tutor2u™ businesscafé Supporting Teachers: Inspiring Students Big Payout for the Top Man at Philip Green, the entrepreneurial boss of retail group Arcadia has just paid himself a dividend of over £1 billion. This is his reward for buying a series of clothing brands and successfully growing their sales and profits.

refelcts the strong financial performance of the Arcadia business recently. Although trading conditions in the UK clothing market have worsened (as consumer spending has slowed), Arcadia managed to improve sales and profits in 2004/05. Operating profit rose 10 per cent to a record £326.1 million as sales increased 6.8 per cent to £1.77 billion. Green reported that sales growth since the financial year-end had fallen to 3 per cent. However, he said he was not worried by this, claiming that the weather should take much of the blame. Off the Shelf “The bottom line is I can’t sell coats in 24 degrees One of the benefits of controlling your own company temperature. Give me some cold weather -- we haven’t is that you decide how to share out the profits. had any winter at all yet,” he said, adding that the Shareholders in companies receive their share of strategy ahead of the all-important Christmas season profits via payments known as dividends. In October was simple. 2005, the majority shareholder in one of Britain’s “There’ll be business to do, we’ve got to make sure leading retailers decided to pay shareholders quite a we’re competitive on merchandise, at the right time, in large dividend - £1.3 billion to be precise. the right place, in the right style, in the right colour at The person in question is the right price. If we do all of that we’ll do business.” billionaire entrepeneur Philip Cost cutting and margin improvement Green. Green is the owner of Arcadia, a privately-owned During 2004/05, Arcadia focused on cutting costs, group of companies that better buying terms from suppliers and reducing operates many well-known high the amount of working capital tied-up in shop street clothing brands such as merchandise This allowed the company to generate Top Shop, , Miss more than 400 million pounds in cash. Growth was Selfridge and . also on Green’s agenda. Arcadia opened 95 stores Philip Green during 2004/05, investing a total of £65 million Arcadia has 2,200 shops in pounds in that and shop refurbishment. the UK. Green owns 92% of the shares in Arcadia. Which means that he will receive about £1.2 billion Arcadia also made an acquisition - buying the of the dividend, with the rest shared by the minority womenswear chain Etam. shareholders. Industry analysts generally welcomed Green’s Green and his wife, Christina, are together worth an decision to pay himself such a large dividend. estimated $6.3 billion, according to Forbes Magazine, “It underlines what a savvy trader he [Philip Green] ranking them as the world’s 68th-richest people. is in terms of buying undervalued assets and Staff incentive rejuvenating them. He undertakes significant risks when he buys these retail assets, and who’s to argue Philip Green wasn’t the only person to benefit from that he doesn’t deserve significant rewards?” profit-related payments. Arcadia staff were also awarded bonuses worth a total of £95 million. This Bryan Roberts, Analyst at Planet Retail.

Sources: Bloomberg; ; Financial Times