LAST year was one of retrenchment for foods group Hillsdown after
years of rapid growth through acquisition. Chairman Sir John Nott said
the company had ''now got to pause''. Its priorities in the short-term
are to withdraw from less satisfying activities, strengthen cashflow,
reduce exposure to commodity-type businesses and build on the new
executive management structure.
Sir John replaces Sir Harry Solomon, founder and previous chairman,
who retires after April's AGM but will remain a non-executive director
of Hillsdown. Following his retirement, the role of chairman and chief
executive will be split, with David Newton becoming chief executive.
Profits last year were hit by depressed margins, particularly in the
third quarter. The company experienced recession in its two major
markets of the UK and Canada and reduced sales, often as a result of
disposals. Profit before tax fell by 17.5% to #154.1m on 6.1% less
turnover. However, turnover on continuing businesses actually rose 6%.
Earnings per share declined by 35% from 21p to 13.6p but the dividend
was maintained at 8.8p.
Sir John said Hillsdown had ''established a firm earnings base for the
future''. It is following the route taken by many companies in this
recession of divesting of non-core activities and those deemed to be
providing an inadequate return. The poultry business, which has been a
problem area for some time, has been reorganised with a greater emphasis
on fresh produce. It continues to suffer from overcapacity in Europe and
last year faced the additional problem of adverse currency movements.
Various other divisions such as tea and beverages are being merged to
sharpen their focus in areas such as sales, marketing and new product
development.
Hillsdown is to cease property trading and is in the process of
disposing of its property portfolio. Its Fairview Homes business was
adversely impacted last year by ''Black Wednesday'' and the ensuing
collapse in consumer confidence. However, since the year-end, trading
has improved. But it is thought unlikely that Fairview will be floated
on the London Stock Exchange this year.
In total, around 17 businesses were closed down or sold in the last
year. An extraordinary provision of #92.3m was made in last year's
accounts to cover the cost of reorganising Hillsdown businesses, about
half of which has been completed although Sir John said he did not
expect there to be a need for further large provisions this year. The
company refused to break down the nature of the provision, although a
large chunk of it will relate to the property portfolio.
At the year-end, gearing was 35.9% up from just over 12% at the start
of the year. A number of factors including currency effects and goodwill
write-offs on acquisitions were to blame.
Although profits declined last year, the City was relieved that at
last some management action was being directed towards streamlining the
business. This was reflected in an early price rise of 8p but the shares
eventually settled back to be unchanged at 163p. They are are supported
by a generous 7.2% yield.
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