Virgin entrepreneur denies that rail arm leaves business empire barely profitable
RICHARD Branson went on the offensive yesterday to reject criticism that his airline-to-financial services empire was facing a financial crisis. He said: "The businesses have never been as strong as they are today."
He broke off from a skiing holiday to declare: "We are not broke. We are sitting on a cash pile of around £250m and are continuing to develop the business."
Mr Branson denied that he would have to float his Virgin Atlantic airline, valued at around £1 billion, to finance growing investment in rail. He said the rail business was on track for a summer flotation, disclosed he planned to seek a public quote for his cinema and leisure business and is considering moving into the entertainment part of the telecommunications market.
He said: "I am not a one-man band. I have a fantastic set of managers. Most of our managers who run our businesses are capable of becoming millionaires and some of them have already done so."
He was stung into action by a detailed analysis of his business empire in the Economist which suggested that his diverse business operations were barely profitable and that he was running the risk of seeing the brand name devalued by failure and joint ventures and growing demands for cash.
The report said the latest set of accounts showed that the travel side of the business made pre-tax profits of £67.5m, with the Virgin Atlantic airline accounting for £45m of the total while six other businesses lost £27.8m. In other operations where the investment was under 50pc the Virgin share of the losses were put at £15.4m.
Mr Branson did not dispute the accuracy of the figures but said they were out of date and failed to reflect the losses involved in some of the start-up businesses, such as Virgin Direct, the financial services joint venture with AMP.
He said: "The business has been an enormous success. AMP would love to buy our 50pc of the company.
"We are talking about having a group with a value of £150m in just a couple of years."
Mr Branson has been fiercely protective of the Virgin brand name but admits he has made mistakes, notably with Virgin Vodka but denies that he has flopped with Virgin Cola. "We licensed our Virgin Vodka but this is the last time we will do it. We should have brought it in-house."
Virgin has already bought out its Cola partner after struggling to build up market share but Mr Branson insists that the business is not a failure. He plans to take the brand into the heart of "Coke" country in America in two months' time and spend six weeks promoting the Virgin brand. "I am still convinced we can rival the Pepsi brand."
Mr Branson also shrugged off criticism about Virgin Rail's performance with the West Coast Main Line franchise, where it has faced heavy criticism from disgruntled passengers. He said it was unfair to judge the company's performance after less than a year under Virgin ownership.
He is concerned that the investigation into his business ventures could undermine confidence in the Virgin Rail flotation. He ran foul of the City when Virgin was floated and later taken back as a private operation but has commitments to his Virgin Rail partners, including investment banks JP Morgan and Bankers Trust to float the business.
He denied that a collapse of London & Continental Railways, the Channel Tunnel Rail Link group in which Virgin has a stake, would damage his business. The Virgin financial exposure is around £10m. Virgin is moving into cosmetics and clothing as part of its latest expansion programme, with the new ventures concentrated onshore rather than offshore like many of the key businesses in the group.
