Mitchells & Butlers FD resigns
The finance director of Mitchells & Butlers (M&B) Karim Naffah has resigned after the company closed a hedge position at a cost of £274m after tax.
The hedge position was taken out last summer in preparation for a joint venture property transaction with activist investor Robert Tchenguiz.
Chief executive Tim Clarke also offered his resignation but it was turned down by the board because it was thought "in the best interests of the company that he should continue to lead the operational out-performance of the business".
A statement by M&B said: "Management, supported by advisers and the Board, acted professionally and diligently in the preparation of the financial package for the proposed joint venture with R20 and the subsequent retention of the hedge, but fell victim to the global credit crunch which began in the midst of the final execution of the transaction."
Jeremy Townsend, currently deputy finance director, will be appointed to the board as finance director.
All executive directors, including Mr Naffah, will forego their 2007 bonus awards in recognition of the large loss suffered by the company from the hedge closure.
Analyst Douglas Jack, of Panmure Gordon, said: "M&B appears to be in a mess, but actually it is getting its house in order, albeit six months too late.
"The hedging loss has been closed (at a cost of £400m pre-tax) and the potentially disastrous OpCo/PropCo idea has been shelved.
"We are downgrading our forecasts by another 7% and are now 15% below consensus. The stock is 15% overvalued and there is a big potential overhang."
City comment with The PMA Team
"Mitchells & Butlers has been profoundly unlucky in one sense. The taking out of the hedge, at bank advice, coincided with the arrival of last summer's credit crunch, which made the subsequent joint vehicle transaction impossible to execute.
"Nevertheless, there will be many who will argue that the hedge position should have been closed much earlier than now as market conditions have made it impossible to use the hedge.
"The outcome is the loss of a huge amount of money, more than a year's profit. Chief executive Tim Clarke will count himself lucky that this has not cost him his job.
"Meanwhile, Robert Tchenguiz's R20, which holds a 19% stake in the company, will also be sitting on huge losses from a parallel hedge position it took out last summer."
