997
expansion w ithin Europe, both organically and by acquiring
quality food and distribution businesses – particularly w
here
m itted to consistent profitable
grow th
to its
the com
6 B
usinesses
uneration Com m
33 Auditors’Report
35 B
alance Sheets
36 G
ains and Losses
37 N
38 N
54 Principal Subsidiaries
54 Shareholder Inform
s of £129.6 m illion, up 3.4%
on turnover up 13.1% at £2,414 m
illion;
pact of acquisitions and tight control of costs.
• European Food profits before exceptional item
s up 19.7% at £100.9 m
illion
– Fresh Foods profits rose 67.3%
to £66.4 m illion aided by acquisition and continuing organic grow
th
– D
illion due to low er m
arket realisations for butter and m ilk
pow der w
• Successful com
m encem
autom ated w
operating profits of £23.4 m illion.
• Kraft European m
argarine and spreads business acquired for £79 m illion, and H
argraves pork processing
• Sale of U
istribution.
• Strong operating cash flow
resulted in increase in net cash to £187.5 m illion despite spend on acquisitions.
• Earnings per share before exceptional item
s up 4.1% at 41.0p.
• D
H ighlights of the year
U nigate P
s £
129.6m £
125.3m
tional item s
2
M alton Foods
m akes added value products for the pork, bacon and cooked m
eat m arkets. In the U
nited Kingdom
ow n brands although it also sells under the H
arris brand nam e.
A w
orldw ide export business has also been developed over the last few
years focusing on the w hole range of
pork products.
St Ivel U K
m anufactures a w
ide range of fresh foods and dairy products bearing com pany brand nam
es and
fat spreads, yogurt, from age frais, desserts, cream
, savoury dips
and fruit juices. St Ivel’s m ajor brands include G
old, U tterly B
com pany has an exclusive agreem
ent for the production of chilled desserts under brand nam es licensed by
the Cadbury G
roup. St Ivel also m anufactures a range of cheeses, w
ith em phasis on the added value m
ature and
low fat sectors, particularly cheddar.
St Ivel Foods, Europe includes businesses in France and Italy. The product range includes m
argarines and spreads
as w ell as yogurt and desserts. In France the principal brand is St. H
ubert 41, w hich is the m
arket leader in French
low fat spreads. O
ther brands include Le Fleurier, a low fat spread, as w
ell as the m argarine brands Prim
a and
Tournolive. In Italy St Ivel’s Vallé m argarine brand is m
arket leader. The yogurt and dessert business in France also
focu ses
on qu
ality m
anu factu
ring of
ow n
label p
rodu cts
for the
French retail
trade as
w ell
as the
U K
m arket.
EU R
O P
EA N
FO O
D – D
A IR
U nigate D
airies is a leading processor and distributor of fresh m ilk in the U
K, prim arily in southern England and
South W ales. U
nigate-supplied independent bottled m ilk buyers,
provide a daily delivery of bottled U nigate fresh m
ilk and a range of other products to over 1.4 m illion hom
es.
holesale rounds supplying fresh m ilk and cream
and an
extensive range of St Ivel and other branded fresh products to convenience stores, shops, forecourts, hospitals,
schools and caterers. U nigate D
airies also supplies a full range of fresh m ilk to the m
ajor grocery retailers. The
results of the D airy division include the results of the G
roup’s related butter and m ilk pow
der activities.
W IN
CA N
TO N
LO G
IS TICS
ated w arehouses; collects and distributes via
tankers, food and other products, prim arily fuel, chem
icals, gases and m ilk; and provides com
m ercial vehicle fleet
er and industrial sectors.
U nigate P
ent 3
These results, w hich include the first full year contributions from
the
ade in our Fresh Foods division over the last eighteen
m onths, dem
roup has shifted from
ards food and distribution. It is particularly
pleasing to record a significant im provem
ent in operating cash flow . Even after
allow ing for low
ent of w orking
capital, it is clear that the revised portfolio of businesses has a greater capacity to generate cash.
D uring the year, w
e took further steps to strengthen our core businesses. In June w e paid £19 m
illion for
alton is now larger than our D
airy
businesses. In A ugust w
e acquired the European m argarine and spreads businesses of Kraft Foods for £79 m
illion,
giving St Ivel access to new m
arkets and brands. The past year also m arked the final w
ithdraw al of the G
roup from
the U
S Restaurants business, w ith the sale in July of B
lack-eyed Pea and in O ctober of Taco B
ueno and Casa B onita.
W ith cash in the bank, the G
roup is w ell-placed to capitalise on its grow
ing strength in food and distribution,
through further investm ent in our existing businesses and by acquisition. In the light of our intention to increase
our exposure to European m
arkets, I am particularly pleased that Victor
Scherrer joined the B oard in Septem
ber as a non-executive director. Victor is
Chairm an and Chief Executive of La Vie S.A
., and President of the French
A ssociation of Food and D
rink Industries. H is
ill
elcom ed John M
oard. A s a
griculture Fisheries and
Food and Secretary of State for Transport, John w ill bring to our deliberations his long
experience of the food and
distribution industries in w hich
w e
Kerridge is retiring at the end of the A G
M this year. O
the G roup has benefited greatly from
his advice, and w
for
success.
anagem ent team
ic new
businesses w hile m
anaging m ature operations through a difficult period of transition. These solid results are the best
m easure of that ability, especially in another difficult year for the dairy industry.
O ver the last five years, the G
roup has repositioned itself in grow th m
arkets. W e have shed som
e operations,
invested heavily in others, and bought new businesses. O
ur task in the year ahead is to ensure that U nigate continues
to adapt successfully to fresh challenges and opportunities, and in particular that w e invest our grow
ing cash
oard is acutely aw are of the dem
ands w hich the continuing process of change m
akes of our
em ployees. W
e are proud of their dedication and flexibility, and grateful for the contribution they have m ade.
Ian M artin, Chairm
dem onstrated
a greater
cap acity
4
European Food increased operating profits by 19.7 per cent to £100.9 m
illion,
on sales up by 23.1 per cent to £1.9 billion. Fresh Foods again perform
ed
w ell,w
ith sales rising by 44.6 per cent and profits by 67.3 per cent. The results
affirm the positive im
pact of acquisitions, sales of
the Fresh Foods division have grow
n 13 per cent and profits 24 per cent.
M alton Foods continued to strengthen its position as the leading pigm
eat processor in the U nited Kingdom
. Sales
nearly doubled to £706 m illion. Profits rose strongly, as the com
pany benefited
from the first full year contributions of the Stocks Lovell, Lovell &
Christm as and
H arris pigm
th. The three
businesses acquired are now substantially integrated. In June, the com
pany
eat processing operation to its portfolio, for a total
consideration of £19 m
illion. It is encouraging that the contribution m ade to the
profitability of M alton by these acquisitions has exceeded our expectations.
A t St Ivel, the chilled products division achieved significant increases in both sales and profits. Strong organic
grow th in sales of yellow
fats w as bolstered by the acquisition in A
ugust of the European m argarine and spreads
businesses of Kraft Foods. This acquisition, w hich cost £79 m
illion, added Vitalite and G olden Churn to the successful
G old and U
tterly B utterly brands already ow
ned by St Ivel. The division now has a 24 per cent share of the U
nited
Kingdom m
arket for m argarine and spreads. The cost base of our spreads business w
ill be low ered follow
ing planned
consolidation of our m anufacturing operations at Liverpool and closure of the H
em yock plant. This reorganisation w
ill
The yogurt and desserts m arkets rem
ained fiercely com petitive. A
s a result, overall sales in these categories w ere
broadly unchanged. Cheese volum es grew
in line w ith m
arket grow th, aided by increased sales of low
fat and m ature
Considerable progress w as m
.
StIvel Foods, Europe increased operating profits by m ore than tw
o thirds to £6.7 m illion. This m
ainly reflected the cost
ing from the m
erger of Prodipal and Vedial SA , but profits also benefited from
the acquisition of the
Italian operations of Kraft Foods. Products m anufactured in France w
ere distributed in B ritain for the first tim
e.
ilk pow der activities as w
ell as the liquid m
ilk business, saw
operating profits fall 22.6 per cent to £34.5 m
illion. The principal cause of the fall in D airy profits w
as the decline in
profitability of butter and m ilk pow
der. The decline arose from falling prices exacerbated by the strength of sterling
and the effect this has had on intervention prices. Com pared w
ith last year, low
der
ately £12 m illion. A
gainst this background, the underlying m ilk
business m anaged a highly creditable perform
ance.
ere dow n 6.9 per cent, principally due to low
er
w ere very tightly controlled. The closure program
m e designed to cut
glass bottling production capacity by around 40 per cent w as com
pleted.
In addition, significant progress w as m
ade in reducing the rate of decline
in doorstep sales, w hich fell to 8.8 per cent by the end ofthe year.
W incanton Logistics
increased sales by 14.2 per cent to £444 m illion but operating profits rose by only 1.7 per
cent to £23.4 m illion; a disappointing perform
ance. A lthough the Retail and M
anufacturer divisions perform ed w
ell,
proved
cut the rate of decline in doorstep m ilk sales
by over one third.
R ecent
acqu isitions,
cou p
led w
sales of
profits by 67 per cent.
Brought to you by Global Reports
Existing distribution contracts w ere renew
ed in m ost cases, and new
business gained included contracts w ith
A rgos, the G
reenalls G roup and H
. J. H einz. Shared distribution for pub retailers, branded as Inn Logistics, is now
being
offered as a specialist service. A second branded service, N
et Logistics, offers retailers and m anufacturers, prepared
to share distribution services, a reduced transport tariff. These new services
are expected to contribute to grow th in the forthcom
ing year.
S trategy:
roup’s strategy to focus on its food and
distribu tion
bu sinesses,
U nigate
com p
leted its
w ithdraw
al from
as sold for £42 m
illion in July and
onita w ere sold for £27 m
illion in O ctober. A
s a result of these disposals, the G roup is now
invested exclusively in the European food and distribution m arkets.
O ver the last three years, our European Food operating profits have increased from
£68.5 m illion to £100.9
m illion. These increased earnings w
ere driven by the strong grow th of our Fresh Foods businesses, w
here profits have
£22.4 m illion to £66.4
m illion. Fresh Foods accounted for less than a quarter of
G roup operating profits three years ago. Today, it accounts for m
ore than half.
Capital spending in the European Food businesses totalled £56 m illion during the year, against £53 m
illion last
illion w as invested in the developm
ent of W incanton, follow
ing the £50 m illion invested the
previous year. O ver the last tw
o years, the G roup has invested over £200 m
illion in these core businesses.
It is clear now that a period of transition is over, and that food and distribution are now
driving the grow th of the
G roup. In yellow
anufacturer in the U nited Kingdom
, and the creation of
a sizeable European business is w ell advanced. M
alton Foods is the largest processor of pigm eat products in the
U nited Kingdom
pete effectively in both the dom estic and export m
arkets. W incanton is the
second largest supplier in a U nited Kingdom
m arket w
hich has considerable scope for further grow th, and the m
arket
arehousing.
arkets in w hich w
e operate to rem ain highly
com petitive, w
ell w ith sales and profits
for the first tw o m
onths ahead of last year. The G roup has a sound strategy, a
strong financial position and a m anagem
ent team com
O ver the last three years, our European
Food operating profits have increased
from £68.5 m
A period of transition is over, and food
and distribution are now driving the
grow th of the business
U nigate P
eview 5
6
an*+ §
oard in M arch 1995 as Chairm
an. H e is
uneration Com m
G ranada G
an of N
erly D eputy Chairm
an of G rand
Joined the U nigate B
oard in 1990 as Chief Executive. Previously Chief Executive of Kellogg Europe. President of the
Food and D
of G rocery D
JB M
ining PLC.
on-Executive*+ Joined the B
A nglian G
incanton Logistics Joined U
nigate in 1972 and the B oard in 1991. Chairm
an of the Freight Transport A
ssociation Environm ent B
em ber and SW
istribution.
ecem ber 1996. H
ber of Parliam
ent and form erly held five Cabinet posts in the
Conservative adm inistration including M
inister of A griculture
Fisheries and Food and Secretary of State for Transport. H e is
also a D irector of A
ssociated B ritish Foods PLC, Slough Estates
PLC and London and M anchester G
roup PLC.
on-Executive*+ Joined the B
an of B ritish
Energy PLC and Logitron H oldings PLC and a D
irector of Theraputic A
om ecq PLC. H
e is D eputy
oard and w as
e PLC. H e is
Chairm an of the A
udit Com m
cherrer (54) N on-Executive*
H e is a French national and holder of the Legion d’H
onneur and joined the B
oard in Septem ber 1996. H
e is Chairm an and Chief
Executive of La Vie SA , President of A
N IA
irector of S IA
L (the Paris International Food Exhibition) and Vice President of CN
PF (Confederation of French Industries B anks and Services).
Cob S tenham
(65) N on-Executive*+
e is Chairm an of A
rjo W iggins
m unications plc
rganisation PLC and Standard Chartered
PLC.
um m
erfield (57) Chief Executive, European Food Joined St Ivel as Production D
irector in 1986 becom ing
M anaging D
irector of U nigate D
airies in 1989 and Chief Executive of the European Food businesses in February 1994. H
e joined the B oard in M
arch 1991. H e is President of the D
airy Industry Federation and a Council M
em ber of the Institute of
G rocery D
an of Pirtek (Europe) Ltd.
John W orby (46) Finance D
irector Joined U
roup Treasurer in 1981. H
e w as Finance D
irector of U nigate D
airy H oldings and of
W incanton G
G roup Finance D
ccountant.
m ittee
+ M em
m ittee
§ M em
ination Com m
ajor supplier of distribution
leading provider of autom ated w
arehousing.
U nigate has built strong positions in the European food and
distribution m arkets. The G
roup has pow erful brands and
substantial shares of the spreads, yogurts and desserts
m arkets in the U
K and a grow
has the largest pigm eat processing business in B
ritain.
ilk to retailers and
consum ers in the southern half of England and S
outh W ales.
U nigate P
usinesses 7
ajor supplier of chilled fruit juice in the U
K .
under the R eal brand and
S t
S ince the launch of Cadbury
desserts in 1991, the innovative range has consistently driven m
arket grow
aintained. S
in desserts.
m anagem
ent expertise saw the extension of the Cadbury’s range of
desserts to include Flake and Cheese Cake, the re-packaging of G old, the
further developm ent of the highly successful U
tterly B utterly brand, and
the launch of Tournolive in France.
In France S t Ivel is m
arket leader in low
fat spreads w ith
ecently launched Tournolive, is the first ever m
argarine in France that com
bines sunflow er
and olive oil.
ent. End-of-line
ootton B assett plants w
as com pleted.
The consolidation of m argarines and spreads in the U
nited Kingdom
ill be m ade on the latest high speed filling
equipm ent. The com
businesses in France has also reduced costs.
U nigate P
ith further organic grow
ritain of Shape Custard Style yogurt and St Ivel
D evonshire-Style R
anufactured in France, the
een the chilled products
being exploited.
The addition of Vitalite and G olden Churn to the product range
m eans
m ono-unsaturated and dairy spreads sectors as w
ell as the low fat
category. This full and com petitive range of products enables St Ivel
to m
G reater focus on added value
cheeses such as M ature
Cheddar and low fat
cheese under the S
hape brand nam e
M alton has benefited from
heavy investm ent. S
30 m illion on plant and
equipm ent.
ade M alton one of the
low est-cost pigm
react to consum er dem
and in the fast grow
ing cooked m eat
cooked m eat.
specifications. M alton has
aterial supplied by U K
pig producers to supply a better, leaner product.
Coupled w ith investm
ent led organic grow
com pany is not only the largest single business w
ithin U nigate, but also
the largest pigm eat processor in B
ritain and one of the top five in Europe.
Exports continued to flourish, and now total over £100 m
illion in sales to
over thirty countries. Shipm ents to Korea and Japan grew
strongly for the
second year in succession, and the M alton and O
ssett plants becam e the
first U K suppliers to be granted access to the A
m erican m
D epartm
A s an integrated processor procuring pigs on contract, M
alton audits its
suppliers on every aspect of pig production and w elfare to offer its retail
custom ers and consum
B y investing in innovative processing techniques and new
product
categories of pork, bacon and ham . N
ew flavourings and presentations,
like basted pork joints and fixed w eight pork chops, are enhancing visual
im pact and broadening sales.
U nlike m
alton supplies a full range of pigm eat
products to a w ide variety of outlets. This breadth of activity m
akes the
ore robust and able to face the seasonal and cyclical
fluctuations in sales and prices.
U nigate P
ith S unflow
utter and garlic base.
ilk bottling plant at H
anw orth
producing over 7 m illion
bottles per w eek for its
doorstep custom ers in the
S outh of England.
of London, is a state of the art m
ilk processing facility for U
nigate custom ers requiring
carton and plastic packaging.
U nigate’s strong advertising
and the excellent service provided by its m
ilkm en
m ilk, cream
and other products to convenience stores, corner shops, forecourts, schools, hospitals and caterers.
doorstep service. N ew
m itm
nigate m ilkm
en, has reinforced
of U nigate’s doorstep
delivery.
arketplace, U nigate D
airies continued to reduce
overheads and distribution costs and im prove productivity. The dairies
at Folkestone and St Erth and a soft-drinks bottling plant at G
loucester
pany also injected over £13 m illion of capital
investm ent to reduce its cost base and further im
prove the quality of
airies rem ains innovative and seeks constantly to anticipate and
satisfy shifts in consum er dem
ands. The com pany has pioneered
-
top carton for value-added products and invested heavily in new filling-
lines for the grow ing plastic container m
arket.
ers enhances quality, flexibility and control.
It is boosting sales by creating opportunities for retailers to m arket ow
n-
label m ilk on a regional basis, such as W
elsh M ilk.
U nigate P
all doorstep delivery businesses
nigate’s com m
itm ent to the
nigate D airies all-round
R ecent investm
ent covers new
processing, packaging equipm
ent and hand-held com
puters helping to both increase productivity and enhance the service to custom
ers.
K and export m
Inform ation Technology is
fundam ental to W
up-to-date technology to
im prove
W incanton is the leading provider of autom
ated w arehousing in the U
K.
ritish A irw
rothers
arket leadership w as confirm
ed last
ajor contract to design, build and operate a
com bined food and clothing w
arehouse at B urton-on-Trent for Littlew
oods.
From its num
ber one position providing logistics services to the U K’s m
ajor
retailers, W incanton has developed its core skills and is now
w inning
ew contracts
rgos catalogue
stores and
billion a year U K logistics m
arket
incanton is one of
here there are clearly am
ple
opportunities for further grow th.
The com pany is capitalising on the success of the G
reenalls and H einz
contracts, and m aking full use of the latest m
ovem ent tracking and data
m anagem
ent technology developed to support them . The shared
distribution services are now branded as Inn Logistics for the licensed
trade and N et Logistics for m
anufacturers, backed by a dedicated fleet
ofvehicles.
K licensed trade. Custom
ork.
based on shared user rating tariffs. W
hen outw ard
other custom ers for the return
journey increasing vehicle utilisation and reducing unit
costs.
and on tim e.
anagem ent
food processing m arkets.
16
nigate S haresave S
LC 17
taken the opportunity to participate directly in the success of the Com pany
by joining its Payw ise profit-related pay schem
e.
ployees are participating in a series of w orkshops
designed to identify custom er expectations and then to exceed them
. This
has engaged the entire w orkforce in the drive for im
proved perform ance.
Excellent results are already apparent, especially in reducing the rate of
decline in doorstep deliveries.W incanton Logistics em
ployees dem onstrate their ability to w
ork flexibly,
m aster a range of skills and take responsibility for decisions in their
operation of the com pany’s autom
ated w arehouses.
St Ivel has introduced a series of initiatives designed to encourage
em ployees to im
ore
a variety of disciplines participate in over tw o
dozen separate team s, w
hose ideas have led to som e dram
atic
Staff throughout our business participate in developm ent program
m es
w orking skills w
Excellent custom er service cannot
be achieved by a form ula, nor by
a sm
ployees to im prove our
custom ers’ experience.
Em ployees from
finance sem inar. Financial
anagem ent
developm ent.
pow erm
ent culture.
Fundraising events organised as part of U
nigate’s com
Children helps m ake a real
difference to the lives of thousands of disadvantaged children in the U
K .
18
ell as helping the frail and
vulnerable.
U nigate is com
unity, U
projects in the regions and localities w here the G
roup is a m ajor em
ployer.
ards the com m
ely
panies include an anti-crim e initiative in London,
inner city im provem
B ristol to B
ath, a technology college
puters for a prim ary school at M
alton and a m ilking parlour
used by schools.
A ll U
nigate com panies are expected to conduct their operations w
ith a proper
ental issues are review ed at Executive level.
A nnual audits have dem
onstrated a steady im provem
ent in both perform ance
and com
ental legislation.
The dairy and food businesses have continuously im proved the m
anagem ent
and control of food hygiene and safety, the treatm ent of effluent, and the
quality and m ethods of w
aste disposal. Steady progress is being m ade
tow ards the replacem
ent of CFC’s in factory chiller units, and the recycling
ofpackaging.
ise engine efficiency
axim ising distances
road congestion and exhaust em issions.
A n on-board com
puter system that m
ental safety and health benefits to W
incanton’s distribution fleet.
have been introduced to ensure that w
ater is not w
here effluent is unavoidably created
it is treated before discharge to protect our rivers and stream
s.
ater services experts set high standards, m
onitor com
standards. A t W
ergency procedures are constantly m
onitored and im
U nigate P
S ales and operating profits
S ales from
£1,949m to
continuing operations, before exceptional
item s, increased 15.8%
from recent acquisitions by M
alton Foods and St Ivel, but also tight control of
costs throughout the G roup.
European Food
hich w ere 19.7%
Food w ere £1,921m
prising M alton Foods,
strong grow th. O
increased to £66.4m , 67.3%
last year. A
The results include turnover of £140.2m and operating
profits, before exceptionals, of £7.6m in respect of acquisitions during the year.
At M alton Foods, further organic grow
th and the integration of acquisitions
m ade in 1996 both contributed to significantly increased sales and profits.
S ales of £706m
, of w hich £246m
related to the recent
acquisitions. O rganic grow
healthy 26% . This grow
th stem s from
ands through the introduction of new added value
products, such as fixed w eight and further processed pork products.
Increased sales to U K retailers w
ere supplem ented w
ith further grow th in
exports to Europe, the Far East and the U nited States, w
hich together accounted for sales of £106m .
The grow th of M
alton Foods has been supported w ith continued capital investm
ent w ith £14.0m
during the year.
The im pact of high pig prices, caused in part by the B
S E
as particularly acute in the first half of the year.
H ow
the latter
half of
the year
benefits, m argins for the year as a w
hole w ere reasonable.
of food and distribution, grouped w ithin the European Food and W
incanton Logistics divisions.
ivisionM alton 54.9%
Cheese 12.5%
grow th w
22
during 1996/97 com pared to 1995/96. These results,
how ever, also need to be seen in the context of the high butter and pow
der prices w hich prevailed in the previous year.
The im pact of the decline is show
n in the graph of butter and m ilk pow
der price trends.
O verall m
n on last year, largely as a result of
low er doorstep sales. The decline in doorstep sales for the year w
as 10.5% . A
num ber of m
easures w ere taken to reduce the rate of decline, including a new
television advertising
cam paign,
an im
proved franchising
package and
extensive canvassing of householders. The results of these m easures are
reflected in the continued deceleration in the rate of decline. B y the year-end,
it had fallen to below 9%
.
e term s. M
achieved on the surplus butterfat generated from the 63%
of m ilk sold as
sem i-skim
ilk. Since 1 April 1997 the intense com petition for
retail business w ith superm
arkets has led to a further w eakening in m
argins in this sector.
Costs continue to be tightly controlled and w ere further reduced by the closure of the Folkestone liquid m
ilk
bottling site and 13 depots during the year. The decision, announced in January, to close the St Erth butter and m ilk
pow der m
anufacturing plant and transfer liquid m ilk processing to Totnes w
ill further reduce costs in the yearahead.
These closures are part of the planned rationalisation of liquid m ilk activities initiated in June 1995. S
ince that tim e,
arginally ahead of the 40% originally planned.
Capital investm
ent of
capacity to
produce m ilk sold in non-returnable plastic containers and to im
prove further processing efficiency at the
W estw
£23.4m
expectations, but profits overall w ere held back by poor
trading in the Transport division. Turnover w as 14.2%
ahead of last year at £444m
. This reflected both new business gains and the com
m encem
autom ated w
pany is operating for M ars’Pedigree
Petfoods and Lever B rothers.
R etail division profits im
proved,
experienced in
recent years.
ers, including W oolw
the am ount of business they placed w
ith W incanton. The Inn
Logistics service,
W incanton Logistics
ivision
B utter and M
ber of new contracts.
ical m arkets.
n on last year. The petrol price w ar w
hich took place during the year led to fluctuating
volum es on a num
ber of contracts. The chem ical sector also suffered from
low er volum
es w hich has adversely affected
the profitability of haulage contracts in the sector. M ilk haulage rem
ained a highly com petitive m
arket. N ew
H S
anagem ent team
underperform ance are being addressed.
D iscontinued operations
(1996: £8.1m ) to profits during 1997. This w
as earned by the U S
Restaurants business up to the date of disposal. The sale of U S Restaurants w
as com pleted in tw
o parts. The B lack-eyed
Pea business w as sold for £42m
in July 1996, £8.6m of w
hich rem ains outstanding as a loan note, and Taco B
ueno and
in O ctober 1996. The disposal of these businesses, w
hich in 1996 contributed £7.0m to operating
profits, has diluted pre-tax profits in 1997 by approxim ately £2m
. Provision for the loss on sale of £59.5m w
as m ade in
the 1995/96 financial year. S ubsequent to the year end, the G
roup also com pleted the disposal of G
uard D efence, a
ned by W incanton Logistics.
Exceptional item s
The exceptional charge before tax for the year of £13.4m represents a provision to m
eet the costs of closing the StIvel
spreads factory at H em
yock and relocating its production to Kirkby, near Liverpool. The decision to consolidate the
production of m argarine and spreads production at Liverpool follow
ed the acquisition in A ugust last year of the
European m argarine and spreads businesses of Kraft Foods. It is anticipated that the transfer of production and
subsequent closure of H em
yock w ill take place in the latter part of 1998. The provision of £13.4m
includes £8.5m in
n of existing buildings, plant and equipm ent at H
em yock.
In the year to 31 M arch 1996, the G
roup reported an exceptional profit before tax of £173.7m . This largely reflected
the disposal of the G roup’s investm
ent in N utricia and the sale of the G
iltspur exhibitions business. It also reflected a
provision of £59.5m for the expected loss on the disposal of the U
S R
ill previously w ritten off; the balance of £21.3m
w as used to m
eet the loss on disposal and
the associated costs of exiting from the U
S Restaurants business.
as £2.4m com
pared to a charge of £7.6m in 1995/96. This reflects the fact that
the G roup rem
ained in a net cash position throughout the year follow ing the realisation of the G
roup’s investm ent in
N utricia during 1995/96. Interest receivable on short term
cash deposits, including those held in the N etherlands
w here the G
; this w as offset by interest payable of £18.5m
w hich arose
borrow ing in the U
K and on the ten-year private placem ent borrow
ing.
Taxation
The taxation charge of £32.4m represents an effective rate of 25%
on profits before exceptional item s. This is 1%
low er
than in 1995/96. The rate continues to reflect the benefits of the G roup’s financing arrangem
ents.
Brought to you by Global Reports
Brought to you by Global Reports
Brought to you by Global Reports
the O perating and Financial Review
on pages 20 to 25. A n indication of future developm
ents is contained in the
Chairm an’s and Chief Executive’s review
s on pages 3 to 5. Profit attributable to ordinary shareholders for the financial
year am ounted to £88.1 m
illion. A n interim
January 1997 and, subject to
shareholders’approval at the A nnual G
eneral M eeting to be held on 29 July 1997, a final ordinary dividend
of 13.2p
per share w ill be paid on 5 A
ugust 1997 to those shareholders on the register on 20 June 1997. This leaves retained
profits of £39.9 m illion to be transferred to reserves.
A cquisitions and D
• O
n 24 June 1996, the pork processing business of H . H
argrave & Co. Ltd for a consideration of £18.8 m
illion; and
n 9 A ugust 1996, the European m
argarines and spreads business of Kraft Jacobs Suchard for £77.1 m illion.
D uring the year the G
roup sold the follow ing businesses:
• O
illion.
• O
onita Inc for a consideration of £27 m illion.
A fter the year end the G
roup sold the business of G uard D
efence Ltd, part of the W incanton G
roup, for £1m .
eserves
D etails of changes in the authorised and issued share capital and reserves of the Com
pany are show n in N
otes 19
and 20
S ubstantial Interests
A t the date of this Report, the Com
pany has been notified by the follow ing that they hold a disclosable beneficial
interest in 3% or m
ore of the issued ordinary share capital of the Com pany.
Royal & Sun A
4.2%
anaged or held by or on advice from the follow
ing bodies, or their subsidiaries, are
interested in 3% or m
ore of the Com pany’s issued ordinary shares:
Prudential Corporation plc 4.0%
ber of w ays to provide em
ployees w ith inform
. These
ployees dealing w ith G
roup and D ivisional results, in-house new
spapers and
Em ployees are encouraged to participate in the G
roup’s perform ance through the Com
pany’s Payw ise profit
related pay schem e and S
AYE S hare O
ise and
of em ployees hold S
AYE options over a total of 6.8 m illion ordinary shares in the Com
pany.
26
(d)m aintain a w
sexual and racial harassm ent or intim
idation;
ploym ent conditions and job requirem
ents reflect our com m
itm ent to equal opportunities.
W here people becom
e disabled during the course of their em ploym
ent, every practical effort is m ade to retain
their services and to provide retraining if necessary. A ll em
ployees are eligible for appropriate training, career
developm ent and p
eop le are not treated any differently in this resp
ect.
pany are show n on page 6. These, and M
r Ernest Sharp w ho retired as a D
irector on
30 July 1996, w ere the only directors during the year. A
s announced on 16 M ay 1997, M
r John Kerridge w ill retire at
the conclusion of the A nnual G
eneral M eeting on 29 July. M
rVictorScherrer w as appointed a D
irector of the Com pany
on 12 Septem ber 1996 and The R
t. H on. John M
acG regor w
pany on 10 D ecem
ber
1996. The other current D irectors served throughout the year.
Victor Scherrer and John M acG
regor, having been appointed D irectors since the last A
nnual G eneral M
r Ross B uckland and M
r G ordon Sum
ith
ssociation and, being eligible, offer them selves for re-election. Victor Scherrer and John
M acG
regor do not have service contracts w ith the Com
pany. Ross B uckland and G
ordon Sum m
erfield have service
contracts details of w hich are set out in the Report of the Rem
uneration Com m
D irectors’
beneficial interests in the Com pany’s ordinary share capital are set out in the Report of the
Rem uneration Com
onations
com panies of the G
roup m ade donations for charitable purposes during the year w
hich
o political donations w ere m
ade.
ith the Cadbury Com m
ittee’s Code of B est Practice
throughout the year. The auditors, KPM G
A udit Plc, have reported to the B
oard that in their opinion: w ith respect to
the D irectors’statem
ents on internal financial control set out below and going concern on page 25, the D
irectors have
provided the disclosures required by the Listing Rules of the London Stock Exchange and such statem ents are not
inconsistent w ith the inform
ation of w hich they are aw
are from their audit w
ork on the financial statem ents; and that
the D irectors’statem
ent set out above appropriately reflects the Com pany’s com
pliance w ith the other aspects of
the code specified by the Listing Rules for their review
. They have carried out their review in accordance w
ith
uditing Practices B oard, w
hich does not require them to perform
any additional
w ork necessary to express a separate opinion on the effectiveness of either the G
roup’s system of internal
financial control or the Com
pany’s corporate governance procedures, or on the ability of
the G roup to continue in
operational existence.
The B oard of D
irectors acknow ledge that they have overall responsibility for the G
roup’s system s of internal
financial control. The G roup’s system
s and procedures are designed to provide reasonable, but not absolute,
assurance against m aterial m
isstatem ent or loss.
to be
follow ed and the overall environm
ent in w hich businesses are expected to operate, including the G
roup s
Financial Reporting:
There is an established procedure for the preparation and review at least annually by the B
oard of individual m edium
term plans and annual budgets for operating businesses. Each business area reports m
onthly on its perform ance
against its agreed budget. The B oard receives m
onthly an update on such perform ance and generally review
s
pletion review s.
A udit Review
ittee review s and agrees the internal and external au
dit p lans and deals w
ith any significant
The D irectors have review
ed the effectiveness of the system of internal financial control in operation during the
year. A statem
ent of the D irectors’responsibilities concerning the preparation of the financial statem
ents is set out on
page 33 and a statem ent on going concern on page 25.
R esearch and D
The G roup is active in the im
provem ent of production processes and existing products, and the developm
ent of new
ents and support the long term profitable grow
th of its businesses.
al code that it follow s w
ith regard to paym ents to suppliers. It agrees paym
ent
term s w
ith its suppliers w hen it enters into binding purchasing contracts for the supply of goods and services. Its
suppliers are, in that w ay, m
ade aw are of these term
s. The Com pany seeks to abide by these paym
ent term s w
hen it
is satisfied that the supplier has provided the goods or services in accordance w ith the agreed term
s and conditions.
ere equivalent to 21 days.
S pecial B
July 1997 at the H otel Inter-Continental, London the
D irectors propose to seek authority to disapply shareholders’
pre-em ption rights in certain circum
stances, and to
renew the Com
pany’s pow er to buy back a proportion of the Com
pany’s share capital. The Com
pany is proposing to
anagers.
The term s of the Resolutions and explanation of the proposals are set out in the separate N
otice of A nnual G
eneral
A uditors
illingness to continue in office and a resolution for their
re-appointm ent in accordance w
ith the provisions of Section 385 of the Com panies A
ct 1985 w ill be proposed at the
A nnual G
eneral M eeting.
Registered O ffice:
oard
o 621482.
C A
Law rence
190 10
7 207
irector in 1996 and 1997; his total em olu
m ents w
S u
u neration C
om p
tive D irectors based on the achievem
ent of p re-agreed targets
for p rofit before tax in the year, and the R
em u
erform ance.
ill dep end on their division’s p
erform ance,
ill dep end on the overall G
rou p
p erform
ance. If targeted p rofit before tax in the year is achieved,
25% of basic salary (30%
for the C hief Execu
tive) w ill be aw
arded. A D
arded u p
of basic salary (30%
u neration C
erform ance over target, the D
irector's p ersonal p
tive team as a w
hole in achieving the strategic aim
s of the bu siness. O
ther Execu tives are eligible for an annu
al p erform
ance of the G rou
p and the p
onsibility w ithin the G
rou p
and individu
ith the m axim
Th e
b ase
salaries of
Execu tives
are review
endent su rveys.
K p
p to
ally after 20 years of qu alifying service.
Pensions for Execu tives are p
rovided on a non-contribu tory basis throu
gh the U nigate G
rou p
p rop
gh the u se of an u
nfu nded arrangem
ent, su p
of credit, to p rovide broadly sim
ilar benefits throu gh a com
p lem
om p
p art of p
ensionable salary. The p
u rchased life p
aym ent of benefits on death or disability.
The follow ing p
irectors from the C
S h
entation of a Savings-Related Share O ption Schem
e (“SAYE Schem e”), the U
nigate G
e and in 1995 the O verseas Executive Share O
ption Schem e (together the
“Executive O ption Schem
chem e w
K em
in accordance w
resenting institu tional investors. For grants since A
u gu
tive op tions can be exercised u
nder the S chem
es, a C om
y the R
m ittee at the tim
e of grant of the op tions has to be achieved.
The p erform
u gu
chem es requ
op tions can norm
p’s earnings p er share before excep
tional item s as p
u blished in the au
dited accou
st in a three year p eriod exceed the su
m of the increase in the G
overnm ent’s R
s 6% .
ect of the S AYE S
chem e, op
p any at a discou
nt to the m
ing ap p
rovisions for and grants of
op tions u
hare O p
tion S chem
nt, bu t su
ch discou nt norm
ally only ap p
lied if the op
eriod of five or m ore years and a p
erform ance condition relating to su
stained good
p erform
p any w
ow er to issu
p any from
the 1994 S
rop osed changes in the Finance B
ill 1996, the D irectors exercised their p
ow ers u
u les. The effect of the change w
as to enable the Execu tive S
chem e to continu
e to be u
p to the levels ap
p roved by shareholders at the 1994 A
G M
chem e
evenu e ap
p roved op
tions u p
R evenu
its ap p
tive op tions is on a discretionary basis w
ithin the lim its set dow
n in the ru les of the Execu
tive O
olicy of the C om
m ittee to consider
axim u
e over w hich they are granted to ensu
re an ap
enerally, in recent years m axim
u m
read over three years. The C
om m
et ou t below
irectors: R
Currently exercisable N
tions held at 31 M arch 1994 are granted u
nder the 1984 Execu tive O
p tion S
tive op tions granted since 1 A
p ril 1994 are granted u
nder the 1994 Execu tive S
hare O p
chem e at m
arket p rice at the date of grant and are su
bject to p erform
exercised betw een 3 and 10 years from
their grant. D
tive op tions at 424p, 63,714 at 434p
and 255,067 at 433p w
ere granted to D irectors.
N o D
arch 1998, 218,189 op tions w
ill becom e exercisable. The
m arket p
rice of the shares at 31 M arch 1997 w
as 452p. The range du ring the year w
as 394p to 461.5p.
32
Report of the Remuneration Committee (continued)
The company’s Register of Directors’ Interests, which is available for inspection, includes full details of Directors’
shareholdings and options.
Long Term Incentive Plan
The Company is proposing the adoption of a Long Term Incentive Plan (‘the Plan’) to shareholders at the 1997 Annual
General Meeting. Details of the Plan are set out in the circular to shareholders convening the 1997 AGM. If approved
the Plan may be implemented during the year. It is intended that once the Plan is approved by shareholders, no further
options will be granted under the Unigate PLC 1994 Executive Share Option Scheme to Executives who are eligible to
receive awards under the Plan.
Directors’ Contracts
Each Executive Director has an existing employment contract with a rolling notice period of 24 months (increasing, in
the case of Ross Buckland, to 36 months in the event of a change in control of the Company) which provides for
remuneration to be paid in respect of any unexpired notice period on termination of employment by the Company, but
there is no specific contractual provision for liquidated damages or fixed payment on early termination. It is the
Committee’s view that they should not change the term of existing Executive Directors’ contracts. They would normally
expect that on any future appointment a one year rolling period would not be exceeded. However, in order to attract
and retain Executive Directors of the right calibre and ability, in future it may be necessary to offer a contract of
employment with a rolling notice period in excess of one and up to two years.
Post retirement medical cover has been given to certain existing senior executives but will not be offered to any new
appointees. The Chairman and non-Executive Directors receive no post retirement benefits.
The Company considerrs that it can be advantageous for executive Directors to sit in a non-executive capacity on
another board or boards and encourages such appointments where it considers it appropriate. It is the Company’s
policy to allow such appointees to retain any fees.
The Chairman has a fixed three year appointment for services running from 9 March 1995 at a fee of £175,000 per
year with no provision for pension, bonus, or share options. He is also provided with use of a company car.
The non-executive Directors, other than the Chairman, receive a basic fee which is currently £22,500 each per
annum other than Victor Scherrer who receives £30,000 per annum. These terms were last reviewed by the Board
in April 1996. The non-executive Directors do not participate in any incentive, pension or benefit schemes. Each
appointment is subject to review every year.
Directors’ Shareholdings
Directors’ beneficial interests in the ordinary share capital of the Company at 31 March 1997 and 1 April 1996 are set
out below. C A Lawrence exercised 3,440 SAYE options on 5 June 1997; no other changes have taken place since
31 March 1997.
Directors I A Martin R Buckland J S Kerridge C A Lawrence J MacGregor J W Robb V A Scherrer A W P Stenham G C Summerfield
J G Worby *At date of appointment.
None of the Directors held any shares non-beneficially
31 March 1997 Ord Shares 25p each
Fully paid Options
10,000 - 10,000 654,437
1,000 - 34,263 205,136
10,000 - 10,000 762,043
25,613 254,158
Company law requires the Directors to prepare financial statements for each financial year which give a true and fair
view of the state of affairs of the Company and Group and of the profit for that period. In preparing those financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable accounting standards have been followed, subject to any material departures disclosed
and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group
will continue in business.
The Directors have general responsibility for the keeping of proper accounting records which disclose with reasonable
accuracy at any time the financial position of the Company and which enable them to ensure that the financial
statements comply with the Companies Act 1985. They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Auditors’ Report for the year ended 31 March 1997
To the members of Unigate PLC
We have audited the financial statements on pages 34 to 53. We have also examined the amounts disclosed relating to
emoluments and share options of the Directors which form part of the Report of the Remuneration Committee on pages
29 to 32.
Respective responsibilities of directors and auditors As described above, the Company’s Directors are responsible for
the preparation of the financial statements. It is our responsibility to form an independent opinion, based on our audit,
on those financial statements and to report our opinion to you.
Basis of opinion We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices
Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors
in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’s
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered
necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are
free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion In our opinion the financial statements give a true and fair view of the state of affairs of the Company and of
the Group as at 31 March 1997 and of the profit of the Group for the year then ended and have been properly prepared
in accordance with the Companies Act 1985.
KPMG Audit Plc
Unigate PLC 33
Before Exceptional Before Exceptional exceptional items exceptional items
items (note 5) Total items (note 5) Total Notes £m £m £m £m £m £m
2 Turnover
– Acquisitions 150.9 – 150.9 – – – 333333333333333333333333333333333333333333333333333333333333333333333333333333333
2,413.9 – 2,413.9 2,133.7 – 2,133.7 666666666666666666666666666666666666666666666666666666666666666666666666666666666
2 & 3 Operating profit
– Acquisitions 8.4 (13.4) (5.0) – – – 333333333333333333333333333333333333333333333333333333333333333333333333333333333
Total operating profit 127.2 (13.4) 113.8 115.4 (6.5) 108.9
Income from associated undertaking – – – 17.5 6.5 24.0
5 Continuing operations
5 Discontinued operations
– Profit on disposal of business – – – – 22.1 22.1
– Provision for loss on disposal of business – – – – (59.5) (59.5) 333333333333333333333333333333333333333333333333333333333333333333333333333333333
Profit on ordinary activities before interest 127.2 (13.4) 113.8 132.9 173.7 306.6
6 Finance income/(costs), net 2.4 – 2.4 (7.6) – (7.6) 333333333333333333333333333333333333333333333333333333333333333333333333333333333
Profit on ordinary activities before taxation 129.6 (13.4) 116.2 125.3 173.7 299.0
7 Taxation (32.4) 4.4 (28.0) (32.6) (0.2) (32.8) 333333333333333333333333333333333333333333333333333333333333333333333333333333333
Profit on ordinary activities after taxation 97.2 (9.0) 88.2 92.7 173.5 266.2 6666666666666666666666666 6666666666666666666666
Minority interests (0.1) (0.1) 33333333333333333333333333333333333333333333333333333333
8 Dividends (48.2) (45.3) 33333333333333333333333333333333333333333333333333333333
9 Earnings per ordinary share of 25p
– on basic earnings 37.2p 113.2p
– on Adjusted earnings 41.0p 39.4p 66666666666666666666666666666666666666666666666666666666
The notes on pages 38 to 53 form part of these financial statements.
Group Profit and Loss Account for the year ended 31 March
34
Fixed assets
11 Investments – – 385.5 371.7 333333333333333333333333333333333333333333333333333333
Current assets
14 Cash and deposits 291.3 356.6 142.1 17.8 333333333333333333333333333333333333333333333333333333
650.3 704.1 267.8 181.3 333333333333333333333333333333333333333333333333333333
Creditors – Amounts falling due within one year
15 Borrowings and finance leases 4.9 83.3 2.2 68.3
16 Other creditors 476.7 453.0 156.4 84.7 333333333333333333333333333333333333333333333333333333
481.6 536.3 158.6 153.0 333333333333333333333333333333333333333333333333333333
Net current assets 168.7 167.8 109.2 28.3 333333333333333333333333333333333333333333333333333333
Total assets less current liabilities 674.1 718.7 498.4 403.5
Creditors – Amounts falling due after more than one year
15 Borrowings and finance leases 98.9 102.6 278.8 191.8
17 Provisions for liabilities and charges 67.4 82.5 22.2 14.2 333333333333333333333333333333333333333333333333333333
507.8 533.6 197.4 197.5 666666666666666666666666666666666666666666666666666666
Capital and reserves
19 Called up equity share capital 59.5 58.9 59.5 58.9
20 Share premium account 60.2 54.4 60.2 54.4
20 Revaluation reserve 16.6 17.1 – –
20 Special reserve – 1.5 – 1.5
20 Profit and loss account 681.1 640.0 77.7 82.7 333333333333333333333333333333333333333333333333333333
Shareholders’ funds – gross 817.4 771.9 197.4 197.5
20 Goodwill reserve (311.4) (240.0) – – 333333333333333333333333333333333333333333333333333333
Shareholders’ funds – net 506.0 531.9 197.4 197.5
Equity minority interests 1.8 1.7 – – 333333333333333333333333333333333333333333333333333333
507.8 533.6 197.4 197.5 666666666666666666666666666666666666666666666666666666
The financial statements were approved by the Board of Directors
on 9 June 1997 and signed on its behalf by:
Ross Buckland – Chief Executive
John Worby – Finance Director
The notes on pages 38 to 53 form part of these financial statements.
Balance Sheets at 31 March
Unigate PLC 35
21 Cash flow from operating activities 200.0 169.8
Returns on investments and servicing of finance
Net interest received/(paid) 3.2 (9.0)
Dividends received from associated undertaking – 5.5
Interest element of finance lease rental payments (0.8) (1.5)
Net repayment of limited recourse finance – (3.6) 333333333333££££3333333333333333333333333££££3333333333333
Net cash inflow/(outflow) from returns on investments and
servicing of finance 2.4 (8.6)
Taxation
Capital expenditure
Sale of tangible fixed assets 14.3 17.6 333333333333££££3333333333333333333333333££££3333333333333
Net cash outflow from capital expenditure (85.5) (99.1)
Acquisitions and disposals
Sale of associated undertaking – 320.1 333333333333££££3333333333333333333333333££££3333333333333
Net cash (outflow)/inflow from acquisitions and disposals (46.3) 317.9
Equity dividends paid (46.3) (43.6)
£3333333333333333333333333££££3333333333333333333333333£££
Cash flow before use of liquid resources and financing 7.2 318.8 ^66666666666666666666666666^666^66666666666666666666666^
22 Management of liquid resources (101.8) 309.7
22 Financing 26.4 56.2
23 Increase/(decrease) in net cash in the year 82.6 (47.1)
£3333333333333333333333333££££3333333333333333333333333£££
7.2 318.8 ^66666666666666666666666666^666^66666666666666666666666^
The notes on pages 38 to 53 form part of these financial statements.
Group Cash Flow Statement for the year ended 31 March
36
Prior year adjustment – cumulative discount on share options 0.4 0.3
Currency translation differences on foreign currency net investments (0.9) 0.3 333333333333333333333333333
Total recognised gains and losses for the year 87.6 266.7 666666666666666666666666666
Reconciliation of Movements in Shareholders’ Funds for the year ended 31 March
1997 1996 £m £m
Dividends (48.2) (45.3) 333333333333333333333333333
Currency translation differences on foreign currency net investments (0.9) 0.3
New share capital issued 6.4 3.4
Discount on share options 0.1 –
Goodwill transferred to profit and loss account – 55.4
Goodwill on acquisitions (71.4) (15.6) 333333333333333333333333333
Net (reduction)/increase in shareholders’ funds (25.9) 264.3
Shareholders’ funds at 1 April 531.9 267.6 333333333333333333333333333
Shareholders’ funds at 31 March 506.0 531.9 666666666666666666666666666
Note of Historical Cost Profits and Losses for the year ended 31 March
There is no material difference between the results as reported and the results that would have been reported on a
historical cost basis. Accordingly, no note of historical cost profits and losses has been included.
Statement of Group Recognised Gains and Losses for the year ended 31 March
. Unigate PLC 37
1 Accounting Policies
The Group financial statements are prepared in accordance with applicable Accounting Standards and consolidate
the financial statements of the Company and its subsidiary undertakings, the principal of which are listed on page 54.
The financial statements of all subsidiary undertakings are made up to 31 March and are prepared under the
historical cost convention, adjusted by the revaluation of certain land and buildings. The results of businesses
acquired or sold during the year are included in the Group financial statements from the date of acquisition or to
the date of disposal.
The cash flow information has been presented in accordance with Financial Reporting Standard 1 (Revised)
which was issued by the Accounting Standards Board in October 1996; the financial statements have also been
prepared in accordance with UITF Abstract 17 - Employee share schemes. Comparative figures have been restated
accordingly.
The principal accounting policies adopted by the Group are described below.
b Goodwill
Net tangible assets are appraised at the date of acquisition and are included in the financial statements at their fair
values. The difference between the cost of businesses acquired and their net tangible assets at the date of
acquisition is transferred to the goodwill reserve.
On disposal of a business the attributable purchased goodwill is included, where separately identifiable, in
determining the profit or loss on sale and is transferred out of the goodwill reserve.
c Associated undertakings
Associated undertakings are those companies in which the Group has a participating interest of at least 20% in the
equity capital and over which it is able to exercise significant influence.
d Foreign currencies
Transactions in foreign currencies are translated at the rate of exchange ruling at the date of the transaction, or
where applicable, at the contracted rate. Profits and losses of overseas companies are translated into sterling at
average rates for the year, or where applicable, the contracted rate. Differences on exchange arising in the ordinary
course of trading are included in operating profit.
Assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the
balance sheet date or, where applicable, at the contracted rate. Differences arising from the translation of Group
investments in foreign subsidiary and associated undertakings and related foreign currency borrowings or hedges
are dealt with through reserves.
e Turnover
Turnover represents net sales to customers outside the Group and excludes value added tax.
f Depreciation
The charge for depreciation is calculated to write down cost or valuation of tangible fixed assets to their estimated
residual values by equal annual instalments over their expected useful lives which are as follows:
Freehold and leasehold buildings up to 50 years
Automated warehouse plant and equipment up to 15 years
Other plant, machinery, electric floats, charging plant, furniture and fittings up to 10 years
Office machinery and computers up to 6 years
Motor vehicles 3 to 7 years
Notes to the Financial Statements for the year ended 31 March 1997
38
1 Accounting Policies continued
Interest costs relating to the period of construction of major warehouses are included in the costs of such assets
and are depreciated as part of the total cost. Freehold land and assets in the course of construction are not
depreciated.
g Government grants
Capital grants received are shown as deferred income and credited to the profit and loss account by instalments on
a basis consistent with the applicable depreciation policy.
Other grants are credited to the profit and loss account to offset the matching expenditure.
h Leased assets
Assets acquired under finance leases are included in the balance sheet at cost less depreciation. The present value
of future rentals is shown as a liability.
The interest element of rental obligations is charged to the profit and loss account over the period of the lease
in proportion to the balance of capital repayments outstanding.
Rentals payable under operating leases are charged to the profit and loss account as incurred.
i Stocks
Stocks are stated at the lower of cost, including attributable overhead expenditure, and net realisable value.
j Deferred taxation
Deferred taxation, calculated using the liability method, is provided where it is probable that a liability
will crystallise.
k Research and development
All expenditure on research and development is written off as incurred.
l Pensions
Contributions to the Group’s pension schemes are charged to the profit and loss account so as to spread the cost
of pensions over the service lives of the employees in the schemes. Variations from the regular cost are spread over
the expected average remaining service lives of current employees in the schemes.
GROUP
Operating profit Trading capital Turnover before exceptional items employed
1997 1996 1997 1996 1997 1996 2 Divisional Analysis of Results £m £m £m £m £m £m
Continuing operations
Dairy 636.7 672.9 34.5 44.6 105.9 107.1 333333333333333333333333333333333333333333333333333333333333333333333333333333333
European Food 1,920.7 1,560.9 100.9 84.3 345.1 324.7
Wincanton Logistics 443.6 388.3 23.4 23.0 119.4 117.4 333333333333333333333333333333333333333333333333333333333333333333333333333333333
2,364.3 1,949.2 124.3 107.3 464.5 442.1
Discontinued operations 49.6 184.5 2.9 8.1 8.7 73.1
Provisions, tax and dividends (152.9) (152.3) 333333333333333333333333333333333333333333333333333333333333333333333333333333333
2,413.9 2,133.7 127.2 115.4 320.3 362.9 666666666666666666666666666666666666666666666666666666666666666666666666666666666
Trading capital employed is defined on page 56.
Unigate PLC – Notes to the Financial Statements 39
2 Divisional Analysis of Results continued
Turnover and operating profit before exceptionals attributable to acquisitions during the year relate to Fresh Foods
(£140.2m and £7.6m respectively) and Dairy (£10.7m and £0.8m respectively).
The segmental analysis has been revised from that shown in previous years to reflect the increasing inter-
relationship of the Group’s liquid milk and butter and milk powder activities. The Dairy business segment now
comprises the results of the liquid milk business (previously shown separately as Dairies) and the butter and milk
powder operations (previously shown within Fresh Foods). Comparative figures for each business segment have
been restated accordingly.
Operating profit Trading capital Turnover before exceptional items employed
1997 1996 1997 1996 1997 1996 £m £m £m £m £m £m
Geographical Analysis of Results
Rest of Europe 119.6 115.9 7.8 5.4 32.6 29.2 333333333333333333333333333333333333333333333333333333333333333333333333333333333
2,364.3 1,949.2 124.3 107.3 320.3 303.1
Discontinued operations
North America 49.6 179.6 2.9 6.8 – 57.3 333333333333333333333333333333333333333333333333333333333333333333333333333333333
2,413.9 2,133.7 127.2 115.4 320.3 362.9 666666666666666666666666666666666666666666666666666666666666666666666666666666666
GROUP
3 Operating Profit
Turnover 2,364.3 49.6 2,413.9 1,949.2 184.5 2,133.7
Cost of sales (1,991.5) (40.7) (2,032.2) (1,651.8) (148.0) (1,799.8) 333333333333333333333333333333333333333333333333333333333333333333333333333333333
Gross profit 372.8 8.9 381.7 297.4 36.5 333.9
Distribution costs (102.4) – (102.4) (95.9) (0.2) (96.1)
Administrative expenses (159.5) (6.0) (165.5) (100.7) (28.2) (128.9) 333333333333333333333333333333333333333333333333333333333333333333333333333333333
Operating profit 110.9 2.9 113.8 100.8 8.1 108.9 666666666666666666666666666666666666666666666666666666666666666666666666666666666
The results of continuing operations in 1997 include the following amounts relating to acquisitions made during the
year: turnover £150.9m, cost of sales £136.9m, distribution costs £7.9m, administrative expenses £11.1m.
Notes to the Financial Statements (continued)
40
The Group’s results include charges for:
Depreciation (including £5.2m (1996: £6.2m) in respect of assets under finance leases) 64.7 63.8
Rental payments for plant and machinery under operating leases 11.7 11.4
Rental payments under other operating leases 9.0 13.2
Auditors’ remuneration
– Audit fees 0.5 0.5
– Other fees paid to KPMG Audit Plc and associates 0.5 0.6
Redundancy payments 1.1 2.6
Other pension costs 9.7 5.5 333333333333333333333333333
512.1 499.4 666666666666666666666666666
4 Directors and Employees
Directors’ emoluments and interests are given in the Report of the Remuneration Committee on pages 29 to 32.
The average number of employees in the year was: 1997 1996
Number Number
Continuing operations
27,379 24,377
Number of employees – average 29,284 30,175 555555555555555555555555555
Number of employees – year end 27,694 31,612 555555555555555555555555555
Gross Tax Net Gross Tax Net
5 Exceptional Items
Continuing operations
Reorganisation and integration costs (a) (13.4) 4.4 (9.0) (6.5) 1.5 (5.0)
Loss on sale of fixed assets – – – (1.2) – (1.2)
Discontinued operations
Profit on disposal of business (c) – – – 22.1 – 22.1
Provision for loss on disposal of business (d) – – – (59.5) – (59.5)
Income from associated undertaking (e) – – – 6.5 (1.7) 4.8 333333333333333333333333333333333333333333333333333333333333333333333333333333333
(13.4) 4.4 (9.0) 173.7 (0.2) 173.5 666666666666666666666666666666666666666666666666666666666666666666666666666666666
Unigate PLC – Notes to the Financial Statements 41
1996 £m
1996 £m
1996 £m
1997 £m
1997 £m
1997 £m
5 Exceptional Items continued
a Reorganisation and integration costs relate to the Fresh Foods business and comprise a provision for the costs of
rationalising the Group’s UK margarine and spreads production facilities. This involves the transfer of spreads
production from St Ivel’s Hemyock factory to the recently acquired Liverpool facility. The provision includes £8.5m
in respect of the write-off of tangible assets. In 1996 a provision was made for the reorganisation and integration of
acquisitions made by Malton Foods and for the costs of merging the operations of Vedial SA and Prodipal, both of
which related to the Fresh Foods business.
b The profit on disposal of associated undertaking reported in 1996 represented the profit on sale of the Group’s
investment in Nutricia and was after charging goodwill of £16.7m previously written off.
c The profit on disposal of business in 1996 represented the profit on sale of the Giltspur business and was after
charging goodwill of £0.5m previously written off.
d The provision for loss on disposal of business made in 1996 related to the US Restaurants business, the disposal
of which was completed during the current year, and was after charging goodwill of £38.2m previously written off.
e The exceptional income from associated undertaking represented an additional three months’ income arising in the
year to 31 March 1996 up to the date of sale on 12 December 1995 of the Group’s investment in Nutricia.
GROUP
At floating rates:
Interest payable and other finance costs:
On bank loans and overdrafts, and other loans falling due within five years (12.5) (6.8)
On other loans – (3.1) 333333333333333333333333333
(12.5) (9.9)
8.4 0.6
At fixed rates:
On bank loans and overdrafts, and other loans falling due within five years (2.0) (3.4)
On other loans (4.0) (3.8)
On finance leases (0.8) (1.5) 333333333333333333333333333
1.6 (8.1) 666666666666666666666666666
1.6 (8.1) 666666666666666666666666666
GROUP
UK – corporation tax at 33% (1996: 33%) 25.9 20.2
UK – deferred tax (1.4) 4.3 333333333333333333333333333
24.5 24.5
Taxation charge 28.0 32.8 666666666666666666666666666
Classified as:
Trading activities – adjustment relating to prior years (1.5) (0.7) 333333333333333333333333333
32.4 32.6
28.0 32.8 666666666666666666666666666
The tax charge on profits has benefited by £0.4m (1996: £2.2m) in respect of accelerated capital allowances.
COMPANY
1997 1996 1997 1996 8 Dividends pence per share £m £m
On ordinary shares: interim 7.0 6.65 16.7 15.7
On ordinary shares: proposed final 13.2 12.55 31.5 29.6 333333333333333333333333333333333333333333333333333333
20.2 19.20 48.2 45.3 666666666666666666666666666666666666666666666666666666
9 Earnings per Ordinary Share
Basic earnings per share:
Earnings per ordinary share is calculated on the basis of the weighted average of 236.7m (1996: 235.1m) ordinary
shares in issue and profit for the financial year, after minority interests, of £88.1m (1996: £266.1m).
Adjusted earnings per share:
Adjusted earnings per share is shown by reference to earnings before exceptional items and related tax since the
Directors consider that this gives a more meaningful measure of the underlying performance of the Group. Earnings
before exceptional items and related tax are calculated as follows:
1997 1996 £m £m
Unigate PLC – Notes to the Financial Statements 43
Assets in course of
10 Tangible Fixed Assets £m £m £m £m
Group
Assets brought into operation 15.8 0.6 (16.4) –
Additions 9.1 85.0 5.7 99.8
Disposals (7.6) (69.5) – (77.1)
New businesses 13.0 14.8 – 27.8
Businesses sold (97.8) (17.6) – (115.4)
Exchange (7.6) (5.8) – (13.4) 333333333333333333333333333333333333333333333333333333
Depreciation:
Exceptional asset writedown (note 5a) 3.0 5.5 – 8.5
Disposals (1.7) (61.9) – (63.6)
Exchange (2.5) (3.4) – (5.9) 333333333333333333333333333333333333333333333333333333
Net book value:
Land and Plant and buildings equipment Total
£m £m £m
Additions – 0.2 0.2
Disposals – (0.1) (0.1)
At 31 March 1997 4.4 4.2 8.6 6666666666666666666666666666666666666666
Depreciation:
Disposals – (0.1) (0.1)
At 31 March 1997 1.6 3.3 4.9 6666666666666666666666666666666666666666
Net book value:
44
GROUP
Land and buildings comprise:
Leasehold – under fifty years 6.2 7.7 333333333333333333333333333
262.6 337.3 666666666666666666666666666
Cost 218.3 288.4 333333333333333333333333333
GROUP
1997 1996 The historical cost of properties revalued in 1981 is: £m £m
Cost 27.7 31.3
Net book value 18.1 22.1 666666666666666666666666666
Included in the net book value of plant and equipment are £6.9m (1996: £11.1m) of assets held under
finance leases. The net book value of assets at 31 March 1997 includes £1.2m of interest which has been capitalised
during the course of construction of major warehouses, of which £0.1m is included in assets in the course
of construction.
Subsidiary undertakings
Cost less amounts written off:
At 1 April 1996 316.0 55.7 371.7
Additions – 85.7 85.7
GROUP
Work in progress 45.0 51.2
Finished goods and goods for resale 48.7 46.9 333333333333333333333333333
126.9 130.4 666666666666666666666666666
GROUP COMPANY
1997 1996 1997 1996 13 Debtors £m £m £m £m
Trade debtors 166.9 165.4 – –
Other debtors 28.2 25.5 2.0 1.2
Advance corporation tax recoverable – – 7.8 5.4
Prepayments and accrued income 37.0 26.2 8.6 11.0 333333333333333333333333333333333333333333333333333333
232.1 217.1 125.7 163.5 666666666666666666666666666666666666666666666666666666
GROUP COMPANY
1997 1996 1997 1996 14 Cash and Deposits £m £m £m £m
Cash at bank 54.2 20.1 61.7 17.8
Short term deposits 237.1 336.5 80.4 – 333333333333333333333333333333333333333333333333333333
291.3 356.6 142.1 17.8 666666666666666666666666666666666666666666666666666666
GROUP COMPANY
1997 1996 1997 1996 15 Borrowings and Finance Leases £m £m £m £m
Amounts falling due within one year:
Unsecured loan stock 1.6 2.1 1.6 2.1
Bank loans and overdrafts 1.6 50.9 0.6 39.1
Commercial paper – 27.0 – 27.0 333333333333333333333333333333333333333333333333333333
3.2 80.0 2.2 68.2
4.9 83.3 2.2 68.3 666666666666666666666666666666666666666666666666666666
Amounts falling due after more than one year:
Borrowings other than from banks 98.0 102.2 278.8 191.8
Bank loans 0.9 0.4 – – 333333333333333333333333333333333333333333333333333333
98.9 102.6 278.8 191.8 666666666666666666666666666666666666666666666666666666
46
GROUP COMPANY
1997 1996 1997 1996 15 Borrowings and Finance Leases continued £m £m £m £m
Amounts falling due after more than one year are repayable as follows:
Borrowings other than from banks:
US$140 million 6.28% Loan Notes October 2001/03 94.5 94.5 – –
Obligations under finance leases 3.5 7.7 – –
Loans from subsidiary undertakings – – 278.8 191.8 333333333333333333333333333333333333333333333333333333
98.0 102.2 278.8 191.8 666666666666666666666666666666666666666666666666666666
Bank loans:
Two to five years 0.3 0.3 – – 333333333333333333333333333333333333333333333333333333
0.9 0.4 – – 666666666666666666666666666666666666666666666666666666
Within amounts falling due after more than one year of £98.9m (1996: £102.6m) is £82.6m (1996: £75.4m) where
the interest rate is fixed during the term of the debt principally through the use of interest rate swaps.
At 31 March 1997, the Group had revolving credit facilities of £230m (1996: £191.6m) under which it
may repay amounts borrowed at its option whilst retaining the flexibility to re-borrow under the facilities.
No amounts were outstanding under the facilities at 31 March 1997.
GROUP
Between one and five years 3.7 6.9
After five years 0.4 3.4 333333333333333333333333333
6.2 14.7
5.2 11.0 666666666666666666666666666
Obligations under finance leases are shown in the balance sheet as:
Amounts falling due within one year 1.7 3.3
Amounts falling due after more than one year 3.5 7.7 333333333333333333333333333
5.2 11.0 666666666666666666666666666
Unigate PLC – Notes to the Financial Statements 47
GROUP COMPANY
1997 1996 1997 1996 16 Other Creditors £m £m £m £m
Trade creditors 185.4 197.8 0.2 0.2
Amounts owed to subsidiary undertakings – – 96.5 34.4
Corporation tax 54.0 40.2 15.6 9.4
Dividends payable 31.5 29.6 31.5 29.6
Other creditors including social security 105.2 91.9 1.0 1.7
Accruals and deferred income 100.6 93.5 11.6 9.4 333333333333333333333333333333333333333333333333333333
476.7 453.0 156.4 84.7 666666666666666666666666666666666666666666666666666666
GROUP COMPANY
1997 1996 1997 1996 17 Provisions for Liabilities and Charges £m £m £m £m
Deferred taxation 13.6 13.7 (1.2) 1.3
Provisions 53.8 68.8 23.4 12.9 333333333333333333333333333333333333333333333333333333
67.4 82.5 22.2 14.2 666666666666666666666666666666666666666666666666666666
Deferred taxation provided:
Capital allowances on fixed assets in excess of depreciation 30.3 29.1 0.1 0.1
Other timing differences and losses available for future relief (8.9) (8.0) (1.3) 3.2 333333333333333333333333333333333333333333333333333333
21.4 21.1 (1.2) 3.3
13.6 13.7 (1.2) 1.3 666666666666666666666666666666666666666666666666666666
Unprovided deferred taxation:
Capital allowances on fixed assets in excess of depreciation 17.1 13.5 – – 666666666666666666666666666666666666666666666666666666
GROUP COMPANY
£m £m
– on ordinary activities – Overseas 1.7 –
– on exceptional items (4.4) –
Other movements (0.5) – 333333333333333333333333333
At 31 March 1997 13.6 (1.2) 666666666666666666666666666
No provision for deferred taxation has been made for taxation payable on the distribution of reserves by overseas
subsidiary undertakings since it is unlikely that material amounts will be distributed to the UK.
48
Notes to the Financial Statements (continued)
1 April Provided 31 March 1996 in the year Utilised 1997
17 Provisions for Liabilities and Charges continued £m £m £m £m
Provisions
Group
Fair value 5.4 – (5.4) –
Pension 11.9 10.0 – 21.9
68.8 15.6 (30.6) 53.8 666666666666666666666666666666666666666666666666666666
Company 12.9 10.6 (0.1) 23.4 666666666666666666666666666666666666666666666666666666
The fair value provision represents reorganisation costs in respect of acquisitions completed prior to 31 March 1994
and of reorganisations commenced prior to acquisition by the Group.
GROUP
18 Business Acquisitions and Disposals
The net cash flows in respect of acquisitions and disposals comprise:
Fixed assets (28.0) 79.1 (26.0) 3.3
Stocks (3.7) 1.1 (10.8) 2.6
Debtors – 4.4 (10.5) 13.3
Provisions – – 4.2 – 333333333333333333333333333333333333333333333333333333
– charged to provision – (14.0) – –
Goodwill (71.4) – (8.1) – 333333333333333333333333333333333333333333333333333333
Cash (paid)/received net of expenses (100.8) 54.5 (36.4) 34.2 666666666666666666666666666666666666666666666666666666
Total cash paid in respect of acquisitions of £100.8m is inclusive of £1.4m additional consideration paid during the
year in respect of prior year acquisitions, following agreement of completion accounts.
Unigate PLC – Notes to the Financial Statements 49
1997 £m
1997 £m
1996 £m
1996 £m
18 Business Acquisitions and Disposals continued Book value Accounting
at acqui- policy Fair value sition alignment Revaluations Other to Group
(a) Acquisition of Kraft European spreads business: £m £m £m £m £m
The total cost of this acquisition comprises:
Fixed assets 17.2 (2.6) (3.5) – 11.1
Working capital 3.5 (1.0) – (1.5) 1.0 3£333333333333333333333333333333333333333333333333333333333333333333
Net assets acquired 20.7 (3.6) (3.5) (1.5) 12.1 666666666666666666666666666666666666666666666666666666
Goodwill arising on acquisition 66.4 3333333333333
Total cost of acquisition 78.5 6666666666666
Total cash consideration 77.1
78.5 6666666666666
Book value Accounting at acqui- policy Fair value
sition alignment Revaluations Other to Group (b) Other acquisitions during the year: £m £m £m £m £m
The total cost of other acquisitions during the year comprise:
Fixed assets 18.8 (0.7) (1.4) – 16.7
Working capital 0.6 – – – 0.6 3£333333333333333333333333333333333333333333333333333333333333333333
Net assets acquired 19.4 (0.7) (1.4) – 17.3 666666666666666666666666666666666666666666666666666666
Goodwill arising on acquisitions 3.6 3333333333333
Total cost of acquisitions 20.9 6666666666666
Total cash consideration 20.6
20.9 6666666666666
The Kraft European spreads business was acquired on 9 August 1996. Other acquisitions comprise the Hargrave
pigmeat business, acquired on 24 June 1996 and the purchase of small independent milk operations. These
businesses have been accounted for as acquisitions and consolidated in the financial statements from the dates
of acquisition.
The turnover and operating profit before exceptionals of the Kraft European spreads business for the period
subsequent to acquisition by the Group to 31 March 1997 are £37.1m and £9.2m respectively. Included as a fair
value adjustment on acquisition is £1.5m which principally relates to commitments made by the vendor prior to
disposal. An exceptional charge to operating profit of £13.4m has also been made during the year relating to a
separate reorganisation programme as explained in Note 5. The profit after taxation of the Kraft business entity
prior to acquisition was as follows: £m
1 January 1996 to date of acquisition 6.1
Year ended 31 December 1995 9.3
The turnover and operating profit of other acquired businesses for the period subsequent to acquisition by the
Group to 31 March 1997 are £113.8m and £0.8m loss respectively.
An adjustment of £1.4m has also been made to increase goodwill relating to acquisitions completed in the
previous year following finalisation of completion accounts. This adjustment comprised £1.4m net increase in
consideration, £0.2m reduction in fair value of stocks and other working capital acquired following agreement of
completion accounts and £0.2m increase in value of tangible fixed assets.
50
1997 1996 19 Share Capital £m £m
Authorised:
Equity – 320,066,924 (1996: 320,066,924) Ordinary shares of 25p each 80.0 80.0 333333333333333333333333333
Called up and allotted:
Equity – 237,927,806 (1996: 235,726,179) Ordinary shares of 25p each 59.5 58.9 333333333333333333333333333
Or