Inter Link watches £8M profit forecast evaporate into a loss

Overstretched bosses at Inter Link Foods have admitted that they are unable to accurately measure their margins on individual lines using their current IT systems.

Shares in the beleaguered baker plummeted in March after it issued its second profit warning in a month following a miserable period, dogged by supply chain problems and pricing pressures.

Chief executive Chris Thompson said: "It was really just in the last couple of weeks that we identified that our margins were lower than we had anticipated. We were so focused on getting our distribution system right that our eyes were not on the ball when it came to the underlying business."

He added: "The difficulty is understanding the actual margin for product X or Y over the last month or the last week. We don't have the right management information. We have been introducing new systems over the past 18 months covering purchasing, finished goods, despatch and invoicing. However, modules for the central part of the system, which covers production management, manufacturing efficiency and waste management, will not be rolled out until the summer."

The own-label business was still suffering, he said and the sales and margins previously anticipated for the final four months of the financial year have been revised downwards. The company was now talking to customers about ditching low-margin business.

It was actively looking for at least one non-executive director and an executive director to join the board, said Thompson. "I am well aware that the credibility of the management has suffered."

The reduction in sales would also increase related costs, such as supplier rebates, said Thompson, who admitted that Inter Link did not have sufficient experience in-house to handle its recent transition to a centralised distribution system.

Meanwhile, the company was engaged in an "open and constructive dialogue" with its bank, which remained supportive.

Although the board remained confident that 2007/08 "will be materially better than the current year", Inter Link is now expected to make a substantial full-year loss against analysts' expectations of an £8M profit.