Grampian loses £33m but pension is plugged

GRAMPIAN Country Food Group is set to place one of its subsidiaries into receivership to pass off responsibility for its £100 million pension deficit.

The process was revealed in company accounts that showed Grampian's losses grew to more than 30m in 2006.

Grampian, Britain's largest meat processor, which employs almost 20,000 people in the UK and Thailand, said it had reached an agreement over its pension deficit with scheme trustees, bankers and pension regulators "that we fundamentally believe is in the best interest of scheme members".

The Pension Protection Fund, a body set up to protect the pensions when an employer becomes insolvent, is to assume the obligations of the schemes, in return for "sharing in the value of the group's business," Grampian said.

It was unclear from the accounts how the PPF would share the value of the company. However the group has provided guarantees to the scheme worth 181m.

The 3,500 members of the final salary pension scheme still working at the company will lose 10 per cent of their future entitlements, while a further 1,500 members who left or retired will be unaffected. The 4,500 members of Grampian's money purchase scheme will also be unaffected.

In February The Scotsman revealed the company was in talks with the PPF. Grampian refused to explain the nature of the discussions.

In its latest company accounts, Grampian said a "non-trading subsidiary" would in the near future "enter a legal process" that would pass the pension scheme obligations to the PPF. The group as a whole continues to trade unaffected. A spokesman said the deal, taken after "considerable professional advice", was watertight.

While the accounts do not spell out that the pension deficit could have forced the group into administration, chairman Alfred Duncan's report said the board had concluded the contributions required to sustain the scheme "would not be possible within the likely resources available to the group".

The revelations came as Grampian released results for the year to 31 May, 2006, which it said was "the most difficult year in the history of the group", culminating in an after-tax loss of 32.8m.

Turnover fell by 44.9m to 1.81 billion, which the company said was caused by restructuring rather than a reduction in its core business. Staff numbers were cut by more than 1,000 to 19,545 after a major restructure, including the closure of factories in Rotherham and Elmswell, while the group's transport operation was sold.

In a statement Grampian, which is now headquartered in Livingston, insisted the results were "historical" and said it expected to report a trading profit - before charges such as interest - in the current year.

Managing director Eddie Power, credited with a "significant turnaround" since joining the company in January last year, said: "The results we are announcing today are historical and do not represent the improved current operational and financial performance of the group.

"Grampian is now better placed to respond to the competitive pressures in the market place and continue to supply our customer base with excellent products and service and very competitive prices."

The accounts show 1m was paid for compensation for loss of office, believed to be to former managing director David Salkeld, who resigned in late 2005.

The fall in sales means that for the first time Glasgow-based car sales company Arnold Clark is Scotland's largest private company by turnover, with its sales increasing to 1.83bn in 2006.

Arnold Clark's financial performance in recent years has been much stronger than Grampian's, reporting a pre-tax profit of 85.7m last year.

GROWING PROBLEMS

GRAMPIAN Country Food Group was built from the ground up by chairman Alfred Duncan, once a farm machinery salesman.

Starting in 1980 with a chicken-processing plant in Banff in the North-east of Scotland, it now has operations throughout the UK and in Thailand. Through a process of major acquisitions, such as that of Marshall's Chickens, the company rose to be Scotland's largest private company, with sales reaching 1.85 billion in 2006. It is also Britain's largest meat processor, selling chicken, pork and lamb to all of the UK's major retailers. However with the growth came problems. The strength of supermarkets and a centralised decision-making system was blamed for a loss of profitability, culminating in the 32.8 million full-year loss revealed yesterday.