Blackfriar: Findel makes a good start on road back to former glories

SIX months after embarking on its ambitiously titled "Full Potential Review", home shopping group Findel announced the outcome this week.

Anyone expecting any radical changes at the Burley-in-Wharfedale company would have been disappointed.

New chief executive Roger Siddle outlined a "back to basics" approach that had all the hallmarks of another retail turnaround specialist – former Morrisons chief executive Marc Bolland, now the new Marks & Spencer's supremo.

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Bolland has always adopted a "don't throw the baby out with the bathwater" approach, or as he calls it "evolution not revolution".

It is a mark of respect to Siddle that Findel's two biggest shareholders Toscafund and Schroders, which collectively control over 50 per cent of the issued share capital, have confirmed they will support the proposed restructuring and the 80m rights issue to help fund Siddle's ambitious investment plans for the group's five core businesses.

Siddle believes that Findel has "five extremely good businesses".

Following the recent management cull, Siddle believes that the group now has a top team that can successfully drive through the changes.

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Asked what went wrong under the previous management, Siddle says too many acquisitions were made that didn't work out, draining funds and leaving the group with an overwhelming debt burden.

It's a familiar story – management overleaps itself in time of boom, failing to see the downturn around the corner.

Findel managed to buy a lot of expensive white elephants, which Siddle has subsequently sold off.

Siddle has a good pedigree. He was chief executive of BPP Holdings, one of Europe's largest professional training and education companies and is a former managing partner of the UK business of Bain & Company, the leading global business consulting firm.

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He has also worked with Findel's chairman David Sugden overseeing the 330m sale of BPP Holdings to Apollo Global at a 70 per cent premium to the pre-bid price.

Of the 80m fundraising, 35m will be invested in the business and 40m will be paid to the group's lenders to reduce debts.

The plan is to reduce net debt, which currently stands at 337m, by around 110m.

One of the key targets of the Full Potential Review, and one that has enormous potential, is to extend the group's Kitbag football merchandising operation.

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Traditionally, Kitbag has run the online retail operation for a number of football clubs including Manchester United, Chelsea, Real Madrid and Barcelona. But now Findel is keen to run the entire online, retail and catalogue operations for clubs, following the success of its full service contract with Everton FC.

Siddle reckons there could be 10 to 15 potential contracts over the next two to three years and each contract could be worth 3m to 10m a year.

The great thing about this model is that Findel can work for more than one club, there are no competition issues as there are with other football related services.

Findel has already signed up Manchester City and Nottingham Forest for the full service contract.

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Others should follow – football clubs want to make the most money they can out of replica sales without being bothered with the day to day running of the retail operation.

Findel will also invest in its catalogue home shopping businesses, which operate under the Studio, 24, Ace and Health & Home Shopping brand names.

Money will be spent on systems, improving credit management to target more credit-worthy customers and better buying processes – all sensible moves.

There are also plans to make the products more value driven – that's cheaper prices to you and me – a move which makes sense as consumers prepare to tighten their belts for an austere 2011.

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Findel has decided to keep its education and healthcare businesses and this perhaps is the most controversial decision made by Siddle.

However, Findel has a market leading position in education supplies and the management believes it will be well placed if the Government reduces the supplier base.

The healthcare business saw half year sales revenues rise by six per cent to 32.6m and it was recently awarded a three-year mobility care contract covering three London Boroughs.

It has other orders in the pipeline and Siddle may well be thinking of beefing up the healthcare business ahead of a sale.

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Last night Findel's shares rose another eight per cent to close at 13.25p as the market digested the proposals and showed its approval.

Siddle has a long way to go before he restores Findel's share price to its former glory, but he has made a good start.

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