young's seafood malcolm the cat

Young’s Seafood is eyeing a number of acquisitions to help arrest a decline in sales and fill the £100m hole caused by the loss of a major contract with Sainsbury’s.

The UK group, which is now a standalone business after Nomad paid £500m for the European arm of Findus last year, is in talks with more than one competitor as it looks to consolidate the market, CEO Pete Ward told The Grocer in an exclusive interview.

It comes as the latest accounts revealed operating profits rose 6% in the year to 30 September 2015 despite a 1.3% fall in revenues to £587.9m as the business kept a close control over costs. EBITDA was up 2% to £37.4m, but it was a big slowdown from the 15% jump a year ago. Sales are expected to plunge to about £500m in the current financial year as the impact of the Sainsbury’s salmon processing contract passing to Marine Harvest takes effect.

Ward said Young’s had completed a strategic review, backed by PE owners Lion Capital, Highbridge Capital Management and Sankaty Advisors, to rebuild the top line, with funds in place to embark on the acquisition trail.

“We’re looking at significant consolidation,” he added. “This includes businesses of smaller niche scale to give us capabilities or access to markets we under-trade in - and also larger-scale players with potential for significant synergies. Those discussions are in play and I would expect one this calendar year.”

Young’s has downsized the Fraserburgh processing site in Scotland to mitigate the profit impact of losing the Sainsbury’s business in June, with 600 staff affected. However, it has kept the facility open to avoid losing long-term capacity and capability. It also exited the smaller Spey Valley site after ambitions to buy the facility and launch a smokehouse brand were thwarted by the landlord refusing to sell, Ward added.

“The profit impact [of the Sainsbury’s contract] had we done nothing would have been significant, although we would still be a profitable business. But what we have done with the reorganisation and downsizing of the Fraserburgh operation, through investment in efficiencies at Grimsby and other cost controls, is mitigating some of that profit impact. But it is fair to say our profits in 2016 will be less than they were in 2015 – although we will still be at industry average, if not a little bit better.”

Young’s has also picked up new tenders since losing the business and has more in the pipline.

“We have got lots of activity with existing and new customers and have already secured two or three significant contracts,” Ward said.

One of these is understood to include processing all of Aldi’s chilled salmon business, currently handled by Marine Harvest, and a large share of the discounter’s smoked salmon.

Ward added Young’s was also in significant tenders for other contracts, looking to take business from its rivals.

“We’re not a damaged business which has its head in its hands. We’re upbeat; we’re starting to win in the commercial market place, we have exciting innovations coming, we continually reorganise and we have supportive owners who want us to go out there and consolidate and acquire other businesses. It is very bright and rosy in Grimsby.”

Read the full Q&A with Pete Ward here.