Lees' Miquel targets new markets

The company behind snowballs and the famous macaroon bar has been hit hard by soaring overheads and pressure from supermarkets to freeze prices.

Half-year results, published yesterday, showed profits before tax and goodwill had fallen by a third to 228,783. That was despite sales rising to just over 7 million, from 6.74m last time, as sweet-toothed consumers snapped up new products lines including raspberry coconut-ice bars and tubs of mini-snowcakes.

Lees' total bill for rates, power and wages rose 136,000 during the six months to the end of June.

Miquel, who took over the Coatbridge-based business in 1993 before floating it on AIM last year, promised that the core manufacturing operations - Lees and Waverley Bakery - would remain within Scotland, but said he was looking at other ways of boosting the bottom line.

"The important thing is to get some diversity going," he said. "We are being squeezed from both ends. The supermarkets are not going to allow us to recover our manufacturing costs. We haven't increased our prices for seven years now.

"While we have to trim costs where we can and keep coming out with new products, there is a limit to what we can do.

"We wouldn't want to move the manufacturing, so the long-term future is to look at developing other areas."

Lees' chairman and managing director, who is credited with saving the iconic firm from almost certain bankruptcy, said he was casting an eye over up-market restaurants and niche hotels.

"I have identified a number of market opportunities, but haven't been able to develop them just yet," Miquel added. "We have got close to deals and turned them down for one reason or another."

Nadia Millar, managing director of the Waverley Bakery subsidiary, is to work alongside the former Bell's whisky boss to identify suitable acquisitions.

Earlier this year, Lees unveiled record annual sales of 13.5m - a figure which is set to be topped in 2006. Profit before tax will fail to meet the 614,000 last year but still be in line with internal forecasts.

Miquel described the group's cash position as "very strong", having built up a multi-million pound war chest to spend on suitable takeover targets.

Macaroon kings

LEES produces around 80 per cent of the meringues sold in British supermarkets, and can trace its roots back to 1931, when confectioner John Justice Lees allegedly botched the formula for making a chocolate fondant bar and threw coconut over it in disgust, producing the first macaroon bar.

The company, which operates from two modern manufacturing sites in Coatbridge and Cambuslang, sells more than 2.5 million macaroon bars a year, and 50 million snowballs in the UK alone.

In the year before Raymond Miquel acquired the business from Northumbrian Fine Foods, Lees racked up losses of 1.6m on turnover of 10.3m.