Derby-based business improvement practice Coriolis UK is working on a two-year strategic project with Geest. The project still has some18 months to run and aims to bring the prepared produce specialist savings of £16 million.
Coriolis is examining each of Geest’s facilities to identify efficiency best practices and will help Geest introduce new systems and working methods across all its manufacturing operations. "This is a long-term project which engages the Coriolis team with Geest employees at many levels from factory operatives to operating board management and encourages cultural change across the group," said Mark Dudley, Coriolis md.
Geest’s business improvement director Mick Vassal said his firm had wanted somebody to help it through "this important transition. By working with Coriolis, Geest aim to achieve very significant benefits that will ensure the company remains at the forefront of the fresh food industry."
Earlier this month Geest warned investors that annual profits are unlikely to meet City expectations. Poor supermarket trading at Sainsbury’s and Safeway have had a knock-on effect on its own business.
Prior to the warning analysts had forecast pre-tax profits of £42 million, but following the news they have been revising their forecasts downwards.
And just last week Geest announced the opening of International Produce a new business to Asda by combining the import activity of Geest’s English Village Salads and the business of Thames Fruit Ltd.
Geest contributed cash of £76,000 to the initial equity.
Based on plans for the first six months of trading, IP is expected to report an estimated annualised profit before tax of £1.7m.
EVS’s profit will reduce as a result of the transfer of business to IP but the expected overall impact of the transaction on Geest in 2004 is a small increase in earnings. As a result of the revised supply contract with Asda, Geest will now account for both IP and EVS - for the supply of produce - as if they were agents.
In the second half of 2004, Geest expects to record aggregate sales of about £18.5m for EVS and IP under this new accounting treatment. Had Geest reported EVS’s sales in this way in 2003, they would have been reduced from approximately £127m to £16m. Geest has granted Asda an option over its shares in IP in consideration for a payment of £5.3m in cash over the next five years. After that period, if the option were exercised, those shares would be valued at net asset value and the consideration for the shares would be paid in cash on completion.
Although net asset value is capped at £80 million, if this transaction were to occur, the expected net asset value is likely to be far lower.
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