JOHN G Russell (Transport) suffered a 43% fall in profits in the last financial year when the group's Icetech freezer operation was devastated by the collapse of the Comet electrical chain, although its logistics arm increased earnings amid challenging conditions.
The latest accounts for the Glasgow-based group show it made £934,000 pre-tax profits in the year to March compared with £1,642,000 in the preceding year as the problems at the former Icetech business weighed on the bottom line.
The freezer maker fell into administration in April with the loss of 70 production jobs in Caithness, five months after the collapse of its biggest customer, Comet, dealt a body blow to the business.
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Writing in John G Russell's accounts for the year to March, directors said Comet's demise left Icetech with a bad debt of around £900,000 and facing a significant cash flow problem.
They added: "The directors made considerable efforts to generate working capital from existing resources to allow the business to continue trading whilst seeking potential buyers for the operation.
"Despite the level of interest shown and proactive efforts to secure an offer no firm offers were received by around mid April ... at which point the company took the decision it was no longer viable to provide ongoing support for Icetech, forcing the directors of Icetech to put the company in administration."
The administration move ended an eight-year campaign by John G Russell to revitalise the former Norfrost business, which it saved from collapse in 2005.
The Norfrost name and Icetech's equipment and designs were subsequently bought from liquidators to the business by Ebac in July in a seven-figure deal. Ebac planned to move production to County Durham.
John G Russell made a £962,000 provision against the book value of Icetech in the year to March.
However, the core logistics business of the privately-owned group increased operating profits to £3.02m in the year to March, from £2.25m in the prior year.
Logistics turnover increased by 13% annually, to £53.9m, from £47.6m.
Directors noted the company won new business but transport margins were static during the year.
Alan Poulton, chief executive of the group, said directors were guardedly optimistic about the outlook for trading conditions.
Asked if the company has seen signs of the economic upturn translating into increased activity, he said: "We are hoping rather than expecting to see it pick up towards the end of the current calendar year. There are some indications to suggest that, but there are still mixed indications."
He added: "I think we will see continued growth in revenues in the current financial year. The margins remain extremely difficult, to get what we think is a fair margin for the quality of service we provide."
Signalling confidence, Mr Poulton said John G Russell would maintain capital investment at around £5m in the current financial year. This will allow the group to improve the age profile of its fleet of more than 500 vehicles.
John G Russell does much of its business with food and drink and consumer goods firms.
But Mr Poulton said the fact it provides a range of services is a strength, particularly during economically challenging times.
In the accounts, directors welcomed an increase in business in its rail freight operation during the year to March.
But they noted the high costs of expanding in this specialised area.
"We strongly believe the Government should be doing more and incentivising companies to switch from road to rail," said Mr Poulton."