More job cuts at Geest blamed on supermarket price wars

By Rick Pendrous

- Last updated on GMT

Related tags: Cost

New focus on non-retail food markets follows tough six months

Fresh prepared foods firm Geest has blamed a further round of cost cutting on tough trading conditions, exacerbated by Morrison's acquisition of Safeway.

Geest will make around 100 managers redundant at a cost of £2m this year as part of a strategy which is expected to save the firm £5m by 2005. The management of Bourne Salads and Bourne Stir Fry in Lincolnshire have already been amalgamated, although the 43 staff affected have been found jobs elsewhere in the company.

Geest said that in the first half of the year to July 3 prices fell by about 2% due to supermarket price wars. It selectively increased prices in response and used its group buying power to offset rises in raw material costs, to achieve expected savings of around £22m over two years.

But the continued downward pressure has forced a change of focus at Geest, which plans to reduce its dependence on retailing and to increase turnover in other markets by £20m a year, said chairman Sir John Banham.

It has a new contract to supply Boots, a partnership agreement with Heinz, and advanced plans to form a £20m turnover joint venture producing ready-to-cook meals with chicken specialist Rannoch Food Group. It has also just acquired the UK's second largest hospital food supplier, Anglia Crown, for £14m, with another £2m payment dependent upon performance. Anglia claimed 25% of the growing out-sourced UK hospital food market, which is worth £65m.

"The UK trading environment for retailers continues to be challenging and has created increasingly turbulent trading conditions for suppliers," said Banham.

First half sales grew 7% year-on-year to £458.8m but operating profit before goodwill fell to £15.6m from £17.6m. Capital expenditure was £17.5m and Banham claimed that Geest would invest £36m this financial year.

To add to its troubles, Geest's Tilbrook plant in Milton Keynes, which made ready meals for Waitrose, has still not fully recovered from a fire in April.