Booker's banks agree pounds 700m refinancing

BOOKER, the struggling cash-and-carry chain, attempted to draw a line under its past problems yesterday with a pounds 700m refinancing programme with its banks.

The new facility, struck with a syndicate of 21 banks, lasts until December 2001 and gives Booker a breathing space during which it can attempt to pay down its huge dent burden, which reached pounds 442m at Booker's December year end and has risen to more than pounds 500m since then.

Stuart Rose, the former Argos chief executive who took the reins at Booker last year, said: "The refinancing is a key step for us. It gives us the space to press ahead with our disposal programme, which will leave us with our core cash-and-carry operation which is a good, undervalued asset. This business is not knackered."

Mr Rose said talks were progressing to sell its food service business, which is worth over pounds 100m. Discussions are also continuing on the sale of the Arbor Acres chicken business and the Harvest McConnell fish processing division.

The announcement came as Booker unveiled a grim set of full-year figures showing that the group had slumped to a pounds 71m loss in the full year to December after pounds 94m of exceptional charges. These included losses on disposals, charges related to the overspend on the Heartland distribution project and pounds 13m of rationalisation costs. Stripping out exceptionals, trading profits also fell from pounds 76m to pounds 22m.

The company said it expected to incur a further pounds 50m of charges in the current year. These relate to losses on the pounds 4m disposal of its Booker Wholesale Foods operation and a further pounds 20m to "sort out" its cash-and- carry operations. Further job losses, in addition to the 900 announced in November, are not ruled out.

Mr Rose is confident he can rescue Booker but it is likely to a long and frustrating journey for shareholders. They have seen the share price slump from almost 300p last summer to just 64p at yesterday's close as a series of profits warnings took their toll, and first Somerfield and then Budgens walked away from merger talks. To add insult to injury, the dividend has been scrapped for the foreseeable future.

The road back to respectability depends on how much Mr Rose can make the expensively developed but chronically underutilised Booker assets sweat.

Booker plans to concentrate on its core chain of 178 cash-and-carry depots, but more product needs to be pushed through the system. Too many of its lorries are travelling half empty and its outlets stock too narrow a range of goods. Mr Rose wants to expand more into higher margin chilled foods, ethnic foods, meat and fresh fruit.

It is going to be a punishing task for the management, and Mr Rose recognises that rather than chase sales growth, the key to prosperity lies in increasing paltry margins. Its cash-and-carry business made pounds 38m of profits on sales of pounds 3.7bn last year, a margin of 1 per cent compared to the 2.6 per cent and 3.5 per cent achieved by smaller rivals Batleys and Bestway respectively.

With the shares at these levels there may not be much downside left. If Mr Rose fails perhaps a bidder - Wal-Mart? - will come to the shareholders' rescue. Few analysts are brave enough to offer current-year profit forecasts but investors who have stayed the course so far should not bail out now.