Source: Walkers Shortbread

Walkers Shortbread saw sales rise 2.7% last year as exports were buoyed by the weaker pound

The boss of Scottish brand Walkers Shortbread has warned of the impact Brexit and US tariffs on British goods could have on its exports-reliant business.

MD Jim Walker told The Grocer that fear the US will impose a 25% tariff of British biscuits from the end of the month creates “a lot of negativity” and is “very concerning”.

“This huge uncertainty makes it very difficult to plan,” Walker said. “We are quite the resilient business but between Brexit and tariffs it’s going to be tough, and we will just have to make changes accordingly.”

Over the past two years, he added, the company had already been negatively affected by Brexit – experiencing market pressures and labour shortages.

“Brexit has already done some damage. We are running substantially short of the workforce that we should be employing just now,” he explained.

“We are a very seasonal business, and this makes running the factories very challenging.”

Walker’s comments were made as newly-filed accounts for the business showed a recovered performance on the prior year.

Annual sales rose 2.7% to £147m for the year to December 2018, with exports rising 3% and now accounting for 47% of the total.

A weaker pound coupled with the improving economic outlook in many of the markets in which it trades contributed to the export increase.

The business said it remained “optimistic” about its future growth prospects in export markets – with the exception of the EU, as “the way Brexit will pan out in Europe” will substantially affect the company’s performance, Walker added.

Meanwhile, operating margins came in at 4.9% last year, an improvement from 3.6% in 2017 but far from the 9.2% seen in 2016, as the business was hit by further increases in the wholesale price of butter – in part recovered through higher consumer prices.

This was “substantially short” of what was considered “acceptable” by the business, Walker added.

“We have a made a slight recovery, but we are still a long way behind where we have been traditionally. A small movement in butter makes a big difference to us.”

Despite the business remaining in a “robust” state, operating profits of £7.2m – improved from £5.1m in 2017 – remained “significantly lower than they were historically”, he added.

Nonetheless, pre-tax profits increased 37% to £7m.

Looking ahead, the current year is expected to be as challenging as 2018 but the business felt “confident on the strength of the brand”.

The “current lack of clarity regarding Brexit”, however, meant the firm could take “nothing for granted”, Walker added.