Chief executive's exit from pubs group hits share price

Published on Thursday 21 May 2009 21:29

A SLUMP in half-time profits at pubs group Mitchells & Butlers was overshadowed yesterday by the abrupt exit of its chief executive after the company lost £69 million in a disastrous bet on interest rates.

M&B said Tim Clarke had stood down after the firm settled a "swap contract" that sought to protect its medium-term borrowings from rising interest rates.

The pubs group has been caught out as rates have dived in the past year. M&B's shares closed down 9 per cent at 237.75p yesterday.

M&B chairman Drummond Hall said: "Tim Clarke felt it was right he should offer his resignation as a matter of principle.

"He felt his position had become untenable. The board, reluctantly, agreed that was the right decision."

The facility had been put in place in 2007 ahead of a planned split of M&B into separate operating and property companies.

That had been lobbied for by entrepreneur Robert Tchenguiz who, at the time, held a 25 per cent stake in the business.

Clarke offered to resign previously in January 2008 after M&B revealed that it had lost 274m closing similar hedging arrangements.

But the board turned down the resignation on that occasion, saying Clarke was too valuable to the company's future – but did accept the resignation of finance director Karim Naffah.

Hall confirmed Clarke will receive a pay-off equal to one year's salary of 573,000 and "associated bonuses".

The chairman added: "He (Clarke] has been the architect of the company's success and we are grateful for his outstanding contribution."

Clarke became chief executive of M&B in 2003, when Six Continents (formerly Bass) demerged its pubs and hotels division into two separate entities – M&B and InterContinental Hotels Group.

M&B chief operating officer Adam Fowle, with 20 years experience in the drinks industry, has been appointed acting chief executive and will be among internal and external candidates interviewed for the job.

City drinks analysts said yesterday that they doubted there would be investor anger at Clarke's payout even though the hedging debacle had happened on his watch.

James Dawson, drinks analyst at broker Charles Stanley, said: "A contractual entitlement is just that, really, and I think that's how the institutional investors will look at it as well."

Yesterday's shock boardroom development came as M&B, which runs 2,000 pubs, said underlying pre-tax profits dived 48 per cent to 44m in the 28 weeks to 11 April, 2009.

The interim dividend is passed.

The group reported a 1.2 per cent rise in like-for-like sales in the 33 weeks to 16 May, but said the trend had recently improved, with like-for-like sales up 1.5 per cent in the 16 weeks to 16 May.

M&B's chains include All Bar One and Harvester, and its 100 or so Scottish outlets include Deacon Brodie's Tavern in Edinburgh, Glasgow's famous Horseshoe Bar and the Hawes Inn in South Queensferry (which featured in Robert Louis Stevenson's famous novel Kidnapped).

The company said yesterday that its profit fall came amid "significant declines in the on-trade drinks and eating out markets".

Meanwhile, net debt was down 300m in the 15 months to 11 April to leave it at 2.6bn.