Granada claims under attack

JOHN SHEPHERD

Granada's claims that its Sutcliffe contract catering business was significantly more profitable than that of the arch-rival Gardner Merchant group, recently sold by Forte, came under attack last night.

Garry Hawkes, chairman and chief executive of Gardner which is now owned by Sedexo of France and which Granada tried to buy, said the claims that "we were inefficient were just not true".

The boast about Sutcliffe was made by Alex Bernstein, chairman of Granada, which is trying to buy the Forte hotels group with a hostile pounds 3.3bn takeover bid.

In a press report last week, Mr Bernstein was attributed with saying: "When you have a business like Gardner Merchant, which is cash generative and is making a 3 per cent or 4 per cent return and your competitor is making 10 per cent, then why sell it before you get it up to 10 per cent as well?"

Mr Hawkes has written to each of Sutcliffe's 2,300 clients. In the letter, he said: "The profit margin at Gardner Merchant last year was 5.4 per cent which is more or less in line with the world's other major contract caterers. A 10 per cent margin, as now claimed by Sutcliffe, we believe to be unsustainable.

"We would need to double our profits on our current turnover of pounds 1.2bn to make a 10 per cent margin. This would require us to eliminate our entire cost base or raise our charges by 50 per cent to achieve this."

Mr Hawkes added: "We have written to Sutcliffe's clients saying they are paying too much."