The Investment Column: Challenging time for UB's sales line

UNITED Biscuits has proved a dismal investment over the past five years, but the company was expressing confidence yesterday that it is now turning the corner. It has cleared out disasters like the Keebler business in America and last November it conducted a pounds 241m asset swap with PepsiCo under which it sold its French and Australian snacks operations in return for PepsiCo's French biscuit business. The deal has enabled United Biscuits to return pounds 150m to shareholders which will be effected by the issue of "B" shares that will then be bought back.

UB's pruned portfolio is now organised into two divisions - the McVities biscuits business and UK foods which takes in snacks, chilled and frozen foods. The plan is to concentrate more on its core banded products like Penguin, Hula Hoops and Skips as well as its new Go Ahead range of low-fat snacks and less on own label goods supplied to the supermarkets.

Management seems more focused on shareholder value. It has cut costs and concentrated on building margins which rose by a full percentage point last year. The challenge now is to build the sales line which didn't budge at all in any of the divisions last year.

This is promising much, but the City is not sure management can deliver. Pre-tax profits before exceptionals fell by 3 per cent to pounds 106.2m last year though UB says this was due to the decline in businesses now discontinued. But in the UK, which is UB's main market by some distance, sales were flat even after stripping out lower exports because of the strong pound and pounds 12m from the sales of businesses. However, management has drawn some comfort from achieving sales growth of around 5 per cent in the last quarter of last year and the first two months of this one.

Delivering longer term sales growth will test UB's marketing skills and will be made more difficult given the cut- throat market in which UB operates. Eric Nicoli, the company's long-standing chief executive, says regional dominance is much more important than global scale, but the fact remains that UB is a pounds 1.4bn company up against huge competitors like PepsiCo and Nestle.

It is looking at bolt-on acquisitions and with gearing halved to 17 per cent it could afford more share buy-backs, but the strong run of the last two months now has the shares looking fully valued. The shares fell 6p to 263p yesterday and assuming full-year profits of pounds 120m this year, they trade on a forward rating of 16 and yield almost five per cent. Given the scale of the challenge that looks high enough.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Tax Manager / Accountant

£35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

Ashdown Group: Contracts Executive - City of London

£35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

Recruitment Genius: Call Centre Debt Collector - Multiple Roles

£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Day In a Page

Giants Club: After wholesale butchery of Idi Amin's regime, Uganda’s giants flourish once again

Uganda's giants are flourishing once again

After the wholesale butchery of Idi Amin's regime, elephant populations are finally recovering
The London: After 350 years, the riddle of Britain's exploding fleet is finally solved

After 350 years, the riddle of Britain's exploding fleet is finally solved

Archaeologists will recover a crucial item from the wreck of the London which could help shed more light on what happened in the vessel's final seconds
Airbus has patented a jet that could fly from London to New York in one hour

Airbus has patented a jet that could fly from London to New York in one hour

The invention involves turbojets and ramjets - a type of jet engine - and a rocket motor
10 best sun creams for kids

10 best sun creams for kids

Protect delicate and sensitive skin with products specially formulated for little ones
Tate Sensorium: New exhibition at Tate Britain invites art lovers to taste, smell and hear art

Tate Sensorium

New exhibition at Tate Britain invites art lovers to taste, smell and hear art
Ashes 2015: Nice guy Steven Finn is making up for lost time – and quickly

Nice guy Finn is making up for lost time – and quickly

He was man-of-the-match in the third Test following his recall to the England side
Ashes 2015: Remember Ashton Agar? The No 11 that nearly toppled England

Remember Ashton Agar?

The No 11 that nearly toppled England
Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks