MFI shares plummet as troubles continue at retail arm

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MFI spooked investors hoping for clarity on the future of its struggling retail arm yesterday as it stressed there was "no quick fix" for its woes. Its shares slumped 20 per cent.

The group is still thrashing out the terms of a possible sale of its retail division with three private-equity groups. It has sweetened the pill by offering to keep MFI Retail's past pensions commitments on its books rather than hand them to the new owner.

Negotiations are stalling on the amount MFI will pay to get rid of the retail business, which is thought to need a cash injection of up to £200m to transform its prospects. Merchant Equity Partners, Apax and Argyll Partners are all understood to have submitted bids.

MFI said it had promised to provide "material financial support" to the purchaser. It would also continue to supply the business for a transitional period after any sale.

Matthew Ingle, MFI's chief executive, said: "We have got several people interested and stuff is still being negotiated." He described the retail business, which lost £14.2m in the six months to 10 June on sales down 25 per cent to £311.8m, as "financially and functionally challenged", adding: "It will be a long road to recovery."

The group is shutting stores, closing factories and cutting jobs in an attempt to reduce costs and improve its performance. Exceptional costs of £39.3m included a £29.7m bill to shut two factories in Stockton and Scunthorpe and £3.6m in redundancy fees. Group interim losses from its continuing operations - it has sold its French retail business and is seeking a buyer for its Sofa Workshops arm - were £45m compared with a £57m profit the previous year.

Its Howden Joinery arm, which supplies builders, reported a 5.5 per cent rise in revenues to £273m and a £600,000 slip in operating profits to £50.9m. Mr Ingle, who started Howden's, said the group would open 40 new depots this year, twice as many as it had expected. MFI shares closed down 21.25p at 85p.

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