 (a) of the model code for share dealing to formally request permission to sell shares in the company’?”’

‘Are you serious?’ I said. ‘Nobody speaks like that. I know these guys well and would never use language that formal.’

‘Well, you should have,’ he insisted.

‘People like him probably do talk like that,’ said Andy.

The conversation with Gate had gone on for hours and, although he was supposed to be advising me, I felt his line of questioning was increasingly hostile. I was totally exhausted.

I saw Grimsey briefly at about 6.30pm and told him I would clear my office by the weekend. He expressed no regret at what had happened. I told him he had got everything he wanted now and asked him to play fair by Andy with his pay-off. ‘Don’t ask me to do anything that would jeopardise the interests of the shareholders’ was his only response. I had heard this line so many times over the past few weeks that it held no credibility for me. He reminded me of some kind of religious zealot preaching high-minded religion and burning people at the stake at the same time.

The four of us met for breakfast next morning and John Berry came over to talk to us but sat at a separate table. For the first time in 30 years there seemed to be no urgency to get on with the day. A great weight had been lifted off my shoulders only to be replaced by uncertainty. I signed the hotel bill but decided to pay for the wine and champagne personally. I didn’t want to give Grimsey an excuse to make an issue out of it.

Harnish met us in the hotel lobby. As our London chauffeur he always heard enough of what was said in the back of the car to work out what was going on. He looked bleak and visibly upset. He drove us to Northolt airport and gave everyone a tearful hug as we boarded the plane. That upset Ranny. He’d worked for us for years and been privy to many of our adventures.

It takes only 35 minutes for the Citation jet to get to Chester airport and this was of course the last time we’d be using it. We’d had a company plane for sixteen years and this had been our first brand new one, bought in 1995. It was still immaculate. We’d always made a profit on selling them and while company planes are often considered an emotive issue, I’d long since given up caring what people thought about it. As a national retailer we’d always found it an invaluable business tool and I’d defend it to anybody. I couldn’t imagine Grimsey keeping anything as extravagant, though. My lifestyle was going to change dramatically now but I couldn’t have been happier about it.

Kathy Wight, my PA, had packed 30 years of personal files into boxes and wrapped up all the accumulated clutter in my office. She’d organised a Transit van to be there the following Saturday morning to take the stuff home. The office was deserted but Janet Marsden, our Personnel Director, was there. I’d employed her twenty years ago as the youngest member of our team. She was obviously embarrassed and upset to be there. Grimsey had asked her to watch me take my possessions out of my office and ensure I didn’t nick any company papers. She said if I took any company documents she was required to make a list of them, but then she offered to go to her office and wait until I’d gone.

Andy was packing up at the same time but he had a lot less junk than me. I’d tended to keep a lot of my personal files at the office. So many adventures over 30 years had generated a lot of memories. We had a librarian who worked four hours each week keeping the archives and all the memorabilia and old photographs carefully filed. A few years earlier I’d realised that most of that kind of stuff had vanished over time and we’d decided to conserve what was left and also keep current items of interest for the future. I left it all behind without much thought.

We’d built a company from nothing to annual sales of over £5 billion. We employed over 30,000 people and probably as many again among our suppliers and support companies. We’d paid hundreds of millions to shareholders and at least £10 million to charity and made many people very wealthy, including some of our staff.

Then the letters and emails started to arrive from friends and colleagues in the business and I had plenty of time to reflect over the next few weeks about how it all began …

2

‘You’re Fired!’

A.V. Green was God. At least to Woolworth’s trainee managers he was. I’d been in his office only once before when I was promoted to deputy manager of Woolworth’s Wrexham branch. It was the biggest office I’d ever seen, dark and wood-panelled with his massive desk in one corner. It was certainly impressive. Last time it had been a handshake and a word of congratulations: the motivation factor of ten minutes with God was deemed to be worth a day out of the store with petrol expenses for the drive to the regional office in Dudley, Birmingham. Head office in London was something too important and remote for me even to contemplate. This time my visit was to get fired. It apparently didn’t occur to anyone to wonder why Johnnie Walton, the Wrexham store manager, couldn’t do it. Deputy store managers were important in the hierarchy and firing one was an event that required some drama.

Peter Hinchcliffe and I drove down to Birmingham together. Peter was called into Green’s office first and I had to wait in the corridor outside. It was only five minutes before it was my turn and I was given a speech about wasting an opportunity. I told Green that the company owed me about 10,000 hours in unpaid overtime but he didn’t seem impressed. His parting words to me were: ‘So, go and run your fish and chip shop or whatever it is.’ It was 27 January 1971, almost 30 years to the day before I was fired for the second time.

We drove back to Oswestry. Peter was deputy manager of Woolies there and that was where we had opened our first Iceland store three months earlier. We were both earning £26 per week at Woolies but our dismissal package had included our holiday pay and pension money so we figured we could last the next few months without drawing anything from the new business. I’d worked at Woolworth’s for seven years, the only job I’d had since leaving school, but I was glad to be out of it. I was bored and I wasn’t doing very well in the company. I was a little scared about the future but also excited: I was 24 and ready to make my fortune.

I joined Woolworth’s after a conversation with the careers teacher at school.

‘What are you good at?’ she asked me, obviously knowing it wasn’t academic studies.

‘I like organising things,’ I replied.

‘In that case you should go into retailing,’ she said. So I did.

I was born in 1946 and brought up in a mining village called Grange Moor in the West Riding of Yorkshire. My Dad was a colliery electrician but he was also something of an entrepreneur. He ran a smallholding of eight-and-a-half acres in his spare time. He grew vegetables and also kept poultry. He was one of the first to install the new battery cages, which were rapidly improving egg production at the time. I used to help him on the farm and like to think I developed my work ethic from him in those early days. In 1955 Dad had an accident at the pit when a coal-cutter crushed his foot, and he then went full-time on the poultry farm. Eventually he set up a small grocery shop near Huddersfield with my Mam and sold a lot of home-grown products and the sponge cakes Mam baked at home. He died young at 52, from cancer, when I was fourteen.

Although I f...