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After six years' decline, patience wears thin

Poor old United Biscuits has the look of an increasingly crumbling edifice. It is rather like one of those knocked about packets of broken biscuits that are sold off cheaply at the supermarket. The price is rock bottom, but still no one wants them. With its falling margins and slashed dividend, the shares have declined steadily over the past few years but still no predator has stepped in to stop the pain. However bad things get at United Biscuits, it seems that they will always get worse.

Management, led by chairman Colin Short and chief executive Eric Nicoli, are "kitchen sinking" the results this time - hoping to draw a line under recent traumas. The worst is now over, they say. We thought about giving up and selling to anyone prepared to take us on. But in the end we decided to have a go. The result is New United Biscuits and the future looks bright. Few share their confidence.

The company has plenty of excuses for its miserable performance - the legacy of the previous management, the weather and nasty competitors that are just too powerful. As far as they go, they are all reasonable ones. However, tough decisions could undoubtedly have been taken earlier. Market conditions have been difficult for all food companies. Most have managed themselves better. UB does have strong brand names such as McVities and KP but has not made them pay. Its biscuit margins, for example, have fallen from 16 per cent to 10 per cent in the last six years. Its operating margins are now lower than those of Hillsdown Holdings, which operates in the more mundane areas of chickens and eggs. If brands are added value, where's the value?

So far management has been given the benefit of the doubt but executives must know they are drinking at last-chance saloon. Colin Short, the former ICI finance director who joined UB as chairman last year, is a fine man. As long as he and the non-executives stand behind Mr Nicoli, boardroom changes seem unlikely. But after six years of relative decline, patience is running thin.