Investment: Tough year in store for Alldays

SHARES IN Alldays, the convenience store chain, lost half their value yesterday when the group shocked the City with disappointing results and warned of a difficult year ahead.

Shares in the group fell from 177.5p to 92.5p, wiping pounds 73m from the market value, now pounds 77m. Last summer the shares reached a peak of 621.5p.

The plunge was caused by pre-tax profits down from pounds 21.1m in 1997 to pounds 13.6m before exceptionals. Analysts expected flat profits of at least pounds 21m.

Colin Glass, chief executive, said the group had expanded too quickly. He said he was self-critical about internal controls that had not been good enough.

AllDays, formerly known as Watson & Phillips, has grown rapidly, adding 200 stores last year to bring the total to 959. The growth was made possible by a system of separately managed regional franchises with discretion over buying decisions.

Mr Glass said there had been too many layers of management, allowing regional managers to make ill-judged purchases. Last year some made speculative decisions to buy CDs and other goods that sold poorly. Excluding asset disposals, only 1 of 32 regional franchises made profits in 1998.

Regional managers struck deals with suppliers offering upfront incentives on equipment such as photocopiers, which they planned to book as profits this year. Instead the central management decided to spread them over three years, pushing down profits this year.

The group was hit by poor weather. Convenience stores rely on high-margin products such as soft drinks and ice cream. Industry observers believe the poor 1998 summer was the least profitable on record.

The group changed its name to Alldays last year and disposed of W&P, its food service business, nearly halving its stock market value. David Saunders, head of the retail business, left last year and Mr Glass took hands-on control.

Alldays yesterday announced a major restructuring that will depress profits in the year ahead. Regional franchises that do not perform will be bought in to reduce overheads. The group has appointed Stuart Lawson, a former director of Burger King, as finance director.

Dresdner Kleinwort Benson, broker to AllDays, predicts flat profits in the year ahead, with dividends staying at 12p, down from 18.8p a year ago. David Stoddart of Henderson Crosthwaite said the shares were unlikely to attract much interest in the near future.