Dividend payouts at J Sainsbury, the supermarket group, could be cut under a review of the business being undertaken by Justin King, the chief executive.
Uncertainty over the group's dividend policy emerged yesterday after the company confirmed that Sir Peter Davis had stepped down as chairman and said that its trading outlook had worsened, prompting a profits warning. It said that Philip Hampton, the former Lloyds TSB finance director, would replace Sir Peter.
"As far as the dividend is concerned we are not commenting. It is a matter of financial structure. It will be part of the business review and we will announce that in October. We will have Philip Hampton on board and he will play a big part," Mr King said.
Sainsbury's difficulties increased speculation that it might become a takeover target from retail-hungry private equity funds.
Mr King also revealed that the company was considering a change to the resolution on board pay that is to be put to the annual meeting on 12 July.
It is thought this could involve shareholders being asked to vote on a new resolution on Sir Peter's pay, including a vote on his share award. However, the company declined to give details about any possible changes yesterday.
"It may well be that one has to change the nature of the resolution. The resolution, to the extent it refers to Sir Peter, is out of date, he's left the company. That's a matter for the board and shareholders whether it would be appropriate to change the resolution," said Mr King.
However, the company confirmed that the matter of Sir Peter's £2.4m bonus for 2003 and his compensation package for being forced to leave a year before his contract ends was now in the hands of lawyers.
In a statement the company said: "In discussion with Sir Peter Davis about possible amendments to his share award, details of which were disclosed in the 2004 report and accounts, it was not possible to reach agreement. It was mutually decided that this matter would be referred to legal representatives of both parties as part of his termination arrangements."
Mr King also revealed the reality of the company's day-to-day trading, which has seen severe problems with the technology installed at its new distribution depots set up by Sir Peter as part of his original turnaround strategy. Mr King said: "The depots are not performing at the level they should. How long it will take to fix them is a piece of string. They are very automated and are reliant on bar codes. If the bar codes are not printed well or are printed in the wrong place or on the wrong paper then the machines can't read them and the machines can't work."
He suggested the depots may become less automated. "Huge investments in the supply chain in a very, very short time period are fraught with difficulties related to software, hardware and people being asked to do different jobs. Our depots have suffered from all of these."
With the announcement of Sir Peter's departure, the company said that profits for 2004-05 would be "significantly below consensus market forecasts".
Sir Peter's exit, which followed a two-hour board meeting on Wednesday afternoon, comes after growing shareholder unrest over the size of his 2003 bonus. Sir Peter is in line for a £2.4m payout, a sum which has outraged shareholders, angry at the company's performance during a year that saw profits fall.
Lord Levene of Portsoken, Sainsbury's senior non executive director, had been holding last minute talks with shareholder groups such as the Association of British Insurers to try to broker a peace deal. Shareholders had wanted Sir Peter to waive some or all of his bonus.Reuse content