MFI chief keeps option open of splitting off Howden joinery arm

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The Independent Online

MFI's new chief executive set about dismantling his predecessor's legacy yesterday by exiting three peripheral businesses. But Matthew Ingle, who replaced John Hancock eight weeks ago, left a decision on splitting its troubled UK retail chain from its stronger trade arm until the new year.

Mr Ingle left the door open to splitting Howden, the trade business he started and used to run, from the loss-making UK chain. "We're not ruling anything in or out," he said.

The group, still in talks with its lenders after coming close to breaching its banking covenants, revealed sales growth at Howden had slowed, prompting it to shelve almost half of its planned new depots this year.

It is quitting its US trade business, which it started three years ago, shutting a London-based joint venture with a US furniture chain and selling its Taiwanese joint venture back to its partner. The move will save it from the £10m losses made by the three businesses but will mean an exceptional charge of £16m.

Mr Ingle said the priority in the UK was to make each of the group's three businesses - MFI retail, Howden and its manufacturing arm - "accountable". He has installed the former head of its French arm to run the UK retail chain and moved to boost margins by cutting the number of ranges on promotion.

Analysts expect at least 20 store closures but are worried about how the group will fund the radical steps needed to restore the chain to profitability given it has net debts of £63m and a £250 pension deficit. Mark Charnock, at Investec Securities, said: "If MFI can claw back some profit from the UK chain it might it easier to effect the next stage of its restructuring."

Mr Ingle ruled out the need for a rights issue yesterday, attempting to draw a line under rumours one was on the cards. But he admitted it was "a good question" how the group would manage to cover the costs associated with a big shake-up. He said the priority was getting ready for the group's busiest trading period, which kicks off with the start of its sale on Boxing Day.

In a trading update before its year-end, the group said like-for-like sales growth at Howden had slowed to 4 per cent in the second half, from double that in the first six months of the year. At its UK retail chain, which is expected to lose about £100m this year, orders fell 15 per cent in the eight weeks to 26 November, half the rate of the previous three weeks, and the gross margin strengthened. Its shares rose 1.75p to 76.5p yesterday.