Action urged over chairman as Morrisons warns on margins

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The Independent Online

Wm Morrison shareholders, stunned yesterday by the group's third profits warning in two months, are being urged to block the re-election of Sir Ken Morrison, the executive chairman, amid fears the supermarket chain's recent boardroom bloodbath has failed to quell his power.

Wm Morrison shareholders, stunned yesterday by the group's third profits warning in two months, are being urged to block the re-election of Sir Ken Morrison, the executive chairman, amid fears the supermarket chain's recent boardroom bloodbath has failed to quell his power.

The corporate governance body RREV - a joint venture between the National Association of Pension Funds and America's Institutional Shareholder Services - is afraid that Sir Ken can still railroad the company's board, despite appointing the first chief executive in the struggling supermarket group's 106-year history.

RREV has advised members to stand up to Morrisons by refusing to re-elect Sir Ken at the group's annual meeting on 26 May. It has also recommended that members vote against the company's remuneration report for failing to provide "adequate disclosure".

Sir Ken's credibility, already battered by disappointments over trading since the acquisition of Safeway, was dealt a further blow yesterday as the group said soaring costs meant operating margins would fall "significantly short" of those achieved last year.

Once again, it was left to David Jones, the new deputy chairman, to mastermind the timing of yesterday's announcement, industry sources said. Bob Stott, the chief executive, was out of the country.

Morrisons shook up its board in March to avoid a shareholder revolt, sacking its finance director and elevating Mr Stott from joint managing director.

Morrisonssaid the cost of running distribution, administration and IT functions had "heavily impacted" its performance. "The board now considers these duplicate costs will remain higher and take longer to eliminate than the market is currently anticipating," the company said.

It does not expect to reduce its costs until it has finished converting Safeway stores to its Morrisons format in November. It predicted there would be a "significant improvement" in its fortunes next year.

Shares in Morrisons rose 0.75p to 187.5p as traders rushed to cover short positions. Analysts at Citigroup said the margin shortfall would cost £150m of operating profit, cutting pre-tax profits forecasts to about £250m. The consensus figure had been profits of £400m.

RREV said Sir Ken had "unfettered powers of decision".

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