Scottish potatoes and daffodils supplier Produce Investments has seen its profits more than halve after counting the cost of a product recall and the closure of a packing facility in Kent.
The Berwickshire firm said revenues for the year to 25 June rose 3.7 per cent to £185.1 million despite “challenging” market conditions.
That increase in sales helped operating profits grow 14.6 per cent to £9.2m, which chief executive Angus Armstrong described as a “robust” performance.
Analysts at house broker Shore Capital said: “Produce has announced an excellent set of preliminary results, in our view, with a significant increase in profitability with strong cash generation.”
However, Aim-quoted Produce – which counts the likes of Asda, Marks & Spencer, Sainsbury’s and Waitrose among its customers – said its pre-tax profits plunged to £3.5m, down from £7.3m a year earlier, after racking up £4.6m of exceptional costs linked to the closure of its Kent packing site and the product recall at its Swancote Foods division.
Swancote Farms warned last year that there was a possible issue with traces of metal being found in one of its products, sparking a recall of a number of potato salad and ready meal ranges.
Armstrong said today: “I am pleased to report that matters have been concluded and the net cost to the business for the un-insured elements of the claim have been finalised, resulting in an exceptional charge of £571,000. This is at the lower end of expectations that we indicated last year of between £300,000 and £1.5m.
“We have installed a new blancher and changed a number of processes to ensure we are best placed to meet future requirements. We believe Swancote Foods is well positioned to take advantage of new business development opportunities and gain additional volume.”
Produce also said its bottom line was hit by a £2.6m writedown on the value of property and equipment transferred from its Kent packaging facility, which closed in December sparking redundancy and other one-off costs of almost £1m. Work from the site has been switched to Duns in the Borders and Floods Ferry in Cambridgeshire.
Despite the drop in profits and a forecast of continued tough conditions in the market, Produce proposed a 2.2 per cent increase in its final dividend to 4.88p a share, to be paid on 1 November. That will lift the total payout for the year from 7.165p to 7.32p.
The firm also announced that chairman Barrie Clapham, who has been at the helm for a decade, is to step down at its annual meeting next month and will be succeeded by non-executive director Neil Davidson, a former chief executive of Arla Foods.
In addition, finance director Brian Macdonald is standing down to be replaced by Jonathan Lamont, who joined the business as group financial controller at the start of July.