Executives are taking the biscuit at United

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The Independent Online
FOR AS many years as I can remember, United Biscuits has been mocked as the most boring company in the Footsie, the club of 100 biggest quoted firms. Not any more. Tomorrow it formally gets booted out because of its shrinking stock-market value. And boring it certaintly isn't. The McVities Digestives and KP Hula Hoops may be a bit mundane, but no one can accuse a company quite so prone to disaster as UB of dullness.

It has been a truly diablolical year for UB. It has issued no fewer than three different profit warnings. Then last week came news of a pounds 48.5m interim loss after a disastrous foray into Spain. Yet, believe it or not, the same executives remain in charge. Not a single head has rolled.

The UB directors are masters at pointing to anybody or anything but themselves to explain the company's singular decline. Rising sugar prices, higher packaging costs, changing American tastes, you name it. I even came across a UB adviser last week still blaming Sir Hector Laing for the company's problems. Sir Hector, a former chairman, certainly made some mistakes, but he retired five years ago.

It is time the current management faced up to their own shortcomings. They should ask themselves how come UB has been so much worse hit than other food manufacturers? How come it took them five years to admit defeat in the US? And in Spain? How come they have lost market share in the UK to both Associated British Foods and Northern Foods despite the advantage of the blue-chip brand McVities. How come their other British crown jewel, the KP snacks business, has been outflanked by the American newcomer, PepsiCo?

The shares have sunk from more than 400p in 1993 to Friday's close of 260.5p. They would be far lower but for the perennial hope that a bidder will come along to put shareholders out of their misery. Hopes that the company will find a generous buyer for the US business Keebler are also propping up the shares. If that buyer does not materialise soon, expect further weakness.

Meanwhile, the directors continue to reward themselves very nicely. Sir Robert Clarke retired as chairman in June. The share price then was lower than when he arrived five years earlier, yet in his last year as a full-timer he received a pounds 751,000 package. Eric Nicoli, chief executive since 1991, received pounds 505,000 last year, including a pounds 16,000 performance- related (ha!) bonus.

The new chairman, Colin Short, the former finance boss at ICI and a UB director since 1992, seems no more willing to believe that UB's problems are of its own making. Factors outside its control are mainly responsible, he insists, and he is 100 per cent behind Nicoli and the other executives. He says he has heard no grumblings about the management from any of UB's institutional investors.

Institutions, of course, are famously reluctant to interfere in companies they own, but I can't believe that silent forbearance will last much longer. UB is crying out for fresh ideas and fresh blood.

Down the tunnel

"THAT Eurotunnel shares should have any value at all when the senior debt is trading at just 60p in the pound is one of life's enduring mysteries. The Channel tunnel is an awe-inspiring engineering feat. Its finances are an even more breathtaking trick. But there are no more rabbits in the hat. One way or another, existing shareholders are going to be diluted to kingdom come. Right now they can get 203p for their shares. They should grab the chance while it's still there."

I wrote that six months ago. Nothing has changed to alter my view. Eurotunnel's suspension of interest payments on its pounds 8bn of debt last week underlines how desperate things have got. The only difference is that now shareholders can only get 142p for their shares. The advice, however, remains the same.

Smiles at Tesco

A PUFF of white smoke is shortly to appear in Cheshunt, Herts, the unglamorous home of Tesco. I gather that the company is planning to unveil its succession plan in November and that Terry Leahy, a marketing whizzkid still in his thirties, is destined to be chief executive when Sir Ian MacLaurin finally retires.

All is going swimmingly at Tesco, which on Tuesday will report something like a 15 per cent hike in interim pre-tax profits to pounds 290m. The group appears on target for full-year profits of pounds 690m. Expect a few upgrades by analysts, but there will be continuing concerns about margins.

How different from life at Sainsbury's. According to one report last week institutional investors are said to be worried about the shortage of non-executive directors in the boardroom. I don't know about that, but I suspect some investors are starting to wonder about David Sainsbury's sureness of touch. He has had to execute two public U-turns, first on loyalty cards, which are now being rolled out in the majority of Sainsbury supermarkets, and second on ultra-cheap own-brands: the first 50 products in the new Sainsbury's "Economy" range appear on the shelves tomorrow. All this and underlying sales volumes are shrinking. Meanwhile, in another part of the forest, the absorption of the Texas Homecare DIY sheds into Sainsbury's culture is proving difficult.

Sainsbury has its own succession headache. Tom Vyner, deputy chairman, has played a key role for years as the Rottweiler who keeps the food manufacturers on their toes. He is due to retire in two years, but there is no obvious young turk like Terry Leahy to replace him.

Power problem

THE case for a Monopolies and Mergers Commission inquiry into the electricity industry is now overwhelming. PowerGen's expected pounds 2bn tilt at Midlands Electricity would make an investigation essential, especially if, as expected, PowerGen strikes a side deal with another regional company, Eastern, selling it generation capacity.

One of the key aspects of electricity privatisation in England and Wales was the separation of generation from distribution and supply. PowerGen will doubtless claim the clearance of the Scottish Power bid for Manweb as a precedent. But Scottish supplies no power direct to Manweb, selling only to the pool. PowerGen's relationship with Midlands is much closer andmuch more susceptible to anti-competitive behaviour.