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Wickes withdraws from South African venture

Wickes, the DIY chain hit by a serious accounting scandal, yesterday sought to distance itself further from a troubled past by pulling out of its joint venture in South Africa.

The decision to withdraw is in line with Wickes' strategy of concentrating on its core UK business following a recent pounds 53m rescue rights issue.

It also shows that, under new chief executive Bill Grimsey, the new Wickes has no sacred cows. Mr Grimsey, who replaced Henry Sweetbaum as chief executive last November, used to be responsible for the South African joint venture with Federated Blaikie.

Wickes' disposal programme began late last year with the sale of a conservatory business in the US. It is also in talks to sell 40 loss-making continental European stores, but recent reports suggest it is having difficulties finding a buyer willing to pay pounds 20m for the outlets in France and the Benelux countries. Mr Grimsey has threatened to close some of the stores if no trade sale can be arranged.

The South African joint venture, which began in 1994, trades as six stores in Johannesburg and Pretoria. Wickes will repay in full deferred loan stock at its nominal value of pounds 300,000.

Shares in Wickes closed unchanged at 165p on the news, compared with the 150p investors paid in the rights issue and the equivalent of 670p last summer when dealings were suspended after Mr Sweetbaum revealed that profits had been overstated by pounds 51m over the previous six years.

The irregularities centred around secret discount deals struck between Wickes' buying department and suppliers that inflated profits in the short term.

The Serious Fraud Office is in the middle of an investigation into the activities of former senior management.

Mr Sweetbaum, who resigned as chief executive and chairman in June, denies any wrongdoing. Most of the other board members linked with the old regime have also gone. Sanford Sigoloff, who was closely associated with Mr Sweetbaum, is expected to resign by Easter.

Mr Grimsey has been keen to draw a line under the past as quickly as possible. Deals were struck with Mr Sweetbaum and other directors to ensure that they escaped litigation in return for some of their profit-related bonuses being repaid.

Investors hoped Mr Grimsey's actions might clear the way for a takeover, but analysts have played down such hopes.

Kingfisher, the B&Q chain, was one name in the frame. Another was RMC, the building materials group.