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Christian Salvesen has reported a slip in underlying operating profit from £20.7m to £18.1m despite a 10 per cent increase in sales.
Much of the problem was in the Transport business. Although sales rose eight per cent to £442m, margins weakened and operating profit halved to £3.7m. The French operation performed well but this was overshadowed by weaker performances in the UK and Iberia.
The company said: “Our UK Transport business faced significant competition from pallet networks and ongoing price pressure from our industrial customer base. Performance was very disappointing and we are taking decisive action to address the situation. A new management team has been installed and we are pursuing improvements across our existing operations.
“We remain focused on developing a lower operating cost structure and will work with external partners to take advantage of any opportunities for efficiencies, together with a modernisation of our working practices and facilities. A strong UK transport business is essential to our clear commitment to a pan-European shared-user transport strategy.”
Mainland Europe saw a fall in margins to 2.3 per cent with underlying operating profit down £1.1m to £3.7m on sales up three per cent.
The bright spot was the UK Food and Consumer business which produced a £1.8m rise in underling operating profit to £10.4m on sales up 17 per cent at £253.6m. The Salvesen Foods business also showed an improvement.
Chief executive Stewart Oades said: “While the continued improvement in growing the business through new wins and increased retention rates is pleasing, there remains much to be done. The markets we operate in are still highly competitive and the performance of UK Transport is not acceptable. We have completed a thorough review of this business unit and have put in place a plan to move this business back into profit. Although this will take time, UK Transport is an essential part of our strategy to create a pan-European shared-user business.
“In the current year we expect revenue growth to continue and anticipate some benefit from the restructuring, although it will take longer before we see the full impact.”
The current year included a gain of £26.0m from the sale and leaseback of some UK properties and a gain of £14.7m from changes in the UK pension plan offset by £6.3m of charges for the continuing restructuring programme and £2.8m related to lease costs for two under-utilised UK properties.
Such measures have enabled Salvesen to reduce the capital employed in the business. This meant that despite the profit fall, it was able to improve its return capital employed from 11.8 per cent to 11.9 per cent.
