Oral evidence: The sale and acquisition of BHS HC 54

Oral evidence, 8 June 2016.

Witnesses

Michael Hitchcock, Former Finance Consultant, BHS, Richard Price, Former Chief Executive, BHS, and Darren Topp, Chief Executive, BHS, gave evidence.

Chair

Gentlemen, good morning. We are very grateful that you have come to give evidence to our inquiry. For the purposes of the record, could you tell us who you are? It would also be useful if you could tell us the dates of when you were involved with BHS.

Richard Price

I am Richard Price. I am currently looking after clothing for Tesco. I was the managing director of BHS from October 2012 up until March 2015.

Darren Topp

I am Darren Topp. I am the chief executive of BHS and have worked for BHS for the last seven years.

Michael Hitchcock

Good morning. My name is Michael Hitchcock. I am a consultant. Darren employed me in July 2015 to fill the void left by the lack of a CFO in the BHS business, and I resigned on 22 March 2016.

Chair

Mr Topp, may I start with you? You just told us that you were involved in BHS for seven years, starting with Arcadia and then on to the new regime. Could you give us a flavour of the state of the company during that period?

Darren Topp

It is a matter of public record that the business continued to lose quite significant amounts of money during that period. I think that was a reflection of a combination of factors—the financial crisis at the back end of 2008, changing demographics and the changing face of retail—and it is fair to say that we did not respond quickly enough or well enough to the changing marketplace. When BHS was competing with C&A, Littlewoods and Allders, we stood pretty well. Sadly those businesses left the high street, and suddenly it was a significantly more competitive market.

Chair

Was there a deterioration over the seven-year period?

Darren Topp

It was up and down, a little, but generally the trend was of a business—as it happened, for some considerable time—that was losing money.

Chair

Was the financial viability of the company under threat?

Darren Topp

Clearly it was being supported by the bigger group—it was being supported by Arcadia. We identified—you will see this from the turnaround plan that I know Members have a copy of—some key things that the business needed to do in order to turn it back into profitability or to give it its best chance of profitability. That was around resetting the cost base, refocusing the business—we had to reinvent ourselves for the modern world—and then it was all about rebuilding the business.

Chair

Why was that not done under Arcadia?

Darren Topp

There were various iterations of that plan and many of them started under Arcadia. We got some traction during that period, albeit that it was a very competitive marketplace, as it continues to be today.

Chair

Forgive me if I keep pressing you on this. So it was sold to Retail Acquisitions.

Darren Topp

Yes.

Chair

In your experience, how did it change? Was the trajectory of the company altered? What was different from when it was owned by Arcadia and Taveta to when it was owned by Retail Acquisitions?

Darren Topp

What the sale allowed us to do was stand on our two feet. That might sound strange because you would think Arcadia as the mothership, if you like, gave everybody quite a bit of comfort. We trialled a number of initiatives—for example, introducing food stores and outsourcing hospitality through Compass—and we trialled various concessions in our stores. What we felt was that we had the basis—the building blocks—of a real recovery plan, but a key part of that was that the cost base needed redressing. It was difficult to redress the biggest cost in the business, which was rents, while we were under the Arcadia umbrella. We felt—I certainly felt at the time—that stepping away from Arcadia would allow us to address those rents and cost base as an independent business.

Chair

We will come to that in a moment. Post March 2015, was the company well run?

Darren Topp

If I could explain to the Committee, at the time of acquisition, Dominic Chappell and his team—he basically said to me, the management team and all the staff in the business through conference calls et cetera, that he was a turnaround expert. He had just completed a significant and successful turnaround on some oil facility, I think in Spain.

Chair

And was that true, both factually and in your experience of what you saw?

Darren Topp

Which bit?

Chair

The turnaround of the oil company.

Darren Topp

To be honest, I took it at face value that it was true. I have subsequently read in the press that perhaps it was not all that it seemed, but at the time, Dominic said he had put £10 million of his own money into the business. He had a crack team, as he said, of very experienced people in turnaround. He was very clear with me that my role was focused on running the business. Actually, what he had in his team was him, a property expert and a financial expert. They were the two things we needed: we needed somebody who could raise finance and we needed somebody who could deal with our property portfolio. Unfortunately, as time progressed, that unravelled in terms of that promise, and it became clear towards the end that rather than putting money in, he literally had his fingers in the till.

Frank Field

Was there any point when you thought, “This guy is a fantasist”?

Darren Topp

To be honest, Mr Field, I didn’t at the time. I felt quite excited about the opportunity. It was probably not until June that I discovered certain things that I felt uncomfortable about, and then, on finding out about those things—maybe we will touch on them later—I decided at that point that I needed a CFO in the business, hence I recruited Michael.

Chair

Could you outline now what those things are?

Darren Topp

This was really as a by-product of—I don’t know whether Members understand this term, but the Pensions Regulator issued us with a section 72 notice, which basically required us to detail various things that happened at the point of transactions. Detailed in that documentation was the fact that Dominic Chappell, either personally or through his company Swiss Rock, had been paid £1.8 million for the transaction. Detailed in there was that, on the sale of North West House next door to Allied Commercial—ACE—RAL had taken £7 million of the proceeds. Detailed in that document was that the original £5 million equity that was put into the business actually came from a loan and not from his own pocket. It was at that point that I started to feel uncomfortable, because that was not the story we had been given at the beginning. I am not an accountant; it is not my area of expertise. Even though Dominic, at the time said, “Darren, you don’t need to worry about the financing and you don’t need to worry about the property,” I was feeling exposed, and consequently recruited Michael as chief financial officer.

Frank Field

On that point, when the scales began to fall from one’s eyes, you said, interestingly, that it did not actually tally with the story you were given. Who gave you the story?

Darren Topp

Dominic.

Frank Field

It was him and nobody else outside of that—

Darren Topp

No, and Dominic was very clear with me, the management team and all the people who worked in the business. To be fair to Dominic, he was very clear about the fact that he had been a bankrupt. He said that, unfortunately, he was a by-product of the financial crisis, hence why his business on the Isle of Wight had gone bankrupt; he had learnt a lot of lessons from it and he wasn’t going to repeat. That was very much his message.

Frank Field

You seem to suggest that him telling you he had been bankrupt from his efforts on the Isle of Wight was reassuring.

Darren Topp

In one sense it was. We had all googled him, so we got a sense of his colourful past. It suggested to me that he wasn’t hiding anything.

Chair

Can I just ask, did you ever discuss Dominic Chappell with Sir Philip Green?

Darren Topp

Only much later.

Chair

What was said?

Frank Field

And can you tell us when “later”?

Darren Topp

We’d discussed Dominic probably a couple of times, pre-Christmas, during the back end of the summer and the beginning of the autumn.

Chair

So that would be Christmas 2014?

Darren Topp

No, Christmas just gone—2015. I hadn’t met Dominic by Christmas 2014. When we were doing the CVA, I had a conversation with Philip saying that I did not believe the business could continue successfully under its current ownership.

Frank Field

You mean Dominic.

Darren Topp

Yes, Dominic. So, we had done a successful CVA, we now needed to raise the finance. Even if we raised the finance, which Dominic was clearly focused on, I was still concerned. The feedback that we were getting from suppliers, credit insurers and so on, concerned me and my ops board—most of whom are here today—that, from a credibility point of view, we were in difficulty.

Chair

What was Philip Green’s reaction to that?

Darren Topp

What I said to Philip was that I wasn’t sure how to do that. I wasn’t sure how we would go about doing that. Philip said that unfortunately he couldn’t help—he wasn’t in a position to help—but we talked through what that might look like. It might have been a vote of no confidence in the owner—we never got there in the end, but it was a tentative conversation because I and the senior managers were concerned that the business, post the CVA, even with the financing, would struggle under that ownership.

Frank Field

So the business is sold. Did Sir Philip leave the headquarters at that point?

Darren Topp

Yes.

Frank Field

Did you talk to him at all between that and just before Christmas, when you expressed doubts about whether this would work?

Darren Topp

No, I spoke to him on a fairly regular basis. We would sometimes go weeks without speaking, and sometimes we would speak more regularly. Just to give it some colour for Members, we clearly got substantial concession operations in our business with sales of tens and tens of millions of pounds. We talk about trade generally, but just as important, Arcadia were providing all the back-of-house facilities. It was a group structure and we were a brand under the group. We had to disentangle ourselves from the group. That is still not complete today, but that took the best part of a year.

Frank Field

How did Dominic appear? Did Sir Philip introduce him to you, or was there just this guy going to buy the business and there was no link at all with Sir Philip?

Darren Topp

Philip did not introduce me to him. I think my first meeting with Dominic was towards the end of February, when we presented our first turnaround plan. He was part of what was, if I’m honest, quite a significant group—there must have been 20 people in the room. Richard, myself and the team gave a presentation on the key components of how we thought we could get this business back up.

Frank Field

And during this whole period—this year so to speak—you could phone up Sir Philip or he might phone you? It was sort of an area of knowledge that you could draw on was it?

Darren Topp

Not just Philip but Ian Grabiner, who was the chief executive, I sought on a regular basis to discuss the service level agreement, and other members of that team.

Frank Field

Did Lady Green ever show up in those conversations or physically?

Darren Topp

Never.

Frank Field

You were not aware that, in a sense, the ownership was there rather than with Sir Philip?

Darren Topp

My relationship was with Arcadia, the entity and the people in it—it wasn’t just those two. We would be having discussions with a number of people.

Chair

Mr Topp, you said that BHS was a brand under the Arcadia umbrella and it found it difficult to disentangle for practical, logistical reasons. Could you give us a flavour as to what extent Philip Green and Arcadia remained involved in BHS post-March 2015?

Darren Topp

From an operational point of view, they were providing a significant number of the services that we were using.

Chair

What would that be? Payroll?

Darren Topp

That would be, for example, that we were on their digital platform; they were running our payroll; they were running our financial accounts payable and accounts receivable; they were doing maintenance. There was quite a detailed programme, led by one of the team, of untangling all this in order to stand alone.

Chair

And they were providing finance as well. Were they providing working capital support?

Darren Topp

There were a couple of occasions where the cash flow was tight—Michael may help me here—where we asked for a short-term loan in order to meet certain commitments.

Frank Field

You said digital platform. Does that mean this was your platform to the world? They kept your public face?

Darren Topp

On the Arcadia platform, all the individual brands are on that website.

Chair

Thank you.

Jeremy Quin

Can I just enquire a little more about the cash, if I may, Darren? And Michael may well want to come in.

Michael Hitchcock

Can I just correct something that Darren said just now?

Jeremy Quin

Please do.

Michael Hitchcock

Arcadia weren’t providing loans. There are many ways that you can ask the key stakeholders in a business to assist you in facilitating cash flow, particularly when you are a creditor. Arcadia were a major creditor because of the flows of cash in terms of the concession moneys that used to flow from BHS back to the Arcadia business and in terms of the TSA arrangement and the fees that were required. They were like any other creditor: they needed to be paid at a certain point in time. If we needed an extension of cash, or a lift in cash, we would approach Arcadia and ask them for an extension of the credit days. I have to say that Arcadia were more than helpful on many an occasion to assist us with that process.

Jeremy Quin

Thank you for that clarification, Michael. It is appreciated. Turning to Darren first, but Michael, by all means, come in. I appreciate that, Michael, you came into the business after the deal was struck, so you had that period of time. I am very curious. I have a note—the Committee has—at the topco level of Arcadia of the cash and facilities available to BHS at the time of the acquisition, which stipulates that there was £94 million available on day one. Going through that, about £16 million was cash known for immediate future liabilities—VAT and the like, so cash that was required for a purpose. Perhaps £78 million would have been a more realistic number as to what was available. I was very curious about one of the notes, which I think that you have now explained, about the proceeds from the sale of North West House. There is a note which says that £25 million went into BHS Barclays accounts and the balance was transferred elsewhere. I was wondering what that is. I think you have answered that, Darren, but can you explain what happened to that extra £7 million?

Darren Topp

I think this was done on day one of the transaction. What I discovered in the section 72 information was that it was sold to ACE for £32 million and £7 million went to RAL.

Jeremy Quin

That’s interesting. So of the £94 million cash available on day one for BHS to run the business, £16 million was for immediate or near-future liabilities and £7 million was taken out on day one from the proceeds of one of the asset sales. If you take out the £25 million working capital facility from HSBC, that really left you with £45 million of proceeds to invest in the business.

Darren Topp

Correct.

Jeremy Quin

Michael, what was your sense, when you arrived in June, as to the cash position of the company and its ability to finance—

Michael Hitchcock

In July.

Jeremy Quin

Sorry, in July. What did you think of the cash position of the company and its ability to finance expansion?

Michael Hitchcock

This was my first interaction with Dominic Chappell and RAL. Like many others throughout this process, I think I was duped. I think the technical term is a mythomaniac. The layperson’s term is that he was a premier league liar and a Sunday pub league retailer, at best. That is great in hindsight, but at the time—because I particularly wanted to meet Darren and the management team—highly credible. There was a highly credible turnaround plan that certainly had legs. It needed a lot of things to go right but, with cash behind the business, there was no reason why this business could not turn itself around. You need the cash. Businesses do not go out of business for making losses; they go out of business if they don’t have cash. That is the long and the short of it. I insisted that I wanted to meet Dominic because a lot of press and media reports that I had read pushed Dominic into a very interesting light, let’s say. I asked him some very direct questions and he gave me some very direct answers. On the basis of those answers, you would believe him. I think that so many people in the process believed him, but he was a liar.

Frank Field

Michael, on that point, we have this in our surgeries. People come to us with marvellous stories and then, all of a sudden, there is something they say that suggests this is not right. You described it better than me—a fantasist. At what point did you think, “Ah. This just doesn’t add up”?

Michael Hitchcock

Within two weeks of being in the business.

Jeremy Quin

Michael, continuing that line of questioning, now we are in that property sale, were the loan arrangements put in place between RAL and BHS and what were the nature of those loan arrangements?

Michael Hitchcock

I liken my situation to walking into a business, being given a thousand-piece jigsaw puzzle, and being told to make the picture up and try to understand exactly what that picture is. With a lot of what I learnt, I had to go back and almost investigate how these things unravelled.

Jeremy Quin

And if you would do that for us now, we would be grateful. We have the same jigsaw puzzle.

Michael Hitchcock

Darren has articulated the £7 million loan on day one, which—

Jeremy Quin

Sorry, it’s a sale, so the sale happened. Then, from what I read, there was loan back from RAL to BHS.

Michael Hitchcock

There was an immediate loan back from BHS to RAL. The sale was made by BHS for £32 million, but £32 million did not come into BHS; £25 million came into BHS and £7 million went direct to RAL. It was accounted for via a loan from BHS to RAL. BHS did not get the full benefit of the £32 million sale of North West House.

Jeremy Quin

What were the rates of the loan for RAL?

Michael Hitchcock

It was an inter-company loan, so it was a zero rate. It was just like any inter-company loan with any business.

Jeremy Quin

Thank you for that. Darren explained to us how Mr Chappell had his own property team working with him. That must have been one of your focuses—trying to work through what the property transactions were. We will talk to Mr Chappell about this later, but was there anything particular that caught your eye or that you would like to share with the Committee about the property transactions that you uncovered while working through the jigsaw?

Michael Hitchcock

There were six pillars of the turnaround plan. The two essential pillars were property and the raising of finance. Property required the business to exit at least 30 loss-making stores and reduce the rents of the remaining stores to facilitate the cash flow to assist with the turnaround. That is point No. 1. Point No. 2 was the raising of capital based on the sale of properties and/or the leveraging of debt against the value of those properties. They did not happen. Dominic Chappell put up a supposed team of experts to address both those issues; they failed dramatically. The first three months of being in BHS was about engaging with the property landlords to help them understand how we needed them, as a key stakeholder, to engage in the turnaround of BHS. Every single one of the landlords I met, without exception, fully bought into the turnaround plan; they understood what we were trying to do and they said it was credible. What they did not give us was the support that we needed, which was a reduction in rents for a period of time to generate the cash. It became very evident to me—and this was the proposal I made to the board—that the only way you would address the property issue in this business and reset the property portfolio and the rents was to do a property-led CVA. That proposal went in before Christmas. For lots of different reasons, and one in particular, RAL and Dominic Chappell chose to ignore that proposal until after Christmas and the trade that was softer than we wanted it to be. The main reason was there was an exercise being undertaken by RAL—led by RAL and Dominic Chappell—called Project Herald. Project Herald was to set about removing the assets within BHS—primarily the international part of the business and the online business of BHS, which was profitable—and taking them outside the group and having them flowing directly into RAL. Dominic and I only found out—[Interruption.] Sorry, I beg your pardon. [Laughter.] Darren and I only found out about this when, basically, RAL had spent up to £350,000 on adviser fees putting this so-called initiative together. We found out about it and, in a scene not too dissimilar to this, quite frankly, the day before black Friday, down in Dorset at an off-site management meeting, in the space of three hours we killed their so-called initiative as being completely unworkable. How they ever thought they could take assets out of the group at a time when it was desperate for cash and needed the buy-in and the support of the suppliers is beyond me. That just goes to show you the credibility and the ability of the people who Dominic surrounded himself with were not fit for purpose.

Chair

And how did he justify that to you? This seems a schoolboy error by someone who has no idea about retail whatsoever, or about finance in general or running a business, so how did he justify it?

Michael Hitchcock

I fundamentally don’t think he understood what was going on. I question his intelligence. He wasn’t a retailer. The motive, as I see it—and I have the benefit of hindsight and unravelling some of these things—was purely for his own benefit.

Frank Field

Aren’t you underplaying it? It is irrational if you want BHS to be a success, but totally rational if you want the assets of BHS in another company, isn’t it?

Michael Hitchcock

Dare I suggest it might have been a financial lifeboat? In the event that BHS fails—the stores fail—he has this other little bit that creates some value for him. And so long as the CVA was not taking place, he could not effect that transfer of assets.

Jeremy Quin

One last question, Chairman. You have described vividly, Michael and Darren, what happened over that period of Mr Chappell’s ownership. I think we have a good picture of that. I just want to go right back to the beginning. I know that is before your time, Michael. This note says there was £94 million of cash, so I can strip out £16 million of that for known future liabilities; £7 million, as was known to Taveta, was not actually in the accounts of BHS. The actual cash position was some £70 million, including a £25 million loan from HSBC. I just want to clarify that. The amount of free cash you had at the outset, when the ownership of BHS transferred into Mr Chappell’s hands, was some £70 million, including a £25 million working capital facility from HSBC. What is your view on the sufficiency of that to underpin the turnaround plan that you were going to execute?

Darren Topp

I’m sure Michael can give you a more detailed financial perspective, but the truth was we had quite significant assets in the business that we could leverage against. We absolutely saw it as a combination of cash that was left in the business and assets that the business had in order to provide us with sufficient cash flow. As Michael said earlier, I think we felt comfortable that if those funds came through, we did have sufficient cash to allow us to execute that turnaround plan.

Jeremy Quin

So an effective property plan might yet have provided you with the cash you needed to turn around the business.

Darren Topp

The truth is that we went to the creditors at the CVA with what we believed was a credible plan. I presented that plan to the creditors on the day. What the plan called for was, first, the creditors to support it, which they duly did—unanimously, pretty much—but, as I said on the day, it also called for the raising of funds against assets of circa £90 million. Unfortunately, those funds did not get raised. What I would say is that I do believe that everybody tried to get those funds raised, but unfortunately a combination of the property transactions or potential sales fell through, and the ABL facility with Gordon Brothers just was not workable or practical and was expensive. The consequence of those two failures meant that we had no choice but to go into administration.

Jeremy Quin

I just need this for information. In the context of the CVA—Michael may be able to tell us—what are the implications for the pension fund if you go into a CVA? Are there any consequences?

Michael Hitchcock

They fall into the PPF.

Jeremy Quin

They do fall into the PPF. So in the plan you envisaged a CVA and the PPF taking on the pension fund.

Darren Topp

It goes into an assessment period—just to clarify that.

Jeremy Quin

Understood.

Darren Topp

We may well talk about the pension later, because Michael, the legal executive Dominic Chandler and I spent quite a bit of time during the autumn of last year trying to come up with an alternative proposal for the PPF for our pension fund. Having never been involved in pensions until last year, we were very mindful of the fact that we had a significant pension deficit, and we pulled together what we termed Project Vera, which was similar to Project Thor. We were in discussions with the chair of trustees, with the PPF and with TPR, with regard to trying to find an alternative to that pension fund going—

Frank Field

Did you talk to Sir Philip Green about the pensions at that stage?

Darren Topp

We talked to Philip about pensions throughout last year—either me, Dominic or members of the team. To be clear, Philip made it clear on selling the business that the solution to the pension deficit fell, in his words, to a combination of him/Arcadia and BHS. He made it very clear that the solution—which I interpreted as the financial solution—lay very much through a combination of his contribution, or Arcadia’s contribution, and BHS.

Chair

Michael, you mentioned Project Herald—is that correct?—and you mentioned the advisers. Do you know who the advisers were?

Michael Hitchcock

Grant Thornton.

Chair

Do you know how they were paid for their work?

Michael Hitchcock

In cash? As you would expect an adviser to be paid—time-based.

Chair

What I am trying to get at is: was it paid through BHS? Was it paid through RAL?

Michael Hitchcock

It was paid by BHS.

Chair

Thank you very much.

Richard Fuller

Just to be clear, Mr Hitchcock, you were a finance consultant, so you were not CFO of BHS at the time.

Michael Hitchcock

I was filling the void left by a CFO. I was fulfilling the task that you would expect a CFO to perform, and others.

Richard Fuller

In your experience, is it usual for an owner of a company to have a secret plan to hive off assets and then stick you for a £315,000 bill without telling you anything about it?

Michael Hitchcock

Mr Fuller, it is typical of the events that were going on during the Dominic Chappell ownership. There was so much happening above us that we did not know about. Darren was spending 90% of his time trying to govern what was happening above him and not focusing on what was happening in the business. That was just the event of what was going on. It was completely extraordinary, to say the least.

Richard Fuller

Mr Hitchcock, you came to your conclusion that Mr Chappell was a fantasist very quickly—within two weeks, I think you said in answer to Mr Field. I assume you have not ever worked for Sir Philip Green or as a consultant for Sir Philip Green?

Michael Hitchcock

I didn’t know Sir Philip before I joined BHS.

Richard Fuller

I ask that because it appears that is only people who are not paid by Sir Philip Green or consulting to Sir Philip Green who can see that Mr Chappell is a fantasist. For everyone who gets money from Sir Philip Green that characteristic seems to pass them by.

Michael Hitchcock

I am sat here with the benefit of hindsight. Maybe two weeks was a short time to form that conclusion but, having got inside the business and based on what I heard from speaking to people, it became evident that the motives, dare I suggest, of Dominic Chappell and RAL were not what you would have expected from a 90% shareholder.

Richard Fuller

Would you have thought that any reasonable person, with a reasonable background in either retail or finance, would have come to that conclusion as rapidly as you?

Michael Hitchcock

I don’t wish to undermine my own ability but maybe—maybe they should have done. I don’t know. There is a big smell test, Mr Fuller, which I adopt in a lot of these situations. It just did not smell right. If it doesn’t smell right, invariably it is not right. Within two weeks we changed the bank mandate to stop any chance of money flowing outside the business that could only happen on the basis of RAL signatures, or RAL-associated people in the business.

Richard Fuller

I want to move us back to the pre-period, just before the sale. On the inter-company services and other arrangements that were pre-existing—services that were provided by other entities within the Arcadia Group to the British Home Stores group—what was the value of those services? How much was the bill to BHS for those services in, say, 2014?

Michael Hitchcock

You have to remember that at the outset of BHS coming outside the Arcadia Group, they had nothing in terms of back-office services, or very limited. Basically, BHS had to replicate everything: HR, finance, tax, treasury. So the bill at the start would have been materially more than it would been in, say, January, because a lot of those services had migrated over as part of an internal project—Crystal—that the management team had adopted. It would have been in excess of £2 million a month at the start, dropping down to just over £1 million a month come the end, with all these services.

Richard Fuller

So as an independent company, those services that you had previously been getting from the Arcadia Group you could source on the external market.

Michael Hitchcock

We were having to renegotiate all contracts.

Richard Fuller

But at a lower cost.

Michael Hitchcock

Invariably, we were achieving lower costs. When you are in a big group, you can negotiate a contract that is right for the big group, but actually on an individual basis you may get slightly less of a good deal. When you can go out and independently do your own deals, you can get a much better deal, as Darren articulated earlier.

Richard Fuller

What would you estimate the ongoing savings from that would be?

Michael Hitchcock

We had £12 million-worth of ongoing savings.

Richard Fuller

So essentially £12 million a year excess was being taken out of BHS into the group for its services, the way it was priced.

Michael Hitchcock

As an independent business, you can be more efficient and you can get a better pricing structure.

Darren Topp

We changed some of the service levels as well. Nearly half of that saving was through the operation of our warehousing facility, where as a consequence of moving food to Compass, it meant we did not need to do daily deliveries. So there were some quite significant savings. The truth was that most of them we managed that—we brought a really great guy in to negotiate them—and a few of them were more expensive.

Richard Fuller

Can I turn to Mr Price for the years preceding the sale, when you were battling with a company in difficult circumstances? What was Sir Philip Green’s involvement with you during those early years when you were managing director?

Richard Price

It varied. Philip had a passion for product. He was very much involved particularly with women’s wear and our home division. We had a very extensive Christmas gifting range, for example, and Philip would sit and personally review those ranges. He was at times quite heavily involved in the day-to-day business.

Richard Fuller

So he was hands on.

Richard Price

Yes.

Richard Fuller

And that was throughout your time as managing director.

Richard Price

Yes, and before.

Richard Fuller

You would meet him once a month?

Richard Price

Oh no, a couple of times a week.

Richard Fuller

So very involved in the business, yet the business was not growing.

Richard Price

No, albeit that in 2013-14 we had like-for-like growth for the first time in eight years. I would say that we paused the decline in sales. As I say, we did see the first growth in eight years, so were making some growth.

Richard Fuller

Which year was that?

Richard Price

2013-14.

Richard Fuller

I have the accounts. They go £699 million of sales in 2012-13; £675 million in 2013-14.

Richard Price

Yes. It was like-for-like growth. There were a number of store closures.

Richard Fuller

The top line was still going down but like-for-like was the same. You were still losing money and not able to arrest these losses, despite Sir Philip Green’s active involvement in the business.

Richard Price

That is correct.

Richard Fuller

Were you involved in putting together the turnaround plan that was the basis for the business subsequently being sold?

Richard Price

I was, yes.

Richard Fuller

Can you tell us a little bit about who advised you on that and how you came up with the financial projections, as well as the strategy behind it?

Richard Price

We did it as a BHS board. Much of what was in that plan was in our plans already. We had been working, as Darren said earlier, on a number of projects. We were trialling a number of initiatives around convenience food and outsourcing the hospitality business. We had done some trials of some low-cost modernisations of the estate, which were proving to be fruitful. The plan was basically a waterfall of a number of initiatives that we had previously tried. Obviously, the major thing was predicated around the closure of the 30 stores, which we believed that the new ownership would enable us to do. That was the big change.

Richard Fuller

Okay, so you had come internally to the conclusion that the only way that the business could have been turned around was not through trading your way out of problems, but through dropping some of the onerous leases.

Richard Price

I think it was a combination, but that was a big factor. We had a number of oversized, old stores that were very loss making. Closure was really the only way to see our way out. It was a solution to the individual stores. We thought that there was growth in the business. We had a difficult Christmas. BHS as a business is overexposed: we have a big Christmas gifting business and historically and traditionally we have been famous for knitwear and outerwear, but we have not had a cold winter for a number of years. The market was against us, but up until that point we were trading the business really well, and the online business had grown from £6 million to circa £70 million or £80 million in six years.

Richard Fuller

Did you come to an assessment of how much money—how much additional new capital—the turnaround plan would require?

Richard Price

We had not done the granularity on that. We only had a week to produce the turnaround plan.

Richard Fuller

A week?

Richard Price

Yes.

Richard Fuller

Why did you only have a week?

Richard Price

Because that was the time we were asked to present.

Richard Fuller

I am a bit confused. So you had been doing stuff and then you had one week to produce a turnaround plan. What was the process there?

Richard Price

We had a plan that was basically predicated under the existing Arcadia/Taveta business. That was the plan that we were running with. Obviously, when the sale of the business was announced, we were asked to present, as a BHS board, what our turnaround plan would be to Retail Acquisitions Ltd and the rest of their team.

Richard Fuller

It is very hard to come up with something new in a week, isn’t it? Essentially, you will just say, “Well, we’ll carry on doing what we’re doing.”

Richard Price

A lot of it was basically a continuation of what we were doing. We thought we were making progress in the business. With investment, we believed that we were on the right trajectory.

Richard Fuller

If you are presenting to potential buyers, or are producing a document that is going to potential buyers, you would have had a cash flow forecast. What was the projected cash flow of annual cash requirements? Can you recall?

Richard Price

All the cash flow projections were done as part of the negotiations with the Taveta group. We were not involved in any of the negotiations with—

Richard Fuller

So yours was a plan with no numbers attached.

Richard Price

It was a trading plan.

Richard Fuller

Where did the numbers come from?

Richard Price

They were our numbers.

Richard Fuller

Okay.

Amanda Milling

We have heard a lot of evidence over the past few weeks about Dominic Chappell’s lack of retail experience, which Michael mentioned earlier. Picking up on Richard’s point, Sir Philip Green is passionate about retail and is pretty hands-on. When it came to the sale of BHS, how did you feel about this issue of retail expertise and Dominic Chappell’s lack of it?

Darren Topp

The truth is that we knew it. It was blatantly obvious but in order to complement the existing teams—you have an ops board with a couple of hundred years of retail experience, some of whom are new and some who have been there for a while—Dominic made a commitment that he would bring a big hitting retail chair. I think that was his quote to the press on acquisition. We were really keen, and I in particular was keen, that the composition of the board change from what it was at the start. I joined the board in late April 2015, and it was pretty much friends and family who had helped him with the deal on the way in. I was very adamant that, from a governance point of view, he needed to honour his commitment to get a big hitting retail chair, and we needed some retail non-executives in order to provide the support, the governance and the challenge. Unfortunately, despite lots of different promises and challenges of Dominic to get this done—in fact, we did interview a number of people—there was always a reason why it didn’t happen. It never did, unfortunately, despite a lot of external and internal pressure, including when we appointed the auditors—they did a governance check audit for us, which clearly identified that the board composition needed to look different. Again, the board needing a different composition was a strand that Michael and I pushed.

Amanda Milling

You had been calling for that. Am I right in saying that, because of the importance of the property initiatives in this, what he said in terms of his property expertise was—

Darren Topp

It was really quite important. His lack of retail experience, at the time, was compensated for by his comments that they were property experts and raising finance experts, and those were areas in which they could provide significant expertise. That was great, because the plan called for two big pieces of work around both of those initiatives.

Michael Hitchcock

The balance sheet Arcadia left for Dominic was stacked full of property value. It was incumbent upon a property expert, aligned with a corporate finance expert, which Dominic said he had as part of his crack team, to come in and raise finance against that property. It was absolutely essential that that happened.

Chair

You say the balance sheet was stacked full of property-related assets?

Michael Hitchcock

In my mind, the value on the balance sheet was sufficient, if it had been leveraged appropriately, to generate the cash needed to turn the business around.

Chair

Can you reassure us that in the run up to March 2015, Arcadia and Taveta did not cherry-pick assets to weaken the balance sheet for Arcadia’s own purposes?

Michael Hitchcock

I was not there so I can’t really comment. All I can express is that on the balance sheet I saw there was sufficient value that, if leveraged correctly, sufficient funding could be raised to give the business a far better chance of turning around than Dominic Chappell and his group of so-called experts delivered.

Chair

Darren, you were there. Did that happen? Was there some degree of cherry-picking of property?

Darren Topp

I am trying to think. There was no property that I was aware of that was moved from BHS into Arcadia pre-acquisition. The property function was done centrally at group, so it was not always immediately obvious to us in the brands whether there were loans on any of the properties or who owned what—it wasn’t obvious. We would know if there were stores that they were proposing to sell or close because Richard and I would clearly be consulted on that, but I was not aware that any assets were taken.

Chair

But there could be BHS stores that were not on BHS’s balance sheet, because it could be part of Arcadia. It would be accounted for under Arcadia’s balance sheet as opposed to BHS’s. Is that fair?

Darren Topp

Potentially, it could be.

Michael Hitchcock

If they were the landlord of that property, yes.

Chair

Amanda, I interrupted. I apologise.

Amanda Milling

When you were having those discussions with Dominic Chappell, were there any alarm bells? You smelled something was not right later on, but were there any reservations during that period of sale?

Darren Topp

During the sale?

Amanda Milling

Yes.

Darren Topp

I only saw Dominic twice properly in a formal setting like this. I didn’t actually speak to him on my own until post transaction. I brought Michael in because I had some concerns based on section 72. Michael was warmed up, if you like. I was honest with Michael, clearly, in the recruitment process about some concerns I had, so Michael was warmed up on—I was feeling uncomfortable here that it wasn’t quite what it seemed.

Richard Graham

Mr Hitchcock, you said earlier that Dominic Chappell was a liar. Could you recap for us what were the main ingredients of the lies?

Michael Hitchcock

If someone stands up in front of you and says, “I’ve put £10 million into this business, I’ve got a property expert and I’ve got a corporate finance expert that can generate sufficient funds to turn this business around,” and you don’t deliver, that’s lying, as far as I’m concerned.

Richard Graham

Then later on, you described his motives as a “financial lifeboat?” What is your assessment of how much money he took out of the business?

Michael Hitchcock

RAL took out £17 million—fact. Arguably, he put 10 of that 17 back in—fact. No one wanted the business to fail, for lots of different reasons. I think Dominic didn’t want it to fail because it allowed him to continue to draw on his little revenue streams that he could generate on the sale of properties and other events that he wanted to create.

Richard Graham

So net-net, what is your analysis of what he put in against what he took out? A figure of £25 million has been mooted.

Michael Hitchcock

You can get to £25 million, but there are so many numbers in this mix. I can get to £45 million if I add loads of different numbers in, but RAL took out £17 million—fact. They put in £10 million—fact. As to how much money they owe other parties, I don’t know, because I’m not close enough to the RAL accounts.

Richard Graham

Thank you. Mr Topp, who hired you?

Darren Topp

Dominic Chappell.

Richard Graham

What made you think that was a good idea?

Darren Topp

I had worked there for a considerable amount of time. I was very passionate about the brand. I thought we had a great team of people. I believed, certainly initially, that Dominic, with his experts—he had invested a lot of his own money and I believed that we had a good turnaround plan. If I am completely honest, it was an honour to be asked to do the job. They gave it me on an interim basis and then they promoted me to permanent CEO later in April.

Richard Graham

You said that when the section 72 notice came from the Pensions Regulator, that was a sort of seminal moment. What exactly happened and how were you and Mr Chappell going about dealing with the pension fund deficit? What meetings, for example, did you have with the trustees, and so on?

Darren Topp

I think it is fair to say that we were very much conscious of the pension fund deficit. We were aware that there was a repairment in place and that there was a contribution that had to be paid from BHS and had to be paid from Arcadia. All of us wanted to find a solution to the pension fund deficit, because we felt it was the right thing to do for the people—because 6,000 of those pensioners work in the business—and it would clearly hinder the business in the long term to have that kind of deficit on the balance sheet.

Richard Graham

What meetings did you have to discuss it? Who was there?

Darren Topp

We would discuss that as a board, and we agreed that me, Michael Hitchcock and Dominic Chandler, our legal representative, would try to put a proposal together on how we could resolve this deficit.

Michael Hitchcock

It is important to note that there were so many advisers advising TPR, the PPF, the business and RAL that in some of these meetings it was like a tea party. There was just a mass of people. You were never going to find a solution with such a huge number of people in the room. It was never going to happen.

Chair

In your experience, Michael, was that an unusual practice? Given your background, you didn’t usually have as many advisers in the room as that. This was striking.

Michael Hitchcock

You cannot find a solution by committee. You need to come up with a small team that makes a workable solution, and then you take it into the bigger committee. It was like a Mexican stand-off. Everyone was dancing around the handbags. It was crazy to see.

Richard Graham

When was the meeting when you decided to have this small group of three?

Darren Topp

This was in the summer, shortly after Michael joined. In our view, we needed to find an alternative.

Richard Graham

What happened next?

Darren Topp

We did engage with Grant Thornton. We got a consultant from Grant Thornton to work up what a pension proposal would look like that was better than the PPF for the members.

Richard Graham

Were you drawing on Project Thor? Did you have the details of it at that stage?

Darren Topp

We had seen Project Thor’s headlines but we needed to update the data, so that is why we needed Grant Thornton. A combination of me, Michael and Dominic came up with what we called Project Vera, which was a proposal as an alternative to the PPF. I think we first discussed that in the first week in September with Chris Martin. Michael and I were at that meeting. We went through what we thought was, frankly, an attractive alternative to the fund going in the pension, for everybody.

Richard Graham

What would have been the impact on the members of the pension scheme, particularly the less well-off ones?

Darren Topp

The alternative—the benefit was that it was better than the PPF and it was more flexible than the PPF, so we believed that it was a significant improvement. But you are absolutely right, the members had to take a—the way it was calculated, the CPI versus RPI, the benefits were not as—

Richard Graham

They would have had to have taken a haircut.

Michael Hitchcock

Circa 7%.

Richard Graham

Seven per cent; thank you. What was Arcadia and Philip Green’s involvement in those discussions? You said earlier that it was going to have to be a joint effort by Arcadia and BHS. What was he putting on the table?

Darren Topp

He was aware that we were doing it, but we hadn’t had conversations about the funding arrangements. What we wanted to do was to understand what the plan would look like. We felt we had got a responsibility to do that. We put a proposal together. It was costed. Unfortunately, I wasn’t at the meeting where we presented it to the PPF and TPR, but Michael was.

Richard Graham

Right. But you still haven’t quite answered the question. What was Arcadia’s commitment? What was Philip Green going to put on the table?

Michael Hitchcock

Arcadia always knew they were part of the solution, from start to finish.

Richard Graham

So what was their contribution going to be?

Michael Hitchcock

We never got to that stage. We took the proposal to the PPF and TPR and we got a very—it said no.

Chair

Who said no?

Michael Hitchcock

TPR and the PPF.

Richard Graham

Why didn’t you have a discussion with Arcadia earlier, though, to see what their contribution was going to be? It was going to have a major impact on the BHS balance sheet, apart from anything else.

Darren Topp

In the context that, if it was not acceptable to the PPF and TPR, there wasn’t really any point.

Frank Field

So the value put to them assumed a subvention from Arcadia. Correct?

Chair

Richard, can I just move on? I am very conscious of time.

Richard Graham

Can I just ask Richard Price a couple of key questions? Mr Price, at what stage did you become aware of Philip Green’s intention to sell BHS?

Richard Price

Towards the end of January—26 January 2015.

Richard Graham

You didn’t know anything about it before then?

Richard Price

No.

Richard Graham

What was your own assessment of the business at that stage, in terms of its viability?

Richard Price

I think, as Darren outlined, the business was losing a significant amount of money. I knew that when I joined the business. It was clearly a big challenge that we had, but looking at the business from outside, I felt that there were lots of opportunities, particularly from a product point of view. My background is from the product arena. I felt that we could make significant improvements to the ranging and to the sales and, as I said earlier, we did achieve the first growth in sales.

Richard Graham

So how was the intention to sell put to you? What were the ambitions behind it, the stated aims of the sale and so on?

Richard Price

Sir Philip got us all together as a board, announced that he had an interested party and explained that it would be a great opportunity and that there would be investment in the business. There was a premise, particularly around the property, that the new owners would be able to do things that, as we said, the Arcadia business could not do.

Richard Graham

How did he explain the interested party? What did he say about the interested party?

Richard Price

At that stage he did not give a huge amount of detail. He obviously explained that a significant amount of due diligence had been done by the Taveta group, that everything had been costed and it was very credible.

Chair

Did he go into any more detail about the due diligence that had been done?

Richard Price

Not the specifics, no.

Chair

Can you remember the wording that was used? Did he actually say those words: “The due diligence has been done”?

Richard Price

I cannot recall the exact words. It was implied that they had spent a lot of time understanding the nature of the investment finances—that members of the Taveta board had spent a considerable amount of time going through—

Frank Field

He was not chairman of Arcadia but, from your answers to Richard, he turned up to tell you he was going to sell. I am just interested in how important Sir Philip was in all of this. Even though he was not chairman of the board, he would just turn up and say that he had decided to sell.

Richard Graham

Can we pursue that, Chair? Mr Price, when was the sale announced to you and the board? Did you hear about the final decision to sell the day before it was announced publicly? How did that process work?

Richard Price

I believe it was on the day it was ratified, essentially.

Richard Graham

What was the message given to you and the board at that time? Were all the senior managers there?

Richard Price

We were all there.

Richard Graham

What was the message?

Richard Price

The message was that this was a great opportunity. There was lots of positivity that there was going to be significant investment in the business. Essentially, it was sold as a form of management buyout—it was a backing of the BHS board. There was an acknowledgment around the lack of—

Chair

Richard, I’m going to have to move on. I apologise, but I’m conscious of time. Jeremy?

Jeremy Quin

Two questions. First, you took Project Vera to TPR. Clearly it fell through, for one reason or another—the numbers may not have stacked up—but what were the questions that TPR was asking you, and why did Project Vera not succeed?

Michael Hitchcock

There were so many people in the room. I honestly cannot remember the questions that were coming back. It was a jamboree, again.

Jeremy Quin

I would be concerned that the questions they may have been asking were related to historic dividends and the money taken out of BHS, even prior to Dominic Chappell’s owning it. Is that fair or is it unfair?

Michael Hitchcock

I am absolutely certain it was all of the above.

Jeremy Quin

So TPR’s questions were—

Michael Hitchcock

They were very credible questions, I am sure. But my take on this is that the pension fund did not have to go into the PPF. It absolutely did not have to go into the PPF. There was a solution to keep it out of the PPF on the table more than once. I have to suggest, if I may be so bold, that the process of TPR and the PPF is not fit for the current commercial world. It is cumbersome, it is not commercial and I do not think it is acting in the best interest of the pensioners, who unfortunately in this situation will suffer.

Jeremy Quin

This is one of the points I wanted to get to. We can explore this at a later date, Chair, but, Michael, you believe that there are process issues that contributed to the fund going into the PPF?

Michael Hitchcock

Absolutely.

Jeremy Quin

Thank you. I have another question entirely, and you may have answered it in what you just said, but we were hearing yesterday that Dominic Chappell appointed advisers on the basis that he would not have to worry about the pension fund—that when he acquired BHS, it would be debt-free and the pension fund would have been sorted. That was the basis on which he initially appointed advisers. In your view, do you think Dominic Chappell took the view that there would be a CVA and he would lose the pension fund as part of his turnaround plan?

Michael Hitchcock

I cannot comment, because I was not there, but I would dare to suggest that Dominic is not intelligent enough to come to that conclusion.

Jeremy Quin

That is very clear.

Frank Field

Michael, when you said that the negotiations with the regulator were like a jamboree, with so many people there, was that because of the number of people you took or the number of people they had there?

Michael Hitchcock

Definitely the number they had.

Craig Mackinlay

Very quickly, because we are short of time—the turnaround plan had three legs or a tripod. No. 1 was the trading side of things, which I assume Mr Price and Mr Topp had involvement in. The other two, of course, were the capital raising and the property changes. Now, you obviously had control of the trading bit of the turnaround plan. Subsequent to the sale, were the margins and turnovers actually on track to do what the turnaround plan or the business plan had suggested?

Darren Topp

The short answer is no. In the year of ownership, our like-for-like sales were broadly flat; they were down 0.2%. Now, our biggest competitor, which was Marks & Spencer—

Craig Mackinlay

What I am trying to get at is, you put the plan together. Did it stick to the plan? If it didn’t, why not?

Darren Topp

I think it is quite interesting. It didn’t. That is fact. As I said, for the year, our sales were broadly flat—down 0.2%. The non-food sales of our biggest competitor, Marks & Spencer, were down 2.9%. So you could say that, relative to our biggest competitor, our performance was pretty good. The truth was that it wasn’t enough—and that is absolutely true. We missed the forecast. We do not believe that it was because of the material reasons that the business ultimately ended up in administration because, as I have said already, that was because we did not raise the finances post the CVA. But it clearly did not help. It put additional pressure on the business, and this was a business that, sadly, did not have a balance sheet like Marks & Spencer, which could cope with difficult trading conditions. That’s the truth.

Craig Mackinlay

Okay, but your team—were you focused too much on managing this upper team and having worries elsewhere? Mr Hitchcock, you were obviously trying to piece together a balance sheet and you were not quite sure what was there. Was that detrimental to these trading plans? Were you being diverted elsewhere?

Darren Topp

There was no doubt that my time was diverted elsewhere, which did not help. That was coupled with the fact that the cash did not come in when we needed it to do the capital expenditure for the food introductions, the modernisations of stores and so on. Unfortunately, we had a number of headwinds but the market was difficult.

Michael Hitchcock

Can I add something? I think Darren is underselling himself. Darren is a very good retailer but when your very good retailer of an £800 million retailer is spending 90% of their time trying to ensure that the governance above you is in order, is it any wonder that the turnaround plan has not been delivered?

Frank Field

But also, Michael, the people above were trying to get assets away.

Michael Hitchcock

That is part and parcel of the governance. You have to have a governance structure in place. It did not exist from the bank mandate that we changed very quickly to the composition of the board. The board was not fit for purpose. You cannot have friends and family on the board of an £800 million retailer.

Chair

Which board?

Michael Hitchcock

The BHS board. If you have your uncle as the chairman, the family’s best friend as one of the non-execs and Dominic Chappell on the board of BHS, the board composition is already in the majority of friends and family.

Chair

Or your wife in Monaco.

Michael Hitchcock

Where does that come into it?

Chair

I am just thinking about how cash is taken out of businesses.

Michael Hitchcock

I can only speak for the time when the lady in Monaco and her husband did not play a part in it. I was there when RAL owned it.

Chair

Thank you.

Amanda Solloway

For my clarification, you said something that I thought was really interesting. You said that originally Sir Philip was getting very involved and having meetings twice a week. Clearly at that point he was thinking that it could be a viable retail concern that BHS would have a future. At what point did that change? Also, when it went to RAL, was it still considered a viable retail concern?

Richard Price

Absolutely. Just to be clear, Philip got involved with all the brands. He has a passion for products. He enjoyed and added value to those kinds of meetings. That was not unusual—one or two meetings a week out of probably 10 or 15 that we would have had—so whilst he was in the business I would not say that he was hands-on, day to day, running that business. I don’t think we felt any different, from a trading point of view, the day before the acquisition from the day after. A lot of the things that we thought we could do to turn the business around were in place and trialled, and were a continuation of what we were already doing as a board. The board was pretty much the existing team that Darren and I had assembled over the previous two years. That did not change.

Amanda Solloway

In your view, Mr Hitchcock, do you think that when RAL purchased BHS for £1 it could possibly have been a good, viable retail concern?

Michael Hitchcock

I wasn’t there. I am only coming at it from the point of coming in. But even when I came into the business, that business was definitely ripe for turnaround. Provided that the cash flows were generated, either through property sales or corporate finance debt raising, that business was ripe for turnaround. I absolutely firmly believe that.

Michelle Thomson

This is a quick question for Darren and Michael in particular. Do you know anything about loans from BHS to Colin Sutton?

Michael Hitchcock

No.

Michelle Thomson

That’s fine. With the benefit of hindsight, which you clearly explained, do you believe that Dominic Chappell came in with the express intention of taking assets out of BHS, or did he genuinely have a plan to turn it around?

Michael Hitchcock

Dominic did not want BHS to fail; no one wanted it to fail; but as time progressed you could clearly see, in my own eyes, that the motives were not necessarily right. I mean, you don’t take out a £7 million loan from a business you have just bought that requires cash to turn itself around. That does not make sense.

Chair

Following on from that, with a question for Darren and Michael, could you tell us whether it is true that Dominic Chappell tried to take £1.5 million out of the business and put into a company called BHS Sweden?

Darren Topp

That is true. Michael had left the business at that point. I got a call from my head of treasury, Harry, to say that £1.5 million had been removed via a manual transfer to BHS Sweden. My initial reaction, if I’m honest, was to call the police, because I was not aware of that transaction. That is a substantial amount of money and this was during the CVA—we’re at the end of the process. I said, “Well, I’ll tell you what, Harry”—because I know Lennart, the other director, who is a friend of Dominic, is Swedish—“before we call the police, let me ring Dominic.” I rang Dominic and he knew about it straight away. I said to him, “That’s theft.” Now, if I take out all the expletives, he basically said, “Do not kick off about this, Darren. I’ve had enough of you telling me what to do over the last few months. It’s my business, I can do what I want. And if you kick off about it, I’m going to come down there and kill you.” Then he threatened to kill me again; and I know it sounds silly, but, you know, apparently he says he was in the helicopter squad of the SAS. I know he’s got a gun; there was a little bit of me that thought—and I said to him, “You threaten me like that again, Dominic, and I’ll call the police,” which he didn’t. Now, maybe I shouldn’t have called him a thief, but as far as I was concerned it was theft. What I said to Dominic was: “That money is for the salaries of the people who work in this business. This is for the teams that work in our stores. That’s what the money’s for, not the directors.” He said, “No. You’ve never done an administration before, Darren. You do not know what it’s like. There’ll be hell to pay and costs to pay, and I want to make sure I look after my home team.” Now, his “home team” were his words he used to describe, clearly, the RAL team. I told him it was completely unacceptable; that money had to come back. To be fair, on discussing it with all the board members of BHS and RAL, we were unanimous that that money had to come back. We had a board meeting two days later. The night before that board meeting, Dominic wanted to table two additional points: my removal as a director of BHS and the removal of Dominic Chandler as a director of BHS, because he had also rung Dominic Chappell to tell him that it was theft. He is a lawyer and was able to describe what theft is in a legal sense much better than I was. At the board meeting, Dominic agreed to return the money, which he duly did, minus £50,000.

Chair

What was that £50,000 for?

Darren Topp

He said that that was associated with fees. I understand that the administrators now have had all the money back. It was just the worst possible thing to do, in my view. This was for the salaries of people not on hundreds of thousands of pounds a year; they were on £7 an hour working in our shops. It was disgusting.

Frank Field

Thank you for coming. We are obviously concerned about the 20,000 pensioners, but there are 11,000 working in the stores, and a lot of them will be watching this. Clearly the message is that had a serious person bought BHS, it could have been turned around and they could have been facing a future of continuing to work for a reshaped company, instead of facing what they are now facing.

Darren Topp

Yes. And what I would say, Mr Field, is that we have a very dedicated workforce who are passionate about this business. To announce to the 1,000 people I spoke to on Thursday of last week, either via conference call or in person, that this business would probably not exist anymore, was the saddest day of my working career.

Frank Field

I went on one of the BBC shows about this issue, and beforehand I went to John Lewis to see what the morale was there and then immediately went into BHS. If anything, the morale and professionalism in BHS was higher than in John Lewis.

Darren Topp

That is testament to the people who work there. During the administration our absence was half our normal rate. That tells you the type of people who work in our organisation.

Frank Field

It makes the contrast between this and Mr Chappell even greater, doesn’t it?

Darren Topp

Indeed.

Chair

Sorry to interrupt. Do you know where Mr Chappell was when the administration was announced?