Poulson quits as Premier Farnell warns on profits
Wednesday 28 January 1998
Shares in Premier Farnell fell 42.5p to 296.5p as the company announced that profits for the year to 1 February would not be less than pounds 137m - the same as the previous year. Analysts had previously forecast the company to make profits of at least pounds 150m.
Malcolm Bates, the former deputy managing director of GEC who was brought in as chairman after Premier Farnell's first profit warning last year, would not comment on the circumstances of Mr Poulson's departure. However, analysts said he had lost the confidence of the City after consistently exaggerating the company's prospects. "After this upset, there was no way he could stay on," said one.
Institutional investors agreed. Stan Pearson, investment director at Scottish Widows, which holds over 5 per cent of Premier Farnell's shares, said: "We have had concerns for some time about the management strength in depth at Premier Farnell. We see this as a first move by the board to strengthen the management team, which is essential if Premier Farnell is to realise its potential."
Another institution said: "As far as strategy is concerned Poulson doesn't have any credibility left. He has given a commitment and failed to deliver."
Mr Poulson will receive a payoff, understood to be worth pounds 470,000, which is equivalent to one year's salary and benefits.
Morton Mandel, who was chairman and chief executive of Premier before its merger with Farnell in January 1996, will take responsibility for day to day operations for the time being.
Mr Mandel retired as an executive director of Premier Farnell in June, but he retains a seat on the board and his family still owns more than 15 per cent of the shares. "He has a deep knowledge of the industry which Premier Farnell serves," Mr Bates said.
Meanwhile, a board committee, led by Mr Bates, has hired a firm of headhunters to find a permanent replacement for Mr Poulson.
Mr Poulson's departure is a belated vindication of the vocal opposition which institutional shareholders showed to the proposed acquisition by Farnell, then a largely European distributor, of Premier - a company which at pounds 1.8bn was almost twice its size - early in 1996.
Mr Poulson, who through a series of acquisitions had built Farnell from a small distributor into a fast-growing company worth almost pounds 1bn, argued that a merger with Premier would bring numerous synergies. But several vocal institutional investors opposed the deal on the grounds that handling the complexities of a transatlantic merger would be beyond Farnell's already stretched management team.
"It was an extremely high-risk strategy and it has not paid off," one institution, which sold most of its shares after failing to block the deal, said yesterday.
Pressure had been growing on Mr Poulson since January last year, when Premier Farnell issued a profits warning in farcical circumstances. After growing speculation that the company was about to report bad news, Premier Farnell eventually put out a statement two minutes before the stock market closed. That warning prompted the appointment of Mr Bates as chairman of Premier Farnell. Analysts attributed Mr Poulson's departure to his presence. But last night Mr Bates said: "I'm glad to be chairman of a world-class company."
Commenting on current trading, Mr Bates said that sales at Newark, Premier Farnell's US catalogue distribution business, were slower than expected.
Analysts said the share price was likely to remain depressed until a new chief executive is appointed.
One analyst said: "Obviously it is disappointing when you get a profits warning. The company hasn't achieved its target of getting the benefits through from the acquisition of Premier in the near term. So Bates, who's ex-GEC and a tough operator, has obviously felt that action is needed."
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