Morrisons hit by departure of finance director

RICHARD Pennycook is to leave Morrisons eight years after he was parachuted in to help the supermarket chain digest its painful takeover of Safeway.

The Bradford-based group said he will continue in his role as finance director for another year to ensure a smooth handover to his successor.

Mr Pennycook, 48, is leaving to “go plural”, the phrase coined by former Asda boss Allan Leighton to describe taking on a number of non-executive chairmen and director roles.

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Mr Pennycook, who is already a non-executive director at York-based housebuilder Persimmon, said it is too early to say which roles he will take up.

“I’ll be head down doing the day to day job until next Spring,” he said.

He will work out his notice period in full so will not receive a pay-off.

His basic salary of £570,000 and annual bonus of £512,000 could be boosted by a potential £1.2m share-based retention payment which will be paid next March.

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This payment was promised when former chief executive Marc Bolland left two years ago. Shareholders wanted to introduce the incentive to ensure that Mr Pennycook, who has played a large role in Morrisons’ recovery, stayed on.

The finance director was brought into Morrisons in 2005 as a turnaround specialist.

At the time the company was struggling with its ill-fated acquisition of Safeway. When he joined in 2005 Morrisons’ pre-tax profits stood at £61.5m. Last year they were £947m.

Mr Pennycook will have worked alongside chief executive Dalton Philips for three years by the time he leaves next year.

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He has informed the board that he intends to concentrate on building “a portfolio career”.

“This was a difficult decision, but by the time I leave next year I will have been with Morrisons for over eight years,” he said.

“Dalton and I talked about spending three years as a partnership. This feels like the right thing to do. I’m going to work my notice as the transition is important and we want to get it right.”

Morrisons’ nomination committee will shortly begin the process of finding a successor.

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Sir Ian Gibson, chairman of Morrisons, said: “Richard has done an outstanding job for Morrisons over the last seven years. He was the architect of the company’s Optimisation Plans and has played an increasing strategic role in the last few years as Morrisons has completed its transformation into a nationwide retailer.

“Richard will remain with Morrisons for another year which will ensure a seamless transition with his eventual successor.”

Mr Philips said: “Richard is an exceptional CFO who has made an enormous contribution to Morrisons. We have worked very closely together for more than two years and he is held in the highest regard by the company and all its stakeholders.”

Shares in Morrisons tumbled 2.5 per cent on the surprise announcement before picking up to close the day down 1.4 per cent, a fall of 3.6p to 264.8p.

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Analysts at Shore Capital said the planned departure is “more unwelcome news”.

“Mr Pennycook’s announcement comes at a time when the company is not trading particularly well in relative or absolute terms.

“As such, we imagine that CEO, Dalton Philips, could have done without this development,” they said, reiterating their ‘sell’ stance on the stock.

“Morrisons will not sell any fewer baked beans because its finance director is going. However, his departure is an unwelcome loss and distraction for the board,” they added.

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Independent retail analyst Nick Bubb said Mr Pennycook’s departure came as a shock.

“The news about his leaving comes at an awkward time for the business, with trading under pressure as Tesco fights back.”

Mr Pennycook’s departure will add to pressure on the chain after recent figures suggested its market share is being eroded amid challenging trading conditions.

The latest data from Kantar Worldpanel showing that the chain’s market share dipped in the 12 weeks to June 10.

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Last month, Morrisons reported a one per cent sales fall for the 13 weeks to the end of April.

Earlier this month former chairman Sir Ken Morrison accused the current management of Morrisons of neglecting the core business.

Speaking at the company’s 71st annual general meeting, the former chairman delivered a damning assessment of the supermarket group’s performance over the last three years.

The 80-year-old said: “Staffing levels have been reduced in the stores in spite of longer opening hours, which results in a lower level of service for customers.

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“I believe that we are witnessing the creation of a new Safeway with all the inherent problems.”

Mr Pennycook’s announcement coincides with the departure of group human resources and communications director Norman Pickavance, who is leaving the company at the end of June.

Pivotal role in renaissance

MORRISONS’ £3bn takeover of rival Safeway in 2004 led to a string of profit warnings before the two businesses were successfully integrated.

Richard Pennycook is credited with playing a major role in the supermarket chain’s renaissance.

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He was a candidate to take over as chief executive when Marc Bolland left to lead Marks & Spencer two years ago, but the role was given to Dalton Philips from Canadian retailer Loblaw.

Investors feared that Mr Pennycook would leave and introduced a three-year share-based retention bonus.

Mr Pennycook said it is too early to say what new roles he may take up as he would not be able to take on any new jobs for another year.

“If my successor is shaping up well, by next Spring I can think of specific positions,” he said.

He is committed to staying at his home in York.

“We will stay in York and Yorkshire. We won’t be moving as a family. We are Yorkshire folk,” he said.

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