Hughes threatens to sue HP Bulmer over dismissal

The former chief executive of HP Bulmer has threatened to sue the crisis-hit cider maker for wrongful dismissal, despite leading the company to the brink of financial collapse.

Mike Hughes, who presided over five profits warnings, was ousted in September after a £3.3m hole was found in the company's accounts. His departure was swiftly followed by that of Alan Flockhart, the finance director, who is also seeking damages.

Mr Hughes, who joined Bulmer in 1998 with the aim of turning it into a £1bn company, said he was "absolutely" prepared to issue a writ against the company. Speaking yesterday, he added: "We are prepared to go to court, yes. Developments could lead to that in the very near future ... if we don't get to an appropriate settlement." Mr Hughes was on a two-year contract and his full compensation package could be up to £1m.

News of Mr Hughes's plans, which emerged in a document sent to Bulmer's shareholders at the end of January, drew derision from industry insiders. One drinks sector analyst called the move "almost laughable".

Mr Flockhart has already lodged a complaint in the Employment Tribunal for "unfair dismissal", which could cost Bulmer £55,600. In addition, his solicitors indicated "that it is likely proceedings will also be issued on his behalf for wrongful dismissal", the document said.

Bulmer, which was forced to hoist the "for sale" sign last month after admitting that it was in danger of breaking its financial covenants, said it "intends to vigorously contest any such claims".

In the event that Bulmer finds a buyer, its new chief executive, Miles Templeman, stands to scoop £550,000 thanks to a clause in his contract that entitles him to two years' salary in the event of a change of control.

A spokesman for the National Association of Pension Funds, which lobbies for shareholders, criticised the package. "These arrangements could create perverse incentives for the directors to manipulate the situation to one where a takeover happened," he said.

Including share options, the total package awarded to Mr Templeman, the highly regarded former Whitbread brewing boss who joined Bulmer at the start of January, is worth around £1.5m. This includes a basic salary of £275,000 and three tranches of options over 1.07 million shares. If Bulmer shares recover to the 400p-plus levels of 12 months ago, the options would be worth £2,731,540. Details of Mr Templeman's contract were also revealed in last month's shareholder circular.

Separately, Bulmer announced the appointment of Richard Pennycook as finance director. Mr Pennycook, 38, was billed as having experience in turnaround situations. His former posts include chief executive and finance director of Welcome Break, the privately owned motorway service station, and stints at Laura Ashley, the struggling womenswear retailer, and JD Wetherspoon.

Bulmer shares were flat at 88.5p.