MFI directors leave troubled group

Two senior directors at British group MFI today paid the price for a profits slump and supply chain problems that left the retailer struggling to deliver orders.

Head of supply Gordon MacDonald and finance director Martin Clifford-King quit their posts less than a week after MFI warned of a material drop in second-half profits.

Problems at the UK retail arm centred around a new supply chain introduced earlier this year to simplify deliveries.

Technical glitches led to customers being offered compensation for delayed deliveries, while costs rose as engineers battled to put the system right.

MFI said on Friday that these problems – combined with lower than expected orders over the August bank holiday and pricing pressures – meant its UK retail business was likely to show “a substantial loss for the current financial year”.

Chief executive John Hancock will now take personal charge of the supply chain with a pledge to update the market on progress in resolving the problems.

The boardroom shake-up also saw former KPMG partner Shaun O’Callaghan become interim chief finance director while the search for a full-time appointment takes place.

Mr O’Callaghan was praised for his “significant financial turnaround skills” as the company set about reversing a 33% fall in its share price since the start of June.

Mr Hancock said: “Despite recent difficulties, Mr MacDonald and Mr Clifford-King have played important roles in the company’s development.”

Mr Clifford-King joined MFI at the end of 2000 after forging a career in the finance departments of retailers including Harveys Furnishing, Debenhams and Evans.

Mr MacDonald was appointed as chief operating officer in 1999, building on the experience gained at supermarket chain Safeway and consumer goods and retail firms such as Associated British Foods and Cadbury Schweppes.

MFI has been striving to improve flagging sales since July when it posted a fall in profits to £32.1m (€47.1m) for the six months to June from £59.3m (€87m) a year ago.

Despite the downturn, MFI said at the time that a turnaround strategy had produced a better showing at the start of the second half.

Action taken to achieve this included increasing its promotional efforts and appointing four category managers to allow faster decision-making.

Retail analyst Richard Ratner, of brokers Seymour Pierce, said the executive departures were likely to appease shareholders in the near term but the board still lacked credibility.

In addition, he said the current problems and fall in the share price made it a likely takeover target.