Unigate delivers pounds 101m profit surprise: Margins improve as milkmen are encouraged to become self-employed

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SHARES in Unigate jumped 6 per cent yesterday as the company produced better than expected profits alongside an improved dividend payout.

The company had been expected to fall victim to the fierce price war between milk suppliers, in which doorstep deliveries have suffered at the expense of milk sold in supermarkets. Unigate delivers to both, but supermarket milk carries inferior profit margins.

Milk profit margins were improved, however, largely because Unigate is encouraging its milkmen to become self employed, thereby reducing the company's costs.

Profits were also helped by advances at Wincanton, the food distributing operation, and at Black Eyed Pea, the US restaurants chain. Profits from the provision of fresh food to UK retailers, however, fell back.

Overall operating profits rose from pounds 89m to pounds 93m. A pension fund holiday, providing a pounds 4m credit, also helped.

The shares closed up 20p at 355p. Tim Potter, food manufacturing analyst at the securities house Smith New Court, said the improved dividend was the main reason for the rise.

Unigate's final dividend was lifted by 8 per cent to 10.4p, making a total for the year of 16.1p - a gross yield of 5.7 per cent.

Pre-tax profits were pounds 101.4m for the year to 31 March, a 54 per cent increase on 1992 figures. However, the 1992 figures include pounds 14m worth of losses chalked up by JP Wood, a chicken business Unigate sold in February last year. The figures are further distorted by the new FRS3 accounting standard, which Unigate adopted for the first time yesterday.

At the year-end the company's gearing ratio was 30 per cent. However, a spending spree since 31 March, in which Unigate bought Cliffords Dairy, the milk business of the Co-operative Wholesale Society and the Glass Glover distribution company, means gearing is currently running at 60 per cent.

Unigate was hoping to float off its US restaurants to raise pounds 150m to reduce borrowings. Adverse market conditions meant the flotation was postponed. Yesterday Ross Buckland, chief executive, predicted the deal would be done in the next 12 months.

Unigate published a modified earnings per share figure, adjusted to give what the company estimates is a fair comparative picture of 1993 on 1992. The adjusted earnings were 9.2 per cent greater in 1993 at 29.8p. FRS3 earnings were 31.3p, up from 23.4p.

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