Appeared in the Times: Saturday, January 24 2009 12:00AM
David Wighton: At leisure with Terry Smith
I feared there might be a fight with Terry Smith. The famously combative head of two City brokers had agreed to be the first subject of The Times’ new series in which we will interview leading business figures “at leisure”.
But there was a snag. Mr Smith is the City’s best-known boxing fan and I was pretty sure the interview would involve boxing in some way, either watching it or doing it. And I didn’t much fancy getting into the ring for the first time since my defeat in the Broomfield House School light-flyweight contest (under 7s).
Luckily, it turns out that while Mr Smith still has a boxing workout several times a week and goes to many of the top fights, his big thing these days is flying, particularly helicopters. He offers to fly me from Southend, where his small fleet of aircraft is based, to the RAF Museum in Hendon, North London, and back.
As he shows me his Bell JetRanger (once owned by Sir Ian Botham), he explains that part of the thrill of flying helicopters is knowing that if you make even a small mistake it can be curtains. Helicopters are more “engaging” than fixed-wing aircraft because you are continually adjusting the controls. “If I take my hands and feet off the controls, we’ll all be dead in a minute and a half,” he says, grinning. Suddenly, the boxing idea doesn’t sound so bad after all.
I climb into the back seat and am not reassured when Mr Smith can’t work out how to shut his door or turn on the heating. But once airborne, it is clear that he is a very confident and competent pilot. Moreover, in the co-pilot’s seat is “AJ” Smith, a droll Lancastrian with decades of experience flying helicopters in the RAF. AJ now works for Kudos Aviation, the company that manages Mr Smith’s fleet. AJ and Mr Smith spend much of the trip abusing each others’ flying skills and joking about AJ’s attempt to sell him an Agusta 109 helicopter. Mr Smith’s colleagues say he has good days and bad days. If so, this is definitely a good one.
Soon after takeoff, Mr Smith points to a hill on the horizon. “That’s my house.” A short detour takes us over the village of Danbury and Mr Smith’s house, a handsome red-brick Georgian number. Mr Smith explains that Danbury is a corruption of Dane Bury, which means hill of the Danes, who camped there during their campaign against the Saxons in AD991. “Like all armies, they built on the highest point they could find.”
History is another of Mr Smith’s passions, particularly military history. Mr Smith, 54, got a first-class degree in history from University College Cardiff, which, he points out with justifiable pride, was not bad going for the son of an East London bus driver. He was offered a lectureship after graduating but turned it down for what his professor described as “vulgar commercial considerations”. He joined Barclays instead. In 1984 he became a banking analyst, and was awarded the No1 ranking from investors in his first year in the job.
He gained a reputation for rigour and integrity and was eventually hired by UBS to become head of research. But in 1992 he published a bestselling book, Accounting for Growth, which criticised the policies of some UBS clients. He was promptly sacked. He then joined a fledgeling stockbroker, Collins Stewart, where he eventually led a buyout, floated it on the stock market and used the listing for acquisitions.
As we are speeding over the fields and golf courses of Essex at 100 knots, Mr Smith points to an airfield on our right which he says is Stapleford, from which Sir Alan Sugar flies. About 20 minutes later we land at Hendon after a very smooth flight.
The reason Mr Smith has brought me to Hendon is that the museum has a mock-up of the operations bunker in Uxbridge from where Sir Keith Park commanded most of the fighters that won the Battle of Britain. Mr Smith is heading a campaign for Sir Keith to be given a permanent memorial in London.
We are shown round the museum’s remarkable collection of Battle of Britain-era aircraft and in the ops room Mr Smith explains the significance of Sir Keith’s achievement. “He could have lost the Battle of Britain in an afternoon. And, as a result of winning the battle, the course of world history was completely changed.”
Mr Smith is meeting the entire cost of the Park campaign — likely to be about £250,000 — but will still have a few bob left. His fortune, estimated at about £60 million, has been dented by the financial crisis, but by less than most in the City. The bigger of the two companies he runs, Tullett Prebon, is an interdealer broker, which acts as a middle man between banks wanting to buy and sell foreign exchange, bonds and interest rate products. Volumes have held up in many of these markets.
Tullett has little exposure to more exotic products, such as credit derivatives, where volumes have slumped. This has hurt GFI, the New York-based interdealer broker, with which Mr Smith held merger talks that broke down in September. “Strategically, I still think it’s right,” Mr Smith says. The combined company would be at least as large as the current market leader, Icap, the broker run by Michael Spencer, the Conservative Party treasurer.
The other company Mr Smith runs, Collins Stewart, has been harder hit by the financial crisis, with its shares down by two thirds over the past year. A broker and corporate adviser focused on smaller companies, Collins Stewart made a fortune during the boom in flotations on the AIM market. But that business has collapsed and Mr Smith expects it to remain very quiet for a long time.
Collins Stewart was in talks to sell itself to Nomura for about £250 million late last year. But the giant Japanese broker pulled out when the opportunity arose to buy Lehman Brothers’ much bigger European business from the administrators.
Collins Stewart has been forced to cut costs and parted company with its chief executive, Joel Plasco, in October.
Mr Smith says the downturn will be the real test of managements. “No general is a great general until he has learnt how to retreat,” he says, quoting, he thinks, Frederick the Great. On the flight back to Southend, Mr Smith talks more about flying and his other pursuits. He used to ride but gave it up a few years ago and took up shooting. The helicopter comes in very handy for getting to shoots on Exmoor or in Yorkshire.
He loves the shooting itself but also finds it useful for networking. “Shooting is the new golf,” he says. Which is just as well, as he has “never hit a golf ball and never will”.
I ask him whether he is motivated by money. “This may sound ridiculous as you’ve just got into my helicopter, but I don’t have a particularly extravagant lifestyle.” For years he drove Volvo estate cars until one of his daughters complained. “She said: ‘This is the most boring car on the planet and I’m not going to get in it any more. Its shameful for a man in your position.’” So he bought a Jaguar, though he kept the Volvo in protest.
After we land at Southend, he gives me a lift back to London and offers his assessment of the financial crisis. It is grim. “The degree of leverage and stupidity was mind-boggling,” he says. “We are going to go through the mother of all recessions and nothing the Government does can prevent it.
“I rather suspect that the measures they have taken might just prolong the agony. People just lived beyond their means and they are going to be less well off for the foreseeable future.”
He predicts some sharp stock market rallies, just as occurred after 1929. “But there is no doubt we are in a major bear market,” Mr Smith says. He is pretty cautious with his own investments, limiting his holdings of shares largely to “things you can eat, drink or smoke”. He has some bonds that are in Japanese yen because he doesn’t trust sterling.
But he is not too worried about the long-term prospects for the City. “It will contract very sharply and it will be quite a bleak place for a time, most parts of it. But it has been around for hundreds of years and it does have certain natural advantages.”
As we get into London, I raise the subject of the extraordinary £230 million libel campaign he launched against the Financial Times in 2003. Even some of his friends believe he rather lost the plot over the FT coverage of allegations made by a former employee about Collins Stewart’s business methods. He believed that he was being persecuted by the FT because he had previously criticised the reporting of Pearson, its parent company.
“I think people should sue newspapers when they get it wrong, the wrong is injurious and they refuse to correct it. All of which was true with the FT,” he says. He and the FT reached a settlement soon after Lionel Barber became Editor at the end of 2005.
The episode has only encouraged journalists to label Mr Smith “combative”, a label he regards as unfair. “I have never run away from a fight, and I like to think that I am a good person for my family, friends and colleagues to have on their side when the chips are down.”
He offers an anecdote in his defence. A while ago, a senior member of staff came into Mr Smith’s office to berate him. Another senior colleague, who has worked for four public company chief executives, saw the encounter and subsequently told Mr Smith that he was the only boss who would not have dismissed the guy on the spot.
“Sam Chisholm, who turned round BSkyB, was allegedly having lunch with a journalist who exclaimed: ‘I’ve discovered your secret — you’re not a total bastard.’ To which Sam responded: ‘I know, but please don’t tell anyone.’
“I will leave you to ponder that,” Mr Smith says.
Mr Smith’s fleet
1 Bell JetRanger 206B3
2 Robinson R22s
1 Socata TB20
1 Volvo estate