United Biscuits plans pounds 110m restructuring: Many managerial job losses feared as competition bites Operating profits higher at pounds 219m

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The Independent Online
UNITED Biscuits is setting aside pounds 110m to restructure its US and European businesses in the face of fierce competition.

The restructuring is likely to involve the loss of 500 jobs in Europe, the bulk of them in Britain, and many more in the US - although it will not give an indication of the number. It employs 35,600 people, 17,100 of them in Britain and 10,300 in the US.

The pounds 110m charge is larger than had been expected and reflects the poor performance of Keebler, the group's US subsidiary, and a fall in margins in Britain.

In the US, which accounts for pounds 81.3m of the charge, the group intends to streamline its distribution to speed up delivery to stores and reduce the amount of stock it holds. In the biscuit market, where it holds second place behind Nabisco, it is reducing the number of new biscuit launches and will concentrate instead on marketing its core brands.

In snacks, where it has been losing money, it is pulling out of about a third of its markets to focus attention on the areas where it has a strong regional presence.

'A 4 per cent national market share is not sufficient to earn profits,' said John Warren, finance director. 'We need to sharpen our penetration of the market and do not think we can do that on a national basis.'

A further pounds 29m will be spent in Britain, pounds 26m of that on redundancies and the remainder on asset write-offs. The 500 job losses will be primarily among management.

United Biscuits estimates that the US restructuring will produce annual savings of at least pounds 40m within four years, while pounds 11m will be added to European profits when the programme is completed at the end of this year.

The restructuring costs were offset by a pounds 47.6m profit on the sale of businesses - mainly Terry's, the chocolate manufacturer. But it still left the group's 1993 profit before tax 28 per cent lower at pounds 116.7m.

At the operating level, however, profits were pounds 16m higher at pounds 219.4m, although that was due to a pounds 27.9m contribution from the Bake- Line acquisition in the US and Smith's in Australia. Sales rose 10.5 per cent to pounds 3.4bn.

The Bake-Line purchase helped Keebler's operating profits rise from pounds 26.6m to pounds 40.1m, although Eric Nicoli, chief executive, said the existing Keebler business had also improved its performance, particularly in the second half.

In Britain, however, profits dipped from pounds 145.7m to pounds 129.5m as both McVitie's and KP faced higher ingredient prices and the group boosted its marketing spend. Profits in Europe rose 30 per cent to pounds 33m while Asia Pacific, boosted by the Smith's acquisition, turned a pounds 700,000 loss to a pounds 15.5m profit.

Earnings per share were 12.8p, down from 22.3p, but the dividend was held at 10.3p. The shares closed 11p higher at 349p.

(Photograph omitted)

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