HP Bulmer axes its CEO alongside its dividend

The chief executive of the beleaguered cider maker HP Bulmer was yesterday forced to fall on his sword just two days after the group revealed a £3.3m hole in its accounts.

The move came as the crisis-hit company, which makes Strongbow and Scrumpy Jack cider, axed its final dividend payment and postponed its annual shareholders meeting just 90 minutes before it was due to start.

Mike Hughes, who joined Bulmer in 1998 with the aim of turning it into a £1bn company, was ousted when the board met ahead of the AGM, which had been scheduled for yesterday afternoon. The company's shares, which have practically halved in the past year, plunged a further 10 per cent to 205p, valuing it at £109m.

Bulmer, which has had a string of disasters since Mr Hughes took the helm, culminating in four profit warnings in seven months, said the board would reconsider the 12.6p-a-share final dividend payment once its auditors, Deloitte & Touche, had investigated the £3.3m of costs disclosed to the market on Monday. The extra expenses are thought to concern additional promotional costs dating back to 1999, relating to discounts promised to retailers such as Tesco and J Sainsbury to promote Bulmer's products.

Will Samuel, Bulmer's chairman, said the board had had no alternative to requesting Mr Hughes' resignation. "When you lose confidence in your chief executive there is only one thing that can happen."

Colin Brown, previously a non-executive director, will become group chief executive while a replacement is sought, he added.

Analysts said Mr Hughes, an ex-Guinness man, had paid the price for a series of overseas disasters. "Clearly he suffered from over ambitions as to how much he could grow the business," Nigel Popham, at Teather & Greenwood, said.

Mr Hughes, who spearheaded Guinness's drive into the US, misjudged the appeal of cider in North America, Australia and South Africa, where the group has struggled to compete with the soaring popularity of ready-to-drink products such as Diageo's Smirnoff Ice. In July, as part of an overhaul of its loss-making international operations, Bulmer said it was pulling out of South Africa and scaling back its US business.

Mr Hughes clearly had no idea of the extent of the Bulmer board's displeasure at the collapse in the company's fortunes. Asked earlier this week whether he would stay on at the group to see through its current shake-up he said: "Absolutely, goodness me, yes." His recent catalogue of errors at Bulmer has included the failure to enter the alcopop market after its attempt – Strongbow Spice – proved unpopular in the UK that cost £1.5m.

Mr Hughes, who left immediately, was on a two-year contract and will be "eligible for compensation", a spokesman said. He received remuneration worth £438,354 last year, of which £302,5000 was his salary.