Geest longs for return of salad days as profits fall

Shares in Geest fell by 9 per cent yesterday after the maker of supermarket ready meals warned that operational problems at two new factories would hit profits in the second half.

Shares in Geest fell by 9 per cent yesterday after the maker of supermarket ready meals warned that operational problems at two new factories would hit profits in the second half.

The group, which stunned the market with a profit warning in June, also said that sales of its prepared salads had not fully recovered from an early summer slump caused by a lack of sunshine.

But in a trading update, the company added that despite rising insurance premiums, operating profit was still expected to match that achieved last year because group sales for the 10 months to the end of October had risen by 16 per cent.

Analysts said the sharp fall in Geest's share price reflected a shift away from earlier City optimism that the fall in salad sales was merely a "blip". The shares closed down 52p at 502p.

Geest said sales of prepared salads were ahead by 10 per cent in the four months to October, up from a 6 per cent rise in the first half. "But [they] have yet to reach the growth rate seen pre-summer," the company said. Sales of freshly prepared food, which includes ready-made Pizza Express products and freshly baked bread, rose by 8 per cent in the last 10 months, it added.

Andrew Saunders, an analyst at Numis Securities, said the stock market reaction to the group's statement reflected its nervousness about consumer goods in the wake of a string of profit warnings from companies in consumer-facing sectors. "[The] trading statement contains nothing unexpected and re-iterates the full-year outlook given following June's profit warning. Investors should not be disappointed with the comments made by the company," he said.

Mr Saunders added that the trading disruption at Geest's new automated pasta and garlic-bread-making facilities at Barton were already included in his pre-tax profit forecast of £41m.

The company, which appointed Sir John Banham as non-executive chairman in September to replace Ian Menzies-Gow, cautioned that the important Christmas trading period was still to come. It added that although trading conditions were becoming "increasingly competitive" in the retail sphere, demand from time-pressed shoppers for fresh prepared goods remained substantial.