Accounting switch hits Argyll shares

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SHARES in Argyll Group, owner of the Safeway supermarket chain, fell 23p to 256p yesterday, despite the soaring market, as it reported disappointing sales figures and warned that a change in its depreciation policy would knock about pounds 40m off profits this year.

The group said it would start depreciating the cost of its freehold and long-leasehold buildings, probably over about 40 years, and speed up the rate at which it writes off some supermarket fixtures and fittings, like lighting and refrigeration.

David Webster, deputy chairman, said: 'In the harsher trading environment, it is unrealistic to say to shareholders that stores have an infinite life.'

Wm Morrison, the supermarket group based in Bradford, already writes its stores off over 100 years. It is expected that other chains will follow eventually.

Sales at the group's Safeway, Presto and Lo-Cost stores rose 11 per cent to pounds 3.1bn in the 28 weeks to 16 October, while pre- tax profits were 6 per cent higher at pounds 217m. The sales increase was largely due to new space - which contributed 12.7 per cent of the 13 per cent growth enjoyed at the Safeway chain.

Margins improved from 6.9 per cent to 7.2 per cent, but the group became the latest food retailer to warn that price wars are likely to hit margins in the second half. Earnings per share were 14.1p, up from 13.3p, and the dividend is increased by 4 per cent to 3.75p.

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