Mitchells & Butlers (M&B) has announced that its finance director Karim Naffah has resigned, after it closed the hedges connected to its proposed £4.5bn property joint venture with Robert Tchenguiz, at a cost of £274m.
The company also announced that Tim Clarke, its chief executive, had tendered his resignation over the issue but it was declined by the group’s board, which felt it was in M&B’s best interests for him to stay on to lead the business.
The group said that the recent instability in the financial markets had led to a further sharp deterioration in its hedges position from a post-tax loss of £180m it previously reported late last year.
It said that in these circumstances maintaining the hedge position to utilise in a property-based transaction, which was now highly unlikely to occur in the near future, “became a risk that could no longer be justified”.
The company said that there appeared little prospect in the near term of market conditions permitting the delivery of such a property joint venture or conversion to a Real Estate Investment Trust (Reit) on attractive terms that would create material value for shareholders.
It said the settlement of the hedges would be funded from a bank facility specifically set up for this purpose.
The company said that additional debt cost resulting from the closure of the hedges was expected to reduce its post tax earnings by approximately £13m in its current financial year, of which £4m would be incurred in the first half.
The group said that at the end of its last financial year, an exceptional accounting loss of £155m post tax was booked in respect of the hedges. It said that the above settlement of the majority of the hedges would result in a further £119m post tax exceptional loss, which will be taken in the current year.
M&B said that all of its executive directors would forgo their 2007 bonus awards in recognition of the large loss suffered from the hedge closure.
It also announced that Jeremy Townsend, currently its deputy finance director, would be appointed to its board as finance director.
