Salvesen Trading Statement

LONDON (AFX) – Christian Salvesen PLC warned full year profits for the year
to end March will be 20 pct below current market expectations and it is to
restructure its UK operations after reviewing its underperforming businesses.
And, while the group still expects to pay a final dividend, it is expected
to be below last year’s payout.
The European logistics company said while some 80 pct of its business by
turnover is performing well and generating expected returns, the balance of the
operations, specifically the German Industrial business and parts of the UK Food
and Consumer and UK Industrial businesses, are producing disappointing results.
Chief executive Edward Roderick said, “The continued underperformance in
certain key business areas is disappointing in the extreme, and is something
that we are in the process of rectifying through immediate and decisive action.”
The group said it plans to integrate the UK Food and Consumer and UK
Industrial businesses into a single function and recruit a senior executive to
take responsibility for the UK operations.
In addition, an accelerated programme of exiting from insufficiently
profitable UK business, coupled with significant cost cutting initiatives is to
be implemented.
A full review of the strategic options available to the group in the German
industrial market is also underway.
The group said it expects full-year profits from the UK food and consumer
operations to be markedly lower than anticipated after a delayed start to new
cold store operations in the run-up to Christmas disupted both UK warehouse and
transport operations while pricing pressures have continued to intensify with
slower-than-expected re-stocking taking place at certain sites since Christmas.
Increased driver costs, higher insurance premiums, and the costs associated
with increased congestion, have proved progressively difficult to recover from
customers through price increases, the company aded.
And, whilst significant progress has been made in winning new business, in
increasing efficiencies and in lowering the cost base, these benefits have been
insufficient to offset the inflationary effect of cost increases, magnified by
the difficult prevailing economic conditions.
The group said the French and Iberian Industrial division businesses have
continued to trade broadly in line with expectations but the worsening economic
environment in Germany means previously outlined restructuring moves are proving
insufficient to turn the performance around. The division’s loss for the full
year is now expected to be similar to that for 2002.