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Aggreko and Menzies may be hit by power cuts and turbulence

THE scale of the changes at the top of two of Scotland's best-known quoted companies, and the attendant challenges, have been underlined this week by news of two executive moves, one entirely out of the blue and the other long anticipated.

John Menzies will have to navigate a potentially turbulent transition period following the resignation of Craig Smyth, who has led the expansion of an aviation division which provides ground-handling services at airports around the world. Monday's news of Mr Smyth's impending exit came as a major surprise.

The venerable Edinburgh-based company, which also has a big newspaper and magazine distribution business, is looking for a group chief executive as it moves to restructure its top echelons. Since 2007, it has operated a three-pronged executive structure, comprising separate managing directors in charge of the two main operating divisions and a group financial director.

There was precious little from John Menzies by way of explanation of Mr Smyth's decision. There was unverified speculation that the company veteran, who appears to have had much to do with the strong performance of John Menzies in recent years, might have been overlooked for the chief executive job because of a decision to seek an external candidate.

If that is the case, and even though Mr Smyth will work his notice period, you have to wonder why the board of John Menzies would deliberately set itself the undoubtedly tough task of rebuilding its top management at a time when it has been enjoying a fairly smooth journey. Especially given that long-serving finance director Paul Dollman, who has been succeeded by Paula Bell, left only last year and the head of the John Menzies distribution division changed as recently as June, when long-time boss David McIntosh was succeeded by Forsyth Black.

John Menzies shares are at 639p, down from highs around 840p hit last October. However, they had been on a very strong run and are comfortably ahead of where they were before the 2008/09 recession. It is worth noting that, for much of February 2004, the month in which Mr Smyth took over as head of the aviation division, the stock was trading around 370p.

As John Menzies attempts to move away from a management structure which has been unconventional but has worked, it would be impossible to overstate the importance of it finding the right candidate.

The day after news of Mr Smyth's decision to exit, Glasgow-based temporary power company Aggreko said its interim chief executive Angus Cockburn was following his former boss, Rupert Soames, to outsourcing company Serco. Aggreko had already said that Mr Cockburn planned to leave later this year, and there had been plenty of speculation that he would join the charismatic Mr Soames, grandson of wartime leader Winston Churchill, in the drive to turn around Serco.

Mr Soames left Aggreko earlier this year, having built it into a FTSE-100 company worth billions of pounds. When he became chief executive on July 1, 2003, the company's shares were trading around 125p. They closed last night at 1720p. The depth of long-time finance chief Mr Cockburn's knowledge of Aggreko is underlined by the fact that he was the obvious choice for interim chief executive even though he was apparently not interested in taking on the top job on a permanent basis.

Aggreko is a step ahead of Menzies, having identified and appointed a new chief executive, British Gas boss Chris Weston. However, he is not expected to arrive until next year. It was reiterated on Tuesday that Aggreko chairman Ken Hanna will assume an executive role at the company until Mr Weston arrives. Long-serving financial controller Carole Cran stepped up to become chief financial officer in June.

Mr Hanna, chairman since April 2012, has experience of various sectors, with his career having included spells as chief financial officer of Cadbury and group finance director of United Distillers. He is also chairman of multinational car dealer Inchcape, and clearly a corporate heavyweight.

But it would also be difficult to overstate the scale of the challenge facing Mr Hanna, and Aggreko's board and top management in dealing with the departures of Mr Soames and Mr Cockburn within months of each other, and the long transitional period.

Confirmation of Mr Cockburn's move to Serco also provided a reminder of the big question of where Aggreko will, in reality rather than name, actually be run from in future. Aggreko's manufacturing facility at Dumbarton provides many skilled jobs. But the company's relatively small head office, in Glasgow, is also very important from the perspective of the Scottish economy.

Mr Soames appeared firmly committed to the Glasgow head office, as does Mr Cockburn. However, this is a truly international business which could be run from just about anywhere. It is to be hoped that Mr Weston will, as well as proving able to fill Mr Soames's sizeable shoes, take to Glasgow and that Mr Hanna will ensure that control of Aggreko does not drift away from the city.

What is for sure is Aggreko and John Menzies are going through crucial phases in their history, and face unenviable succession challenges.

From the perspective of corporate Scotland, we should keep everything crossed that Aggreko will not suffer from interruptions in the executive power supply and that John Menzies can avoid a bumpy ride.

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