Food Ingredients is a broad market sector and with major product sectors driven by commodity pricing.
Food Ingredients profile 2016/2017
Sales revenues grew by over 20% but this was largely a result of recovering commodity prices in sugar and dairy. R&W Scott increased its sales by just over 5% while Garrett’s pursued a strategy of retaining customer volume despite poor margins. Both businesses suffered gross margin reverses with Garrett Ingredients particularly suffering around the sharp and unexpected currency movements after the Brexit vote leading to increased commodity costs. A dispute regarding the supply of sugar constrained Garrett’s trading position and remained unresolved at the year end. As a result the division traded at an operating loss.
An annual impairment review was conducted in accordance with IAS38 ‘Intangible assets’ and IAS36 ‘Impairment of assets’ and this resulted in an impairment of goodwill and fixed assets of £3.6 million.
The acquisition of Brighter Foods transformed the scale and profitability of this division and met the objective of expanding our presence in the added value health sector. New supplier relationships following the trading dispute should enable margin recovery in sugar from October 2017, while dairy trading should also present opportunities during the second half of the year providing currency trends stabilise.
R&W Scott started supply of a major jam contract in September while last year’s investment will deliver operational savings. R&W Scott has also worked on a number of inter-company supply contracts, particularly to Haydens, which will bring margin in-house.
Food Ingredients includes the following businesses:
Garrett Ingredients sources dairy, sugar and other specialist food ingredients from across the UK, Eire and continental Europe and sells them to large, medium and small food manufacturers across the UK.
Brighter Foods manufactures snackbars, both own label and branded, targeted at the growing health and 'healthy lifestyle' markets; e.g. slimming, sports nutrition, 'free from' and organic.