Morrisons sacrifices finance chief in bid to placate investors

Wm Morrison moved to head off a shareholder revolt by shaking up its board and sacking its finance director. The changes came yesterday as Morrisons issued another poor set of results, which City analysts interpreted as a veiled profit warning.

Wm Morrison moved to head off a shareholder revolt by shaking up its board and sacking its finance director. The changes came yesterday as Morrisons issued another poor set of results, which City analysts interpreted as a veiled profit warning.

The supermarket group, which is notorious for not complying with corporate governance guidelines, created the post of chief executive for the first time in its 106-year history.

It has tasked David Jones, the Next chairman who joined Morrisons' board as a non-executive director last May, to find successors to the chairman, Sir Ken Morrison, and Bob Stott, who was promoted from joint managing director to the chief executive role yesterday, on his 62nd birthday.

But investors criticised the boardroom reshuffle for "obfuscating" the leadership issue and coming too late for a credible FTSE 100 company - especially one that has tripled in size by spending £3bn on buying Safeway. "Were things to deteriorate further, Sir Ken's position would become untenable," one shareholder said. Shares in the group fell 3.5p to 198.25p.

Martin Ackroyd, the finance director, will step down after 31 years with the group once an external replacement has been found. He is the first executive director to leave the board since it was floated 37 years ago and is likely to receive up to £400,000 in compensation.

Mr Jones, who became deputy chairman, will head the search for at least two more independent directors to replace Duncan Davidson, the Persimmon chairman who yesterday resigned from the board just 10 months after taking his non-executive role. Sir Ken, 73, signalled that the company would appoint some young blood as it sought to strengthen its management team.

The boardroom shake-up was announced alongside disappointing full-year results that laid bare the extent of the problems the group has encountered since buying Safeway. Analysts cut up to 25 per cent off forecasts for the current financial year. Most alarming was the revelation that underlying sales at the core Morrisons' estate were deteriorating and that operating margins were barely expected to improve this year.

The group admitted that integrating Safeway had put "considerable strain on the existing financial resource". This had had "some impact on our ability to reliably forecast likely trends in profitability and to obtain a full understanding of the underlying trading balances with certain of our suppliers," it added. Mr Ackroyd said the profit warning, concerning £40m of supplier rebates, was caused by Safeway's inadequate accounting system, which was "incapable of producing accurately even the most basic accounting reports". This left Morrisons unable to track money owed by Safeway suppliers, forcing it to make a double provision for the £40m.

The sales decline in the Safeway stores yet to be converted to Morrisons had eased since January. Excluding petrol, underlying sales in the 180 Safeway stores were just 0.5 per cent weaker. Mr Stott said the group was "delighted" with the progress it was making with assimilating Safeway, pointing to the 11.3 per cent jump in sales at the 76 converted stores. The average sales per square foot are creeping towards the group's £19.72 target.

Pre-tax profit fell 7 per cent to £297m, while operating profit before exceptionals was £321.1m, at the bottom of expectations. It said exceptional costs would be twice as high as predicted after the cost of converting a former Safeway store shot up to £1.25m.