Mark Robson is the third MFI group finance director in two years, taking over
from interim CFO Shaun O’Callaghan and his predecessor Martin Clifford-King.
The revolving door of senior finance chiefs at one of the UK’s largest
retailers gives just a small indication as to the trials and tribulations the
business has undergone in recent times.
Major problems with its supply chain during the implementation of a new SAP
IT platform saw margins slashed, with Clifford-King and COO Gordon MacDonald
carrying the can for its failure – resulting in a profits warning and £20m write
Throw in a £60m VAT dispute over insurance-backed structural guarantees, and
it was clear that Clifford-King’s successor was set for a rough ride.
Despite the troubles, Mark Robson took the plunge and joined the group.
‘The reason being is at the point I joined, the assessment of the company by
the analysts showed common wisdom that despite the system problems – this
‘wheel’ had fallen off MFI – but during 2005 the wheel was being put back on,
systems stability achieved; so onwards and upwards,’ says Robson.
To the prospective CFO the internal problems were resolved. What he didn’t
anticipate, nor did the analysts for that matter, was the downward plunge that
the retail sector was bound for, with MFI caught slap bang in the middle of it.
Robson says that as the economy ‘turned’ in 2004, the company’s margins
dropped and the structural problems faced by its retail model became apparent.
Only Howdens, its joinery business, performed well and continues to be robust.
‘No, it wasn’t what I expected,’ Robson says understatedly.
But that was just the start of the problems. Things got even worse by the end
of 2005. MFI faced severe financial difficulties, forcing Robson and the board
to frantically renegotiate credit arrangements with lenders. The result was in
an auspicious £150m refinancing deal that gave the company some breathing space.
The downside was that it included slashing 1,500 jobs and reining in retail
outlets and manufacturing plants.
Despite the deal MFI still faced nearly £200m in pension deficits, and
trustees were looking for guarantees that fund members would get paid. And,
surprisingly, Robson describes the situation MFI faced as ‘fascinating’, and the
deal that was hammered out between MFI, the pension fund trustees and banks as
He claims the deal is ‘very economical’, because the trustees decided not to
push too hard for a large upfront payment as part of the deal, which Robson
admits that, giving the circumstances of the company, ‘others may have
considered that quite likely’.
The trustees took the triannual actuarial calculation to work out the
deficit, not the FRS 17 calculation or what Robson describes as the
‘cataclysmic’ buyout calculation.
So why the generosity from the trustees? Robson believes they saw the deal as
helping give the group the chance at being ‘healthy’, plus the added security
given by MFI to the fund was key.
The business could soon be healthier, with a potential sale lined up for its
retail arm – with retail revenues around £700m – providing the company with a
massive boost. But analysts have raised concerns about splitting the business,
specifically on the point of the trustees’ rights during the divestment.
Credit Suisse said that as the trustees were given a first fixed charge over
Howdens, it is ‘unclear’ how much a purchaser would pay for the retail business
if any pension liabilities were transferred to the purchaser.
Robson admits that a sale would open up the deficit ‘to discussion’ again.
But he feels MFI has established a ‘good relationship’ with the trustees and
regulator, and would be confident of a ‘positive outcome’ if and when the
‘In this environment you resolve to progress things to the best of your
ability. It might mean you’re in a positive business situation, other times you
may be facing a big funding issue. But if you set out by saying I’m only going
to get job satisfaction and a kick from a business that’s stable and has a nice
growth issue – you’re going to get unhappy,’ he says.
While Robson freely admits that the pace of the downturn at MFI caught him by
surprise, his previous experience as FD of international industrial group Delta
saw him dealing with a similar set of circumstances, albeit not on the same
‘The funding difficulties weren’t as acute as at MFI, the pace of changing
the business and correcting it wasn’t as acute as at MFI.’
This included a major divestment programme in the late 1990s that saw Delta
sell its cable business. The funds raised helped to lower the company’s gearing,
which at one point hit a worryingly high 69%.
Apart from managing MFI’s day-to-day struggles, Robson has also been involved
in keeping the company’s corporate governance on track, and making sure the
company is correctly reporting under the new financial accounting standards.
He is tough on himself. But he would rather that than the regulators coming
down hard. Good governance while ‘fire-fighting’ is especially tough, agrees
Robson, but it is no excuse for a ‘sloppy attitude’ towards the subject. He is
‘very conscious’ that the capital markets are organised in such a way as to see
stakeholders ‘take flight’ over bad governance.
Robson also applauds the intentions of standards-setters to create
comparisons across markets and enable a better flow of capital. But it will need
‘bedding down’ time, although at least MFI’s 24 December year-end means its
first full year of IFRS will be 2007.
‘Often people read an accounting standard in a very dry way, and sometimes
there’s a lot of hot reaction – how will it work?’ He sees this situation as
natural, and a common application of the standards will arise. ‘We need to get
to the stage of how people are applying them.’
For now MFI looks set for a new chapter, with or without its retail outlets.
With all the trials and tribulations, Robson says ‘it sounds corny but it’s good
experience’. ‘But I wouldn’t volunteer for it.’
The economy’s effect on retailers
Of all the ailments suffered by MFI over the last few years; IT problems,
battles with the taxman and juggling its pension fund while attempting to divest
part of its business, at least it’s not alone in struggling against the stalling
economy and its effect on the retail sector.
‘If you look back to the start of 2005, we saw quite a marked fall in trading
activity, as did competitors,’ says MFI group finance director Mark Robson.
Yet low interest rates have seen a boom in the housing market, and a general
focus on home renovation. So what is the big problem for MFI?
Academic research undertaken for the group relating to sales of its kitchens
found something unusual, according to Robson.
Ironically for MFI, the research found that consumers were just as likely to
change a kitchen if they were staying in the property compared to those
‘preparing’ for a sale.
And ‘what pushes the numbers around’, says Robson, are the general economic
factors such as consumer confidence, unemployment rate, interest rates – the
very things the group was trying to look beyond for a deeper understanding of
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