Wellworth set to expand to Republic

FITZWILTON'S supermarket subsidiary in Northern Ireland, Wellworth, is considering expanding into the Republic, but has not stated whether such an expansion would be done independently or in partnership.

The full year results statement from Fitzwilton makes no mention of the proposed sale of half of Wellworth to the British group Safeway for an estimated £90-100 million, and chief executive Mr Kevin McGoran refused to make any comment on the Safeway reports.

Retail analysts believe that Wellworth would need a partner with buying power like Safeway if it has any plans to move south from its base in Northern Ireland. The presence of Britain's biggest retail chain, Tesco, in the market in the Republic means that anybody contemplating a move into the market will need substantial financial muscle and purchasing power.

"We have to look south and we believe that there is room for us in the market in the Republic," Mr McGoran said. Asked where Wellworth would fit into the retail market in the Republic, he replied: "Wellworth would be the family store, carrying food and non food items, even to the extent of carrying leisure and entertainment lines like CDs and videos."

In the North, Wellworth has committed £18 million sterling towards developing three new sites which will be developed over the next year.

At the end of 1996, Fitzwilton had net debt of over £116 million, and that debt position will be exacerbated later this month after Fitzwilton pays £24 million to buy a further 3.7 per cent of Waterford Wedgwood.

But Mr McGoran said that the group was under no pressure to reduce its debt or conclude a deal with any partner. He said that the bulk of the debt had been converted in to a bond maturing in nine years time. "No principal repayments are due until then," he said.

He added that Fitwilton's true position was distorted by the fact that the investment in Waterford Wedgwood was carried in the accounts at cost and does not reflect the £28 million increase in the value of the investment since 1995.

The Fitzwilton results for the year show that Wellworth's operating profits fell sharply in the second half of the year, with the group showing full year operating profits of £18.8 million sterling, down 7 per cent. Given that operating profits in the first half were up to per cent, it seems that the group was squeezed in the second half.

Mr McGoran said, however, that a major contributor to the fall in operating profits was discretionary spending of around £2 million on technology and customer support services. "Gross margins were maintained but there was a conscious decision to spend on technology and support services," he stated.

But the Fitzwilton results came in well short of market forecasts, with pretax profits of £15.1 million down from £15.5 million last year and well short of the £18 million plus forecast by Riada Stockbrokers. Earnings per share of 4.01p were also well short of forecasts in the 4.6p range and were largely due to a lower than expected tax charge of £1.5 million.

The fall in profits at Wellworth was compounded by a weaker performance at subsidiary Rennicks where pretax profits fell from £1.4 million to £1.2 million even though sales were up sharply from £18.6 million to £22.2 million.