Restructuring brings rewards for Hillsdown: European businesses help operating profit to pounds 199m

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HILLSDOWN Holdings, the food manufacturer, yesterday showed the benefits of its restructuring programme with a 20 per cent rise in operating profits to pounds 199m for 1993.

At the pre-tax level, profits jumped from pounds 63.7m to pounds 162.3m, partly due to a pounds 70.9m charge for business closures and losses on disposals in the previous year's figures. That fell to pounds 100,000 this year as the pounds 68.8m cost of restructuring in 1993 was charged against provisions in the balance sheet.

John Nott, chairman, said the result was 'a very creditable performance, given the harsh trading environment that the group faced at home and abroad'. He said the group had made considerable progress in restructuring and he was confident for the future. But he warned that progress would be steady rather than spectacular.

Sales increased by 4.1 per cent to pounds 4.6bn, including the first full year's contribution from the European chilled salads business acquired at the end of 1992, as well as a pounds 33.1m contribution from purchases made during 1993.

The best performance came from the European poultry business, which increased operating profits from pounds 17m to pounds 28.5m. The figure reflects the benefits of restructuring since the group acquired Unigate's chicken business two years ago. Since then, it has cut output by more than a third, to two million birds a week, and concentrated on added-value business such as prepared meats.

David Newton, chief executive, said restructuring of the group's businesses was now about 80 per cent complete and while there were likely to be more disposals, they would be small. The group was still considering acquisitions, but these would be small additions to existing businesses. 'One of the ways we failed in the past was in buying businesses because they were a good deal.'

He pointed to European chilled salads, where the group has a presence in important countries apart from France, as an area where it could expand.

Borrowings fell from pounds 313.5m to pounds 291.7m, despite pounds 74.9m spent on acquisitions. Mr Newton said he was particularly pleased about this performance, as it reversed several years of negative cash flow. He expected it to continue into 1994.

As well as its food interests, the group also owns a house-builder and furniture manufacturer. Their contribution increased from pounds 25.8m to pounds 32.2m. The group has considered selling these in the past, but Mr Newton said they would be kept unless the group could find a better use for the cash.

Earnings per share were 13.6p, compared with a 0.3p loss last year, and the dividend is held at 8.8p via a 6.6p final. The shares closed 8p lower at 166p.