Mulcahey still has plenty to do


Given the run of grim news from Comet-to-Woolworths retail group Kingfisher, the recent vow of silence from chief executive Sir Geoff Mulcahy is not entirely surprising. A profits warning in January, the departure of four directors with payoffs of pounds 2.7m and a share performance that was the worst in the FT-SE 100 last year, would have been enough to send the most hardened company boss scurrying for the bunker.

The problems were spelled out in results for the year to January, which saw profits down from pounds 310m to pounds 281.5m, the first decline since the group's formation in 1982. Comet made a pounds 2m loss and Woolworths' profits fell by a third after stock problems and uncompetitive pricing affected sales. By the end of the financial year, the shares had fallen to 389p, barely half the 774p reached at the beginning of 1994.

Ignoring calls for his head, Sir Geoff put up the shutters at Kingfisher's Marylebone Road headquarters and started hammering out a plausible recovery story. In the last week or two he has emerged blinking into the sunlight to tell the tale, the part relating to problem child Woolworths anyway.

A four point plan to put the wonder back into Woolies now involves focusing its 780 branches on home and family products, keeping prices low and segmenting the chain into three different types according to location.

All well and good but the worry persists that Sir Geoff is still not addressing Woolies' core problems, the most pressing of which is that many of its core products are offered in greater depth elsewhere. In toys it is up against Toys 'R' Us and Argos. In childrenswear it battles against a rejuvenated Mothercare and an improving Adams. In entertainment, competitors include WH Smith and the supermarkets are increasingly turning their attention to CDs and videos.

Analysts also fret that Kingfisher's management now has so much on its plate that resources will be stretched to breaking point. The loss-making Comet electricals chain is being moved back to lower price items after last year's mistaken foray upmarket but still faces a cut-throat sector. The DIY market is still tough going for B&Q and the implications of Sainsbury's takeover of Texas Homecare are still uncertain. Superdrug is doing well but it is dangerously exposed to the supermarkets and Boots.

Hoare Govett forecasts group profits of pounds 290m this year which puts the shares, up 2p yesterday to 456p, on a forward rating of 14.5. Given the continuing uncertainties, that is high enough.

Whitbread needs a brewing coup

Whitbread's shares, up by a fifth since March, took a breather yesterday, slipping 3p to 628p as the market got the jitters about rumours that the brewer and pub retailer was running its slide rule over 16 of the American Marriott chain's UK hotels.

Having secured itself a profitable niche in the fast-growing budget hotel sector, analysts questioned why the company was contemplating a move into the highly competitive three and four star market. And after a sequence of high-profile missed opportunities, alarm bells started to jangle about the company's 18 per cent share price premium to the rest of the market.

In the context of a tripling of earnings per share, and an almost doubling of that share price over the past three years, there appears to be an element of worrying for the sake of it here. We are happy to stick with this column's comments three months ago on Whitbread's retailing skills, marketing nous and efficiency.

But plainly things have not gone Whitbread's way since the spring. Having under-bid for Courage and lost out to Scottish & Newcastle in the chase for the Chef & Brewer chain, the company has now been pipped to the post by Bass in the race for the attractive Harvester pubs, concluded last week.

With a balance sheet sporting less than pounds 100m of debt on shareholders' funds of more than pounds 2bn, Whitbread is in danger of allowing caution to get in the way of the bold moves that it now needs to keep up with the pace in a rapidly concentrating sector.

Having worked wonders with Boddingtons, a Manchester brewer unknown a few years ago and now one of the country's leading beer brands, Whitbread desperately needs another brewing coup to boost its uncomfortably middling 12 per cent market share.

A bid for Greene King or Marstons would reassure the market that Whitbread has not lost its way. In the meantime, the shares, on a prospective price/earnings ratio of 15, leave little room for disappointment.

No attractions in Merrydown

Investors will be forgiven a wry smile over Merrydown's latest venture: an implausible drink, alcoholic lemonade, with an equally improbable name - Two Dogs. It is a fitting product for a company whose shares have spent the past five years in steady retreat from a high of 404p to yesterday's 79p, down 2p.

There was nothing unexpected about results from the tiny Sussex cider maker, but that is about the only good thing to be said for a loss of pounds 1.85m from sales of pounds 23.5m. After a loss per share of 17.9p, the final dividend was passed, leaving a full year total of 1p, which compares with 2.5p last year and 7p two years ago.

Merrydown is not alone in being hammered by a lunatic price war in the cider market, where a scramble for market share is undermining one of the drinks sector's only success stories. Unlike the much bigger, but flat, beer market, volumes of cider are growing fast, but a rash of economy- brand launches has undermined the pricing of premium products such as Merrydown's Original.

Pressure on prices, which has seen the cost of a litre of Original fall from pounds 2.59 to as low as pounds 1.99, squeezed profits from continuing businesses to pounds 550,000, half last year's level. A bigger loss from Martlet Natural Foods, a previous failed diversification, wiped away a further pounds 250,000; stock write-downs and reorganisation accounted for another pounds 2m.

Merrydown has pinned its hopes on a distribution agreement with Whitbread. As a tiny company battling with the drinks industry titans, that makes sense, but you can be sure Whitbread is exacting a serious price for its efforts.

Too small to compete effectively in a consolidating industry, Merrydown is heavily borrowed, has no yield support and has failed to tempt a bidder. Even after their slump, the shares have no attractions.


Turnover pounds P/Tax pounds EPS Dividend

Adam & Harvey Group (F) 49m(42.1m) 6m(5.7m) 84.7p (77.6p) 13.5p(11p)

APTA Healthcare (F) 6m(-) 859,000(-) 1.2p (-) 0.5p(-)

Excalibur Group (F) 64.1m(54.4m) 2.05m(-1.6m) 2.3p (-2.7p) 0.45p(0.38p)

Halkin Holdings (I) 14.25m(11.4m) 1.45m(1.25m) 2.43p (2.46p) 0.25p(-)

Merrydown (F) 23.5m(25.6) -2.7m(-2.8m) -17.85p (-22.76p) -(1.5p)

(Q) - Quarterly (F) - Final (I) - Interim

Suggested Topics
Start your day with The Independent, sign up for daily news emails
The Queen and the letter sent to Charlie
Arts and Entertainment
Eurovision Song Contest 2015
EurovisionGoogle marks the 2015 show
Two lesbians hold hands at a gay pride parade.
peopleIrish journalist shares moving story on day of referendum
Arts and Entertainment
<b>Kathryn Williams</b>
When I was supporting Ray La Montagne I was six months pregnant. He had been touring for a year and he was exhausted and full of the cold. I was feeling motherly, so I would leave presents for him and his band: Tunnock's Tea Cakes, cold remedies and proper tea. Ray seemed painfully shy. He hardly spoke, hardly looked at you in the face. I felt like a dick speaking to him, but said "hi" every day. </p>
He was being courted by the same record company who had signed me and subsequently let me go, and I wanted him to know that there were people around who didn't want anything from him. At the Shepherds Bush Empire in London, on the last night of the tour, Ray stopped in his set to thank me for doing the support. He said I was a really good songwriter and people should buy my stuff. I was taken aback and felt emotionally overwhelmed. Later that year, just before I had my boy Louis, I was l asleep in bed with Radio 4 on when Louis moved around in my belly and woke me up. Ray was doing a session on the World Service. </p>
I really believe that Louis recognised the music from the tour, and when I gave birth to him at home I played Ray's record as something that he would recognise to come into the world with. </p>
booksKathryn Williams explores the works and influences of Sylvia Plath
Liz Kendall played a key role in the introduction of the smoking ban
newsLiz Kendall: profile
Life and Style
techPatent specifies 'anthropomorphic device' to control media devices
The PM proposed 'commonsense restrictions' on migrant benefits
voicesAndrew Grice: Prime Minister can talk 'one nation Conservatism' but putting it into action will be tougher
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?