STRATHMORE Foods, the Scottish ready-meal manufacturer, has increased pre-tax profit by six per cent to £2.23 million despite coronavirus creating an “extremely challenging operating environment for the company”, new accounts show.

It also said initial positivity that the end of the Brexit transition period past year would lift uncertainty over supplies was dashed by a wave of ingredient and packaging cost hikes, which will ultimately be passed on to customers.

The Forfar-based firm said turnover was slightly down at £14.2m over the period, for year end June 30, against £14.3m over the same period the previous year.

The family-run company said that since early 2020 the pandemic had an impact on almost all aspects of its business, ranging from its internal processes to its supply chain and customer demand.

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Dain Egan, Strathmore finance director, said that “against this challenging backdrop, however, the directors are pleased with the financial performance”.

The firm said it operates in markets where volatility of pricing policies across major customers and competitors “exert considerable pressure” on turnover and profit, and that last year the United Kingdom quitting the European Union created uncertainty which was followed by cost fluctuations.

Mr Egan said: “During the year, the UK and EU managed to reach a trade deal that took effect at the end of the Brexit transition period, and this went some way to alleviate the uncertainties about the continuity and price of supplies.

“Despite this, and for a variety of reasons, 2021 has witnessed a series of ingredient and packaging price increases from suppliers, the combined effect of which cannot be absorbed by the business, and the company will be required to pass these on to customers.”

The accounts newly filed with Companies House said that as well as the increases and, in particular, post year-end, rising staffing costs and recruitment challenges came with a reduced labour pool over almost all areas of the business.

He said: “Many of the company’s foodservice customers continued to experience substantially reduced demand, and the contraction in some retail markets for convenience ready-meals also adversely affected turnover, particularly in the first half of the year.

“In addition, the company also faced downward pressure on its sales prices from some of its customers.”

However, customer demand recovered “steadily” in the second half and the business hailed acquiring major new product listings.

The firm said that the results and “the continued growth in the net assets of the company were an excellent performance in such a difficult trading environment”.

Strathmore noted positive cash flow and no debt at June 2021. It said it invested £513,000 in tangible fixed assets and had capital commitments for a further £420,000 of plant and equipment, which reflected its “policy of investment to improve production capacity and efficiency.

Ordinary dividends were paid amounting to £1.7m and the directors do not recommend payment of a final dividend.

Profit after tax was £1.72m against £1.69m the previous year.

Strathmore Foods added that while the turnover ended down 0.9%, the directors believe “that this was a good result in the circumstances and are confident that sales will continue to improve into the next financial year".