Leo McKee, BrightHouse CEO: unrepentant about rent-to-own

Leo McKee is ruminating on his voting intentions in next month's general election. The chief executive of BrightHouse, the UK's largest rent-to-own retailer, says Labour will not be getting his vote. He is in favour of Europe so the UK Independence party has no appeal.

Where does that leave the pro-United Kingdom Scot? "Sort of Conservative, sort of middle." If he had to declare his colours he would call himself "a social democrat". Not a Liberal Democrat? "I'm not sure if the Lib Dems are middle any more."

Politicians of all hues have spent time on the shop floor at their local branch of BrightHouse, which sells televisions, washing machines and other goods to customers who cannot stump up the cash outright but who are willing to sign up to instead sign up to a programme of regular repayments that is more costly.

Richard Harrington, the Tory MP for Watford, donned the BrightHouse uniform and served customers in his constituency's store, the venue for our interview. "Now, he's got a good idea what BrightHouse is about," says Mr McKee, sitting on an overstuffed black leather sofa in the middle of the shop.

The CEO is keen to demonstrate that BrightHouse is a responsible business, serving its local community. No small task. The company has come in for some heavy criticism. In February, a report by an all-party group of MPs looking into debt and personal finance attacked stores including BrightHouse for charging "inflated prices to some of the poorest people in the country".

Its cash-strapped customers do pay a premium. A MacBook Air laptop, for instance, is on sale for the equivalent of £2,080 at BrightHouse over 104 weeks, or a single payment of £1,156.51 (including obligatory insurance and warranty of £335 in both cases - more on this later). It costs £849 in John Lewis. If a BrightHouse customer falls behind with payments they risk repossession of the item.

BrightHouse, owned by private equity firm Vision Capital, is the biggest of the three dominant rent-to-own retailers, with 300 stores, up from 197 five years ago. In the last financial year, revenue grew to £333.3m, up 12.2 per cent on the year before. Earnings before interest, tax, depreciation and amortisation rose 10.1 per cent to £52.6m.

Mark Haslam of StepChange, a debt advice charity, attributes the rent-to-own sector's growth to a post-recession problem with precarious incomes, both for those in work and those receiving benefits. "As a result, more families simply lack the means to pay upfront for essential household goods."

The 68-year-old Mr McKee, on the other hand, attributes his company's success to providing a service to customers that is "fair, transparent and excellent, consistently excellent". Fridays for him are for store visits; sometimes Thursdays and Saturdays too.

<

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

Mr McKee is good at talking, confessing a yearning to join his local amateur dramatics society. Later he paraphrases Robert Burns, the 18th-century Scottish poet. "Burns says, it's not the badge you wear, it's who you are behind that badge, and I believe that." He is partial to poetry, citing as favourites Wordsworth and the late media entrepreneur-turned-poet Felix Dennis. In rare moments of solitude, he likes to write his own "contemplative poetry".

Mr McKee invites me to stay and chat to customers. Lisa Waters, 42, comes to complain about her broken microwave. Despite the breakage, the full-time mother of three children, trailing in her wake, is loyal to BrightHouse, believing staff to be friendly and helpful. "If you're struggling with credit rating and on a budget - BrightHouse is good. Credit card rates are extortionate."

The way Mr McKee sees it, he is providing a valuable service to low-income Britons. "Our customers are family-centric. The big thing is the sitting room." A nice sofa and television is a "badge of pride". He insists that the retailer's typical 69.9 per cent APR, an interest rate measure, is low. "I can take you out to the high street and show you one [lender offering] 660 per cent."

The warranty and insurance are important, he says, because "you have a complete no quibble protection". People on tight budgets cannot afford to pay high repair costs. "If you buy a washing machine and you leave screws in the pocket of your jeans and it damages the washing machine, it is [covered] at BrightHouse."

Perhaps, but the February report by MPs criticised the retailer for its expensive insurance and for selling products that may have already been covered under customers' existing home cover. Mr McKee says he welcomes scrutiny from the Financial Conduct Authority, which has overseen the sector for a year. The company plans to announce changes to its insurance policy for new customers soon.

One of five children, Mr McKee grew up in the east end of Glasgow. His father, a transport foreman, instilled a strong work ethic in his children. Despite his humble beginnings, the chief executive does not believe it gives him special insight into his customers' lives. "It's perfectly possible for someone who went to Eton and Oxford, as long as they . . . make a serious effort to understand the high street and customer."

Two years into his languages degree at Glasgow University, he was lured by the "prospect of earning a full-time wage". His first job was with the Co-operative Group in Glasgow, before working in HR and strategy roles at Levi Strauss Europe and Thorn EMI. In 1986 he moved to Kingfisher, the retail group, where he spent more than 15 years.

He ended up as managing director of Woolworths, the high street chain then owned by Kingfisher. Mr McKee is understandably keen to distance himself from Woolworths' descent into administration in2008, well after his departure in 2001. "The Woolworths I was at had a record of growth and was fast moving." Later, it "lost the plot" and was insufficiently "fleet of foot".

In 2005, he was appointed BrightHouse chief executive. "This company had really bad press - they deserved it." Aggressive sales techniques and lending to people who could not afford to pay were some of the problems he tackled.

"When I came to this business we had a sign on the door that said, 'no hassle credit, everybody welcome'. The level of rejection was running at 2 per cent. It's now running north of 20 per cent. We take affordability very seriously. There is no value in overloading people."

Across the sector, however, the MPs' report said more than one in 10 rent-to-own agreements resulted in goods being taken back or repossessed.

Last year, Vision Capital appointed Rothschild to look at strategic options for BrightHouse, including a flotation. Mr McKee will not be drawn on its decision, except to say he could not afford to buy it himself.

Before he leaves to visit the new store in the English south coast town of Bognor Regis, I ask why the company's reputation is important when custom is so brisk. "I don't think the business community can sit back . . . We've got a responsibility to influence debate."

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation