We’ll fight back - that’s the vow from Bernard Matthews’ bosses as it announces £20m loss
10:03 29 January 2014
One of Norfolk’s most high-profile firms has vowed to battle back into the black after revealing a £20.3m loss in the last year.
Turkey production is strengthening as pressures from feed prices and utilities are starting to ease, the British Poultry Association has said.
Andrew Large, chief executive of the BPA, said its latest poultry meat industry survey showed increased positivity across the poultry sector about the state of the market, with 40% of its members looking to increase production.
But the findings – which are collected from 95% of the UK’s poultry providers – reported that 60% of producers had not increased production at all.
“About 40% are more confident than they were six months ago, which shows positivity is growing,” he said.
“The challenges facing the industry are consumer demand, regulation, and skills investment. But one expects significant growth in UK poultry demand as the population rises. But in the medium term, there will be a little bit of volatility – with a bit of a slow period before it goes up again.
“To an extent, the industry is a reflection of what is happening with the national supermarkets, as some of them are going through a difficult period. Meanwhile, feed prices are definitely having a major impact on the poultry produced. But in the last six months there are signs that feed prices are stabilising, while other costs such as packaging and energy have also dipped slightly.
“Elsewhere, for the last year, the feedback from turkey producers is that the market has been relatively strong, and it is coming back from its low of 2008 and 2009. Our latest figures show that 200,000 tonnes of turkey meat was produced in 2012 – a 14% rise on 2011.
“And turkey meat productivity is also up 17% over the same period, according to Defra.”
Bernard Matthews, which grew from humble beginnings to be a major global poultry processing company, was hit by a double blow in the shape of high feed costs and demand from supermarkets to drive down prices.
The two issues contributed to the big loss in 2013 – which compared unfavourably to a £2m profit in 2012.
Executive chairman David Joll said the big loss was “extremely disappointing”, but said the firm was on course for a brighter future.
He said: “If we can achieve a combination of cost reduction and improved brand performance, I am confident that we have a very successful and profitable future ahead of us.”
The business gained nationwide fame through its “bootiful” TV advertising campaign, fronted by founder Bernard Matthews, who died in 2010 at the age of 80.
It also hit the headlines in 2005, when TV chef Jamie Oliver criticised its Turkey Twizzlers, which were being served up at some schools for children’s lunches.
Mr Joll is focused on returning the business to profit after high feed costs, and a demand from supermarkets to keep prices low, dealt a major blow to its bottom line.
The scale of the damage has been reflected in the company’s profits after it posted a £20.3m pre-tax loss last year – compared to a £2m pre-tax profit the year before.
But while Mr Joll admitted that its performance was “extremely disappointing”, he also believed the firm was edging towards a brighter future, with a clear strategy to reduce costs and improve brand performance.
To deliver it, the company is trusting in the expertise of business turnaround specialist Rutland Partners, which ploughed £23.5m into the business in exchange for a substantial equity stake.
And it could come at a crucial time, as the latest study from the British Poultry Association (BPA) shows increased confidence from poultry providers that productivity is improving and costs are easing.
Customers got a taste of things to come last October when Bernard Matthews invested £1m in a brand relaunch to make its products more appealing to mums.
But the difficult decisions that have faced Mr Joll have been laid bare in the company’s latest set of accounts, which reveal the loss of 423 employees from across the group in the last year.
“2012-13 was undoubted a challenging period for the business brought about as a result of exceptionally high global wheat prices, which had a direct impact on our cost base,” Mr Joll said. “We weren’t alone in having to deal with these pressures as other companies across the meat and poultry sector suffered from the same issue.
“While the effects of the wheat pricing have eased slightly the food sector still remains a very challenging environment, with pressure from consumers to keep prices low, set against continually rising business costs at the other end. It is in this economic climate that we have to successfully ensure the future profitability of the business, and have a clear strategy in place to enable us to do this.
“The first part of this strategy was getting on board a new partner to help the business grow and bring much needed new capital into the company. In September 2013 we were delighted that Rutland Partners become a key shareholder, bringing with them enormous experience in helping well-known brands achieve their financial potential.
“The next stage for us, and something that we are currently working on, is ensuring the business is as efficient as possible and that we are creating products that consumers want to buy at a price that is right.
“Clearly our cost base was too high, something we are now addressing and we are focusing much more attention on the Bernard Matthews brand than was the case before I returned to the business.
“If we can achieve this combination of cost reduction and improved brand performance, I am confident that we have a very successful and profitable future ahead of us.”
Some may question if this is the start, or the end, of a painful restructuring process for Bernard Matthews – and whether the investment deal means it is no longer in control of its own destiny.
According to its accounts ending June 30 2013, published this month, total sales have edged higher, to £346.4m from £341.4m, but the group − which is based at Great Witchingham in Norfolk and also has a major operation at Holton, near Halesworth in Suffolk − recorded an £11.7m operating loss compared to a £5.3m operating profit last time.
The turkey giant has looked to drive down costs and restructure parts of the group.
It confirmed that the majority of the 423 jobs lost had come from the Hungarian arm SaGa Foods, after it closed its farming operations and a slaughterhouse to become a “standalone” processing business.
However, the Hungarian bank CIB Bank Zrt – which partly funded the operation through a loan facility – has demanded Bernard Matthews pay back about £7m within a year amid claims that it had broken the covenant of its agreement.
But the company expects to meet the demands after saving money from other parts of the business.