On paper, Sports Direct billionaire Mike Ashley and business secretary Andrea Leadsom are titans of trade, colossi of commerce, doyen(ne)s of dealmaking. But on the ballot papers at Sports Direct’s annual meeting, and on Mrs Leadsom’s revised CV, they appear somewhat less so. On Wednesday, 24 per cent of Mr Ashley’s independent shareholders voted against his reappointment as boss of the retailer he majority owns. And in 2016 a number of Mrs Leadsom’s former colleagues contradicted her claims to senior roles in the City. Now, though, there is a real possibility that the two will have to pool their talents to tackle a corporate crisis: Sports Direct’s inability, confirmed at its AGM, to find a new auditor.

By law, if Mr Ashley cannot appoint a firm soon, Mrs Leadsom must do so. However, judging by reports ahead of the AGM, one has little faith in the other. Sky News said Sports Direct was “pleading with the Big Four accountants to pitch for its audit contract” to prevent government intervention. At the meeting, Mr Ashley insisted attempts to win over one of PwC, KPMG, EY or Deloitte — each of which has ruled itself out — had a different motivation: PA reported him as saying, “It’s like having the biggest lawyers, a little achievement.” Still, shareholders worry that time is running out and business is suffering. At the AGM, one suggested not having an auditor was putting off suppliers.

A change of heart from the Big Four does not look likely, as they see risk in Mr Ashley’s proprietorial conduct as much as his accounts. PwC expressed “a reluctance to engage based on ownership structure”. Nor does the person charged with persuading them, director Richard Bottomley, appear well placed. Shareholders were urged to vote him off Sports Direct’s board by adviser Pirc, which noted his failure to alert former auditor Grant Thornton to a £600m tax bill while serving on the audit committee. At the AGM, 11 per cent of shareholders tried to do so.

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A mid-tier audit firm might come to the rescue. Sports Direct is said to have held talks with Mazars and MHA MacIntyre Hudson. But Mazars was due to decide by the end of August and has since said nothing. And hiring MacIntyre Hudson would hardly signify a position of strength. The firm’s biggest job to date, at miner Ferrexpo, only came about after Deloitte resigned over management behaviour.

Each day of Sports Direct’s financial year that passes with no auditor in place only reinforces the case for a new system. Options include giving the new accounting regulator powers to assign an auditor and indemnify it from risk; the industry setting up emergency audit teams with personnel seconded from major firms; or an independent appointments panel selecting auditors for all listed companies.

Unless one of these solutions is adopted, there is a danger of hearing the multi-skilled Mrs Leadsom utter the nine most terrifying words in the English language: “I’m from the government and I’m here to help”.

Sorrell on form

Just one year old and S4 Capital, Martin Sorrell’s digital ad-venture, has reported first-half revenue of £88m, writes Kate Burgess. That is a 42 per cent increase on the same period in 2018 “pro forma”, ie, if the company as it is today had existed a year ago. Adjusted operating profit fell to £9m before nasties such as tax and one-off acquisition and expansion costs. That is set against £12m “pro forma like-for-like”. That is . . . well . . . you know. The group’s “like-for-like” headcount has risen 60 per cent to 1,375 staff in six months. It has taken on close to 500 staff since the transformative acquisitions of MediaMonks Multimedia and MightyHive last year.

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S4 says it is investing in human capital and prioritising revenue over profit. It plans to double in size by 2021 — “organically”, emphasises the famously well-paid Sir Martin, who is known privately by some in the City as “Bagpuss”, after the 1970s TV cloth cat. There will be infill acquisitions but S4 “is not an acquisition vehicle,” says Sir Martin. Again.

Analysts have pencilled in adjusted pre-tax profit of £26m-ish for the full year. They can adjust all they like, but there are only two points that investors need to consider. First, the infant S4 Capital today will look nothing like its three-year-old self in 2021. Second, shareholders are backing Sir Martin’s vision. And Sir M, like the BBC’s “old saggy cloth cat . . . a bit loose at the seams”, will be remembered and loved by some. But not all.

LSE: heading South?

Some think the 5 per cent rise in London Stock Exchange shares after a bid from the South China Sea is as good as it gets, given political obstacles and investor preference for a tie-up with Refinitiv. But might it get worse? If LSE shares were recently buoyed not by Refinitiv but by takeover speculation, as Berenberg analysts have pondered, a scuppered deal may soon see that northerly progress reverse.


S4 Capital: kate.burgess@ft.com