Farmfoods cashes in on consumers' money woes

SALES at frozen goods retailer Farmfoods have smashed through the £500 million barrier for the first time as cash-strapped shoppers continue to trade down to discount stores.

The Cumbernauld-based firm, which has about 300 stores in the UK, posted a 20 per cent rise in turnover to 579m for 2010, strengthening its status as one of Scotland's largest private businesses.

Accounts filed at Companies House also reveal that pre-tax profits jumped from 13.8m to 17.8 after the firm trimmed its administrative expenses.

The rise allowed the company to double its interim dividend from 3 a share to 6, leading to a payout of 6.8m. No final dividend was recommended in either 2010 or 2009.

The lion's share of the divi was paid to chairman and managing director Eric Herd, who owns an 83.7 per cent stake in the group.

Herd and his brother, Gordon, inherited the business - which was founded in Aberdeen in 1955 as a meat processor - from their father and grew the chain from 31 stores in 1988 to its current standing.

Herd bought out his brother's 21 per cent stake in 2005 for 10.3m. Other shareholders include fellow director William McCreadie and other members of Herd's family.

Herd's personal wealth has been estimated at 105m.

Farmfoods' highest-paid director, likely to be Herd, saw their total pay package rise from 1m to 1.1m, while the company's overall wage bill increased from 32.2m to 36m, with the headcount up from 2,798 to 2,989.

Writing in the directors' report, company secretary Susan Crombie said: "Trading conditions have been, and are expected to remain, competitive."

The same statement has accompanied the publicity-shy firm's accounts for the best part of the past decade.

Farmfoods has been one of the supermarket sector's winners during the recession, with shoppers looking for competitive prices.

The latest figures from retail analysts at Kantar Worldpanel showed that the Scottish chain out-grew the grocery market in the 12 weeks to 20 March. Group sales rose by 11.7 per cent to 140.9m, beating larger rival Iceland's 4.2 per cent growth and the grocery market's overall 2.6 per cent rise.

Kantar Worldpanel director Edward Garner said: "While there are no signs yet of the explosive growth in economy own-label ranges that we saw in 2008, there are now clear indications that value-for-money is driving retailer performance.

"The freezer centres - Iceland and Farmfoods - outperformed the market. This growth is driven by customers seeking out value-for-money products."

Garner noted that discount retailers Aldi and Lidl had also posted double-digit sales growth.