BAXTERS Food Group has made a loss of £675,000 after new accounts for the Highland soup maker show it racked up exceptional costs of £9.5 million in its most recent financial period, including exceptional charges relating to job cuts at its factory in Fochabers.
Family-owned Baxters announced up to 80 roles would be affected when it embarked on a two-year manufacturing transformation plan in May 2016. Sixty jobs ultimately went at Fochabers, where Baxters now employs around 450 staff.
The latest accounts for Baxters show £4m of restructuring and related costs, with executive chairman Audrey Baxter noting that the redundancies occurred during a year of “significant transition” for the firm.
Ms Baxter also highlighted one-off costs incurred relating to breaking the lease of its Kelty retail site, as well as major changes to its operations in the US, Canada and Australia. These include a move into customer own brand (COB) sales in the US, including work with Walmart.
“These projects have seen the Group absorb £9.5m of exceptional costs in the year with the work undertaken in the year leaving the Group well placed to continue to move forward and adapt to the changing market conditions,” Ms Baxter writes in the accounts.
Baxters cited the benefit of the pound’s weakness since the Brexit vote, notably on sales generated in the US and Canada after their translation into sterling.
The accounts show that revenue at Baxters increased by 19 per cent to £296.7m, although turnover for the year ended April 1 were measured against a 10-month period covered by its previous accounts.
Before exceptional items, the company made a profit before tax of £8.8m, up from £7m for the 10 months to April 2, 2016.
Ms Baxter said in a statement: “The outcome of the Brexit referendum has impacted our results, with the Group benefitting from the weakening of sterling when translating overseas results on consolidation, particularly from the USA and Canada.
“Longer term uncertainty over the actual terms and conditions of any final Brexit agreement is likely until clarity is obtained. Like many other UK corporates, the Group is currently assessing opportunities and risks together with options and alternatives for whatever outcome is ultimately determined.”
US revenue now accounts for more than 50 per cent of Baxters’ total sales, and rose to $207.7m for the period. Growth in the US was “underpinned” by a major contract with Asda owner Walmart, which Baxters said generated revenue of $10.7m “in less than a year”.
Baxter had significantly strengthened its presence in the US in 2014 with the acquisition of Ohio-based Wornick Foods, which supplies military rations as well as restaurant chains and consumers goods companies.
The start-up costs associated with the move into COB in the US contributed to the £9.5m of exceptional costs booked in the period. There were costs in Canada to renegotiate a union agreement, and in Australia linked to the start of work to relocate to one production site, and to start up a contract manufacturing business.
In Europe, Ms Baxter highlighted growing demand for its COB products, while observing that the “market continues to exhibit changing consumer good habits towards products perceived as healthier and more convenience formats.”
The accounts show average employee numbers fell to 1,463 from 1,539, with staff costs climbing to £57.6m from £40.8m. Directors’ pay rose to £1.8m from £998,000.
Meanwhile, Ms Baxter noted the liability of Baxters’ defined pension scheme had increased to £16.2m from £11.1m, stating that the deficit is “largely attributed to the sustained period of record low interest rates”.
She confirmed that Baxters has shifted its head office to Edinburgh, stating it would provide a platform for “organic growth, investment and potential acquisitions.”
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