unigate plc report and accounts 1999

Unigate PLC Report and Accounts 1999

Brought to you by Global Reports

Unigate is a European food and distributiongroup. It has over 30,000 employees and anannual turnover of £2.3 billion. Building on itsstrong financial position, the Group is pursuingexpansion within Europe, both organically and by acquiring quality food and distributionbusinesses, particularly where it can add value. As it expands, Unigate is committed toconsistent profitable growth as the means bywhich it can provide attractive returns to itsshareholders, be a responsible employer andsupport the communities in which it operates.

Corporate Statement

Contents

1 Highl ights2 Business Act iv i t ies3 Chairman's Statement4 Chief Execut ive’s Review6 Board of Directors

Operat ing Review:8 Fresh Foods

10 Malton Foods12 St Ivel14 Dairy18 Wincanton Logist ics22 Social Responsibi l i ty24 Financial Review

28 Directors’ Report30 Corporate Governance32 Directors’ Responsibi l i t ies

for Financial Statements33 Remunerat ion Report37 Auditors’ Report38 Group Prof i t and Loss

Account39 Balance Sheets 40 Group Cash Flow

Statement41 Statement of Group

Recognised Gains andLosses

41 Reconci l iat ion of Movements inShareholders’ Funds

41 Note of Historical Cost Prof i ts and Losses

42 Notes to the Financial Statements

62 Principal Subsidiaries62 Shareholder Information64 Five Year Record


1 Unigate PLC Report and Accounts 1999

Highl ights1999 1998 change %

Turnover £2,309m £2,311m –

Operating Profit before exceptional items

and goodwill amortisation £133.4m £138.9m –4.0%

Profit before tax, exceptional items

and goodwill amortisation £141.9m £146.4m –3.1%

Exceptional items £13.6m £1.5m

Profit before tax £155.1m £147.9m +4.9%

Earnings per share

– on basic earnings 53.1p 47.2p +12.5%

– on earnings before exceptional items and

goodwill amortisation 44.9p 46.5p –3.4%

Dividend per share 23.2p 22.0p +5.5%

• Profit before tax, exceptional items and goodwill amortisation, of £141.9 million, down3.1 per cent.

• In a challenging year, European Food profits of £103 million, down 9.6 per cent; WincantonLogistics profits strongly up 22.1 per cent to £30.4 million, capitalising on recent investmentsand additional business won.

• Substantial capital investment of £118 million and £90 million spent on acquisitions during the year.

• Reinforced commitment to growth sector of food and distribution markets with

– completion of the acquisition of Terranova Foods for £274 million since the year end and;

– announcement of the proposed acquisition of Marie, the French convenience foods business for £145 million.

• Significant progress in fulfilling strategic objective of becoming a major European value-added food processor.


Malton Foods: added valueproducts for the pork, baconand cooked meat markets,mainly for UK retailers, but alsoworldwide exports. St Ivel UK: a wide range of fresh food anddairy products under brandssuch as St Ivel, Cadbury, Gold,Utterly Butterly, Vitalite, GoldenChurn, Shape, Mr. Wilson ExtraMature Cheddar and for theown label market. St IvelFoods, Europe: yellow fatspreads, yogurts and dessertsfor branded and own labelmarkets in France, Italy and theUK. UNIQfoods: a leadingsupplier of dips, sauces,dressings and marinades formajor retailers and caterers.

Subsequent to the year endUnigate acquired TerranovaFoods plc: chilled conveniencefoods for the retail and foodservice industries. TerranovaFoods operates in nine countriesthroughout Europe.

Unigate Dairies: one of thelargest milk processors inBritain. It distributes milk to1.3 million homes, primarily in southern England and SouthWales, through a mixture ofemployed and franchisedroundsmen and independentbottled milk suppliers. UnigateDairies also supplies freshmilk to the major retailers, in a wide variety of sizes andpackaging formats. UnigateChill Chain distributes freshmilk and cream, and a rangeof St Ivel and other brandedproducts, to convenience stores,shops, forecourts, hospitals,schools and caterers. Theresults of the Dairy divisioninclude the results of theGroup’s related butter andmilk powder activities.

Wincanton Logistics: one of the leading suppliers of logistics services to UKindustry. It provides dedicated,shared and consolidateddistribution services to majorretailers and manufacturers;designs, builds and operatesautomated warehouses; collectsand distributes fuel, gases, milk,food and other finished goodsand raw materials via a fleet oftankers and other vehicles; andprovides commercial vehiclefleet management services across a wide range of retail,commercial and industrialsectors.

European Food – DairyOperating Profit£ million

95

44.6

34.540.5 43.144.8

96 97 98 99

Wincanton LogisticsOperating Profit£ million

95

21.7 23.0 23.4 24.930.4

96 97 98 99

Business Activities and Operating Profit by Division


Dairy 32.3%

Wincanton Logistics 22.8%

Fresh Foods 44.9%

European Food – Fresh FoodsOperating Profit£ million

95

26.2

39.7

66.473.5

59.9

96 97 98 99



In a very challenging year for the food industry as a

whole, Unigate nevertheless reported pre-tax profits ,

before exceptional items and goodwill amortisation, of

£141.9 million, 3.1 per cent down on 1997/98. Earnings per

share, excluding exceptional items and goodwill amortisation,

have fallen by 3.4 per cent to 44.9p. Pre-tax profits after

exceptional items rose by 4.9 per cent to £155.1 million

and basic earnings per share are up by 12.5 per cent to 53.1p.

The Board has recommended a final dividend of 15.3p, taking

the total dividend for the year to 23.2p. This represents an

increase of 5.5 per cent on last year.

European Food reported profits down 9.6 per cent to

£103.0 million. Within this , Fresh Foods experienced a

difficult year and profits fell by 18.5 per cent to £59.9 million.

However the Dairy Group had a good year raising profits by

6.4 per cent to £43.1 million. Wincanton Logistics performed

exceptionally well, raising profits by 22.1 per cent to £30.4

million. The details of these results are reviewed by the

Chief Executive on pages 4 and 5.

Strategically the year saw substantial progress towards

our aim of building a major value-added food processing

business in Europe. In this respect, our acquisitions in the year

included the Fisher Quality Food’s sauces and dressings business,

which was a first step in expanding our range of convenience

food products . In addition, we were particularly pleased to be

able to announce two major acquisitions costing £419 million

in aggregate after the end of the year, which transform

Unigate’s position. The acquisition of Terranova Foods not

only expands the range of chilled convenience foods which

we manufacture, but also extends our presence on the

Continent from France and Italy into Germany, Poland,

Scandinavia , Spain and the Benelux countries .

The recently announced intention to acquire Marie,

Danone’s French convenience foods business will give us

a strong brand position in France and a further widened

product range. Together with our existing French businesses ,

these acquisitions create a Continental European business

with turnover of some £600 million across nine countries .

We are excited by the platform that these acquisitions provide

for us and will continue to pursue a strategy of building on

the European convenience foods business . We are convinced

that this strategy will add significant shareholder value.

Following the acquisition of Terranova Foods , I am

particularly pleased to welcome Terry Stannard, Terranova

Food’s Chief Executive, to the Board. Terry has accepted the

appointment of Managing Director of an enlarged St Ivel

Group. In this role, he will assume responsibility for the St Ivel

UK operations in addition to the Terranova Food’s business .

Importantly, we continue to give strong support to the

communities in which we operate. We also run our business

using technologies and techniques which reflect our concern

for the environment.

The difficult trading environment we encountered in

1998/99 did not distract us from the key tasks of holding

and improving market shares , increasing our efficiency and

building for the future. We have made significant progress

in pursuing our strategic objectives and, despite the

uncertainties in the immediate outlook in some of the

markets in which we operate, we remain confident in the

prospects for the continuing growth of the Group.

Ian Mart in Chairman

Chairman’s Statement



1998/99 was a challenging year for Unigate with mixed

performances within the Group. Sales were unchanged at

£2.3 billion, but the Group was not immune to the problems

which have affected the food manufacturing sector, and

operating profits before exceptional items and goodwill

amortisation, were down by 4.0 per cent to £133.4 million.

Although the overall result is disappointing , it nonetheless

includes good performances in a number of businesses .

Importantly, we continued to invest in all of our businesses

in order to strengthen their brands and market shares , to

lower our operating costs and to develop new products

and services . We also embarked upon a wide-ranging

cost reduction programme, particularly in our Fresh Foods

business , designed to respond to the trading conditions.

An exceptional charge of £7.7 million was taken to reflect

the costs of these initiatives .

European Food profits were down 9.6 per cent to

£103.0 million. In Fresh Foods, operating profits fell by

18.5 per cent to £59.9 million. Malton Foods was affected by

the overproduction of pigs throughout Europe and the loss of

markets in Asia, and especially, Russia. This resulted in a period

where the market price of pigs fell below the contracted

price paid by Malton, costing the company approximately

£5 million in the first half of the year. Profits were further

impacted by the cost of meeting higher animal welfare

standards and the loss of revenue from bone and offal sales .

Operationally Malton was also affected by disruption due

to a fire, which destroyed the Ballymoney plant in June.

The losses were fully insured and processing capacity in

Northern Ireland was restored promptly, principally through

the acquisition of the Unipork business . In St Ivel UK, sales

and market shares generally increased, but profits fell as

margins were depressed in a particularly competitive market-

place necessitating heavier marketing expenditure. This has

increased sales and protected brands , but reduced operating

profits . St Ivel Foods , Europe improved profitability and

provided valuable additional processing capacity to support

the increased sales of yogurts and desserts in the UK.

Dairy profits were up 6.4 per cent to £43.1 million. In liquid

milk , a slight fall in volumes was offset by a reduction in

costs . The rate of decline in doorstep sales again improved to

6.8 per cent by the year end. Additional business was secured

from supermarkets , as they rationalised their suppliers . The

butter/powder business performed well. Growth in sales of

packet butter were particularly strong , although prices

weakened towards the end of the year.

Wincanton Logistics had an outstanding year, raising

operating profits by 22.1 per cent to £30.4 million. All three

divisions performed well, capitalising on recent investments

and winning additional business from new and existing clients.

Business Development To strengthen our brands ,

we increased marketing expenditure by 1.5 per cent to

£92.7 million during the year (18.2 per cent increase during

the second half ).

A further £118 million was invested in new plant and

equipment. The £20 million expansion of the spreads plant

at Liverpool was completed towards the end of the year.

The full benefits of this investment will become apparent

for the first time during the current financial year. The

benefits of the £17 million investment in the new National

Distribution Centre for St Ivel, which commenced operations

Sir Ross Buckland Chief Execut ive

Chief Executive’s Review



in May 1999, will also be felt during the current year; it is

operated by Wincanton Logistics . With the completion of the

programme of investment in hand-held computers , Unigate

Dairies is now the only dairy group to have equipped every

roundsman with these important tools . They improve service

to customers , facilitate promotional activities , and generate

vital management information.

A total of £90 million was spent during the year on several

important acquisitions. The purchase of Unipork in

September 1998 for £35 million enabled Malton to maintain

its presence in Northern Ireland in the wake of the fire at

Ballymoney, while the acquisition of Case & Sons gave the

company a strong position in the South West.

The purchase of the doorstep business of Wessex Dairies in

March 1999 will integrate well with Unigate Dairies existing

business in the South West.

Strategically, the acquisition of the sauces and dressings

business , bought from Albert Fisher for £42 million in

February 1999, demonstrated our commitment to investing

in growth sectors of the food processing market. This

commitment has been reinforced since the year end with the

acquisition of Terranova Foods and the recently announced

intention to acquire Marie, Danone’s French convenience foods

business referred to in the Chairman’s Statement.

Management The acquisition of Terranova Foods has allowed

us to review and strengthen the management structure of our

food operations. Terry Stannard becomes Managing Director,

St Ivel Group, reporting to Gordon Summerfield, the main

board Director responsible for our food businesses . We have

also made a number of other senior appointments.

With this new structure, we have strong managers in charge

of each of our major food businesses , an important step in

preparation for Gordon Summerfield’s retirement at the end

of the year.

People In such a challenging year, we are most appreciative

of the loyalty and hard work of our employees . As the new

fiscal year begins , we also welcome over 6,000 new colleagues

in Terranova Foods and 2,000 in Marie. All can look forward

to a challenging and rewarding future.

Outlook Whilst Wincanton continues to make good progress ,

we have experienced a difficult start to the new year in our

food businesses with a continuation of the challenging trading

conditions seen in the second half last year, exacerbated by

renewed margin pressure at Malton. We expect that the

climate in the food manufacturing sector is likely to remain

difficult in the short term, especially in the pig markets . We

are addressing these conditions , including most recently, the

announcement of the closure of Malton’s slaughtering facility

at Spalding to align its slaughtering capacity with a smaller

pig herd in Great Britain. In the light of the steps we are

taking , we expect to see an improvement in trading in the

second half of the year.

Importantly, the recent acquisition of Terranova Foods and

the proposed acquisition of the Marie business have enabled

us to make good progress in fulfilling our objective to

become a major European value-added food processor.



Board of Directors

Board Committees

Unigate has Remuneration, Audit, Finance

and Nomination Committees . Membership

of these Committees is indicated after

Directors’ names.

The Remuneration Committee considers

and approves the salaries , bonuses and

terms of employment of senior executives

including the Chairman and Executive

Directors and approves the granting of

executive share options and other long

term incentives .

The Audit Committee reviews the work

of the internal and external auditors , seeks

to ensure that appropriate accounting

systems and financial controls are in

operation, reviews the terms of reference

of the auditors , and reviews the Interim

and Preliminary results before they are

submitted to the Board.

The Finance Committee is responsible for

approving certain capital expenditure

projects , acquisitions and treasury

procedures and actions within limits

delegated by the Board.

The Nomination Committee is responsible

for the selection and recommendation to

the Board of candidates for appointment

to the Board.

*Member of the Remuneration Committee

†Member of the Audit Committee

‡Member of the Nomination Committee

#Member of the Finance Committee

Ian Martin (64) Chairman *†‡

Joined the Unigate Board in March 1995

as Chairman. He is also Chairman of

Newmond PLC and Erycinus PLC (formerly

C.E. Heath) and is a Director of House

of Fraser PLC. He was formerly Deputy

Chairman of Grand Metropolitan PLC.

Sir Ross Buckland (56) Chief Executive‡#

Joined the Unigate Board in 1990 as Chief

Executive. President of the Institute of Grocery

Distribution, a Director of RJB Mining PLC

and Allied Domecq PLC. Previously Chief

Executive of Kellogg Europe.


Chas Lawrence (54) Chief Executive,

Wincanton Logistics#

Joined Unigate in 1972 and the Board

in 1991. Board Member of the Freight

Transport Association and Chairman

of the FTA Environment Best Practice

Working Group.

Victor Scherrer (56) Non-Executive*‡

Joined the Board in September 1996. He is

a French national and holder of the Legion

d’Honneur. He is Chairman and Chief

Executive of Le gout de la vie S.A. President

of ANIA (the French Association of Food

and Drink Industries), Chairman of the

Supervisory Board of SIAL (the Paris

International Food Exhibition) and Vice

President of MEDEF (Confederation of

French Industries , Banks and Services).

John Worby (48) Finance Director#

Joined Unigate in 1978 and became

Group Treasurer in 1981. He was Finance

Director of Unigate Dairy Holdings and of

Wincanton Group before being appointed

to the Board as Group Finance Director in

1987. He is a Chartered Accountant.

John Robb (63) Non-Executive *†‡

Joined the Board in January 1996 and

is Chairman of the Audit Committee.

He is Chairman of British Energy PLC

and Chairman of Hewden Stuart PLC.

He is Deputy Chairman of the Horserace

Betting Levy Board and Trustee of The

Royal Botanic Garden Edinburgh. Formerly

Chairman and Chief Executive of Wellcome

PLC. He is also a Director of Horseracing

Forensic Laboratory Limited.

Gordon Summerfield (59)

Chief Executive, European Food#

Joined St Ivel as Production Director in

1986, becoming Managing Director of

Unigate Dairies in 1989. He joined the

Board in March 1991 and became Chief

Executive of the European Food businesses

in February 1994. He is immediate past-

President of the Dairy Industry Federation,

a Council Member of Food from Britain

and non-executive Chairman of Pirtek

(Europe) Ltd.

The RT. Hon. John MacGregor OBE MP

(62) Non-Executive*†‡

Joined the Board in December 1996

and nominated as Senior Non-executive

Director in November 1998. He is Chairman

of the Remuneration Committee. A Member

of Parliament for 25 years and in the

Conservative Government for 15 years , he

held five Cabinet posts , including Minister

of Agriculture, Fisheries and Food and

Secretary of State for Transport. He is also

a Director of Associated British Foods PLC,

Slough Estates PLC and Friends Provident.

Terry Stannard (49) Managing Director,

St Ivel Group (not pictured above)

Following the acquisition of Terranova

Foods plc, he was appointed to the Board

on 7 June 1999. Previously Chief Executive

of Terranova Foods plc, an executive

Director of Hillsdown Holdings plc and

with United Biscuits (Holdings) plc.



Fresh Foods experienced challenging trading conditions during the year, which resulted in a reduction

in operating profits of 18.5 per cent to £59.9 million. Nevertheless, progress was made in a number

of areas. The acquisitions of UNIQfoods and subsequent to the year end, Terranova Foods, has added

salads, salad dressings, marinades, sauce dip pots and sandwiches to the existing range of fresh and

convenience foods. With the acquisition of Terranova Foods, Fresh Foods products are now distributed

in nine Continental European markets. Malton Foods the largest pig processor in the UK, strengthened

its position with the acquisition of Case & Sons in the south west of England. Sales of value-added

products to the major retailers further increased. To maintain its competitive advantage, Malton

continued to invest in its facilities to improve efficiency. Costs were also reduced by factory rationalisation.

St Ivel UK broadly maintained its share of branded spreads and increased its share of the yogurts

and desserts markets; it also continued to focus on value-added mature and low fat cheeses.

The concentration of spreads production at Liverpool was completed, further reducing costs. A new

National Distribution Centre for St Ivel, designed to improve operational efficiency was opened after

the year end. St Ivel Foods, Europe increased profits, with all its established brands maintaining

or increasing market share. A new sunflower based margarine, Sollen, was launched in January 1999.

Production for the British market continued to rise, driven by the success of Teletubbies yogurts.

A second themed yogurt, Rugrats, was launched in March 1999.

Operating Review: Fresh Foods

1999 1998Fresh Foods £m £m

Turnover 1,231 1,255

Operating profit 59.9 73.5

ROTCE 15.7% 25.5%


Hand Decorated Gammon Joint With Apricots supplied by Malton to Marks & Spencer.

Utterly Butterly, the most popular dairy spread, continues to gain market share.

Another successful year for the Shape range; Cadbury’s Light Mousse, another addition to this leading dessert range.

Orange, Ginger & Chilli Pork Sausages launched in January for Safeway. UNIQfoods’ marinades under the ‘Newman’s Own’ label.


Performance Malton Foods performed robustly in

extremely difficult trading conditions. Total sales fell

7 per cent to £607 million due to falling selling prices .

However, sales of value-added pork, ham and bacon

products to the major retailers were up by 5 per cent in

volume terms. Malton continued to introduce new products

during the year including easy roast gammon joints in

Dijonnaise, plain or with sage, onion and apple stuffing;

easy roast pork joints with mushroom or mustard stuffing;

low salt healthy choice selection of gammon steaks ,

rindless back bacon and chops; premium pre-cooked ribs

and drycure wafer thin ham and frozen sausages .

The markets in which Malton operates were adversely

affected by continuing oversupply of pigmeat throughout

Europe and by the significant fall in demand from the

major export markets of east Asia and Russia. This has

led to falling revenues. After two years in which returns

to pig producers benefited from good returns , the weekly

kill of pigs in western Europe rose 8.3 per cent from 3.6

million in 1997 to 3.9 million by the end of 1998.

Whilst this oversupply also caused pig prices to fall, overall

margins were lower, particularly in the first half of the year

when the contract price of pigs paid by Malton remained

above the market price for several months. Malton revised

its pig procurement arrangements in June to enable

some restoration of margins .

Higher veterinary and meat inspection charges and the

introduction of bone and offal disposal fees also led to

a rise in operating costs . To mitigate these difficulties ,

Malton continued to improve efficiency. Its bacon packing

plant at Evesham was closed and production transferred to

facilities at Ashton and Winsford. The site at Motcombe, part

of the Case & Sons acquisition, was also closed. Operationally,

Malton suffered significant disruption from the destruction

by fire of its Ballymoney plant in June 1998. However, prompt

Unsmoked Rindless Back Bacon Rashers, made for Tesco, Freedom Foodsaccredited, produced from UK pigs, reared to the highest welfare standards.

Northern Ireland’s No. 1 branded rasher, Cookstown Unsmoked Back Bacon.

Easy to use Wafer Thin Dry Cure Ham, made by Malton for Tesco.

Easy Roast Gammon Joint. Meals made easy – a growth area for Malton.

Harris succulent Pork Loin Steaks, microwavable for convenience.


management action including shipping of pigs to the mainland,

enabled Malton to limit the impact of the fire. The company

is fully insured.

Investment Despite the loss of the Ballymoney plant,

where a £10 million investment programme was nearing

completion at the time of the fire, the Group reaffirmed

its commitment to maintain a presence in Ireland with

two major investments . Unipork, an independent processor

with plants at Cookstown and Enniskillen, was purchased

in September for £35 million. A vacant factory at Ahoghill,

near Ballymoney, was also acquired and reopened. These

decisions , coupled with increased shipping of pigs to the

mainland, enabled Malton to retain the confidence of both

staff and suppliers during a difficult period. Case & Sons , a

pigmeat processing business with plants at Motcombe and

Wiveliscombe, was purchased in June 1998. This acquisition

has given Malton better access to pig suppliers in Wales and

the South West, and added traditional Wiltshire cures to its

portfolio of products .

Future Outlook After a prolonged period of

oversupply, European pigmeat processors and

their suppliers face a challenging adjustment

to the changing structure of the marketplace

in the year ahead. UK farmers are rationalising

production ahead of their European competitors,

leading to a shortage of UK pigmeat. Malton

is responding to this situation by reducing

slaughtering throughput with the closure of

the Brunel Road, Spalding facility and where

necessary, product is being sourced from

outside the UK.

As a low cost, high volume producer with a full

portfolio of products, ranging from standard cuts

and cures to value-added cooked meats, Malton

is well placed to compete effectively and to

maintain its leadership position.


Malton Foods

Thick Cut Rindless Back Bacon for ASDA – meeting consumer needs for a thicker cut.

Easy Roast Pork Joint with mustard stuffing – meets consumer need for taste and convenience. UNIQfoods classic French dressing for Marks & Spencer.


Malton – Weekly PigThroughputthousands

95

30,0

35,8

66,1

76,6

68,5

96 97 98 99


Performance In difficult markets , St Ivel UK had a

disappointing year. Profits were impacted by lower margins ,

caused by high promotional cost, and a heavy marketing

programme which enabled St Ivel to maintain or improve

its position in all but one of its markets . Profits were also

impacted by higher costs associated with the closure of the

Hemyock spreads plant into an expanded Liverpool factory

and the commissioning of new desserts production

machinery.

Despite increasingly fierce competition in the spreads

market, St Ivel’s portfolio proved resilient with volumes

performing in line with the overall 6 per cent market decline.

As a result, St Ivel’s market share at 31 March 1999 of

20 per cent was largely unchanged from a year ago.

Yogurts and desserts had an outstanding year in volume

terms, raising sales by 13 and 15 per cent respectively with

market share of Shape and Cadbury brands both increasing.

These volume performances reflected an aggressive pricing

strategy. New products introduced included a new range

of desserts for Marks & Spencer, and in March, Rugrats , a

themed yogurt designed to capitalise on the success of

Teletubbies . Chilled fruit juices had a difficult year. Volumes

fell by 13 per cent, as consumers switched from fresh juice.

Cheese again performed well, with margins benefiting from

an improved mix. Sales of higher margin mature cheddar,

which now accounts for over 60 per cent of St Ivel’s volumes ,

rose 9 per cent during the year, in a market which, overall,

declined by 5 per cent. Low fat cheese sales increased by

20 per cent. The national launch of the new brand, Mr

Wilson Extra Mature Cheddar, was undertaken successfully

with a television advertising campaign.

St Ivel Foods , Europe had a good year. Its overall share of

the spreads market in France was maintained. Sales of

Tournolive, which is now the market leader in olive-based

spreads , grew strongly. In Italy, the Valle brand increased

Gold Light, the UK’s leading low fat spread.

Wexford Mature, Ireland’s leading brand of cheddar.

In France St Ivel is the market leader in low fat spreads with St. Hubert 41 and Le Fleurier; Tournolive leads the olive spreads sector.

Golden Churn a buttery tasting spread. Mr. Wilson Extra Maturea fast growing brand in the cheddar market. Shape the brandleader in low fat cheese.

Teletubbies, the No. 1 children’s yogurt.Cadbury’s Crunchie joins Flake, the number onechocolate twinpot dessert.

UNIQfoods – supplier of sauce dip pots to McDonald’s for overtwenty years.




St Ivel

St Ivel’s premium quality fresh juice.

Shape Mousse, the market leader of the fruitmousse market.

both volumes and market share. Production of yogurts

and desserts for the UK market, driven by the strong

performance of Teletubbies yogurts , also rose.

Investment St Ivel continued to invest in branding ,

innovation and efficiency. The new National Distribution

Centre operated by Wincanton at Gloucester began operations

in May 1999, and will be fully operational by September.

Capital investment during the year amounted to

£31.5 million. Projects included the transfer of spreads

production from Hemyock to the refurbished factory at

Liverpool, end-of-line automation at two plants and

new desserts machinery. St Ivel UK also increased marketing

expenditure by £8.9 million in the second half of the year.

St Ivel Foods , Europe continued to support St Hubert 41,

Le Fleurier and Tournolive with national television

advertising.

Shape Cottage cheese – a wellrecognised consumer brand.Vitalite – a cholesterol free sunflower spread.

Future Outlook The markets in which

St Ivel operates are stabilising after a period

of exceptional volatility. Though competitive

pressures remain intense, the company has

established brands and strong market positions.

The full benefits of recent investments, including

the Liverpool spreads plant and the new National

Distribution Centre, will be felt for the first time in

1999/2000. The cheese business is strengthening

its presence in the higher margin mature and

low fat categories, both of which are showing

growth. With established brands and a healthy

export business, St Ivel Foods, Europe is well

positioned to benefit from the growing market

for chilled products in Continental Europe.

St Ivel UKSales£ million

95

396 420

477519 530

96 97 98 99

St Ivel UK Marketing Expenditure£ million

95

31.3

39.142.3

61.964.9

96 97 98 99



Dairy raised profits again in highly competitive markets by maintaining tight control of costs and

continuing to invest in improving the quality of its service. Sales of packet butter increased strongly,

and additional liquid milk business was won from the major supermarkets as they rationalised their

suppliers. Supermarket deliveries rose and margins improved; successful initiatives welcomed by

customers included the introduction of regional brands, such as Welsh Milk and West Country Milk,

guaranteed traceability and higher standards of animal welfare. Unigate now has a 16 per cent share

of supermarket sales. Doorstep delivery saw a further slowing in the rate of decline of sales to below

7 per cent. The goal of equipping every roundsman with a hand-held computer was reached, giving

Unigate Dairies a unique degree of flexibility on pricing and promotion, as well as cutting administrative

costs and producing valuable market and management information. Unigate Chill Chain which operates

over 200 dedicated wholesale rounds, further developed its share of the convenience store market.

Sales comprise Unigate milk, branded cream and a range of St Ivel and other branded products to

shops, forecourts, hospitals, schools and caterers. Unigate Dairies has reinforced its commitment to

doorstep delivery through the acquisition of the doorstep business of Wessex Dairies shortly before

the year end which will integrate well with Unigate Dairies existing business in the south west of

England and added 150,000 customers and £25 million of sales. The company is well placed to benefit

from the anticipated restructuring of the dairy industry.

Operating Review: Dairy

1999 1998Dairy £m £m

Turnover 529 581


ROTCE 41.8% 40.0%


The new lifestyle milk packaging for the Unigate brand. Bottled apple juice joins orange juice on the doorstep.

The new Unigate school milk pack with a straw – easier for children to drink.

Unigate doorstep delivery remains a major part of the business with over 1.3 million customers.


Performance Unigate Dairies again performed well in

difficult market conditions , raising profits despite a fall in

turnover and a 3 per cent overall volume decline. This increase

reflected the benefit of lower raw material prices and tight

control of costs in all areas of the business , together with

continuing investment in product and service quality.

Unigate Dairies doorstep operation delivers fresh milk and

a range of other products to over 1.3 million homes a day,

via both Unigate milkmen and Unigate supplied bottled

milk buyers . With two out of three rounds now franchised,

and completion of the £4 million investment to equip every

roundsman with a hand-held computer, the improvement

in the quality of the doorstep delivery service has further

reduced the rate of decline in doorstep sales which ended

the year at below 7 per cent.

Unigate Chill Chain delivers fresh milk , branded cream and

other products to convenience stores , forecourts , corner

shops , schools , hospitals and caterers . The packaging of

Unigate milk was redesigned to raise its profile in the chiller

cabinet, and update its image among customers . An easy-to-

use school milk pack was also launched. While competitive

pressures prompted a decline in volumes , the continued

investment in the service leaves Unigate Chill Chain well

placed to benefit from the anticipated growth in its

chosen markets .

The volume of fresh milk sold to supermarkets increased by

3 per cent for the year as a result of significant new business

coming on stream in the last quarter. The extension of Welsh

Milk and the introduction of West Country Milk , coupled

with investment in production and supply chain facilities,

assisted the rise in volumes. Prices remained extremely

competitive, keeping returns below acceptable levels .

The downward pressure on costs was maintained, with the

commencement of the phased closure of the Bournemouth

Dairy which will be concluded by October 1999.

Welsh milk for major multiple customers. Shirgar, a traditional butter made to an original Welsh recipe with a distinctive salty flavour.

From its site in Totnes Unigate Dairies was the first dairy to supply WestCountry milk to major multiple customers including J. Sainsbury.

Highest quality standards have taken Unigate to number one milk supplier to Waitrose. Golden Curl an English butter with a distinctive shape.Milquik a skimmed milk powder in resealable consumer packs.

Marks & Spencer Specially Selected is anexample of quality and value in milk.



Future Outlook The liquid milk marketremains competitive, but continuing investmentin quality assets and employees leaves Unigatewell positioned to meet the challenges nowconfronting the dairy industry. In each of themain areas of the liquid milk business furtherinvestments in product and service quality areplanned for the coming year.

In the butter and milk powder business the re-equipment of the Chard plant will enhanceUnigate’s position as one of the most efficientand competitive milk processors in the market.

Overall, the Dairy business remains well placedto pursue its commitment to exceeding theexpectations of all its customers.


DairySales of packet butter continued to improve in a market

that declined by 9 per cent during the year. Country Life

volumes remained steady. Margins remained reasonable with

a milk price reduction in the second half of the year

compensating for the lower returns available in the market.

The volume of milk processed into butter and milk powder

at the Chard factory was adversely affected by a major

fire in October.

Investment During the year over £23 million was

invested in new filling lines , processing equipment, cold

stores , vehicles and computer systems. These investments

helped to improve productivity, enhance product quality

and raise service levels . A major programme of reinvestment

is in train at Chard following the fire; this will provide the

business with expanded world class processing facilities .

The acquisition of the doorstep business of Wessex Dairies

was completed in March 1999, and added 150,000 customers

and £25 million of turnover.

Unigate Chill Chain provides a six day refrigerated delivery of Unigate milkand dairy products to shops and caterers.

Milk volumes sold to Multiplesmillion gallons

95 96 97 98 99

84 8387 90

76

Doorstep Decline(at 31 March)per cent

95

13.7

7.3

8.8

16.7

6.8

96 97 98 99

Having completed its £4 million investment programme Unigate Dairies is theonly major dairy to equip every roundsman with hand held computers.


Wincanton Logistics had an outstanding year, raising operating profits by 22.1 per cent to £30.4 million.

The Retail, Manufacturer and Industrial and Commercial divisions all capitalised on recent investments

in warehousing, vehicles and computer systems to renew and enlarge existing contracts and win new

business. The Retail Division where the new automated warehouse for Littlewoods made its first full

year contribution, won extra business from Somerfield after its merger with Kwik Save and signed a

new contract with Iceland. Its non food activities continued to expand, with new business coming from

Argos, Littlewoods and Woolworths. The Manufacturer Division completed a major new warehouse

project for SmithKline Beecham in October and a second, for sister company St Ivel, opened shortly

after the year end. The successful integration of Rokold, the chilled consolidation business acquired

last year, took the division into cross channel distribution for the first time. The Industrial and

Commercial Division where new management has adjusted the focus of the business to improve

profitability, made further good progress. The loss making chemical tanker operations were exited

in December, and the division won new business from Carlsberg-Tetley, Kerry Foods and Texaco.

Wincanton Logistics operates in rapidly expanding markets, as increasing numbers of manufacturers,

retailers and caterers outsource distribution and supply chain management. The company is now

the market leader in automated warehouse construction and management and is well placed for

further organic growth.

Operating Review: Wincanton Logistics


1999 1998Wincanton Logistics £m £m

Turnover 549 475


ROTCE 24.0% 19.7%


Unigate has invested in a new National DistributionCentre (NDC) for St Ivel to be managed byWincanton Logistics.

St Ivel and Wincanton have worked closely together to develop the NDC.

This automated temperature controlled NDC is designed to enable15,000 cases to be picked per hour.

The NDC can handle 234 pallets in and out every hour.

Wincanton is a key logistics provider for Somerfield as it re-engineers its supply chain. Wincanton increasingly transfers its core skills as it grows in the non food sector.


This automated NDC has enabled Littlewoods to lower stocks and significantlyreduce lead times to stores.

This innovative new flowmeter system for milk collection provides enhancedsampling facilities and improved management information.

Wincanton warehouse management systems are fundamental to the successfuloperation of our high tech warehouses.

Performance The significant investment of recent years

led to strong growth at Wincanton Logistics . Turnover was

up 16 per cent to £549 million and profits increased by

22.1 per cent to £30.4 million. Each business performed

well. All major contracts falling due for renewal were renewed.

Additional work was secured from existing clients and

unprofitable business was relinquished. All three divisions won

new business .

The Retail Division secured additional business from

Somerfield (after its merger with Kwik Save), Co-operative

Retail Society and Iceland. The Littlewoods National

Distribution Centre (NDC) at Burton-on-Trent made its f irst

full year contribution. The division has continued to expand

into non food distribution, winning new business from Argos ,

Littlewoods and Woolworths.

In the Manufacturer Division a new distribution contract

started with Sun Valley. The NDC for SmithKline Beecham

commenced in October 1998 and the new automated NDC for

St Ivel in May 1999. Earnings from chilled consolidation were

boosted by a first full year contribution from Rokold, and by

the withdrawal of a major competitor.

The Industrial and Commercial Division (formerly referred to

as the Transport Division) continued its steady progress since

the management was changed two years ago. Further work was

won from Carlsberg-Tetley, Kerry Foods and Texaco and new

business commenced with Wm Canning. The underperforming

chemical tanker business was exited in December and the

division resigned certain contracts on grounds of price.

Investment Wincanton Logistics invested over £40 million

last year in new warehousing operations , vehicles and

information technology. The major investments were at

Gloucester for St Ivel and SmithKline Beecham with

£18 million of the total of £24 million planned expenditure

on these projects being incurred during the year.

Net Logistics, the ambient shared user network, continues to grow with majormanufacturers such as Heinz.


Future Outlook Wincanton Logistics has

a sizeable presence at every point in the supply

chain, from raw material delivery, through

manufacturing, to retail distribution. Its markets

are growing, as manufacturers and retailers

re-engineer their supply chains and outsource

not only distribution and storage, but information

and inventory management.

Wincanton is the leading provider of distribution services to the UK’sgrocery retailers working with them night and day, every day.

Operat ing Review: Wincanton Logist ics

Wincanton LogisticsThe businesses also benefited from further investment in

information technology. The company has developed a

proprietary warehouse management system for both

automated and manual warehouses which can be customised

to meet the needs of different clients . Computer modelling

has enabled Wincanton Logistics to cut the cost and improve

the timeliness of deliveries by identifying opportunities for

customers to share routes and loads. The savings in fuel

consumption, improved vehicle utilisation and reduced

journey times also have a positive impact on the environment.

Recent tax increases are still a burden, particularly the fuel

duty escalator.

Wincanton Logistics designs, builds and operates complete warehousing andtransport solutions for customers such as SmithKline Beecham.


The Retail Division which is the market leader

in grocery distribution, is adding value in a

relatively mature sector by helping retailers

rationalise and consolidate their supply

networks. It is also winning business in clothing

and home shopping, while the Industrial and

Commercial Division is concentrating on

contracts to manage and deliver raw materials,

food ingredients, parts, packaging and fuel.

In the Manufacturer Division several important

projects are in the pipeline already. The NDC

for St Ivel will make its first contribution in the

coming year, while new warehouse contracts,

including one for Mattel, will add to growth over

the next two years.

Wincanton’s long term prospects remain

encouraging.

Wincanton LogisticsTurnover£ million

95

362

External

424

486522

603

96 97 98 99

Internal


People Unigate has always believed that its staff are a

source of competitive advantage. This is why the Group

invests in training programmes designed to enhance the skills

and flexibility of its employees , enabling them to undertake

a wider range of tasks without supervision. Unigate also seeks

to capitalise on the knowledge and experience of its

employees , by encouraging them to contribute to the

development of the Group.

The inaugural meeting of the Unigate European Forum is

to be held in June 1999. This consultative body, established

in advance of legislative requirements , will give employees

useful insights into how the Group is performing and a

clearer understanding of its strategy and competitive

position. The members are, or will be, drawn from every

country where the Group operates with more than 100

employees . Some representatives are elected by employees

and some nominated by the trade unions. The Forum will

meet once a year under the chairmanship of the Group Chief

Executive to discuss transnational issues , but the facility also

exists for extraordinary meetings to be convened in relation

to major transnational developments .

One member of the Forum has been selected by the elected

members to serve as a trustee of the body established by

the Group to acquire and distribute shares to employees

through the Save As You Earn Share Option scheme.

Employee representatives serve as trustees of the Unigate

pension scheme having been appointed during the previous

financial year. They play an important part in setting the

investment strategy of the fund, monitoring the performance

of investment managers and ensuring that all pension issues

are dealt with in accordance with the rules of the scheme.

Environment Unigate takes its responsibilities for the

environment seriously. The Group Environmental Policy

requires all businesses to reduce the impact on the

environment of their day to day operations by conserving

energy, recovering and recycling packaging waste, minimising

noise, and other measures to avoid pollution and waste.

Capital equipment has been installed, changes to processes

made, and much management time is spent to help in the

Unigate’s commitment to Save the Children helps make a real difference to the livesof thousands of disadvantaged children in the UK.

People/Environment/Community

Social Responsibility



drive to ensure not only that environmental laws are complied

with, but also that we are ahead of the requirement of the

law in being environmentally aware. Progress is monitored

by regular review of the Group’s Executive Committee.

During the year, the Hanworth Dairy secured an ISO 14000

certificate of approval for its environmental management

system. Other processing sites are seeking similar accreditation.

Wincanton Logistics is working with customers and vehicle

and engine manufacturers on new technology designed to

reduce targetted exhaust emissions by up to 90 per cent.

Community Staff at all Unigate companies continue to

raise money for a wide variety of clubs, charities and voluntary

groups in the areas where they operate. By far the greatest

help was given to the two organisations chosen as the

Company’s corporate sponsorships , Age Concern and Save

the Children in the UK.

Outside of these two charity groups there have been

numerous initiatives on behalf of the young. These have

taken the form of co-operation with the Metropolitan Police

and local schools in a Junior Citizen’s Scheme and an education

business partnership with schools through Young Enterprise.

Our continued sponsorship of schemes for road safety and

fighting crime benefit all. On a smaller scale our employees

support many local community events and organisations.

Brian Sutlieff, Operations Manager, Unigate Dairies Westway, shows AlexMasih, Factory Manager, plastic flakes from granulated polybottles whichwill be recycled to make other plastic containers.

Emissions technology being independently tested and verified at theMillbrook Proving Ground.

Alan Bye (left), Class 1, HGV Driver, Unigate Dairies, with Mark Digby, Regional Manager, Wincanton Logistics, both are members of the European Forum. Alan is also a Pension Trustee and Mark is a Trustee of the Qualifying Employee Share Ownership Trust (QUEST).




Results for the Year Sales were £2,309m compared

with £2,311m last year. Underlying volume growth was

approximately 3%. Operating profit before exceptional

items and goodwill amortisation was down 4% to £133.4m.

European Food profit fell 9.6% to £103.0m whilst Wincanton

Logistics’ profit rose 22.1% to £30.4m. A more detailed analysis

of the Group’s results and activities is given in the Operating

Review on pages 8 to 23.

Exceptional Items Pre-tax exceptional items of £13.6m

have been credited to the profit and loss account, within

which £8.2m has been charged against operating profit.

Rationalisation costs of £7.7m have been charged as an

exceptional item in respect of a cost reduction programme

being implemented in St Ivel. A further £0.5m has been incurred

to meet the cost of integrating the recently acquired Case &

Sons pig processing operation within Malton Foods’ operations.

A credit of £19.5m has been included in exceptional items

reflecting the insurance proceeds received in excess of the

book value of the assets destroyed in fires at the Ballymoney

pig processing site and at the Chard creamery. The insurance

claim for both fires has yet to be finalised with insurers but is

expected to be around £60m in aggregate. At 31 March 1999

the Company had received £45.5m on account from their

insurers for material damage, compensation for loss of profits

and additional costs of working. The treatment of the monies

received is fully explained in Note 7 of the financial statements.

Profit on disposal of businesses of £2.3m reflects a release

of provisions following a reassessment of the cost of exiting

the Group’s US Restaurant business in 1996. During the year

the Group also agreed certain tax computations with the

US tax authorities in relation to the sale of its US Restaurant

business; this resulted in the inclusion of a £7.6m credit in

the exceptional tax credit at 31 March 1999.

Interest In 1998/99 the net interest income received increased

by £1.0m to £8.5m. This improvement arises from higher

interest rates at the beginning of the year together with the

benefits of good cash flow generation. Interest receivable

on short term cash deposits was £22.4m; this was offset by

interest payable of £13.9m, a significant part of which arose

on the Group’s ten year private placement borrowing.

Taxation The taxation charge of £34.0m on profits before

exceptional items represents an effective tax rate of 24%, which

is unchanged from last year. The tax rate continues to reflect

the ongoing benefit of the Group’s financing arrangements

John Worby Finance Director

Financial Review

Operating profit

(before goodwill

amortisation and

exceptionalSummary of 1998/99 Turnover items)

Results by Segment £ million £ million

Fresh Foods 1,231 59.9

Dairy 529 43.1

European Food 1,760 103.0

Wincanton Logistics 549 30.4

2,309 133.4

Turnover(continuing operations)£ billion

95

1.94

2.312.36

1.63

2.31

96 97 98 99


together with the benefit of accelerated tax depreciation due

to the Group’s substantial capital investment programme.

The exceptional tax credit of £6.6m includes £7.6m received

last year in respect of overseas tax and now confirmed as

recoverable following agreement of tax computations submitted

in connection with the disposal of US Restaurants in 1996.

Earnings and Dividends Earnings per share of 53.1p are up

12.5% on last year’s 47.2p as a result of the exceptional profit

arising from the disposal of tangible fixed assets . A more

meaningful indication of the Group’s underlying performance

is given by earnings per share before exceptional items and

goodwill amortisation (referred to as Adjusted earnings per

share) which at 44.9p are 3.4% lower than the 46.5p per share

reported last year. The final dividend proposed is 15.3p per

share. Together with the interim dividend of 7.9p, the total

dividend payable for the year is 23.2p, an increase of 5.5%. The

dividend is covered 1.9 times by earnings before exceptional

items and goodwill amortisation.

Cash Flow The Group’s underlying cash flow remains strong

with net cash flow from operating activities of £196.7m. This

is lower than last year’s £212.2m due to increased working

capital levels at the year end principally reflecting higher

stocks of mature cheese.

The Group continued with its heavy capital investment

programme, spending a total of £118.3m compared to a

depreciation charge of £70.2m. The largest share of the

spending was attributable to the Group’s Fresh Foods operations

where capital expenditure of £54.3m related principally to

providing additional capacity and improving operating efficiency.

Total net expenditure on acquisitions during the year was

£90.1m and included the purchase of UNIQfoods (formerly

Fisher Quality Foods) in February 1999 for £42.2m and the

purchase of Unipork in September for £34.8m. The Group

received insurance proceeds of £45.5m during the year. A

substantial part of these proceeds related to the assets destroyed

in the fire at Ballymoney. In cash flow terms these proceeds

have effectively been applied towards purchasing the Unipork

pig processing business to replace the processing capacity

destroyed by the fire. In overall terms, after the £90.1m spent

on acquisitions, there was a £44.3m cash outflow for the year.

Financial Position As a result of the cash outflow in the year,

net funds have decreased by £44.3m to £186.9m at 31 March 1999.

Subsequent to the year end, the Group completed the

acquisition of Terranova Foods plc at a cost of £274m. The

Group also announced the intended acquisition of the Marie

French convenience foods business at a cost of £145m. Not

withstanding these acquisitions , the Group will continue to

have a strong financial position with good interest cover.

Shareholder Value To ensure that Unigate’s objectives

are aligned with delivering shareholder value, value based

management techniques are used in the Group’s strategy

development. For shorter term performance measures , the

Group uses return on trading capital employed.


Adjusted Earnings per Sharepence

95

39.4

46.5

41.036.8

44.9

96 97 98 99

Cash Generatedfrom Operations£ million

95

170

212200

169

197

96 97 98 99

Dividend per Sharepence

95

19.2

22.020.2

18.2

23.2

96 97 98 99



Overall return on capital employed (including goodwill of the

businesses) declined to 18.0%. This reflected slightly higher

average working capital levels , the reduced level of operating

profit and investment in the Group’s businesses for their long

term development.

Unigate’s share price during the year fell from a particularly high

level of 727.5p at 31 March 1998 to 439.5p at 31 March 1999.

A major part of the fall has been attributed to uncertainty

surrounding difficult trading conditions being experienced by

food manufacturers in the UK. This has resulted in a change in

investor sentiment away from the Food Sector.

Treasury Risk Management The Group maintains a

centralised treasury function which operates under Board

approved treasury policies and guidelines covering funding

and management of foreign exchange exposure and interest

rate risk. All transactions entered into by the Group’s treasury

operations are required to be in support of, or as a consequence

of, underlying commercial transactions.

A description of the Group’s accounting policies for financial

instruments is set out on page 43 of the Annual Report and

further disclosures relating to financial instruments are set out

in Note 19 to the financial statements.

Finance and Interest Rate Risk The Group manages its

exposure to interest rate fluctuations on its borrowings and

cash resources through the use of interest rate swaps , cross

currency interest rate swaps , forward rate agreements and

interest rate caps. Objectives for the mix between fixed and

floating rate borrowings are set so as to reduce the impact of

adverse variations in interest rates on the Group’s profits and

cash flow. During 1999, the Group was in a net cash position

and in order to preserve a minimum level of net interest

income, action was taken early in the year to substantially

protect the Group against the adverse impact of a reduction

in rates . As a result any decrease in rates would have had no

significant impact on the Group. Following the acquisition of

Terranova Foods subsequent to the year end, the Group has

moved into a net debt position with fixed rate borrowings ,

as set out in Note 19.

Liquidity Risk The Group has continued to manage its net

cash position in a manner designed to maximise the after tax

return, whilst at the same time recognising the temporary

nature of its net cash position. The Group had net funds of

£186.9m at the year end (1998: £231.2m), which comprises

£290.6m of cash and short term deposits offset by £103.7m of

borrowings , of which the Group’s US$140m (£94.5m) ten year

private placement is the largest part. In addition, committed

bank facilities available to the Group at 31 March 1999

amounted to £260m, none of which was drawn down.

Included within the Group’s cash is £117m which at 31 March

1999 was held in the Netherlands. These cash funds have been

swapped into sterling in line with the Group’s hedging

policies . The Group’s policy on investment of surplus funds

restricts counterparties to those with a strong investment

grade credit rating.

Foreign Exchange Risk During the year, the Group had few

operations outside the UK and accordingly the impact of

F i nanc ia l Rev iew cont i nued

Return on Trading Capital Employed(including goodwill)per cent

95

19.1

21.420.1

17.5 18.0

96 97 98 99


changes in foreign exchange rates was limited. The Group’s

foreign currency exposure management policy requires

operating companies to hedge transactional currency

exposures back into the currency in which their results are

reported. Currency swaps and forward currency contracts are

used, as appropriate, to achieve this , and to hedge overseas

net assets . No hedging of operating profits earned overseas

was undertaken in the year.

IT 2000 Unigate continues to implement a carefully planned

programme which was initiated at the end of 1996 designed

to ensure that the Group should not experience any undue

disruption in its businesses as a result of the potential IT

system problems associated with the Year 2000. Progress is

co-ordinated and monitored by the Group Finance Director,

aided by independent reviews by specialist consultants .

Regular reports on progress are made to the Board.

The programme encompasses all systems, processes and

equipment as well as reviews of third party suppliers’ own

compliance programmes. All of Unigate’s business critical

systems and also the majority of its less critical systems are

compliant and all remaining systems are expected to be

compliant in good time for Year 2000. In addition, during

1999 Unigate is developing transition contingency plans to

deal with unexpected third party failures during this period.

The total expenditure to address this issue is estimated to be

in the order of £14m of which approximately £4m is capital

expenditure. During the year ended 31 March 1999, a total

of £5.3m (1998: £4.2m) of such expenditure was charged to the

profit and loss account and £2.3m (1998: £1.6m) capitalised

in accordance with the requirements of UITF 20.

The Euro A steering group of executives from across the

Group regularly monitors and co-ordinates the business and

operational issues arising from Economic and Monetary

Union. Progress is monitored by the Group Finance Director

and periodically reported to the Board.

Plans are being developed for business units operating in

the member states that adopted the euro on 1 January 1999

to use the euro as their currency of accounting. The cost of

these plans is not expected to be material.

Accounting Standards A number of new Financial Reporting

Standards (“FRSs”) have been introduced during the financial

year and details of their adoption are shown on page 42. The

adoption of these FRSs has not resulted in a restatement of

prior year results , although where necessary, the presentation

of the financial statements has been amended to comply

with the new standards’ requirements. As permitted by FRS10,

goodwill written off to reserves prior to 1 April 1998 has not

been capitalised in the Group Balance Sheet.

Going Concern The Directors have reviewed the Group’s

budget for 1999/00 and the Group’s profit and cash flow

projections for subsequent periods and are satisfied that it is

appropriate to prepare the financial statements on the going

concern basis .


Dairy 19.6%

Wincanton Logistics34.5%

FreshFoods45.9%

Capital Expenditure by Division

Net (Debt)/Cash£ million

95

170.7

231.2

187.5

(152.4)

186.9

96 97 98 99



D i rec tors ’ Repor tf o r t he ye ar e nde d 31 March 1999

Principal Activities The Company is the holding company

of a Group whose principal activities are in the areas of food

processing and distribution.

Results and Dividends A review of the activities of the

Group during the financial year and analyses of turnover and

profit are presented in the Operating Review and the Financial

Review on pages 8 to 27. An indication of future developments

is contained in the Chairman’s and Chief Executive’s reviews

on pages 3 to 5. Profit attributable to ordinary shareholders

for the financial year amounted to £127.3 million. An interim

ordinary dividend of 7.9p was paid on 5 January 1999 and,

subject to shareholders’ approval at the Annual General

Meeting to be held on 21 July 1999, a final ordinary

dividend of 15.3p per share will be paid on 5 August 1999

to those shareholders on the register on 25 June 1999. This

leaves retained profits of £71.7m to be transferred to reserves .

Acquisitions and Disposals On 16 June 1998 the Group

acquired Case & Sons Limited, on 14 September 1998 the

Roata Limited group of companies (trading as Unipork) for

£35m, on 12 February 1999 Fisher Quality Foods Limited for

£42m and on 27 March 1999 the doorstep business of Wessex

Dairies Limited for £7m. On 18 May 1999 the Company’s £274m

bid for Terranova Foods plc went unconditional in all respects .

Share Capital and Reserves Details of changes in the

authorised and issued share capital and reserves of the Company

are shown in Notes 23 and 24 to the financial statements .

Substantial Interests At the date of this Report, the

Company has been notified by the following that they hold

a disclosable beneficial interest in 3% or more of the issued

ordinary share capital of the Company:

%

Fidelity Investments 4.06

Legal & General Investment Management Ltd 3.02

The investment portfolios managed or held by or on advice

from the following bodies , or their subsidiaries , are interested

in 3% or more of the Company’s issued ordinary shares:

%

Prudential Corporation plc 4.91

Silchester International Investors 3.92

Perpetual plc 3.72

M&G Group plc 3.54

Employees The Group uses a number of ways to provide

employees with information on matters of interest to them.

These include the Annual Report to Employees dealing with

Group and Divisional results , in-house newspapers and

briefing and consultative meetings .

A Unigate European Forum has been set up to further

promote employee relations. Further details are set out

on page 22.

Employees are encouraged to participate in the Group’s

performance through the Company’s Paywise profit related

pay scheme and SAYE Share Option Schemes; 95% of

employees in the UK participate in Paywise. The Company

continues to maintain and promote its SAYE Share Option

Scheme which is open to all UK employees who have three

months service at the date of invitation. 1998/99 has seen a

further increase in membership, with 24% of UK employees

holding options. The Company has established a Qualifying

Employee Share Ownership Trust (QUEST) to acquire and

distribute shares to employees in connection with the SAYE

Share Option Scheme. One of the trustees of the QUEST is an

employee representative who has been selected by the

elected members of the Unigate European Forum.

Unigate is committed to a policy of equal opportunities in

employment by which the Group has and continues to:

• select, recruit, develop and promote the very best people,

basing its judgement solely on suitability for the job;

• ensure that all applicants and employees receive fair

and equal treatment irrespective of sex, marital status ,

nationality, colour, race, ethnicity, national origin or

disability;

• encourage diversity in its workforce, reflecting , where

practical, the diversity of the working population;

• maintain a working environment free from sexual

and racial harassment or intimidation;

• ensure that all employment conditions and job

requirements reflect its commitment to equal

opportunities .

Where people become disabled during the course of their

employment, every practical effort is made to retain their

services and to provide retraining if necessary. All employees

are eligible for appropriate training , career development and

promotion, and disabled people are not treated any differently

in this respect.


Directors The present Directors of the Company are shown

on pages 6 and 7. These were the only directors during the

year, other than Mr A W P Stenham who retired on 29 July 1998.

Mr Terry Stannard joins the Board on 7 June 1999 following

the acquisition of Terranova Foods plc. Terry Stannard stands

for election in accordance with the Articles at his f irst Annual

General Meeting. Mr John Robb and Mr John Worby retire

by rotation in accordance with the Company’s Articles of

Association and, being eligible, offer themselves for re-election.

John Worby has a service contract, details of which are set out

in the Remuneration Report on pages 33 to 36. John Robb

does not have a service contract with the Company. Details

of Terry Stannard’s service contract are set out in the Notice

convening the Annual General Meeting.

Directors’ beneficial interests in the Company’s ordinary share

capital are set out in the Remuneration Report.

Charitable and Political Donations The United Kingdom

companies of the Group made donations for charitable

purposes during the year which amounted to £259,000.

No political donations were made.

Research and Development The Group is active in the

improvement of production processes , existing products ,

and development of new products and logistics capabilities ,

to satisfy customer requirements and support the long term

profitable growth of its businesses .

Payment Policy The Company does not have a formal code

that it follows with regard to payments to suppliers . It agrees

payment terms with its suppliers when it enters into binding

purchasing contracts for the supply of goods and services .

Its suppliers are, in that way, made aware of these terms.

The Company seeks to abide by these payment terms when

it is satisfied that the supplier has provided the goods or

services in accordance with the agreed terms and conditions.

At 31 March 1999 the amount of trade creditors shown in the

balance sheet represents 21 days of average purchases for the

Company and 41 days for the Group.

Annual General Meeting The forthcoming Annual General

Meeting will be held on 21 July 1999 at 12.00 noon at the

Hotel Inter-Continental, London. As well as the usual business ,

the Directors propose to seek authority to continue to allot

shares and to disapply shareholders’ pre-emption rights in

certain circumstances , and to renew the Company’s power

to buy back a proportion of the Company’s share capital.

The terms of the Resolutions and explanation of the proposals

are set out in the separate Notice of Annual General Meeting

sent with the Annual Report to shareholders .

Auditors The auditors , KPMG Audit Plc, have expressed

their willingness to continue in office and a resolution for

their re-appointment will be proposed at the Annual General

Meeting in accordance with the provisions of Section 385 of

the Companies Act 1985.

Registered Office: By order of the Board

Unigate House J F Burkitt

Wood Lane

London W12 7RP 7 June 1999

Registered in England and Wales , No 621482.




C orp ora te Governance

Compliance Statement In June 1998 the Committee on

Corporate Governance issued the Combined Code which

was incorporated into the Listing Rules of the London Stock

Exchange in January 1999. The following is a statement, as

required by the Listing Rules , as to how the Company has

complied with the Combined Code. The Code covers four

principal areas which are dealt with below.

Board of Directors The Board has nine members ,

comprising the Chairman, the Chief Executive and four other

Executive Directors and three other Non-executive Directors .

All of the Non-executive Directors , including the Chairman,

are “independent” within the meaning of the Combined Code.

Non-executive Directors are appointed for a one year term

ending at the close of the AGM each year.

The biographical details of the Board members are set out

on pages 6 and 7. The Directors have all occupied, or occupy,

senior positions in industry and/or government and/or have

substantial experience in one or more of the Group’s fields

of operations. They have a range of business , general and

international experience essential for the effective operation

of a business the size and complexity of the Unigate Group.

All Directors must stand for election at the first AGM after

they are appointed. The Articles currently provide for up to

one third to stand for re-election each year. It is the policy

of the Board of Directors that all Directors will stand for re-

election at least every three years . At a suitable opportunity,

proposals will be put to amend the Articles of the Company

to incorporate this policy.

The Board meets regularly and is responsible for the proper

management of the Company. During the year, the Board

normally meets monthly and in addition meets for an annual

strategy review. It has a formal schedule of matters reserved

to it for decision making , including the approval of annual and

interim results , annual budgets , acquisitions and disposals ,

material agreements and major capital commitments.

Board members are given appropriate documentation in

advance of each Board or Committee meeting. These normally

include a detailed report on current trading and full papers on

matters where the Board will be required to make a decision

or give its approval. Annual reports are given to the Board on

such matters as pensions , insurance and treasury and specific

business presentations are given when appropriate.

The Board has approved an agreed procedure for Directors to

take independent professional advice if necessary. In addition,

the Directors have direct access to the advice and services of

the Company Secretary who is charged by the Board with

ensuring that Board procedures are followed. Removal of the

Company Secretary is a matter for the Board as a whole.

On joining the Board, Directors are given current information

and background documents describing the Company and its

activities . Site visits and briefings are also arranged. Manuals ,

books and training are available to all Directors on their

duties as directors . On appointment, the Company Secretary

is charged with ensuring that new Directors receive appropriate

training or advice. There is also a programme to ensure ongoing

Directors are instructed on relevant material changes to laws

and regulations affecting the Company, or its business , on at

least an annual basis .

The differing roles of the Chairman and Chief Executive are

acknowledged. The Chairman is primarily responsible for the

workings of the Board and ensuring that its role is achieved.

The Chief Executive is responsible for the running of the

business , carrying out the agreed strategy and implementing

specific Board decisions relating to the operation of the

Company. The Chief Executive has written terms of reference.

The senior Non-executive Director is the Rt. Hon. John

MacGregor OBE, MP.

There are a number of standing Committees of the Board

to which various matters are delegated. Membership of the

Committees is set out on pages 6 to 7. The Committees all

have terms of reference, brief details of which are set out below.

The Nomination Committee is responsible for considering

and recommending to the Board, persons who are appropriate

for appointment as Executive and Non-executive Directors .

Appointment is the responsibility of the whole Board. The

Committee is comprised of a majority of Non-executive

Directors . Ian Martin is Chairman of the Committee. It

meets as necessary and uses the services of outside personnel

consultants to assist it. The Chief Executive, who is a member

of the Committee, can make recommendations to it.

The Finance Committee, comprising of the Executive Directors

and certain senior executives within the business , oversees

decisions on certain important matters below Board decision

level. These include in particular, capital expenditure,


acquisitions and disposals below a designated level (currently

£3m) and certain Treasury controls .

The Remuneration Committee, comprising of all the Non-

executive Directors , is responsible for the establishment of

remuneration policies for senior executives , including the

Executive Directors , and for fixing their remuneration and

granting executive options and long term incentive plans .

Full details of its activities are set out in the Remuneration

Report on page 33.

The Audit Committee, comprising the Chairman and all of the

Non-executive Directors except Victor Scherrer, is responsible

for overseeing various financial and audit matters . John Robb

is Chairman of the Committee. The Committee reviews the

full year and half year financial statements before they are

presented to the Board, agrees , in respect of the internal and

external auditors , internal and external audit plans , reviews

the annual audit highlights memorandum, receives reports

from the Head of Internal Audit and deals with any significant

control issues arising. It is a specific responsibility of the

Audit Committee to ensure that an appropriate relationship

is maintained between the Company and its Auditors .

Directors’ Remuneration Details of Directors’ remuneration

are set out in the Remuneration Report on pages 33 to 36.

This details compliance with the Combined Code’s requirements

with regards to remuneration matters . The Rt. Hon. John

MacGregor is Chairman of the Remuneration Committee.

Shareholder Relations The Company seeks to maintain

good communications with shareholders . Senior executives ,

including the Chief Executive, Finance Director, Corporate

Affairs Manager and the Chairman have regular dialogue with

individual institutional shareholders and give a collective,

general presentation covering the interim and preliminary

results . All shareholders have the opportunity to put

questions at the Company’s Annual General Meeting when

the Chairman gives a statement on the Company’s performance

during the year, together with a statement on current trading

conditions. The Chairmen of the Audit, Nomination and

Remuneration Committees normally attend the AGM and the

Chairman advises shareholders on the proxy voting details .

Accounting and Audit The respective responsibilities of

the Directors and Auditors in connection with the financial

statements are explained on pages 32 and 37 respectively.

The Directors’ going concern statement appears on page 27.

The Group’s systems and procedures of internal control are

designed to provide reasonable control over the activities of

the Company and the Group. However, it is recognised that it

is the nature of any business that business and commercial risk

must be taken and that for a business to succeed enterprise,

initiative and motivation are key elements to success which

must not be unduly stif led. The key elements of the control

system are as follows:-

The Group has an organisational structure with established

lines of accountability as well as clearly defined levels of

authority as to matters which are reserved to the Board and

the delegation of other matters to Board Committees or the

Group’s executive management. Each business is required

to operate in accordance with established policies and

procedures . The Group’s “Managers’ Guide to Policies and

Procedures” provides details of the key aspects to be followed

and the overall environment in which businesses are expected

to operate, including the Group’s ethical code. There are also

specific guidelines covering some other areas such as Treasury

and Personnel.

The Group’s Internal Audit Department carries out reviews

across the Group in accordance with the annual programme

agreed with the Audit Committee and undertakes from time

to time ad hoc assignments requested by senior executives or

the Audit Committee.

There is an established procedure for the preparation and

review at least annually by the Board of medium term plans

and annual budgets for operating businesses . Each business

area reports monthly on its performance against its agreed

budget. The Board receives monthly an update on such

performance and generally reviews significant variances on

a monthly basis . Major investment decisions are subject to

post-completion reviews.

The Directors have reviewed the effectiveness of the systems

of internal f inancial control in operation during the year.

When the report of the Institute of Chartered Accountants

in England and Wales working party on reporting on internal

controls is published, the Board will report in accordance with

such guidelines .




C orp ora te Governance cont inued

Compliance with Combined Code Prior to the introduction

of the Combined Code, the Company complied with the

Code of Best Practice (“the Cadbury Code”). Revisions to the

existing procedures were adopted by the Board in the light

of the Combined Code on 12 November 1998. Since that date

the Company has complied in all respects with the Code. As

a result, the areas of non-compliance during part of the year

were as follows:-

– the Company did not appoint a senior Non-executive

Director until 12 November 1998;

– the Nomination Committee had an equality of Executive

and Non-executive Directors between 29 July 1998 and

12 November 1998; and

– until 12 November 1998, there was no specific commitment

that all Directors would stand for re-election at least every

three years .

As referred to in their Audit Report on page 37, KPMG Audit

Plc have reviewed the statements herein on compliance with

the Combined Code to the extent required by the Listing

Rules of the London Stock Exchange.

Di rec tors ’ Respons ib i l i t i es fo r F inanc ia l S ta teme nt s

Company law requires the Directors to prepare financial

statements for each financial year which give a true and fair

view of the state of affairs of the Company and Group and

of the profit for that period. In preparing those financial

statements , the Directors are required to:

• select suitable accounting policies and then apply them

consistently;

• make judgements and estimates that are reasonable and

prudent;

• state whether applicable accounting standards have been

followed, subject to any material departures disclosed

and explained in the financial statements; and

• prepare the financial statements on the going concern

basis unless it is inappropriate to presume that the

Group will continue in business .

The Directors have general responsibility for the keeping of

proper accounting records which disclose with reasonable

accuracy the financial position of the Company and which

enable them to ensure that the financial statements comply

with the Companies Act 1985. They have general responsibility

for taking such steps as are reasonable to safeguard the assets

of the Group (within a business environment the nature of

which is to take business and commercial risk) and to seek

to prevent and detect fraud and other irregularities .



Remunera t ion Repor t fo r t he ye ar e nde d 31 March 1999

Constitution The Remuneration Committee of Unigate

PLC is constituted in accordance with the Combined Code

on Corporate Governance annexed to the London Stock

Exchange Listing Rules . The Remuneration Committee is

chaired by John MacGregor and comprises the Chairman

and all of the other Non-executive Directors and meets as

appropriate during the year. Except when matters concerning

his own position are being considered, the Chief Executive,

Ross Buckland, is invited to attend the meetings to assist the

Committee as set out in the Combined Code. Any matter

affecting the Chairman is discussed by the Remuneration

Committee without the Chairman present.

Policy The Committee has given full consideration to the

provisions of Schedule A of the Combined Code and the

following:

• the decentralised and differing natures of the Group’s

businesses and the Board’s commitment to their profitable

growth on a long term basis;

• the importance of recruitment, motivation and retention

of high quality management;

• the culture of linking reward to sustained performance,

both at a business and corporate level.

The policy of the Remuneration Committee is to pay

competitive market salaries and associated benefits , having

regard to the executive’s experience, the size and complexity

of the job, and any other relevant factors (such as special

expertise or market requirements necessary to acquire a new

recruit) in order to attract, retain and motivate executives and

to link individual rewards to the long term success of the Group.

The Remuneration Committee monitors practices in other

companies to ensure that it remains in touch with current

best practice in the market, whilst accepting its obligations to

continue to honour pre-existing contractual commitments .

Directors’ Remuneration The total remuneration of the

Directors of the Company for the year ended 31 March 1999

was:

1999 1998

£000 £000

Salary 1,459 1,325

Performance related bonus 27 512

Other benefits 86 85

Non-executive Directors’ fees 96 113

1,668 2,035

Gains from options exercised

in the year 198 82

Pension costs 570 555

2,436 2,672

Pension costs are the annual cost using the long term funding

rate recommended by the Unigate pension scheme’s actuaries .

Of the pension cost above, £338,858 (1998: £315,250) was

attributable to Ross Buckland, the highest paid Director.

Other benefits relate principally to cars and medical insurance

expenses . Ross Buckland was the highest paid Director in 1998

and 1999; his total emoluments were as shown on page 34.

Subject to an overriding discretion of the Remuneration

Committee after taking an overall view of the Company’s

performance, annual bonuses may be earned by Executive

Directors based on the achievement of pre-agreed targets

for profit before tax in the year, and the Remuneration

Committee’s assessment of strategic and personal performance.

For Executive Directors with direct divisional responsibility,

half their bonus will depend on their, and their division’s

performance, all other calculations will depend on the overall

Group performance. If targeted profit before tax in the year is

achieved, 25% of basic salary (30% for the Chief Executive) will

be awarded. A Director may be awarded up to a further 25%

of basic salary (30% for the Chief Executive) at the

Remuneration Committee’s discretion based on the extent of

performance over target, the Director’s personal performance

and the effectiveness of the executive team as a whole

in achieving the strategic aims of the business. The maximum

bonus is capped at 50% of basic salary (60% for Chief Executive).



Remunera t ion Repor t cont inued

The base salaries of executives are reviewed annually, having

regard to personal performance, Company performance and

competitive market practice, supported by research through

external independent surveys .

Pensions Executive Directors are members of the Group’s

main pension scheme. Directors are eligible for a pension of

up to two-thirds of base salary at normal retirement age of

60 normally after 20 years of qualifying service.

Pensions for Executive Directors are provided on a non-

contributory basis through the Unigate Group pension

scheme so far as possible and where appropriate in individual

cases , through the use of an unfunded arrangement,

supported by a letter of credit, to provide broadly similar

benefits through a complementary pension scheme

established by the Company. The value of bonuses , other

benefits and share options or other long term incentives

do not form part of pensionable salary. The pension scheme

and/or purchased life policies provide for the payment of

benefits on death or disability. Normal retirement age is 60.

The Directors’ current ages are as stated on pages 6 and 7.

Pensions in payment increase in line with Limited Price

Salary and Performance Other Prior yearThe fee or salary, bonus and other benefits for each of the Fees Bonus Benefits Total total

Directors during the year were: £000 £000 £000 £000 £000

I A Martin 200 – 19 219 196

R Buckland 514 – 36 550 766

J S Kerridge – – – – 7

C A Lawrence 212 27 9 248 279

J MacGregor 28 – – 28 25

J W Robb 28 – – 28 27

V A Scherrer 33 – – 33 31

A W P Stenham 7 – – 7 23

G C Summerfield 280 – 12 292 353

J G Worby 253 – 10 263 328

1,555 27 86 1,668 2,035

Annual pension

accrued Total annual Total annual

Transfer value in 1998/99 accrued accrued

of increase in in excess pension at pension at

accrued pension of inflation 31.3.1999 31.3.1998

The following pension benefits accrued to Directors from the Company: £ £ £ £

R Buckland 534,514 32,291 216,352 178,354

C A Lawrence 114,213 7,400 116,269 105,493

G C Summerfield 399,279 21,262 185,345 158,996

J G Worby 194,689 15,939 107,332 88,559

Indexation. Individuals may take early retirement at any age

after 50, their pension being appropriately reduced.

On death, a two-thirds spouse’s pension is due. Children’s

allowances to a maximum, including spouse’s pension, of

100% of the executive’s pension may be payable. In calculating

transfer values , no allowance is made for discretionary

benefits .

Share Options Shareholders have approved implementation

of a Savings Related Share Option Scheme (“SAYE Scheme”),

the Unigate Group 1984 and 1994 Executive Share Option

Schemes and in 1995 the Overseas Executive Share Option

Scheme (together the “Executive Option Schemes”).

The SAYE Scheme is open to UK employees who have served

3 months at the invitation date. The Executive Option

Schemes are set up in accordance with guidelines published

by the bodies representing institutional investors . For grants

since August 1994, generally before any Executive Options can

be exercised under the Schemes , a performance condition set

by the Remuneration Committee at the time of grant of the

options has to be achieved.



The performance condition for grants made since August

1994 under the Executive Option Schemes requires that

before any such options can normally be exercised the Group’s

earnings per share before exceptional items as published in the

audited accounts must in a three year period exceed the sum

of the increase in the Government’s Retail Price Index plus 6%.

Other than in respect of the SAYE Scheme, options are no

longer granted at a discount.

The grant of Executive Options is on a discretionary basis

within the limits set down in the rules of the Executive Option

Schemes with emphasis on performance and job responsibilities.

It is the policy of the Committee to consider carefully both

the maximum grant of options and the spread of time over

which they are granted to ensure an appropriate long term

incentive. Generally in recent years maximum grants , where

applicable, have been spread over three years . The Committee

keeps under review the structure and mix of incentives overall.

Executive options held at 31 March 1994 were granted under

the 1984 Executive Option Scheme and are exercisable

between 3 and 10 years from grant. A small proportion of

these were granted at a discount. Executive options granted

since 1 April 1994 are granted under the 1994 Executive Share

Option Scheme or Overseas Executive Scheme at market price

at the date of grant and are subject to performance criteria

stated above. They may only be exercised between 3 and 10

years from their grant.

During the year no Executive Options and 4,884 SAYE Options

at 532p were granted to Directors. No Directors’ options lapsed.

During the year ending 31 March 2000, 569,987 options may

become exercisable. The market price of the shares at 31 March

1999 was 439.5p. The range during the year was 383p to 738.5p.

Long Term Incentive Plan A Long Term Incentive Plan for

senior executives was adopted at the 1997 Annual General

Meeting. Under it, the Remuneration Committee may grant

to eligible senior executives a conditional right to receive

a number of shares in the Company provided certain

performance targets are met.

The maximum Award which may be conditionally made to

any executive in any year is shares with a market value at the

date of grant equal to 80% of the executive’s basic annual

salary. Over three years , starting on 1 April immediately prior

to the date of grant, one or more of the minimum performance

targets must be met for any shares to vest in the executive. If

the performance conditions are at least in part met, then the

relevant amount of vesting takes place on 1 April four years

after the performance conditions are first assessed. The

performance criteria and the basis of vesting are as follows:

• if growth in adjusted earnings per share over the Retail

Price Index (RPI) over the three year performance period

is 6%, then 18.75% of the Award will vest, and if EPS growth

is 30% or more above RPI over the three years 50% of the

Award will vest. If performance is in between, proportional

vesting is assessed on a straight line basis . If the minimum

target is not met, no shares will vest under this heading;

• under the second test, Unigate’s Total Shareholder Return

(“TSR”) compared to the TSR of the FTSE Food Producers’

sector must be at least equal to the 55th percentile over

the three year performance period, and in such

circumstances 9.375% of the Award will vest. If performance

is at the 75th percentile or above, 25% of the Award will

vest, and if performance is in between these figures ,

proportional vesting is assessed on a straight line basis;

• the third test is Unigate’s TSR against the TSRs of the FTSE

mid-250 index (excluding investment trusts) and is on the

same basis as the Food Producers test. Under both TSR tests,

no vesting takes place unless the minimum target is met.

Total grants to all executives under the LTIP are 1998: 434,646,

1999: 385,217 to total 819,863.

Rights at 31 March 1999

Currently exercisable Not yet exercisable

Granted Exercised Gain Weighted Weighted

in year in year on exercise average price average price

Directors’ Share Options Number Number £ Number pence Number pence

R Buckland 2,127 – – 474,443 296p 173,521 434p

C A Lawrence 630 774 3,851 131,921 350p 91,408 438p

G C Summerfield – 56,315 193,757 – – 183,989 424p

J G Worby 2,127 – – 134,505 314p 149,514 435p



Remunera t ion Repor t cont inued

Directors’ Contracts Each Executive Director who served

during the year has an existing employment contract with

a rolling notice period of 24 months. There is no specific

contractual provision for liquidated damages or fixed payment

on early termination, normal damages and mitigation

considerations would generally apply. It is the Committee’s

view that they should not change the term of existing Executive

Directors’ contracts . They would normally expect that on any

future appointment a one year rolling period would not be

exceeded. However, in order to attract and retain Executive

Directors of the right calibre and ability, in future it may be

necessary to offer a contract of employment with a rolling

notice period in excess of one and up to two years or to give

an initial longer notice period dropping to one year.

Post retirement medical cover has been given to certain

existing senior executives but will not be offered to any

new appointees . The Chairman and Non-executive Directors

receive no post retirement benefits . The Chairman has a fixed

three year appointment for services running from 9 March

1998 at a fee of £200,000 per year with no pension, bonus , or

share options. He is also provided with use of a Company car.

Details of T Stannard’s contract are set out in the Notice

convening the Annual General Meeting.

The Non-executive Directors , other than the Chairman,

receive a basic fee which is currently £26,000 each per annum

other than Victor Scherrer who receives £33,500 per annum.

Chairmen of Committees also receive a fee of £4,000 per annum

per Committee. These terms were last reviewed by the Board

in June 1999. The Non-executive Directors do not participate

in any incentive, pension or benefit schemes. Each appointment

is subject to review every year.

31 March 1999 1 April 1998

Ord Shares 25p each Ord Shares 25p each

Directors’ Shareholdings Fully paid Options Fully paid Options

I A Martin 10,000 – 10,000 –

R Buckland 20,000 647,964 20,000 645,837

C A Lawrence 29,391 223,329 28,617 223,473

J MacGregor 2,000 – 2,000 –

J W Robb 3,000 – 3,000 –

V A Scherrer 1,000 – 1,000 –

G C Summerfield 51,915 183,989 39,600 240,304

J G Worby 42,178 284,019 42,178 281,892

None of the Directors held any shares non-beneficially. All the Directors , together with other employees are potentially

beneficiaries of a Qualifying Employee Share Ownership Trust, and are therefore interested in all the shares held in the trust which

at the year end amounted to 691,184 shares . After the year end Mr C A Lawrence exercised 1,161 SAYE options at 297p per share.

LTIP shares Total shares

LTIP maximum granted in currently

Directors’ LTIP Interests shares at 1.4.98 the year Awarded

(a) (b)

R Buckland 72,320 61,881 134,201

C A Lawrence 29,748 25,462 55,210

G C Summerfield 36,160 33,709 69,869

J G Worby 32,730 30,458 63,188

Note

(a) Normally none of these shares crystallise until 1 April 2000 and then only to the extent that stringent performance conditions

are met. Any vesting will not normally occur until 1 April 2001 at the earliest.

(b) The same principles in note (a) apply to this Award; any vesting will not normally occur until 1 April 2002 at the earliest .


Aud i tor s ’ R ep or tTo t he m e m be r s o f Un i g a te PLC

We have audited the financial statements on pages 38 to 61.

We have also examined the amounts disclosed relating to

emoluments and share options and pension entitlements of

the Directors which form part of the Remuneration Report

on pages 33 to 36.

Respective responsibilities of Directors and Auditors

The Directors are responsible for preparing the Annual

Report including , as described on page 32, the financial

statements. Our responsibilities , as independent auditors ,

are established by statute, the Auditing Practices Board,

the Listing Rules of the London Stock Exchange, and by

our profession’s ethical guidance.

We report to you our opinion as to whether the financial

statements give a true and fair view and are properly

prepared in accordance with the Companies Act. We also

report to you if, in our opinion, the Directors’ Report

is not consistent with the financial statements , if the

Company has not kept proper accounting records , if we

have not received all the information and explanations we

require for our audit, or if information specified by law or

the Listing Rules regarding Directors’ remuneration and

transactions with the Company is not disclosed.

We review whether the statement on pages 30, 31 and 32

reflects the Company’s compliance with those provisions

of the Combined Code specified for our review by the Stock

Exchange, and we report if it does not. We are not required

to form an opinion on the effectiveness of the Company’s

corporate governance procedures or its internal controls .

We read the other information contained in the Annual

Report, including the corporate governance statement, and

consider whether it is consistent with the audited financial

statements. We consider the implications for our report

if we become aware of any apparent misstatements or

material inconsistencies with the financial statements.

Basis of audit opinion We conducted our audit in

accordance with Auditing Standards issued by the Auditing

Practices Board. An audit includes examination, on a test

basis , of evidence relevant to the amounts and disclosures

in the financial statements. It also includes an assessment

of the significant estimates and judgements made by the

Directors in the preparation of the financial statements ,

and of whether the accounting policies are appropriate

to the Group’s circumstances , consistently applied and

adequately disclosed.

We planned and performed our audit so as to obtain all

the information and explanations which we considered

necessary in order to provide us with sufficient evidence

to give reasonable assurance that the financial statements

are free from material misstatement, whether caused by

fraud or other irregularity or error. In forming our opinion

we also evaluated the overall adequacy of the presentation

of information in the financial statements.

Opinion In our opinion the financial statements give a true

and fair view of the state of affairs of the Company and the

Group as at 31 March 1999 and of the profit of the Group

for the year then ended and have been properly prepared

in accordance with the Companies Act 1985.

KPMG Audit Plc

Chartered Accountants

Registered Auditor

London 7 June 1999



Group P ro f i t an d L oss Accountf o r t he ye ar e nde d 31 March

1999 1998

Before Exceptional Before Exceptional

exceptional items exceptional items

items (note 6) Total items (note 6) Total

Notes £m £m £m £m £m £m

2 Turnover

Continuing operations 2,263.3 – 2,263.3 2,310.7 – 2,310.7

– Acquisitions 46.1 – 46.1 – – –

2,309.4 – 2,309.4 2,310.7 – 2,310.7

2 & 4 Operating profit

Continuing operations 131.7 (7.7) 124.0 138.9 – 138.9

– Acquisitions 1.7 (0.5) 1.2 – – –

133.4 (8.2) 125.2 138.9 – 138.9

Goodwill amortisation (0.4) – (0.4) – – –

Total operating profit 133.0 (8.2) 124.8 138.9 – 138.9

6 Non operating items

Continuing operations

– Profit on disposal of fixed assets – 19.5 19.5 – – –

Discontinued operations

– Profit on disposal of businesses – 2.3 2.3 – 1.5 1.5

Profit on ordinary activities before interest 133.0 13.6 146.6 138.9 1.5 140.4

8 Finance income 8.5 – 8.5 7.5 – 7.5

Profit on ordinary activities before taxation 141.5 13.6 155.1 146.4 1.5 147.9

9 Taxation (34.0) 6.6 (27.4) (35.1) – (35.1)

Profit on ordinary activities after taxation 107.5 20.2 127.7 111.3 1.5 112.8

Equity minority interests (0.4) (0.2)

Profit for the financial year 127.3 112.6

10 Dividends (55.6) (52.8)

24 Retained profit for the financial year 71.7 59.8

11 Earnings per ordinary share of 25p

– on basic earnings 53.1p 47.2p

– on Adjusted earnings 44.9p 46.5p

– on fully diluted earnings 52.6p 46.4p

– on fully diluted Adjusted earnings 44.4p 45.8p


The notes on pages 42 to 61 form part of these financial statements.


Balance Shee tsa t 3 1 M arch

G R O U P C O M PA N Y

1999 1998 1999 1998

Notes £m £m £m £m

Fixed assets

12 Intangible assets: Goodwill 40.0 – – –

13 Tangible fixed assets 623.9 554.4 3.3 3.5

14 Investments 2.7 1.0 402.0 470.0

666.6 555.4 405.3 473.5

Current assets

15 Stocks 151.7 147.0 – –

16 Debtors 247.4 206.9 149.9 139.8

17 Cash and deposits 290.6 336.4 122.4 86.6

689.7 690.3 272.3 226.4

Creditors – Amounts falling due within one year

18 Borrowings and finance leases 7.0 7.6 2.8 5.0

20 Other creditors 507.3 491.5 170.0 183.4

514.3 499.1 172.8 188.4

Net current assets 175.4 191.2 99.5 38.0

Total assets less current liabilities 842.0 746.6 504.8 511.5

Creditors – Amounts falling due after more than one year

18 Borrowings and finance leases 96.7 97.6 241.9 280.3

21 Provisions for liabilities and charges 99.7 79.8 38.0 28.7

645.6 569.2 224.9 202.5

Capital and reserves

23 Called up equity share capital 60.2 59.8 60.2 59.8

24 Share premium account 68.3 63.5 68.3 63.5

24 Revaluation reserve 11.4 15.6 – –

24 Profit and loss account 503.5 428.5 96.4 79.2

Shareholders’ funds 643.4 567.4 224.9 202.5

Equity minority interests 2.2 1.8 – –

645.6 569.2 224.9 202.5

The financial statements were approved by the Board of Directors on 7 June 1999 and signed on its behalf by:

Sir Ross Buckland – Chief Executive

John Worby – Finance Director





Group C ash F low S t a t ementf o r t he ye ar e nde d 31 March

1999 1998

Notes £m £m £m £m

25 Cash flow from operating activities 196.7 212.2

Returns on investments and servicing of finance

Net interest received 8.8 7.9

Interest element of finance lease rental payments (0.3) (0.4)

Net cash inflow from returns on investments and

servicing of finance 8.5 7.5

Taxation

UK corporation and overseas tax paid (27.4) (18.2)

Capital expenditure and investments

Purchase of tangible fixed assets (118.3) (123.9)

7 Insurance proceeds on disposal of tangible fixed assets 30.0 –

Sale of other tangible fixed assets 11.7 11.6

Purchase of fixed asset investments (1.7) (1.0)

Net cash outflow from capital expenditure and investments (78.3) (113.3)

Acquisitions and disposals

22 Acquisition of businesses (90.1) (4.3)

22 Sale of businesses – 2.3

Net cash outflow from acquisitions and disposals (90.1) (2.0)

Equity dividends paid (53.7) (49.5)

Cash flow before use of liquid resources and financing (44.3) 36.7

26 Management of liquid resources 47.2 (76.6)

26 Financing 2.5 1.3

27 Increase/(decrease) in net cash in the year 5.4 (38.6)



Sta temen t o f G rou p R ecogn ised Ga ins and Lossesfo r t he ye ar e nde d 31 March

1999 1998

£m £m


Currency translation differences on foreign currency net investments (0.5) (0.8)

Total recognised gains and losses for the year 126.8 111.8

Reconc i l i a t i on o f Movements in Shareho lders ’ Funds fo r t he ye ar e nde d 31 March

1999 1998

£m £m


Dividends (55.6) (52.8)

Retained profit for the financial year 71.7 59.8

Currency translation differences on foreign currency net investments (0.5) (0.8)

New share capital issued 5.2 3.6

Discount on value of shares issued to the QUEST (0.9) –

Goodwill on disposals 0.5 (1.2)

Net increase in shareholders’ funds 76.0 61.4

Shareholders’ funds at 1 April 567.4 506.0

Shareholders’ funds at 31 March 643.4 567.4

Note o f H is t or i ca l C os t Pro f i t s and Lossesfo r t he ye ar e nde d 31 March

There is no material difference between the results as reported and the results that would have been reported on a historical cost

basis . Accordingly, no note of historical cost profits and losses has been included.




Notes to t h e F in an c ia l S ta tementsf o r t he ye ar e nde d 31 March 1999

1 Accounting Policies

a Basis of accounting The financial statements are prepared under the historical cost convention modified for the revaluation

of certain land and buildings. The financial statements are prepared in accordance with applicable accounting standards all of

which have been applied consistently throughout the year and the preceding year.

The following Financial Reporting Standards (FRS) have been adopted during 1998/99 in these financial statements: FRS 9

“Associates and Joint Ventures”, FRS 10 “Goodwill and Intangible Assets”, FRS 11 “Impairment of Fixed Assets and Goodwill”,

FRS 12 “Provisions, Contingent Liabilities and Contingent Assets”, FRS 13 “Derivatives and Other Financial Instruments:

Disclosures”, FRS 14 “Earnings Per Share”, and FRS 15 “Tangible Fixed Assets”.

The requirements of these Financial Reporting Standards are, where appropriate, discussed further in the applicable sections below.

The principal accounting policies adopted by the Group are described below.

b Basis of consolidation The Group financial statements consolidate the accounts of the Company and its subsidiary undertakings,

the principal of which are set out on page 62. A separate profit and loss account for Unigate PLC itself is not presented, as

permitted by Section 230 of the Companies Act.

The results of businesses acquired or sold during the year are included in the Group financial statements from the date

of acquisition or to the date of disposal.

c Goodwill On the acquisition of a subsidiary, business or associate, fair values are attributed to the net tangible assets acquired.

Where the fair value of the consideration exceeds the aggregate value of these assets , the difference is treated as goodwill.

In accordance with FRS 10, goodwill arising on acquisitions since 1 April 1998 is capitalised on the Group balance sheet

and amortised in equal instalments over its useful economic life. In the absence of indications to the contrary, the useful

economic life is assumed to be no more than 10 years for Dairy businesses and no more than 20 years for other businesses.

As permitted by the transitional provisions of FRS 10, goodwill that arose on businesses acquired prior to 1 April 1998 will

remain written off to reserves. In the event of subsequent disposal of any of these businesses , the attributable goodwill will

be taken into account in determining the profit or loss on sale. A credit of equal amount to reserves will ensure that there

is no impact on shareholders’ funds.

d Tangible fixed assets The cost of tangible fixed assets includes directly attributable costs , including appropriate commissioning

costs. Finance costs are capitalised where appropriate and in particular, in respect of the cost of major warehouses. Finance

costs are depreciated as part of the total cost. The capitalisation rate used represents the actual finance costs incurred on the

funds borrowed specifically to construct the asset. Freehold land and assets in the course of construction are not depreciated.

As permitted by the transitional provisions of FRS 15 “Tangible Fixed Assets” the Company has elected not to adopt a policy

of revaluation of tangible fixed assets. However it will retain the carrying value of land and buildings , previously revalued in

1981, and will not update that valuation.

e Depreciation The charge for depreciation is calculated to write down the cost or valuation of tangible fixed assets to their

estimated residual values by equal annual instalments over their expected useful lives which are as follows:

Freehold and leasehold buildings up to 50 years

Automated warehouse plant and equipment up to 15 years

Other plant, machinery, electric floats , charging plant, furniture and fittings up to 10 years

Office machinery and computers up to 6 years

Motor vehicles up to 7 years



1 Accounting Policies continued

f Government grants Capital grants received are shown as deferred income and credited to the profit and loss account

by instalments on a basis consistent with the applicable depreciation policy. Other grants are credited to the profit and

loss account to offset the matching expenditure.

g Leased assets Assets acquired under finance leases are included in the balance sheet at cost less depreciation.

The present value of future rentals is shown as a liability. The interest element of rental obligations is charged to the profit

and loss account over the period of the lease in proportion to the balance of capital repayments outstanding. Rentals payable

under operating leases are charged to the profit and loss account in the year in which they are incurred.

h Stocks Stocks are stated at the lower of cost, including attributable overhead expenditure, and net realisable value.

i Deferred taxation Deferred taxation, calculated using the liability method, is provided where it is probable that a liability

will crystallise.

j Turnover Turnover represents the invoiced value of sales to customers outside the Group and excludes value added tax.

k Research and development All expenditure on research and development is written off as incurred.

l Pensions Contributions to the Group’s pension schemes are charged to the profit and loss account so as to spread the cost of

pensions over the service lives of the employees in the schemes. Variations from the regular cost are spread over the expected

average remaining service lives of current employees in the schemes.

m Foreign currencies Assets and liabilities denominated in foreign currencies are translated into sterling at the rates ruling at the

end of the financial year except when covered by an open foreign exchange contract in which case the rate of exchange

specified in the contract is used.

Profits and losses on exchange arising from the translation of the opening balance sheets of overseas subsidiary undertakings

at the beginning of the year, or the date of acquisition, where later and any foreign currency borrowings used to finance or

hedge long term foreign investments are taken directly to reserves. All other profits and losses on exchange are credited or

charged to operating profit.

Transactions in foreign currencies are translated at the rate of exchange ruling at the date of transaction, or where applicable,

the contracted rate.

The results of overseas subsidiary undertakings are translated into sterling at average rates for the year. The exchange

differences arising as a result of restating retained profits to closing rates are dealt with as movements on reserves.

n Financial instruments Gains and losses on financial instruments which are hedging existing assets or liabilities are included in

the carrying amounts of those assets or liabilities. Gains and losses on financial instruments which are hedging firm commitments

or anticipated transactions are deferred and are recognised in the profit and loss account, or as adjustments to carrying

amounts , when the hedged transaction occurs.

Gains and losses on financial instruments that are not related to the Group’s hedging activities are recognised as other

income or expense. If a financial instrument ceases to be a hedge, for example because the underlying hedged position

is eliminated, the instrument is marked to market and any subsequent gains or losses are recognised as other income

or expense.

The disclosures required under FRS 13 “Derivatives and Other Financial Instruments: Disclosures” relating to the

management of financial instruments and their impact on the Group’s risk profile, performance and financial condition

are set out in note 19.



Notes to t h e F in an c ia l S ta tements cont inued

G R O U P

Operating profit

before goodwill

amortisation, exceptional Operating profit

Turnover items and taxation before taxation

1999 1998 1999 1998 1999 1998

2 Analysis of Results £m £m £m £m £m £m

By Business Segment

Fresh Foods 1,231.4 1,254.9 59.9 73.5 51.3 73.5

Dairy 529.4 581.2 43.1 40.5 43.1 40.5

European Food 1,760.8 1,836.1 103.0 114.0 94.4 114.0

Wincanton Logistics 548.6 474.6 30.4 24.9 30.4 24.9

2,309.4 2,310.7 133.4 138.9 124.8 138.9

By Geographical area

United Kingdom 2,203.0 2,212.9 122.8 129.8 114.2 129.8

Rest of Europe 106.4 97.8 10.6 9.1 10.6 9.1

2,309.4 2,310.7 133.4 138.9 124.8 138.9

Turnover of £46.1m and operating profit, before goodwill amortisation and exceptional items, of £1.7m is attributable to

acquisitions during the year and relates to Fresh Foods. The above table shows only third party turnover. Inter-segmental

turnover for the year was Dairy £5.8m (1998: £12.8m), Fresh Foods £9.3m (1998: £14.1m) and Wincanton Logistics £54.6m

(1998: £46.9m).

Turnover by geographical area is stated by origin which is not materially different from turnover by destination. Sales to

countries outside of Europe totalled £66.8m (1998: £104.6m).

Costs in respect of the Group’s Year 2000 programme charged against operating profit amount in aggregate to £5.3m

(1998: £4.2m) of which £3.2m (1998: £2.8m) arises in Fresh Foods, £0.8m (1998: £0.7m) in Dairy and £1.3m (1998: £0.7m)

in Wincanton Logistics.

G R O U P

Net assets Capital expenditure

1999 1998 1999 1998

3 Analysis of Net Assets £m £m £m £m

Fresh Foods 382.4 288.3 54.3 64.4

Dairy 103.2 101.2 23.2 19.5

European Food 485.6 389.5 77.5 83.9

Wincanton Logistics 126.7 126.6 40.8 39.9

Other – – – 0.1

612.3 516.1 118.3 123.9

Capitalised goodwill 40.0 –

Provisions, tax and dividends (193.6) (178.1)

Trading capital employed 458.7 338.0

Net funds 186.9 231.2

Equity minority interest (2.2) (1.8)

Total 643.4 567.4 118.3 123.9

Trading capital employed is analysed as £423.2m (1998: £301.8m) in the United Kingdom and £35.5m (1998: £36.2m) outside the

United Kingdom.



G R O U P

Continuing Exceptional Total Continuing Exceptional Total

1999 1999 1999 1998 1998 1998

4 Operating Profit before Goodwill Amortisation £m £m £m £m £m £m

The Group’s results are analysed as follows:

Turnover 2,309.4 – 2,309.4 2,310.7 – 2,310.7

Cost of sales (1,913.4) (6.0) (1,919.4) (1,894.2) – (1,894.2)

Gross profit 396.0 (6.0) 390.0 416.5 – 416.5

Distribution costs (96.9) (0.7) (97.6) (106.3) – (106.3)

Administrative expenses (180.6) (1.5) (182.1) (171.3) – (171.3)

Other income (note 7) 14.9 – 14.9 – – –

Operating profit before goodwill amortisation 133.4 (8.2) 125.2 138.9 – 138.9

The results of continuing operations in 1999 include the following amounts relating to acquisitions made during the year:

turnover £46.1m (1998: £1.4m), cost of sales £32.2m (1998: £1.2m), distribution costs £3.1m (1998: £nil), administrative

expenses £9.1m (1998: £0.1m).1999 1998

£m £m

The Group’s results include charges for:

Depreciation (including £1.0m (1998: £1.8m) in respect of assets under finance leases) 70.2 64.3

Rental payments for plant and machinery under operating leases 21.3 13.1

Rental payments under other operating leases 7.6 6.6

IT 2000 costs 5.3 4.2

Auditors’ remuneration

– Audit fees 0.5 0.4

– Other fees paid to KPMG Audit Plc and its associates 0.3 0.4

The aggregate payroll costs were:

Wages and salaries 514.3 466.0

Social security costs 45.3 39.8

Other pension costs 10.6 11.8

570.2 517.6

5 Directors and Employees

Directors’ emoluments and interests are given in the Remuneration Report on pages 33 to 36.

The average number of employees in the year was:1999 1998

Number Number

Continuing operations

Fresh Foods 12,222 10,395

Dairy 4,690 4,843

European Food 16,912 15,238

Wincanton Logistics 13,697 12,836

Number of employees – average 30,609 28,074

Number of employees – year end 31,680 28,243




Gross Tax Net Gross Tax Net

1999 1999 1999 1998 1998 1998

6 Exceptional Items £m £m £m £m £m £m

Operating profit

Reorganisation and integration costs (a) (0.5) 0.2 (0.3) – – –

Rationalisation costs (b) (7.7) 2.4 (5.3) – – –

Non operating items

Profit on disposal of fixed assets (c) 19.5 (3.9) 15.6 – – –

Profit on disposal of businesses (d) 2.3 7.9 10.2 1.5 – 1.5

13.6 6.6 20.2 1.5 – 1.5

a Reorganisation and integration costs relate to the Fresh Foods business and comprise a provision for the costs of closing a pig

processing site of Case & Sons, a company acquired by Malton Foods during the year.

b Rationalisation costs relate to the Fresh Foods business and comprise a provision for the costs of rationalising certain of the

existing activities in St Ivel UK.

c The profit on disposal of assets represents the insurance proceeds received in excess of the net book value of assets destroyed

during the year by fires at the Ballymoney pig processing site and at the Chard creamery. The impact of these insurance claims

on the financial statements at 31 March 1999 is more fully described in note 7 to the financial statements.

d The profit on disposal of businesses of £2.3m represents the release of provisions no longer required relating to the sale of the

Group’s US restaurant business in 1996. The tax credit on disposal of businesses includes a £7.6m credit which arises following

agreement during the year of tax computations relating to the disposal of US Restaurants.

7 Impact of Insurance Claims

On 20 June 1998, Malton Foods’ pig processing site in Ballymoney, Northern Ireland was destroyed by fire. On 24 October

1998, a substantial part of St Ivel UK’s milk processing operations based at the Chard creamery were destroyed by fire. The

loss arising from both of these fires is fully insured. At 31 March 1999 £45.5m in aggregate has been received on account from

insurers in respect of the insurance claims relating to these fires.

In the financial statements at 31 March 1999, £30.0m of the aggregate amount received has been accounted for as proceeds

on disposal of tangible fixed assets and £0.6m as proceeds on disposal of stock. After deducting the net book value of assets

destroyed in these fires , a profit on disposal of fixed assets of £19.5m, before related taxation thereon, arises and has been

recognised in the financial statements as an exceptional item, as disclosed in note 6.

In addition £14.9m has been received from the insurers in respect of increased costs of working and consequential loss of

profits . This has been included as other income in operating profits as disclosed in note 4.

The claims remain to be finalised with the insurers. Additional amounts received (including amounts in respect of additional

costs of working and consequential loss) will be accounted for in the 1999/2000 financial year.



G R O U P

1999 1998

8 Finance Income £m £m

Interest receivable 22.4 20.4

Interest payable

– on bank loans and overdrafts (1.2) (1.3)

– on other loans (12.9) (12.3)

– on finance leases (0.3) (0.4)

8.0 6.4

Classified as:

Finance income 8.5 7.5

Interest payable capitalised (0.5) (1.1)

8.0 6.4

G R O U P

1999 1998

9 Taxation £m £m

Charge on profit on ordinary activities

UK – corporation tax at 31% (1998: 31%) 29.0 28.5

– deferred tax 1.0 4.2

30.0 32.7

Overseas taxation (2.6) 2.4

Taxation charge 27.4 35.1

Classified as:

Trading activities – current 35.5 37.1

– adjustment relating to prior years (1.5) (2.0)

34.0 35.1

Tax credit on exceptional items (note 6) (6.6) –

27.4 35.1

The tax charge on profits of trading activities has benefited by £2.3m (1998: £nil) in respect of accelerated capital allowances.

C O M PA N Y

1999 1998 1999 1998

pence pence

10 Dividends per share per share £m £m

On ordinary shares – interim 7.9 7.5 18.8 18.0

– proposed final 15.3 14.5 36.8 34.8

23.2 22.0 55.6 52.8




11 Earnings per Ordinary Share

Basic earnings per share

Earnings per ordinary share is calculated on the basis of the weighted average of 239.6m (1998: 238.7m) ordinary shares in

issue during the year and the profit for the financial year, after minority interests , of £127.3m (1998: £112.6m).

Adjusted earnings per share

Adjusted earnings per share is shown by reference to earnings before goodwill amortisation, exceptional items and related

tax since the Directors consider that this gives a more meaningful measure of the underlying performance of the Group.

Earnings before goodwill amortisation, exceptional items and related tax are calculated as follows:

1999 1998

£m £m


Goodwill amortisation 0.4 –

Exceptional items (note 6) (20.2) (1.5)

Adjusted earnings 107.5 111.1

Fully diluted earnings per share

Fully diluted earnings per share is calculated on the basis of the weighted average ordinary shares in issue during the year

increased by the effects of all dilutive potential ordinary shares which are calculated as follows:

1999 1998

number number

Weighted average ordinary shares in issue 239.6 238.7

Share options 2.6 3.7

Potential weighted average ordinary shares in issue 242.2 242.4

1999

12 Intangible Assets: Goodwill £m

Goodwill arising on acquisitions during the year 40.4

Amortisation charge (0.4)

Net book value at 31 March 1999 40.0

In accordance with the the accounting policy for goodwill, described in note 1, goodwill arising on acquisitions since 1 April 1998

has been capitalised. Goodwill arising on businesses acquired prior to 1 April 1998 amounting to £312.1m, has been written

off to reserves in prior years.



Assets in

Land and Plant and course of

buildings equipment construction Total

13 Tangible Fixed Assets £m £m £m £m

Group

Cost or valuation

At 1 April 1998 260.8 649.7 21.2 931.7

Assets brought into operation – 19.8 (19.8) –

Additions 11.3 84.3 23.4 119.0

Disposals (8.7) (50.3) – (59.0)

New businesses 20.3 24.3 – 44.6

Businesses sold – (3.2) – (3.2)

Exchange 0.4 1.4 – 1.8

At 31 March 1999 284.1 726.0 24.8 1,034.9

Depreciation

At 1 April 1998 51.5 325.8 – 377.3

Provided in the year 6.0 64.2 – 70.2

Disposals (1.7) (33.3) – (35.0)

Businesses sold – (2.2) – (2.2)

Exchange 0.1 0.6 – 0.7

At 31 March 1999 55.9 355.1 – 411.0

Net book value

At 31 March 1999 228.2 370.9 24.8 623.9

At 31 March 1998 209.3 323.9 21.2 554.4

Land and Plant and

buildings equipment Total

£m £m £m

Company

Cost

At 1 April 1998 4.4 4.3 8.7

Additions – – –

At 31 March 1999 4.4 4.3 8.7

Depreciation

At 1 April 1998 1.7 3.5 5.2

Provided in the year 0.1 0.1 0.2

At 31 March 1999 1.8 3.6 5.4

Net book value

At 31 March 1999 2.6 0.7 3.3

At 31 March 1998 2.7 0.8 3.5




G R O U P

1999 1998

13 Tangible Fixed Assets continued £m £m

Land and buildings comprise:By tenure

Freehold 262.0 239.7

Leasehold – over fifty years 15.1 14.4

– under fifty years 7.0 6.7

284.1 260.8

By cost or valuation

Valuation in 1981 39.6 43.4

Cost 244.5 217.4

284.1 260.8

G R O U P

1999 1998

The historical cost of properties revalued in 1981 is: £m £m

Cost 27.0 27.0

Depreciation (10.4) (10.0)

Net book value 16.6 17.0

Included in the net book value of plant and equipment are £4.4m (1998: £5.2m) of assets held under finance leases. The net

book value of assets at 31 March 1999 includes £2.7m (1998: £2.2m) of interest which has been capitalised, of which £0.6m

(1998: £0.1m) is included in assets in the course of construction.


Shares held by Subsidiary undertakings

ESOT Shares Loans Total

14 Investments £m £m £m £m

Cost less amounts written off

At 1 April 1998 1.0 316.0 154.0 470.0

Additions 1.7 – 61.8 61.8

Disposals – – (129.8) (129.8)

At 31 March 1999 2.7 316.0 86.0 402.0

The Employee Share Ownership Trust (ESOT) was established in June 1997 to purchase shares in the Company in order to meet

certain future obligations of the Group in respect of shares awarded under the Unigate Long Term Incentive Plan (LTIP). During

the year, the Trustee of the ESOT purchased 251,600 shares in the Company. No shares have been distributed. Dividends

receivable on the shares owned by the Trust have been waived. At 31 March 1999 the ESOT held 411,600 shares (1998: 160,000

shares) in the Company at a cost of £2.7m which had a market value of £1.8m (1998: £1.2m). Further details of the LTIP are set

out on page 35 in the Remuneration Report.



G R O U P

1999 1998

15 Stocks £m £m

Raw materials and consumables 36.0 31.6

Work in progress 55.1 65.4

Finished goods and goods for resale 60.6 50.0

151.7 147.0


1999 1998 1999 1998

16 Debtors £m £m £m £m

Trade debtors 167.5 146.8 – –

Amounts owed by subsidiary undertakings – – 139.4 121.4

Other debtors 35.8 21.2 2.2 1.9

Advance corporation tax recoverable – – – 8.7

Prepayments and accrued income 44.1 38.9 8.3 7.8

247.4 206.9 149.9 139.8


1999 1998 1999 1998

17 Cash and Deposits £m £m £m £m

Cash at bank 22.0 19.6 21.7 30.4

Short term deposits 268.6 316.8 100.7 56.2

290.6 336.4 122.4 86.6





1999 1998 1999 1998

18 Borrowings and Finance Leases £m £m £m £m

Amounts falling due within one year

Unsecured loan stock – 1.1 – 1.1

Bank loans and overdrafts 5.8 5.3 2.8 3.9

5.8 6.4 2.8 5.0

Obligations under finance leases 1.2 1.2 – –

7.0 7.6 2.8 5.0

Amounts falling due after more than one year

Borrowings other than from banks 96.7 97.0 241.9 280.3

Bank loans – 0.6 – –

96.7 97.6 241.9 280.3

Amounts falling due after more than one year are repayable as follows:

Borrowings other than from banks

US$140 million 6.28% Loan Notes October 2001/03 94.5 94.5 – –

Obligations under finance leases 2.2 2.5 – –

Loans from subsidiary undertakings – – 241.9 280.3

96.7 97.0 241.9 280.3

Bank loans

One to two years – 0.3 – –

Two to five years – 0.3 – –

– 0.6 – –

Within amounts falling due after more than one year of £96.7m (1998: £97.6m) is £83.6m (1998: £84.9m) where the interest

rate is fixed during the term of the debt, principally through the use of interest rate swaps. There is also £3.4m of short term

debt subject to fixed interest rates.

At 31 March 1999, the Group had revolving credit facilities of £260m (1998: £160m) under which it may repay amounts

borrowed at its option whilst retaining the flexibility to re-borrow under the facilities. These facilities expire during the

period from 1 June 2001 to 1 June 2002.



19 Derivatives and other Financial Instruments

Treasury risk management

A discussion of the Group’s objectives , policies and strategies with regard to derivatives and other financial instruments is set

out in the Financial Review on pages 24 to 27.

Interest rate and currency of funding

After taking into account the various interest rate and currency swaps and options entered into by the Group, the effective

currency and interest rate exposure of the Group’s net cash position as at 31 March 1999 were as follows:

Sterling Euro US$ Total

£m £m £m £m

Floating rate borrowings (9.8) (5.9) (1.0) (16.7)

Fixed rate borrowings (87.0) – – (87.0)

(96.8) (5.9) (1.0) (103.7)

Cash and liquid resources 290.6 – – 290.6

Net cash position 193.8 (5.9) (1.0) 186.9

Fixed rate borrowings comprise those borrowings where the initial duration of the borrowing was in excess of one year, and

the interest rate payable thereon was fixed at the outset.

The fixed rate borrowings have a weighted average interest rate of 7.2% and have a remaining average duration of 6 years.

Floating rate borrowings bear interest based on short term inter-bank rates (principally LIBOR applicable to periods of three

months or less). The cash and liquid resources , which are all at floating rates , yield interest based on short term inter-bank

rates (principally LIBOR applicable to periods of three months or less).

Currency analysis of net assets

In accordance with the Group’s policy to hedge all contractual commitments , all of the Group’s monetary assets and liabilities

are denominated in, or are hedged to, the functional currency of the subsidiary concerned.

The Group’s net assets by currency at 31 March 1999 were as follows:

Sterling Euro US$ Total

£m £m £m £m

Net cash/(borrowings) by currency 163.3 118.1 (94.5) 186.9

Currency swaps 30.7 (124.2) 93.5 –

Net cash position 194.0 (6.1) (1.0) 186.9

Other net assets 423.2 37.1 (1.6) 458.7

Total net assets 617.2 31.0 (2.6) 645.6

Net assets includes minority interests. No gain or loss arises in the profit and loss account in respect of any of the above foreign

currency assets and liabilities because such foreign currency assets and liabilities are either denominated in the currency of the

Group operation to which they belong (the functional currency), or they provide a hedge against a foreign equity investment.




19 Derivatives and other Financial Instruments continued

Fair values of financial instruments

The comparison of book and fair values of all the Group’s financial instruments is set out below. Where available, market

values have been used to determine fair values. Where market values are not available, fair values have been calculated by

discounting cash flows at prevailing interest and exchange rates.

Book value Fair value Book value Fair value

1999 1999 1998 1998

£m £m £m £m

Cash at bank and in hand 22.0 22.0 19.6 19.6

Liquid resources 268.6 268.6 316.8 316.8

Debt (103.7) (97.6) (105.2) (94.6)

Derivatives to manage interest rate and currency of net funds – (14.4) – (13.0)

Net cash 186.9 178.6 231.2 228.8

Derivatives relating to net cash:

Long term currency swaps – (7.6) – (11.2)

Long term interest rate swaps – (6.8) – (3.6)

Forward exchange contracts – – – 1.8

– (14.4) – (13.0)

Included in the 1998/99 profit and loss account is £0.2m of realised losses relating to long term interest rate swaps. At 31 March

1999, these same interest rate swaps results in £1.3m being charged against profit in 1999/2000 if interest rates remain unchanged.

At 31 March 1999 the Group also held various forward contracts taken out to hedge expected future foreign currency denominated

sales and purchases.


1999 1998 1999 1998

20 Other Creditors £m £m £m £m

Trade creditors 174.7 179.8 1.0 0.1

Amounts owed to subsidiary undertakings – – 115.9 125.1

Corporation tax 57.2 63.5 7.5 13.4

Dividends payable 36.7 34.8 36.8 34.8

Other creditors , including social security 114.2 115.5 1.1 1.7

Accruals and deferred income 124.5 97.9 7.7 8.3

507.3 491.5 170.0 183.4




1999 1998 1999 1998

21 Provisions for Liabilities and Charges £m £m £m £m

Deferred taxation 31.0 20.6 (12.3) (8.2)

Provisions 68.7 59.2 50.3 36.9

99.7 79.8 38.0 28.7

Deferred taxation provided

Capital allowances on fixed assets in excess of depreciation 41.1 35.6 0.1 0.1

Other timing differences and losses available for future relief (10.1) (10.0) (12.4) (8.3)

31.0 25.6 (12.3) (8.2)

Less: advance corporation tax – (5.0) – –

31.0 20.6 (12.3) (8.2)

Unprovided deferred taxation

Capital allowances on fixed assets in excess of depreciation 9.8 7.5 – –


£m £m

Analysis of movements on deferred taxation

At 1 April 1998 20.6 (8.2)

Transfer from profit and loss account 2.8 (4.1)

Other movements 7.6 –

At 31 March 1999 31.0 (12.3)

No provision for deferred taxation has been made for taxation payable on the distribution of reserves by overseas subsidiary

undertakings since it is unlikely that material amounts will be distributed to the UK.

1 April Provided 31 March

1998 Reclassified in the year Utilised 1999

£m £m £m £m £m

Provisions

Group

Restructuring , integration and reorganisation costs 18.6 – 3.9 (10.7) 11.8

Pension 37.3 – 13.5 – 50.8

Other 3.3 2.1 1.8 (1.1) 6.1

59.2 2.1 19.2 (11.8) 68.7

Company 36.9 – 13.4 – 50.3

A reclassification of £2.1m from creditors to provisions at 1 April 1998 has been made following the adoption of FRS 12.

The amount provided in the year for restructuring , integration and reorganisation costs comprise the costs of completing the

Group’s restructuring and rationalisation of businesses , net of £3.0m released in respect of provisions no longer required.

These costs are expected to be incurred during the next financial year.

The pension provision, the majority of which is held in the Company, represents the amount by which the regular pension cost

exceeds the contributions paid to the scheme. This is expected to reverse over the average remaining life of the employees.

Other provisions comprise amounts provided in the ordinary course of business which are expected to be utilised during the

next two years.




G R O U P

Acquisitions Disposals Acquisitions Disposals

1999 1999 1998 1998

22 Business Acquisitions and Disposals £m £m £m £m

The net cash flows in respect of acquisitions and disposals comprise:

Fixed assets (44.6) 1.0 (1.7) –

Stocks (11.6) – – –

Debtors (17.5) – (2.6) –

Creditors 19.7 (0.8) 1.7 –

Taxation 4.3 – – –

Provisions – (3.0) – –

Net assets acquired/disposed (49.7) (2.8) (2.6) –

Net profit on disposal of businesses – 2.3 – 1.5

Goodwill (40.4) 0.5 (1.7) 0.8

Cash (paid)/received net of expenses (90.1) – (4.3) 2.3

Accounting

Book value policy Fair value

at acquisition alignment Revaluation to Group

£m £m £m £m

Acquisition of Fisher Quality Foods Limited:

The total cost of this acquisition comprises:

Fixed assets 19.2 – (1.7) 17.5

Working capital 7.3 – – 7.3

Taxation (2.0) (1.9) – (3.9)

Net assets acquired 24.5 (1.9) (1.7) 20.9

Goodwill arising on acquisition 21.3

Total cost of acquisition 42.2

Cash consideration 42.1

Expenses of acquisition 0.1


Fisher Quality Foods Limited (renamed UNIQfoods Limited) was acquired on 12 February 1999 and has been accounted for as an

acquisition and consolidated in the financial statements from the date of acquisition. The turnover and operating profit, before

exceptional items and goodwill amortisation, for the period from acquisition by the Group to 31 March 1999 are £5.4m and

£0.5m respectively. The profit after taxation for the last financial year prior to acquisition was £2.0m.



Accounting



22 Business Acquisitions and Disposals continued £m £m £m £m

Acquisition of Roata Limited:

The total cost of this acquisition comprises:

Fixed assets 20.5 (0.8) (1.2) 18.5

Working capital 4.7 (0.6) (1.0) 3.1

Taxation – 0.2 – 0.2


Goodwill arising on acquisition 13.0



Debt acquired 19.9

Total consideration 34.7

Expenses of acquisition 0.1


Roata Limited (trading as Unipork) was acquired on 14 September 1998 and has been accounted for as an acquisition and

consolidated in the financial statements from the date of acquisition. The turnover and operating profit, before exceptional

items and goodwill amortisation, for the period from acquisition by the Group to 31 March 1999 are £21.5m and £nil

respectively. The loss after taxation for the last full financial period prior to acquisition was £46,000.

Accounting



£m £m £m £m

Other acquisitions during the year:

The total cost of other acquisitions during the year comprises:

Fixed assets 9.3 (0.2) (0.5) 8.6

Working capital (0.6) (0.1) (0.3) (1.0)

Taxation (0.1) (0.5) – (0.6)


Goodwill arising on acquisitions 6.1

Total cost of acquisitions 13.1


Debt acquired 5.3

Total consideration 12.8

Expenses of acquisitions 0.3

Total cost of acquisitions 13.1

Other acquisitions comprise the doorstep business of Wessex Dairies Limited, acquired on 27 March 1999 for £7.1m, Case & Sons

Limited, a pig processing business acquired on 16 June 1998, and the purchase of small independent milk operations. These

businesses have been accounted for as acquisitions and consolidated in the financial statements from the dates of acquisition.

The turnover and operating profit, before exceptional items and goodwill amortisation, of other acquired businesses for the

period subsequent to acquisition by the Group to 31 March 1999 are £19.2m and £1.2m respectively. The profit after taxation

of these businesses , prior to acquisition, is not material.




1999 1998

23 Share Capital £m £m

Authorised

Equity – 320,066,924 (1998: 320,066,924) Ordinary shares of 25p each 80.0 80.0

Called up and allotted

Equity – 240,802,513 (1998: 239,316,876) Ordinary shares of 25p each 60.2 59.8

Ordinary shares include 13,383 (1998: 13,383) 25p fully paid restricted shares and 26,766 (1998: 26,766) 1p paid shares issued

under the 1971 Share Incentive Scheme. During the year ended 31 March 1999, 794,453 ordinary shares of 25p each were

issued for an aggregate consideration of £2.2m in respect of options exercised under the Group’s share option schemes.

A Qualifying Employee Share Ownership Trust (QUEST) was established, under a deed of trust, on 4 March 1999 to acquire

shares in the Company for the benefit of employees, including Directors, of the Company and its subsidiaries. Under the terms

of the trust, the Company is empowered to finance the acquisition of shares by the QUEST. On 4 March 1999 the Company

provided £3.0m for this purpose of which £2.1m is expected to be reimbursed on exercise of the options. The QUEST

subscribed at market value for 691,184 of the Company’s ordinary 25p shares , all of which were still held at 31 March 1999

(market value: £3m). The shares rank pari passu in all respects with the existing ordinary shares and will be allocated to

employees and Directors in satisfaction of their options under the Savings Related Share Option Scheme (“SAYE Scheme”).

At the date of this report, only 60,271 shares remain held by the QUEST. The cost of the contribution by the Company has

been transferred directly to profit and loss account reserve, and the share premium account has been increased by the excess

of the subscription price over nominal value which amounts to £2.8m.

The shares held by the QUEST at 31 March 1999 have been included in the Group balance sheet at nil value, reflecting their

ultimate purpose which is to satisfy options granted to employees and Directors of the Company. Dividends are waived on

the shares held by the QUEST.

Options over ordinary shares outstanding at 31 March 1999 were as follows:

Outstanding Average

Option scheme share options Exercise price range Dates of grant exercise price

Executive 5,072,261 227p – 664.5p 1990–1998 431p

Overseas Executive 267,208 400p – 664.5p 1995–1998 480p

UK SAYE 6,260,229 290p – 532p 1993–1998 395p

Irish SAYE 48,311 362p – 428p 1993–1997 401p

The aggregate number of options outstanding is 11,648,009. The total consideration receivable if all options outstanding

were exercised would be £48.1m. Executive options are normally exercisable between 3 and 10 years and SAYE options

between 3 and 51/2 years from their date of grant.



Share

premium Revaluation Profit and

account reserve loss account Total

24 Reserves £m £m £m £m

Group

At 1 April 1998 63.5 15.6 428.5 507.6

Retained profit for the year – – 71.7 71.7

Premium on shares issued in the year 4.8 – – 4.8

Discount on value of shares issued to the QUEST – – (0.9) (0.9)

Revaluation surplus realised – (4.2) 4.2 –

Goodwill transferred to profit and loss account – – 0.5 0.5

Exchange – – (0.5) (0.5)

At 31 March 1999 68.3 11.4 503.5 583.2

At 31 March 1999 goodwill written off against profit and loss account reserves amounted to £312.1m (1998: £312.6m).

Share Profit

premium and loss

account account Total

£m £m £m

Company

At 1 April 1998 63.5 79.2 142.7

Retained profit for the year – 17.8 17.8

Premium on shares issued in the year 4.8 – 4.8

Exchange – (0.6) (0.6)

At 31 March 1999 68.3 96.4 164.7

G R O U P

1999 1999 1998 1998

25 Reconciliation of Total Operating Profit to Operating Cash Flows £m £m £m £m

Total operating profit 124.8 138.9

Depreciation and amortisation 70.6 64.3

Decrease/(increase) in stocks 7.6 (22.8)

(Increase)/decrease in debtors (19.4) 22.9

Increase in creditors 3.1 3.3

(8.7) 3.4

Increase in provisions 10.0 5.6

Cash flow from operating activities 196.7 212.2




1999 1998

26 Analysis of Cash Flows from Management of Liquid Resources and Financing £m £m

Management of liquid resources*

Net decrease/(increase) in short-term deposits 47.2 (76.6)

Financing

Decrease in unsecured loan stock (1.1) (0.5)

Increase/(decrease) in long-term borrowings 1.7 (0.3)

Capital element of finance lease rental payments (0.3) (1.5)

Cash inflow/(outflow) from increase/(decrease) in debt 0.3 (2.3)

Cash inflow from issue of ordinary share capital 2.2 3.6

Net cash generated from financing activities 2.5 1.3

*Liquid resources comprise short-term cash deposits maturing within one year.

Borrowings

and finance leases

Falling due Falling due

Cash at Short-term within one after one Net

bank Overdrafts Net cash deposits year year funds

27 Reconciliation and Analysis of Net Funds £m £m £m £m £m £m £m

At 1 April 1997 54.2 (1.6) 52.6 237.1 (3.3) (98.9) 187.5

Cash flow (34.6) (4.0) (38.6) 76.6 1.0 1.3 40.3

Translation differences – 0.3 0.3 3.1 – – 3.4

At 31 March 1998 19.6 (5.3) 14.3 316.8 (2.3) (97.6) 231.2

Cash flow 2.4 3.0 5.4 (47.2) (1.2) 0.9 (42.1)

Translation differences – (1.2) (1.2) (1.0) – – (2.2)

At 31 March 1999 22.0 (3.5) 18.5 268.6 (3.5) (96.7) 186.9

G R O U P

1999 1998

28 Commitments £m £m

Capital commitments contracted, but not provided 21.9 38.3

G R O U P

Land & Other

buildings leases Total

£m £m £m

Annual operating lease payments are under commitments expiring:

Within one year 0.3 4.0 4.3

Between one and five years 1.1 16.7 17.8

After five years 7.1 0.9 8.0

8.5 21.6 30.1



29 Contingent Liabilities

Guarantees and contingencies of £9.7m exist in the ordinary course of business. Certain guarantees are performance related.

30 Pensions

The Group operates a pension scheme in the UK. The scheme is contributory for members and provides defined benefits for

the majority of members. The scheme also provides defined contribution arrangements for certain employees, the value of which at

the year end was £11m. Assets are held in a separate trust fund independent of the Group’s finances. Contributions are established

according to funding rates advised by the scheme’s actuaries, Aon Consulting.

The Group’s principal UK scheme was actuarially assessed, using the projected unit method, at 31 March 1998. The principal actuarial

assumptions adopted in the valuation were that, over the long term, the annual rate of return on investments would be 2.5%

higher than the annual increase in total pensionable remuneration, 4.5% higher than the annual increase in present and future

pensions in payment and 4.0% higher than the annual increase in retail inflation.

The market value of the assets at the date of the valuation was £843m. The actuarial valuation showed assets sufficient to

cover 113% of the benefits accruing to members after allowing for expected future increases in pensionable remuneration.

The residual surplus , taking into account the pension provision held in the Company’s balance sheet, is being credited to the

profit and loss account over twelve years , which is the expected average remaining service lifetime of the members of the

scheme. The next valuation of this scheme will be made at 31 March 2001.

The Group’s total pension charge was £10.6m (1998: £11.8m) of which £9.8m (1998: £10.8m) related to the principal scheme.

31 Subsequent Events

On 18 May 1999 the Group completed the acquisition of Terranova Foods plc for consideration of £274m. On 31 May 1999

the Group announced the proposed acquisition of Marie, the French convenience foods business of Danone, for an estimated

net cost of £145m.



Pr inc ipa l S u b s id iar iesat 31 M arch 1999

% of Country of

Equity Incorporation and

Notes Subsidiary Undertakings Principal Activity Held Principal Operation

Unigate (UK) Ltd Principal company for UK food businesses 100* Great Britain

Unigate Distribution Services Ltd Principal company for distribution businesses 100* Great Britain

Unigate Netherlands BV Investment holding company 100 Netherlands

Porton Underwriting Limited Captive insurer 100 Guernsey

1 Unigate Dairies Ltd Liquid milk distribution 100 Great Britain

1 St Ivel Westway Ltd Liquid milk distribution 100 Great Britain

1 St Ivel Ltd Dairy and other fresh food products 100 Great Britain

1 Malton Bacon Factory Ltd Pork, bacon, ham and other

cooked meat products 100 Great Britain

1 UNIQfoods Limited Sauces and dressings 100 Great Britain

1 Roata Limited Pigmeat processor 100 Northern Ireland

Wexford Creamery Ltd Manufacture and sale of cheese 80 Republic of Ireland

Vedial S.A. Manufacture and sale of spreads 100 France

Société Laitière de la

Vallée de l’Ourcq S.A. (SLVO) Manufacture and sale of yogurts 100 France

2 Wincanton Ltd Logistics and fleet management 100 Great Britain

Notes

1 & 2 The assets , liabilities and business of a number of subsidiary undertakings marked 1 have been transferred to Unigate (UK) Ltd, and those marked 2 to

Unigate Distribution Services Ltd and the subsidiary undertakings have been appointed as undisclosed agents to carry on the trade on their behalf.

3 Shareholdings marked * are directly owned by Unigate PLC and the remainder are held through subsidiary undertakings.

4 Companies incorporated in Great Britain are registered in England and Wales.

Shareho ld er In f orm at ion

Financial Calendar

Full year results Preliminary announcement on 7 June 1999

Annual Report Posted to shareholders at the end of June 1999

Annual General Meeting To be held on 21 July 1999 at 12 noon at

Hotel Inter-Continental, Hyde Park Corner, London W1

Half year results Interim announcement November 1999

Ordinary dividends – Interim 7.9p per share Announced 16 November 1998: Paid 5 January 1999

– Final 15.3p per share Payable 5 August 1999 to shareholders on the register at the close

of business on 25 June 1999



% of

Analysis of Ordinary Shareholders issued shares

Pension funds 22.55

Investment/Unit trusts 18.98

Insurance companies 15.77

Individuals 10.47

Overseas holders 14.04

Other 18.19

100.00

% of

Size of shareholdings Holders Shares shares

up to 1,000 14,394 7,007,753 2.91

1,001 – 10,000 8,479 19,833,197 8.23

10,001 – 100,000 460 15,186,110 6.31

100,001 – 250,000 100 16,754,461 6.96

above 250,000 125 182,059,625 75.59

The above tables have been completed from the Company records at 24 May 1999.

Report & Accounts Copies can be obtained from the Group Corporate Affairs Department at the Company’s address below.

Share Registrar The Company’s Registrar is Lloyds TSB Registrars. If you have any questions about your holding or

wish to notify any change in your details please contact the Registrar at: Lloyds TSB Registrars , The Causeway, Worthing ,

West Sussex BN99 6DA. Telephone: 01903 502541. Whenever you contact the Registrar, please quote the full names in which

your shares are held. Please advise the Registrar promptly of any change of address.

Dividend Mandates If you wish all further dividends to be paid directly into your bank or building society account, you

should contact the Registrar for a dividend mandate form or complete the instructions attached to your dividend payment.

Individual Savings Accounts (ISAs) You may invest in Unigate shares via a Unigate corporate ISA. If you would like further

information please contact the ISA Manager: Carr Sheppards Crosthwaite Limited, Dogflud Way, Farnham, Surrey, GU9 7UL.

Telephone 01252 712049 (Monday to Friday, 10.00am to 4.00pm) Fax 01252 734628. Carr Sheppards Crosthwaite is regulated

by the Securities and Futures Authority and is a member of the London Stock Exchange. Carr Sheppards Crosthwaite is also

the Plan Manager of the Unigate Corporate PEP.

Share Dealing Service Unigate shares may be dealt through the Company’s brokers at a special commission rate. If you

would like further information you may contact the brokers at: Cazenove & Co, 12 Tokenhouse Yard, London EC2R 7AN.

Telephone: 0171-588 2828.

Share Price Quotation The Company’s share price is quoted daily in national and regional newspapers as well as on BBC 2

Ceefax, page 223 and Channel 4 Teletext, page 516 where it is updated at intervals through the day. The Financial Times “City

Line” financial information service will give an up to the minute Unigate share price on 0891 434344. A fee is charged for this

telephone service.

Shareholders’ Enquiries If you have an enquiry about the Company’s business or about something affecting you as

a shareholder (other than questions which are dealt with by Lloyds TSB Registrars) you are invited to contact the Corporate

Affairs Manager at the Company’s address below.

Web site Unigate’s web site is available at www.unigate.plc.uk.

Secretary and Registered Office J F Burkitt LLB, Unigate PLC, Unigate House, Wood Lane, London W12 7RP.

Telephone: 0181-749 8888. Fax: 0181-576 6071. Registered in England and Wales , No. 621482.



F ive Year R ecord

1999 1998 1997 1996 1995

Notes £m £m £m £m £m

Profit and loss

Turnover 2,309 2,311 2,414 2,134 1,893

Operating profit

Fresh Foods 59.9 73.5 66.4 39.7 26.2

Dairy 43.1 40.5 34.5 44.6 44.8

European Food 103.0 114.0 100.9 84.3 71.0

Wincanton Logistics 30.4 24.9 23.4 23.0 21.7

Discontinued – – 2.9 8.1 15.5

133.4 138.9 127.2 115.4 108.2

Goodwill amortisation (0.4) – – – –

Total operating profit 133.0 138.9 127.2 115.4 108.2

Income from associated undertakings – – – 17.5 20.9

Finance income/(costs), net 8.5 7.5 2.4 (7.6) (12.5)

Profit before taxation and exceptionals 141.5 146.4 129.6 125.3 116.6

Exceptional items 13.6 1.5 (13.4) 173.7 (58.3)

Taxation (27.4) (35.1) (28.0) (32.8) (11.7)

Profit after taxation 127.7 112.8 88.2 266.2 46.6

Capital structure

1 Shareholders’ funds 643.4 567.4 506.0 531.9 267.6

2 Net (cash)/debt (186.9) (231.2) (187.5) (170.7) 152.4

3 Trading capital employed 458.7 338.0 320.3 362.9 341.5

Cash flow from operating activities 196.7 212.2 200.0 169.8 168.9

Capital expenditure 118.3 123.9 99.8 116.7 97.4

Depreciation 70.2 64.3 64.7 63.8 62.8

Per ordinary share

Basic earnings 53.1p 47.2p 37.2p 113.2p 19.8p

5 Adjusted earnings 44.9p 46.5p 41.0p 39.4p 36.8p

Dividends 23.2p 22.0p 20.2p 19.2p 18.2p

6 Net assets 267p 237p 213p 226p 114p

Interest and dividend cover (times)

Interest cover – – – 15.2 8.6

7 Dividend cover 1.9 2.1 2.0 2.1 2.0

Ratios % % % % %

4 Return on trading capital employed 18.0 21.4 20.1 19.1 17.5

Operating profit/turnover 5.8 6.0 5.3 5.4 5.7

2 Net debt gearing – – – – 57.0

Notes

1 Shareholders’ funds represent share capital and reserves.

2 Net (cash)/debt includes total loans and obligations under finance leases less cash at bank and short-term deposits. Net debt gearing represents net debt as

a percentage of shareholders’ funds.

3 Trading capital employed is defined as net assets (including goodwill capitalised since 1 April 1998) plus net debt and minority interests.

4 Return on trading capital employed represents operating profit as a percentage of trading capital employed (as adjusted for the effect of the timing of major

acquisitions and disposals) including all goodwill arising on acquisitions (whether capitalised or charged to reserves).

5 Adjusted earnings per share is calculated in accordance with note 11 to the financial statements.

6 Net assets per share have been calculated by dividing shareholders’ funds by the number of ordinary shares in issue at the year end.

7 Dividend cover is calculated on Adjusted earnings.

8 Comparatives have not been restated for the impact of new Financial Reporting Standards.



Designed and produced by Pauffley, London. Typesetting by Real Time Studio. Printed in England by Westerham Press. Stocks: front end Munken Lynx, back end Challenger Offset.Front cover image by Generator Limited, Board photography by Michael Harding, Product photography by Simon Brown, Stylist, Liz Bauwens, Home Economist, Silvana Franco.Location photography by Damian Gillie and Save the Children photography by Peter Fryer and Jenny Matthews.


Unigate House Wood Lane London W12 7RP T: 0181 749 8888 F: 0181 576 6081 www.unigate.plc.uk


unigate plc report and accounts 1999

Documents