Not surprising, I am afraid, to hear the news about Morrisons' write-off of £374 million 'cost of integration' following their takeover of Safeway and the conversion of 220 stores.
Their shares took a tumble today as a result, with Morrisons finding themselves in the unenviable position of being among the largest fallers of the day. Seems the market was unconvinced by their three-year plans to restore profitability. Ken Morrison was quoted as saying they are now planning to get back to basics and concentrate on the 'day job' – in effect he's got be talking about improvements in store performance, 'one store at a time'.
One of the analyst's I heard comment about this yesterday actually said that it was to do with the fact that the 'Northern Morrisons' didn't understand what to sell to the 'Southerners of Safeway' when they took them over, quoting that 'they started selling pasties and chips to the Southerners' and this was key to the downfall - not knowing their marketplace and customers.
Well, as a Southerner who likes the odd pasty and chips I have to disagree. Perhaps I'm missing the point, but surely the reason is simple – post-acquisition or post-merger integration is very hard to get right. It demands strong change management and a clear strategy – history is littered with case studies. The 'back to basics' message is the right one to restore confidence.
The 'North-South' divide was also quoted again yesterday, but this time in the context of water shortages. The hosepipe bans (and potential forced metering) being set by some of the water companies in the south (Thames, Southern for example) are a far cry from the over-abundant supply available to Yorkshire Water customers. In fact the Radio 5 coverage I listened to included a poll of customers in the north being asked if they'd mind the south taking the excess supply from the north. Surprisingly, everyone interviewed said yes. A magnanimous gesture indeed, but then considering some parts of Essex are now apparently dryer than the Gobi Desert, a gesture worth having. If only water could flow uphill as well as down dale.
Les Dawson, CEO at Southern Water has been interviewed in Utility Week - note their website appears under development at the moment) this week talking through his view on Southern's challenges and the challenges of the water companies in general – an interesting read.
One thing he doesn't mention is the idea I heard on Five Live this morning as a wacky way to overcome the water shortage – tow icebergs from Greenland or the Arctic to near shore UK and all of our woes will be over. Hmm.
Of course the basic issues remain for the water companies – stop or reduce leakages in pipes and reservoirs, and focus on this before looking for alternative sources.
Costly to do of course, which is why part of the answer has to lie in freeing funds from non-core back office activities – funds that can be spent where they are most needed. I still like the idea of an iceberg sitting outside Portsmouth Harbour though…