16 June 1995

Now Unigate is to axe jobs as profits plummet

By Shelley Wright

UNIGATE is to shed 1500 jobs in the next three years, and will close an unspecified number of its milk bottling and manufacturing plants.

Chief executive Ross Buckland this week blamed the "excessive milk cost increases" since de-regulation last November, and the accelerating decline in doorstep deliveries.

Announcing the companys annual results for the year to Mar 31, he said that £55.1m had been set aside to cover the cost of this restructuring.

This "exceptional item" caused Unigates profit before tax to plummet by 43.1% on the year to £58.3m on sales of £1.87bn. But Mr Buckland insisted that the companys underlying performance had improved. Operating profit before this exceptional item increased 2% to £107m.

But operating profit in Unigate Dairies division fell 9% to £38.4m. Mr Buckland said the company had faced an 11% increase in its milk price since November, adding £40m to its raw material costs.

With the decline in doorstep deliveries, he said that Unigate would reduce its milk bottling business by 40% in the next three years. Doorstep sales had already fallen to 44% of the liquid market.

But Milk Marque chief executive Andrew Dare said he was dismayed that Unigate had tried to blame his organisation for any job losses and restructuring.

"It is nothing to do with deregulation of the milk market, and certainly not the responsibility of Milk Marque," he said. "The trend of pinta sales away from the doorstep to supermarkets has been going on for some years and is the result of the lower price of milk sold in supermarkets."

Meanwhile, Unigates yogurt, dairy spread and dairy dessert business performed well. But Mr Buckland said the increased milk prices had still not been recovered from the cheese market.

&#8226 A similar combination of intense competition between retailers and escalating milk costs has taken a more severe toll on Northern Foods, which this week reported a 24% fall in pre-tax profits to £119.3m, writes Philip Clarke.

After deducting exceptional charges of £91.4m for restructuring the dairy and prepared foods divisions and an £11.5m loss from other disposals, net group profit before tax came to just £16.4m on sales of almost £2bn.

"Operating profits were reduced in both dairy and prepared foods, with the more substantial decline (35.7%) in dairy, reflecting lower doorstep sales, higher milk costs and the accelerated completion of our London franchising programme," said chairman Chris Haskins.