Store wars eat into profits at Walkers Shortbread

STAFF numbers at Scottish ­biscuit-maker Walkers Shortbread passed a record 1,700 at one stage last year as turnover topped £140 million.

Walkers saw sales growth despite a tighter eurozone market. Picture: Jon Savage

But despite continuing sales success across the world, the impact of quantative easing on European exchange rates and supermarket price wars took their toll on margins and profits at the Aberlour-based company.

Sales rose by 2.7 per cent to £140.8m in 2014 with exports accounting for more than 42 per cent of turnover as its products continued to enjoy popularity in some 60 countries.

Although cost pressures were not as severe as expected, the lack of growth in Europe and adverse currency movements contributed to operating margins dropping from 9.7 to 7.4 per cent. Pre-tax profits dropped to £10.9m from £14.5m.

The company, which makes shortbread, oatcakes and cakes, also highlighted pricing pressures in the private label sector which it supplies and which it said reflected the growth of discounters – such as Lidl and Aldi – and the response of the major UK retailers to greater competition.

“In a very short period of time this has become the key focus in the management of relationships and we expect it will limit the extent to which our margins will ultimately recover,” said the company in its report to the accounts filed at Companies House.

Although the price of key ingredients has eased in recent months, it highlighted the impact of quantitative easing in the eurozone which has pushed sterling to its highest level since 2007 making it “significantly harder to trade profitably” in the region.

Despite the challenges, Walkers said the “enduring nature of its customer relationships” and the quality of its products meant it was well-placed for the future.

Permanent staff numbers at the firm, which has factories in Aberlour and Elgin, rose from 1,394 to 1,450 during the year with more than 1,700 people employed at the Christmas peak.

Boardroom pay rose to £3.17m from £3.04m but the pay of the highest paid director – thought to be Joe Walker – dipped from £944,000 to £925,000.

The company was founded in 1898 and its still under control of the Walker family.