Shares hit as food supplier is sold off New name for ailing Watson and Philip

Watson & Philip will seek shareholder consent to change its name to Alldays at an extraordinary meeting on October 30. After its #38m disposal of W&P Foodservice, it will be left with only the fast-growing convenience stores chain and its relatively insignificant Trademarket cash-and-carry business.

It will make a gain of about #8.2m, after expenses, on the sale of Foodservice to Brake Brothers.

Brake Bros was keen on Foodservice's strong position in the distribution of so-called ambient foods, those canned, packet, and dried goods such as tea, tinned tomatoes, and pasta which are transported at room temperature. Foodservice mainly supplies hotels and restaurants.

Kent-based Brake Bros is paying about #43.6m and is also acquiring exclusive rights to the Watson & Philip name, but the Dundee company will have to settle and realise Foodservice's trade creditors and debtors at a net cost of about #5.6m.

Its #8.2m gain on the deal will be offset in the current financial year to October 31 by a #5m restructuring charge, to provide mainly for about 50 redundancies within the slimmed-down group and the cost of exiting properties.

A company spokesman claimed these redundancies would probably be ''in various parts of England''.

Brake Bros' chief executive, Ian Player, said his company would retain Foodservice's 10 depots. The Scottish depots are at Inverness, Dundee, and Uddingston in Lanarkshire. He added that there would be no redundancies among Foodservice's 900-strong workforce.

The reshaping of Watson & Philip has unseated David Saunders, the respected managing director of Alldays. He will receive a sizeable pay-off when he leaves at the end of this month.

Group chief executive Colin Glass will assume more direct responsibility for the 902-strong convenience stores chain, which is adding about 200 outlets each year.

David Sharratt, who will step down as managing director of Trademarket because it is also coming directly under Glass's control, will also receive a settlement.

Glass said there were no plans to sell Trademarket, which he described as a ''well-managed business''.

Although the City welcomed Watson & Philip's exit from catering supply, analysts moved swiftly to downgrade full-year profit forecasts in the wake of the accompanying trading statement.

The company said Foodservice's profits would be ''below our initial expectation'' because of dismal summer weather and revealed that Alldays stores and Trademarket had been similarly affected.

Ignoring exceptionals, Isabelle Payet, analyst at stockbroker Sutherlands, said she would be cutting her forecast of full-year, pre-tax profits from #24.4m.

Between May and August, like-for-like sales in Alldays' 256 owned, rather than franchised, stores were down about 1.0% on the same period last year. This measure discounts the beneficial impact of expansion. However, like-for-like sales last month were up 1.5% on the previous September.

In stores franchised to so-called regional development companies formed by experienced retailers, like-for-like sales between May and September were up about 3.7% on the same period last year. But Watson & Philip admitted that this reflected the greater proportion of such stores in their early growth phase.

Of Watson & Philip's 646 franchised stores, 182 are on Total petrol station forecourts. The vast bulk of the remainder are franchised to regional development companies. More than 100 of Alldays' 902 outlets are in Scotland.

Brake Bros claims to be the biggest supplier of frozen food to the catering industry and puts its share of this market at 27%. It sees the Foodservice business, which is second only to Booker in the more fragmented ambient market with an albeit much lower share of about 5%, as complementary.

Player said his company had approached Watson & Philip and had ''exploratory talks'' last year. The Dundee company had decided to sell Foodservice three or four months ago and, in the wake of approaches from a number of potential buyers, had given Brake Bros exclusivity.

He added that Brake Bros had not taken on the creditors and debtors because Watson & Philip had wanted to make the sale in a tax-efficient manner.

Payet was disappointed Saunders was going because he had done a lot for Alldays.

Watson & Philip finance director George Leckie said Saunders, a main board director who earned a basic salary of #136,000 last year, was on a two-year notice period.

Asked if he would receive two years' salary in lieu of notice, Leckie replied: ''Something like that.''

Leckie said of Saunders's departure: ''That is a sad but simple fact. There isn't room for two (Saunders and Glass).''

Foodservice's managing director, Ken Knowland, will stay with the business under Brake Bros.

Shares in Brake Bros were unchanged at 610p yesterday.

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