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It has served his companies for 25 years, since long before he joined P&O's board.Even the institutions themselves are hamstrung. For example, Schroder, the biggest shareholder in P&O with a 4.8 per cent stake, manages a chunk of P&O's pension fund. Any public complaints about Lord Sterling, and it would inevitably face the sack. Are shareholders justified in calling for Lord Sterling's head?To understand P&O and his role there, you have togo back to the company's origins in 1822, when a London shipbroker, Brodie McGhie Willcox, and a former Royal Navy clerk, Arthur Anderson, formed a partnership to operate ships to the Iberian peninsula.
The early years were spent running guns during the Portuguese and Spanish civil wars. The quartered P&O flag incorporates the royal colours of Portugal and Spain.The expansion of international mail services in the mid-19th century was the source of the company's great fortune. It started carrying the mails from Falmouth to Vigo, Oporto, Lisbon, Cadiz, and Gibraltar. Later came services to Egypt and places east, and in 1840 the Peninsular and Oriental Steam Navigation Company was incorporated by Royal Charter.Over the next century, P&O was to become an Imperial institution It shipped out soldiers and civil servants to India It ferried generations of hopeful emigrants to Australia It contributed troop ships in both world wars. It shipped cargoes across the globe.Then in the 1960s and 1970s came two innovations that were to lead to a terrible decline: the jet airliner and the container ship. P&O was slow to adjust to either, and by the 1980s it was an anachronism.
Nigel Broackes of Trafalgar House launched a hostile bid, and it was Jeffrey Sterling, a property developer, who was appointed chairman of the P&O board to fend him off.The son of an east London Jewish businessman, he had earned himself a reputation as a consummate dealmaker in property. In 1974, he had rescued Town & City Properties, reversing it into his own Sterling Guarantee Trust.To foil Trafalgar, he executed some nifty footwork. He rushed out the P&O results, which were both earlier and better than expected Trafs retired hurt. Two years later, he injected Sterling Guarantee Trust into P&O, catapulting it into the property premier league. The company's assets include the London exhibition centres at Earl's Court and Olympia, and the Arndale shopping centre in Manchester.
Total property assets are valued at pounds 1.4bn.The P&O fleet is even more impressive, comprising 225 vessels from tugs to ferries to cruise ships to tankers, bulk carriers and container ships.In share price terms, Lord Sterling's rule is not as impressive. From 1983, when he was appointed chairman, P&O has merely tracked the overall stock market, and almost all the good performance came in the first two years. Since 1985, when SGT was injected into the business, the shares have underperformed by 50 per cent. The past 18 months in particular have been dismal, the shares plunging from a high of 741p to as low as 462p They stand now at 495p.Things are getting worse. Ranked by total shareholder return - share price increase plus dividends - P & O has consistently been in the bottom 25 per cent of the FT-SE 100.
Over five years, 15 out of 100 companies performed worse than P&O; over three years 25 were worse; over two years 13 were worse; but over just the last year only two companies were worse - Redland with a return of minus 32 per cent and Inchcape with minus 36 per cent. "That is why we're starting to get jumpy," said one institutional investor.Critics are unhappy about P&O on at least four fronts First, there is the vagueness of the group strategy P&O has 11 divisions that span the globe. Some investors would like to see that slimmed down and the company concentrate on areas where it has a clear advantage. "It needs more focus," said one.Secondly, there is the enormous capital expenditure programme. P&O has spent pounds 4bn in the past five years, but the return on capital has been feeble.
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