View from City Road: A very good trick if he can do it

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The Independent Online
THE Burton chief executive John Hoerner, a keen amateur pilot and huntsman, will be able to add conjuring to his list of pursuits if he achieves all the aims of his radical restructuring. According to Mr Hoerner, axing 933 jobs from the head office complement of 4,000 will have no adverse impact on the running of the business and will actually improve it. The pounds 15m- pounds 20m of annual savings on the wages bill is cream on the cake. Not so much 2+2=5, more 2-1=3.

There are encouraging precedents. BhS, part of the Storehouse group, sacked 900 head office staff with few permanent ill effects, though there were teething problems in areas like quality control. Moreover, the morale of the survivors has since soared.

Burton says the jobs purge will shorten lines of communication and eliminate bureaucracy. And by standardising working methods it can better exploit scale economies. Fine ideas, but hard to achieve without some downside. Plenty of expertise and experience - as well as dead wood - disappeared amid the shower of P45s yesterday.

The move towards fewer full-timers and more part-timers in the shops carries much less risk. All retailers are discovering the advantage of being able to field extra staff in busy lunchtimes and on Saturdays without having to fork out a full weekly wage packet (not to mention a pension).

The pay-off for Geoff Powell, sacked after only a year at Burton, will do nothing to dispel the lingering suspicion of boardroom extravagance at Burton. (Laurence Cooklin, the former chief executive, stands to receive even more than the pounds 1m package estimated at the time of his departure because his bonus has been boosted by Burton's subsequent performance). But at least Mr Hoerner is cracking down on executive perks: company cars are being downgraded and free petrol has been scrapped.

The shares put on 1 1/2p to 80p yesterday. They have doubled since September. Burton now stands on a multiple of 40 times this year's prospective earnings and about 20 times 1993/94 earnings forcasts. That looks too expensive. Mr Hoerner showed he could pull rabbits out of a hat when he ran Debenhams. He has proved he has the vision and courage to overturn the existing regime at Burton. He has got managers of the different chains co-operating rather than squabbling. He is starting to tackle the problem of Burton's long lead times by opening a Hong Kong office. But not even he has found a way of ditching the excess space that plagues the company.

(Photograph omitted)