View From City Road: Return of the NFC old guard

Aficionados of boardroom bust-ups have seen this one before. Last year BPB, the plasterboard maker, sacked its chief executive of less than a year's standing because he had the temerity to try to implement changes he had been appointed to make.

Like BPB, NFC took the view that, with the halcyon days of the 1980s over, only a fresh eye could navigate the company through choppier and more competitive waters. And like BPB, having taken the plunge, it found the temperature not to its liking. The pace of change Peter Sherlock wanted to push through, and the upheaval it represented, apparently proved unacceptable.

Both companies operate in industries in crisis - BPB because of a ruinous price war, NFC because its recession-hit customers are increasingly demanding value for money, thereby squeezing the company's margins.

Businesses now contract out far more of their distribution than they used to but, by the same token, the actual cost of distribution to industry has fallen hugely - by something like half, according to some estimates. In other words, there is more business around but at much lower prices. The marketplace has changed out of all recognition and NFC needs to change with it.

Whether Peter Sherlock had the strategy right is anyone's guess, but at least he was addressing the issue. Yesterday's veiled profit warning and a slumping share price are evidence of deep-seated problems.

His error, if that is the word, was to believe that overnight he could turn an employee co-operative into a more conventionally run publicly quoted company that institutions would want to invest in. A three-year rolling contract suggests his conversion to modern ways was not as complete as it might have been but he should nevertheless be commended for forcing NFC to tell its shareholders where their profits came from and what they included.

With the return of the old guard and the hunt for a new chief executive more comfortable with the traditional culture of this company, family values can now be expected to reassert themselves. Whether this is the best way for the company to respond to the challenge of the future is a different matter. Judging by the share price reaction yesterday, the City thinks not.