Booker crisis looms as shares hit 16-year low

THE PROBLEMS at Booker, the struggling cash-and-carry group, reached new depths yesterday when the company issued the latest in a series of profits warnings, scrapped its final dividend and warned that it was in danger of breaching its banking covenants.

Booker shares lost almost half their value on the news, closing at a 16-year low of 64.5p.

The shock warning followed a strategic review by the new chief executive, Stuart Rose, who joined in September. He blamed weaker-than-expected sales at the core cash-and- carry business, lower margins and higher costs related to distribution changes.

In an obvious swipe at former management, Mr Rose said previous expectations of the group's prospects were "clearly overoptimistic".

Adrian Busby, the head of Booker's cash-and-carry chain, has left the company with immediate effect. He was on a two-year contract and will be in line for compensation of up to pounds 320,000. Mr Rose will take on direct responsibility for the division.

Mr Busby's departure means Booker now has just two executive directors, Mr Rose and John Kitson, the finance director. Analysts said that if management resources were not so thin, Mr Kitson's position would also be under threat.

Mr Rose denied that he had bitten off more than he could chew by taking on Booker. "It's certainly a bigger bite than I thought, but I think we can make a go of it," he said.

He admitted that Booker's management team was now "stretched" following the latest boardroom departure. The company is now searching for new directors, he said.

Analysts reacted with despair to the latest warning, which forced them to reduce their full-year profit forecasts from pounds 65m to pounds 22m. "It is pretty extraordinary to produce this warning ahead of the company's peak [Christmas] trading season," one analyst said. "The final figures could be even worse if Christmas falls below expectations."

Another analyst said: "This is a disaster. It just smacks of no management controls, no idea of what sales figures are doing, nor what costs are doing."

In response to the growing crisis in the company, which was spurned in merger talks by both Somerfield and Budgens in the summer, Mr Rose plans to dispose of the wholesale food business. He will also examine the role of the food service division, which supplies catering businesses. Overheads will be significantly reduced with the closure of the head office in London. This will affect up to 50 jobs, although there will be redundancies across the company. Investment in Booker's international operations will be stopped for the foreseeable future.

The collapse of Booker's share price means the company is now worth only around pounds 150m. But analysts said they regarded a bid as unlikely until it is clear that Booker has begun to resolve its problems.

Outlook, page 19

Booker's Tale of Woe

7 January 1998: Booker's first profits warning of the year.

17 March: Charles Bowen, chief executive, resigns after second profits warning.

17 August: Somerfield reveals it is in merger talks with Booker. It later pulls out amidst rumours of poor trading.

7 September: Budgens says it is in talks with Booker about a reverse takeover. These talks also break down as Booker shares continue to slide. Booker denies there are problems with its banking covenants.

28 September: Stuart Rose, the former Argos boss, is appointed chief executive, heralding the departure of long-standing chairman Jonathan Taylor.

10 November: Another profits warning is issued, and the head of the cash-and-carry chain leaves. The full-year dividend is scrapped. The company admits that it is in prospective breach of its banking covenants.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor