SCOTTISH tea cake and caramel wafer manufacturer Thomas Tunnock more than trebled its pre-tax profits to £3.41 million in its last financial year, boosted by a one-off gain of £2.03m which is believed to have resulted from the completion of two trade-related legal actions.

This jump in profits at the company, which is owned by 78-year-old Boyd Tunnock and his daughters, is revealed in accounts obtained by The Herald from Companies House.

Stripping out the one-off gain, Tunnock enjoyed a rise in underlying pre-tax profits from £1.02m to £1.38m in the year to February 28.

However, with turnover falling from £34.75m to £32.55m, this rise in underlying profits was enabled by a big cut in directors’ pay.

The accounts show that total directors’ remuneration dropped from £999,394 to £480,552 in the year to February 28.

The remuneration of the highest-paid director fell from £615,193 to £172,431. The figure of £615,193 for the year to February 2010 had included a £550,000 pension fund contribution from the company.

Bruce Reidford, company secretary at Tunnock, said that the 12 months to February 28 had been a “poor year” for sales.

However, he revealed that Tunnock was on target to exceed the £34.75m of turnover achieved in the year to February 2010 in its current financial year to next February.

And he highlighted the fact that Tunnock, which is based at Uddingston in Lanarkshire and employs about 560 people, was now benefiting from heavy investment made in the more difficult times.

Mr Reidford told The Herald: “If things continue, we will get to above the position we are at in [the year to February] 2010, which was £34.7m. Hopefully, with good trading over the Christmas and New Year period, when we post our results next year we should be above that.”

Asked about the profit picture this financial year, Mr Reidford said: “I think we are holding our own, profit-wise. We are hopeful we will get a reasonable margin on the sales. It just depends what the product mix is.”

Caramel wafers remain Tunnock’s biggest seller by a considerable margin. Tunnock produces more than five million of the bars each week.

The company makes nearly three million tea cakes each week.

Mr Reidford also revealed that Tunnock, which sells to about 30 countries, had won a contract to supply tea cakes to South African supermarket giant Checkers.

He said: “We have a big order for tea cakes. That is a new market for us. It is a very difficult market in the sense that tea cakes are a very fragile product. It will be interesting to see how that develops.”

Highlighting the scale of Checkers, Mr Reidford said: “If we can get a foothold in there, hopefully we can build upon that.”

He also noted that Saudi Arabia remained a “good market” for Tunnock. He said that the company had been selling into the Saudi Arabian market-place for about 40 years, with another family-owned business which had continued through the generations as its agent.

Highlighting Tunnock’s recent capital investment, Mr Reidford said: “We invested heavily in new plant, so when things got a wee bit better we were geared up for it. That has helped. Our sales have improved in the current financial year, both home and export. We are very grateful for that. We took advantage of that [tougher] time to invest.”

Mr Reidford highlighted the impact on Tunnock’s costs of surging electricity and gas prices, which he noted had more than doubled in recent years.

Noting the relatively fixed nature of Tunnock’s energy use, he said: “If you are baking something for an hour, you can’t cut it back to half-an-hour.”

Tunnock gives no clues about the nature of the legal actions from which it made the one-off gain, citing confidentiality, but these are understood to be trade-related.

It states in the accounts: “The company concluded two actions during the year, resulting in net income being due to the company of £2,034,469, after professional fees.

“This income was received post-year-end. No further details have been provided as the terms of the actions are confidential.”

Tunnock’s accounts show the company paid a dividend of £500,000 to its owners during the year to February 2011. This was the same level of dividend as that paid in the prior 12-month period.

The accounts show Tunnock’s UK sales dipped from £29.27m to £27.9m during the year to February, with exports dipping from £5.48m to £4.65m