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| It seemed to be doing OK. The closure last year of the branch in St Peter's Avenue, Wilkinson, was an early sign that things were going wrong at the company. |
THERE was sadness - and anger - when the two Grimsby branches of Wilko were among 400 of the company's stores that closed in August this year after administrators were called in. Their demise followed in the wake of the Cleethorpes store that had closed in September the previous year. What went wrong? The chair of Wilko, Lisa Wilkinson, granddaughter of the founder, and Mark Jackson, managing director during its closing months, were summoned to give evidence to MPs at a special Select Committee meeting in the Commons. Here are some of the exchanges.
Committee chairman Liam Byrne MP: We are seeking to learn the lessons from the collapse of Wilko. Ms Wilkinson, perhaps I could start with you. Could you tell the committee: did your greed bankrupt Wilko?
Lisa Wilkinson: I do not believe so, no.
Chair: Do you want to tell us why Wilko collapsed?
Lisa Wilkinson: Would you like me to do that or Mark Jackson?
Chair: I would like your perspective first, please.
Lisa Wilkinson: In essence, Wilko failed because we ran out of cash.That is what caused the downfall in the end.
There were a lot of contributory factors that led to that over quite a long period of time.
Clearly, we had a strategy to deal with those factors that were hitting us, but Wilko went out of business before that strategy was fully implemented.
There were a series of external factors and a series of internal factors.
Externally, we are all familiar with the landscape. We had declining high streets, and Wilko was very much a high street-based stores retailer with long leases and high rents that kept us on those high streets.
We, of course, faced the cost of business rates.
We faced Covid, like all businesses did. During Covid we stayed open. We did not furlough any team members.
I like to think that we were supportive of team members who had high risk because of medical conditions they had.
We also, relatively unusually, paid our landlords in full throughout Covid.
The things we took advantage of were the delays in paying VAT, which we paid off, and the business rates concessions.
Other than that, we stayed open during Covid and covered our costs.
There is some debate, which Mark will bring into the picture, about whether we should have done that or not, but we did.
Financially, our revenues were falling faster than our cost base could be reduced, and this was eroding cash.
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| Lisa Wilkinson - she denied that 'greed' bankrupted the company |
We lost the confidence, sadly, of key allies.
We lost the confidence of Lloyds Bank, which had been our bank for 90 years, and they pulled away from us in 2022.
We lost the confidence of the credit assurers, who pulled away from us in autumn 2022.
We got some amazing support from some of our goods for resale and goods not for resale suppliers, but we did not get support from enough of them to sustain us through that.
Our customers gradually reduced shopping with Wilko. Lots of people have their theories as to why.
Some on my list, if you are interested, are that we failed to grow and scale our online business, the cost of living crisis clearly reduced our sales and we had big internal challenges around product availability.
That was caused by many internal difficulties to do with things such as lorry driver shortage, distribution centre infrastructure changes, lack of credit assurance and low supplier confidence.
We are a value retailer, but our proposition was unclear against the discounters.
We failed satisfactorily to address our category and product offer and to move to something different and better.
We had huge pressure on margin rate, spiralling costs and, I think that it has been alluded to, that Wilko was over-rented on the high street.
We had weak processes and infrastructure. I am sure that there are more, but those are the ones in my mind.
Chair: That is a long list of failures and the failure of that strategy has now left the taxpayer on the hook for over £40-million of financial support for those made redundant.
We have a pension fund deficit of over £50 million and creditors that, at best, are going to see 4p in the pound on the debts that Wilko owes to them.
Do you want to take this moment to apologise to those workers who are facing Christmas without work?
Lisa Wilkinson: I am thankful to so many people for so many things that they have done to help Wilko, not least among them those fantastic team members that have always worked at Wilko and the amazing suppliers and advisers who have supported us.
Of course, top of that list has to be the fantastic customers who shopped with us for over 90 years in our stores.
I am devastated that we have let each and every one of those people down with the insolvency that Wilko has done.
I do not know how to put into words how sad I am that we have let down all our customers, all our team members, our suppliers and our advisers.
Genuinely, I do not know what you want me to say.
Chair: "Sorry" was the one word I was looking for and that I did not hear.
Lisa Wilkinson: You can have the word "sorry". Of course, I am sorry. If you wish me to say the word "sorry", I am.
Chair: I wanted to give you that opportunity.
Lisa Wilkinson: I thought that "devastated" covered it. I apologise. I was not trying to be clever. I am sorry that we are not there supporting all those people anymore.
Mark Jackson (managing director): At the end of January 2021, the balance sheet of the business was pretty well placed.
There was over £100 million of cash, over £100 million of reserves.
In my view, the biggest contributory factors to cash outflow were the increased competition, global supply chain issues, cost increases and failing to act on cost reduction.
Most importantly, I believe, with hindsight, that we should not have stayed open during Covid.
I would have protected the business on the furlough scheme and on rents like 90 per cent of other retailers.
There was a warehouse management system implementation that was nothing short of a disaster. This led to a shortage of availability in store stock.
Chair: This was Project Optimus?
Mark Jackson: Yes. Project Optimus was a wider project that included spending £60-million on bringing our warehouses up to scratch.
You can quickly see the Covid impact of not furloughing. Yes, we stayed open and traded, but cash was going out the door.
Andy McDonald MP: Some informed observers felt that, with the cost of living crisis and shoppers looking for bargains, this should have been Wilko’s time to shine.
Chair: In 2021 you had £108-million in cash on the balance sheet. You had a deterioration in trading conditions, but that affects every business on the high street.
Other players seem to have been able to weather the storm, and you did not.
We are trying to understand why you did not when others did, when you started with such a strong cash position.
Mark Jackson: I was not in the midst of the decision-making, but you can imagine.
We were paying rents, which are £90 million a year; we were not furloughing people; we were spending £60 million on two warehouses; we had the impact of credit insurance being pulled; we were accelerating cash out to suppliers. This can happen quite quickly.
Chair: Those are all examples of management failure.
Mark Jackson: I was not there at the time, so I cannot comment on the decisions and the reasons why they were made.
Chair: Ms Wilkinson, you were there at the time. Why were those decisions taken?
Lisa Wilkinson: There were many decisions that Mark talked about. Which ones do you want me to talk about?
Chair: Let us go through all of them. Let us go through the furlough and the failure of Project Optimus. Let us start with those two.
Lisa Wilkinson: We took a decision to stay open. The history of Wilko is that it has always stayed open. It stayed open throughout World War II.
It has always stayed open when challenges have happened. We were an essential retailer.
We debated at great length as a board whether we should stay open. The decision we took was to stay open, not to furlough our team members, to support those who were medically vulnerable and to pay our landlords in full. That is the decision we took.
Chair: What about the warehouse project?
Lisa Wilkinson: We had two warehouses. One is in Magor in Wales; one is in Worksop.
There were two forms to the warehouse project.
There was the warehouse management system implementation across both distribution centres and there was a re-lay of the racking and the layout of both distribution centres.
Ian Lavery MP: Ms Wilkinson, you mentioned before that, under your guidance, the company, Wilko, was a really friendly company.
The workforce felt part of a family and everybody respected each other.
I wonder whether the workforce think that now as a result of what has happened.
At the same time as everybody was part of this huge welcoming and embracing family, the Wilkinson family had creamed off nearly £150 million in dividends over a period of 20 years.
That includes £3.75-million in the year preceding the collapse.
That amount of profit has been made. The family has creamed it off.
You then look at the 12,000 people who lost their jobs and the closing of 400-plus stores.
They have had their livelihood taken away from them, and not only that, but the potential for financial security, in terms of the pension scheme, is in jeopardy as well.
Why on earth did this family-friendly company with 12,000 dedicated workers decide not to invest more in the company?
Indeed, why did you not put any finances, any of the profits that you creamed off for your family, into the pension scheme?
It has been suggested this morning that the pension scheme has an estimated deficit of £76-million on a buyout basis.
Lisa Wilkinson: There was a lot in there. Yes, the team members involved in Wilko did feel like one big family.
Ian Lavery: Do you think they feel like that now?
Lisa Wilkinson: As between themselves, I am sure they still do. I am sure I am no longer included in that family, but I am sure that, as between themselves, they still do.
I am very proud of them for feeling that way. They are an amazing group of people.
I have not worked in many businesses, but I have always been proud to be part of the team members in Wilko and will continue to thank them for everything they did.
Were we focusing on the pension and doing our best to ensure that that pension was covered? We were.
Chair: The point that Mr Lavery is really underlining is that you were taking dividends out of a business that was failing and had a pension deficit. How can that be justified?
Lisa Wilkinson: The easiest way I can explain the dividend is that, yes, there was a return made to shareholders by way of a dividend.
My understanding is that -
Chair: When you say "shareholders", you mean you.
Lisa Wilkinson: I did not receive any dividends in my personal capacity.
There were no dividends paid to individual people. I was not a shareholder in my personal capacity.
Chair: The dividends presumably went to the holding company?
Lisa Wilkinson: The dividends went to Amalgamated Holdings Wilkinson Ltd, which was put in place in 2017.
Chair: You are a shareholder in that?
Lisa Wilkinson: No. There is a series of family trusts that are shareholders in that. I am genuinely not fibbing when I say I did not hold a share in a personal capacity.
Amalgamated Holdings Wilkinson Ltd was put in place to give everybody visibility because sometimes trusts in this country are viewed as being opaque.
We put that vehicle in not as a defence mechanism for the family but as a means of people being able to see what went out of the Wilko Group and into the family holding company and, if anything had been paid out of the family holding company, what came out. Nothing came out. We did not pay anything out in those years.
Ian Lavery: I will conclude with this question, Ms Wilkinson. To questioning earlier, you offered an apology.
Will you be offering a sincere apology to the 12,000 people who you have said were the bedrock of your business?
Why have you not apologised until this morning?
Lisa Wilkinson: I am not sure I am allowed to say this.
Chair: You are under parliamentary privilege. You can say what you like.
Lisa Wilkinson: Before Wilko went into administration - it might have been shortly after; I might have my timing wrong - I asked to do an announcement to all team members to thank them and to say all of the things you have said, but the advice from the directors and the administrators was that I should not do that.
Subsequently, I have of course responded to anybody who messaged me.
I am not difficult to get hold of. I am a very private person who does not do interviews with the Press, but I did an interview with Oliver Shah at The Times in order to say thank you to my team members.
He asked me what the one thing I wanted to get out was, and it was to thank my team members, customers and suppliers for everything they have done. That is the only reason I did that interview.
Yes, you can say it is not an appropriate newspaper for doing that in.
I agree: it is not. It is not necessarily my team members’ or customers’ newspaper of choice, but it was the only means I had of getting a thank you out to my team members.
Today, you - thank you - have given me another opportunity to thank my team members and my customers.
I will be thanking my team members and my customers to my dying day.
You will never find me saying anything else. I appreciate each and every one of them.
I echo your words: they were the bedrock of Wilko.
Chair: Let me just wrap up this point with a question about the profitability between 2019 and 2022.
The profits for that period were £11.6-million.
The dividends that were paid out over that time were £7.5-million. That is two-thirds.
Two-thirds of the profits of a company that was in trouble were paid out in dividends. How on earth can that be justified?
Lisa Wilkinson: I am sorry. Off the top of my head, I do not recognise that time period.
I am not disputing it at all, but I do not recognise the time period.
Each of those dividends would have followed the correct corporate governance.
They would have been recommended by the chief financial officer as prudent. They would have gone through the board of directors.
We would only have paid those dividends if we had either the right profit in year or reserved profits - I do not believe they fell below £100 million - and we had cash to do that.
Over that nine-year period, we also invested £273-million in the business and £36-million in the pension scheme.
I hear you when you say we took £50-million out, and we did.
Chair: What is especially stark is that, as the business plunged into deeper trouble, the dividends went up. How can that be justified?
Lisa Wilkinson: My understanding is that the directors looked at the figures, the reserves and the cash, and that was the dividend that was recommended.
Chair: It looks to us, just on the numbers, like you are burgling a failing business.
Lisa Wilkinson: I cannot answer the question any other way. That is my understanding of how dividend is arrived at.
Sir Stephen Timms MP: The Wilkinson family is among the wealthiest families in the country, thanks to the Wilko business over 90 years.
As things stand, there is a £50-million hole in the Wilko pension fund. Should the family not be making good that hole so that at least the full pensions owed to people are paid?
Lisa Wilkinson: I do not recognise that statement that we are one of the wealthiest families in the country.
I do not have assets to fill a £50-million hole in a pension scheme. I do not.
Sir Stephen Timms: You explained to us that the dividends that were paid went into the holding company rather than to individuals.
Lisa Wilkinson: Yes.
Sir Stephen Timms: What has happened? Are they still sitting in that holding company? What has become of them?
Lisa Wilkinson: The dividends from 2017 were paid into AHWL. They are sitting in AHWL. They are invested in start-up businesses, UK properties and a limited amount of stock market investment.
Sir Stephen Timms: Are there not resources there that can be used to fill the pension hole?
Lisa Wilkinson: No, there are not. They are tied up in other things. My understanding is, as a director of Amalgamated Holdings Wilkinson Lt, I have legal obligations to act in the best interests of AHWL, having taken into account its stakeholders.
Those do not include the group retirement benefit scheme.
It certainly would not add up to anything like that figure because, as we pointed out, since 2017 nothing like that money has come out of the business in order to do that.
The assets that Amalgamated Holdings Wilkinson Ltd has are fully visible at Companies House. That is why we put the vehicle there in the first place: so that people could see.
Sir Stephen Timms: We are told that the family has received nearly £150-million in dividends from Wilko, admittedly over 20 years.
There surely must be some resources there that could be applied to -
Lisa Wilkinson: Do I have time to cover the dividend? I cannot do a pithy one-liner on the dividend.
Chair: No, that is fine. We are quite interested in how so much money has come out, leaving a great big deficit, which now somehow cannot be filled because you have fiduciary duties to the company it was siphoned into.
We are asking why the dividends that have come out cannot be used to fund the pension fund deficit?
Lisa Wilkinson: I hear you. I do not recognise those numbers.
Chair: They are from your accounts.
Lisa Wilkinson: Yes, but I do not recognise them. I am happy to share what they are. I am happy to go back, dig through and share what they are. I am not trying to be difficult about it. The shareholders do not have that money.
Chair: Where has it gone?
Lisa Wilkinson: It went on buying out the shareholders who have left.
Chair: There is £100-million in dividends that has gone into whatever the holding company is, over and above the £80 million that has gone into consolidating your control.
Lisa Wilkinson: No, there is not.
Chair: They have spent it?
Lisa Wilkinson: There are two chunks to that. I do not believe, sir, it has been spent. I believe it is either sitting invested in the trusts or it is sitting invested where you can see it in Amalgamated Holdings Wilkinson Ltd.
Sir Stephen Timms: Is there not some obligation on those shareholders who have departed, as you have explained, to contribute towards filling this very large hole at the moment in the pension fund?
A large amount of their wealth was derived from the business. Is there not an obligation on them?
Lisa Wilkinson: I am conscious that I am not them and I cannot answer for them. I am not their spokesperson.
Jane Hunt MP: Let me just state this. Some 12,000 people were made unemployed, many of whom worked for decades, including some of my own constituents.
You had anchor stores with very high reputations throughout many of the towns in this country.
Your rents were 40 per cent above market rate. You were a cash company and your cash halved in 2021-22.
You talked about Covid, but you were not doing so well in 2018 either.
In 2017, you set up Amalgamated Holdings Wilkinson Ltd.
You talked about global supply chains being an issue, Mr Jackson.
If I think about walking around Home Bargains, B&M or The Range, I think of colour and lots and lots of things on the shelves.
For quite some time now, if you were to go around Wilko, you would see beige shelves, empty shelves. That is not something that has happened just in these last few years.
What could and should have been done differently in running Wilko, Ms Wilkinson?
Mr Jackson, I do understand that you were only there since Christmas 2022. If you had been there since 2018, what would you have done in the meantime?
Lisa Wilkinson: What should we have done?
Jane Hunt: Yes, what should you have done differently in running the company?
Lisa Wilkinson: We should have had, exactly as you describe, higher stock availability on shelf.
Half of Wilko’s sales were Wilko own-brand products, not branded products.
We should have taken steps to reinvent our category and product offer so it was different and better.
We could have and did try to rework our store portfolio so that our stores were not over-rented and so they were in the right towns, in the right place in towns or on the right retail parks.
We should have gone larger on our digital offer.
We should have built wilko.com faster and better.
Value sat at the heart of the Wilko offer. In Wilko world, value has three components to it. One is price, one is experience and one is quality.
There was never a desire to erode the experience or the quality of our product or offer for our customers.
There was a great concentration on how you do that and still deliver product at great value to the customer.
Could we have worked harder with that?
I am sure more energy and effort should have gone into it.
There are a whole load of others that I could raise, but, if you are asking me to go back in time and say what was super-important, I think those things were super-important.
Jane Hunt: Mr Jackson, do you agree? If so, what could have been done?
Mark Jackson: Hindsight is always brilliant. I just want to go back to 2018-19 which keeps being brought up as the year when everything started to go wrong.
It is my understanding - I caveat this by saying that I may be wrong -that this was a disastrous year because of a load of foreign exchange derivatives, nothing to do with underlying trading.
A significant restructure was required to recover the business from that which was the process it went through.
Chair: Let me wrap this session up.
This has been a sorry story that we have heard today.
We have had you, Ms Wilkinson, admit to a number of significant management mistakes around stock, range and furlough.
We have heard about a £60-million warehouse modernisation that went wrong, a £40-million loss on financial derivatives and a process of restructuring rents that did not go through.
Despite those problems, you cannot explain why dividends went up.
We have money sloshing around in trusts that somehow cannot be used to refund a pension scheme.
We have at least had an apology, but I think we have a number of questions to now put to Ministers.
Thank you very much indeed for your evidence today.
The Grimsby News says: Lisa Wilkinson had a rough ride at the hearing, but we still think she got off lightly. Money that should have been retained within Wilko was evidently being diverted to another operation, Amalgamated Holdings Wilkinson Ltd, whose shareholders in chief are are family trusts in which Ms Wilkinson and her father are the main beneficiaries. Before a line is drawn under this disturbing state of affairs, there needs to be the most rigorous scrutiny of AHWL and its family trusts. Some of its undoubtedly vast wealth should be deployed partly into covering any deficit in the Wilko staff’s pension fund, partly into making recompense to taxpayers who have been obliged to cover the workers’ redundancy payments and partly in paying money owed to the creditors. Oh yes, and one other thing. If Ms Wilkinson is sincere in expressions of regret to Wilko's 12,000 ‘fantastic’ but forsaken staff, why not make a goodwill of payment of £10,000 to each? It would not even make a dent in the colossal fortune of the Wilkinson family but it would do much to redeem Ms Wilkinson’s own reputation.
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