Granada's 'caterer' finds the right mix: The group's long- term direction is emerging with the purchase of LWT, writes Gail Counsell

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The Independent Online
FOR a man who claims to know more about soft drinks than catering, Gerry Robinson is a passable corporate cook.

Unintentionally, an unfriendly John Cleese hit the nail on the head when he dubbed Robinson, newly arrived at Granada from the catering group Compass, 'the caterer'.

Robinson hates his nickname, insisting he spent longer with Coca-Cola than Compass, but his corporate culinary skills are undoubted.

Granada's melange of flavours - large dollops of rental business and television franchises, plus a drop of computer services here, and a sprinkle of nightclubs there - could easily taste like a mess of pottage.

Certainly LWT, the London weekend broadcaster which on Friday failed to fight off a hostile bid from Granada, made much of its enemy's lack of trading purity.

Yet the group has been to the taste of the City since Robinson's arrival as chief executive in 1991, despite its business mix. Nor did its eclectic selection of businesses appear to put off LWT's shareholders, most of whom took Granada's shares in exchange for the broadcaster's.

At a time when 'focus' is the obligatory mantra for chief executives, and companies from Pearson to ICI are demerging in haste, Robinson is utterly unabashed about running an old-fashioned disparate conglomerate.

'It would be a mistake to pretend there was any direct relationship between the different parts of our business, because there isn't,' he insists. 'But what is consistent is that they are all businesses with solid income streams and we manage them all very tightly.'

That said, with the acquisition of LWT, Granada's long-term direction begins to emerge. When Robinson arrived at the company in 1991, it was a mess, heavily indebted, with excess staff and overheads, and worryingly reliant on the cash-generating but dying business of television rental.

Cost-cutting, a rights issue and the sale of its bingo clubs put the group back on the straight and narrow. Then last year came the pounds 360m acquisition of the catering group Sutcliffe, which helped to cut the dominance of rental.

The pounds 760m addition of LWT changes the group's shape again, skewing it much more heavily towards television. More than a third of operating profits will now be generated by terrestrial television through Granada and LWT, on top of which there is the group's 13.5 per cent stake in BSkyB, which could be worth up to pounds 500m within two years.

For the present, Robinson sees Granada as composed of two basic divisions - television/leisure and business services such as catering, computers and rental. The idea is to keep the cash-generative businesses running as long as possible while the money is recycled into longer-term investments. Robinson is scared of businesses he does not understand, however. Hence the decision to stick with television.

His problem is that in LWT and Granada - as in the rental business - the group has earnings of highly uncertain duration.

No one, outside or inside the industry, has any real idea of what terrestrial television franchises will be worth when they receive their first, semi-automatic, renewal in 2002. Competition from alternatives such as cable and satellite, and video on demand, will arrive with a vengeance before then.

Moreover, the mooted fifth national terrestrial channel and the renewal - on as yet unclear terms - of the BBC's charter could also be eating at the same-sized advertising cake.

Robinson recognises the problem, but he is relatively sanguine. 'In the US, audiences became increasingly fragmented as the number of channels multiplied.

'But the price advertisers were prepared to pay for a sizeable chunk of that audience went up correspondingly. So though audiences fell 20 per cent, ad revenues dropped by less than 10 per cent.'

Ultimately, he acknowledges that the focus will have to switch from delivery systems - cable, satellite, terrestrial television - to programme making. As the biggest programme maker in the UK apart from the BBC, Granada/LWT should be in a position to cash in on their hunger for programmes. If LWT can be satisfactorily integrated, that is.

On that subject, Robinson is at his balletic, charming best. The emphasis is on taking time and exploring the possibilities. Charles Allen, the accountant who runs Granada's television interests, will not necessarily be responsible for LWT, he stresses. A lot depends on Greg Dyke, LWT's talented chief executive, whom he wants to stay.

There will be no immediate integration of Granada's London headquarters with LWT's; no change of name; as many as possible of LWT's staff will be asked to stay. Sir Christopher Bland, LWT's chairman, will leave - but contrary to expectations, not immediately.

Those with long memories may remember a similar Indian summer at Granada, however. Winter, with swingeing cuts and much blood - including that of Granada TV's then head, David Plowright - was not far behind. Robinson's hearty laughter may soon be echoing through the emptying South Bank halls of LWT.

(Photograph and graph omitted)

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