Granada's day of reckoning will come

It is far too early to spoil Gerry Robinson's jolly party at Granada. He won his battle for Forte and has just unveiled sparkling results across all the divisions, cheering the City and causing even some of his fiercest opponents to grant he got the takeover bid right. Certainly that is what the share price says.

Even Mr Robinson's relaxed attitude toward disposals (when the time is right and not before; we shall not be rushed) is gaining him extra points, despite gearing at the end of the March of a whopping 389 per cent. The City is convinced he can get the pounds 1.5bn promised without too much trouble through the sale of the Exclusives, the Savoy stake, Alpha and the Welcome Break service stations. That, along with Granada's hefty share of glittering satellite broadcaster BSkyB, will bring gearing down to about 100 per cent by next September. At that point, the cash being thrown off will be so excess to immediate needs that people will again be asking what Gerry is going to do with all that money.

But at that point a different chorus of criticism is likely to be heard. It becomes increasingly obvious to everyone - even Mr Robinson and his trusted chief executive, Charles Allen - that Granada as presently constituted simply does not make sense. What on earth do media, rentals, hotels and catering all have to do with each other? At the very least, the rentals operations should be spun off. It is in any case the slowest growing of the Granada businesses, despite all the cash it generates. TV rental will never achieve the rating afforded to media (still growing now that Granada has launched into satellite TV) or even the hotels and restaurants, which after the Granada treatment should begin to yield a reasonable return.

With Thorn EMI showing the way this summer, by spinning off its rentals division, Granada will soon be under pressure to do the same thing. That would leave a more logical company, and could even give Messrs Robinson and Allen some room to contemplate their next major acquisition. Who knows, if Pearson is still its old, unreconstructed self this time next year, maybe Granada could pounce there.

Until then, let the Granada team work its magic. Mr Robinson deserves some time to make sense of Forte. But the day of reckoning cannot be put off forever.

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