Burton has to recruit as redundancy scheme goes wrong: Stronger sales help to push clothing retailer to 13% rise in interim profits

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The Independent Online
A JOB restructuring plan at Burton Group, the clothing retailer, has gone awry, costing millions of pounds more than expected and forcing the company to take on 4,000 more part- timers than it wanted.

The pounds 18.9m actual cost of the redundancy programme compares with pounds 10m- pounds 15m budgeted when it was announced in January. Many more staff volunteered for redundancy than Burton expected, forcing it to seek more part-timers.

John Hoerner, chief executive, said the extra recruits represented 'a massive training requirement' but he played down the divergence from budget. 'It hasn't gone that far off plan. This is an inexact science.'

In January Burton announced plans to sack 1,000 store staff, replacing them with 3,000 part-timers as part of a programme to increase staffing flexibility. In the event, 1,200 were sacked and another 1,600 full-timers left rather than accept shorter hours, creating the need for 7,000 part-timers. One thousand of them have still to be recruited.

Burton yesterday reported a 13 per cent increase in pre-tax profits to pounds 24.7m in the 26 weeks to 27 February. It held the interim dividend at 1p.

The profits line was flattered by the release of a pounds 7m provision brought forward from previous years. Without it, profits would have fallen.

Earnings per share fell from 1.9p to 1.4p because the group started paying tax again and because of the enlarged share capital from the rights issue, whose pounds 163m proceeds came through just before the end of the period.

At the operating level Burton had a stronger story to tell, lifting sales by 14 per cent to pounds 1.07bn and trading profits from pounds 32.6m to pounds 42.7m. Its shares were marked up 4p to 85p.

Market share grew from 12 to 13 per cent. Sales were partly boosted by the switch from concessions, where only the concession fee is counted in the sales line, to more space devoted to in- house merchandise.

In the first 10 weeks of the second half, sales growth had slowed to 4 per cent year-on-year. However, the gross margin widened as Burton cut down sharply on promotions.

Burton operates Debenhams department stores and a string of multiples including Top Shop, Principles, Dorothy Perkins and Evans. All increased profits except Champion, the sports chain, hit by obsolete stock.

The multiples' contribution rose from pounds 3.1m to pounds 14.4m. Debenhams rose from pounds 29.5m to pounds 40.2m. Demand was strongest for fashionable clothing and casual items. Sales of plainer commodity items were weaker.

Net debt was pounds 186m and gearing down from 33 per cent to 21 per cent, thanks to the rights proceeds.