Clothier 'living on borrowed time' at Dalgety

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The Independent Online
Institutional investors in Dalgety yesterday warned that the company's chief executive, Richard Clothier, was living on borrowed time after it issued its second profits warning in two months.

Investors in the troubled pet food to fertilisers group took fright at the latest warning, driving the share price down by almost 15 per cent to 225.5p, which wiped more than pounds 113m off its stock market value.

Some institutional investors expressed anger at yesterday's trading statement. One, who declined to be named, said: "Just when we thought it could not get any worse it has. He [Clothier] is living on borrowed time."

Mr Clothier, however, ignored the threats and said he had no plans to resign: "I see eye-to-eye with the new chairman, Sir Denys Henderson, and the finance director. We have agreed about our approach and now we have got to get on and do it. I am determined to stay and deliver results."

Dalgety is considering selling one or more of its five divisions as part of an urgent strategic review . "I do not rule out selling one or two of our main businesses," said Mr Clothier.

Two of its divisions will undergo emergency surgery. According to industry sources, Dalgety has plans to make up to 700 people redundant at its ailing pet food business, about a fifth of its workforce. Jobs will also be lost at its fertiliser and animal feed business.

Analysts believe the price fall will leave the group vulnerable to a takeover bid by a predator which would break up the group. "Dalgety's credibility is at rock bottom. But things could get even worse," an industry analyst yesterday. "A rival may not be willing to buy such damaged goods. But companies such as Nestle or Heinz may be interested in businesses such as the pet food division."

Dalgety has warned that underlying profits will fall to around pounds 65m this year, compared with analysts' forecasts of pounds 80m-pounds 85m. A host of exceptional charges, totalling pounds 138m, will plunge the group into the red.

Dalgety's trading profits in the past three months have fallen well short of expectations. The chief offender is the pet food business, which produces the Felix and Winalot brands. Supply problems and price competition from Mars, its chief rival which sells Whiskas cat food, have resulted in poor sales. Dalgety has been forced to put aside pounds 67m to overhaul the business and fund redundancy costs.

Dalgety's decision to buy Quakers Oats' European pet food business in 1995 has drawn criticism from analysts. But Mr Clothier is adamant it was the correct decision. "It was right for us to buy the business and sell our consumer businesses such as crisps. But I admit our execution of the merger has been poor," he said yesterday.

Dalgety's agribusiness has also been hit by the wet weather in June, which reduced demand for fertilisers.

After inspecting the books Dalgety's new finance director, Ken Hanna, has decided to provide pounds 58m to cover a writedown in the value of some of Dalgety's assets and a clutch of businesses that are already up for sale.