HP Bulmer, the struggling UK-based cider group, is facing an extremely uncertain future following the announcement yesterday that it was likely to face a £14.5 million (€22.8m) shortfall in pre-tax profits for 2003.
A variety of factors have contributed to the disastrous financial performance. Then company said in a statement that the decision to reduce its stock levels in the UK and abroad would cut £4.1 million off profits, while a disappointing performance from new products would shave a further £2.0 million off the figure.
While both those factors are likely to have an impact only on the 2003 results, there were a number of others which could continue to take their toll on profits beyond the current fiscal year, the group said.
These include lower expectations for profitability in the home UK market (which will take £4.6 million off profits this year), continued poor results in international markets (£1.8 million this year) and an increase in pension costs (£2.0 million).
A further £4.7 million in one-off charges are expected for the write off of investment in new product development and an as yet unquantified amount for the impairment of goodwill on Bulmer's US acquisitions, which currently stands at £22 million.
With the future clearly likely to be an uphill struggle for Bulmer, to put it mildly, the company has also announced that it is to begin discussions with its banks and lenders to discuss the situation, and in particular the breaches of covenant - the conditions, related to financial performance, which Bulmer must meet to ensure its loans - entailed by the shortfall in profits.
Earlier this year, Bulmer announced £3.3 million in unidentified promotional costs relating to the take home business for its leading brands, which include Scrumpy Jack and Strongbow, leading to a sharp drop in the company's already beleaguered share price and the departure of several top managers.