The Investment Column: Unigate

ROSS BUCKLAND, the chief executive of Unigate, is accustomed to calling the company's results unsatisfactory, and yesterday was no exception. Despite a profits warning in July, half-year figures came in even lower than expected. Mr Buckland, however, says things are now getting better.

Unigate's main problem, the St Ivel spreads business, should benefit from its new management after a failed campaign to win volume at the expense of margin led to half-year sales falling 11 per cent as competitors beat St Ivel at its own game.

The other blackspot, the Malton Foods pigmeat business, is responding to reorganisation and should show some improvement in the second half. In the first half, its sales fell 5 per cent as cheap imports took their toll. The cheaper meat helped the performance of Malton's so-called value- added products - sausages, if you prefer - which enjoyed stronger sales.

Even so, the year-on-year comparison in Unigate's fresh foods business, which suffered a 16 per cent fall in profits overall, is still likely to be negative in the full year.

Meanwhile, Unigate's dairy business continued to decline, with profits down 22 per cent. Volumes were up - sales to supermarkets rose 11 per cent - but the strong pound hit margins.

On the upside, Terranova, the supplier to Marks & Spencer acquired in April, delivered a strong performance. But with M&S reviewing its relationships with food suppliers, even that looks vulnerable.

Mr Buckland says recent price cutting by supermarkets is stimulating demand across the board. Still, Unigate could suffer as the supermarkets become aggressive with suppliers.

Despite Mr Buckland's guarded optimism, he refuses to rule out more redundancies following the half-year's 1,800 cuts. Analysts downgraded pre-tax profit and earnings per share forecasts to around pounds 124m - 38.7p per share. Earnings growth is some way off, but Unigate shares now yield 8.8 per cent and are worth holding.