Settlement of £2m disputes sweetens a ‘poor’ year for Tunnock’s

The Uddingston-based firm declined to provide details of the disputes, which inflated pre-tax profits threefold in a year when turnover fell from £34.7m to £32.6m.

Tunnocks said it could provide no further details due to confidentiality clauses, saying only that the actions related to “trading matters”.

Excluding exceptional items, operating profit was £1.1m, up from £745,000, as the company cut its wage bill. Due to the legal payouts, taxable profit rose from £1m to £3.4m.

Bruce Reidford, the company secretary, said trade had been “poor” last year, with both exports and home sales declining, but custom had picked up.

“It was just a sign of the times and, thankfully, in the current financial year we have recovered and hope to be above the 2010 figures,” he said.

Reidford said that both home sales and exports had recovered well, with the biscuits selling particularly well in the Middle East. Tunnock’s teacakes and caramel wafers are especially popular in Saudi Arabia, where they have been sold for more than 40 years.

UK sales, which had also declined the year before, fell by a further £1.4m to £27.9m. Export sales, which had previously been on the rise, fell to £4.7m, from £5.5m the year before.

Reidford said the firm now exports to 30 countries, and has recently won an order to sell teacakes to a South African supermarket.

He said the company continued to invest in its production facilities after spending £5m in the previous two years on new equipment so that it is ready to meet demand as the consumer environment improves.

Reidford said: “We are putting in new machines in the early part of the new year.”

Despite the legal windfall, dividends paid to the Tunnock family remained at £500,000 for the third successive year.

The company, which remains in the same area of Glasgow where Thomas Tunnock opened his first shop in 1890, also made charitable donations of £109,000, a similar level to 2010.

Employee numbers fell from 559 to 529, helping to cut its wage bill by nearly 10 per cent.

Tunnock’s was hit by strike action last year when workers at the firm staged two 24-hour walk-outs after Unite members rejected a 2 per cent pay offer.

The dispute was resolved following talks at the conciliation service Acas. Workers agreed to a 2.5 per cent backdated pay increase.

The directors’ remuneration stood much lower in the year to February due to the effect of a one-off payment to managing director Boyd Tunnock, who saw £550,000 added to his pension pot in 2009-10. The pension contribution was made to reflect the 78-year-old’s long-term contribution to the firm he continues to lead.

In the last financial year, the company’s directors received a total of £480,000. The highest paid director, who was not named, earned £132,000 plus pension contributions.