Straight axes jobs at factory in bid to cut down on costs

The Leeds-based wheelie bin and kerbside box-maker said it has taken longer than expected to “align manufacturing capability... with core sales demand.”

But Straight, which booked pre-tax losses of £0.8m in 2011, insisted it is now trading profitably.

Chief executive Jonathan Straight said the group has axed 40 per cent of its manufacturing staff at the factory in Hull – 45 jobs – and may cut more.

“The challenge is to be able to make a decent margin and the cost base has been too high,” he said. “We’ve come back to an underlying level of profit in the last few months but because it’s taken a little longer than anticipated to get all the changes through it’s likely to impact on the figure the broker has in the market.”

House broker Cenkos had expected pre-tax profits of £0.9m for 2012.

Straight started manufacturing in March 2010 when it bought the bulk of waste company Helesi’s UK business for £1.65m in cash, after Helesi ceased manufacturing at its Bradford plant in September 2009.

In August 2010 it bought Hull-based injection moulding firm Powell Plastics, which earned the bulk of its £10m annual revenues making plastic recycling and waste containers for Straight.

Its strategy, dubbed ‘vertical integration’, means rather than outsourcing manufacturing, Straight now makes the bulk of its products. However, the Powell deal has proved problematic.

Mr Straight said Powell was “in a bit of a state when we took it over”. It was due to pay up to £2.9m for the company, but Mr Straight said it has so far handed over just £910,000.

“It’s fair to say it’s caused us no end of problems, but it was definitely the right thing to do,” he said. “We had anticipated shedding a lot of labour. There remains more we can do but we had a hell of a battle with the union.”

It now employs about 60 staff in Hull, where it makes products including wheelie bins and DIY goods.

Straight said sales in the first six months of the year have increased 11 per cent to £16.7m. Sales have been boosted by “strong performance” in the garden and hardware sector, it said, and further cost cuts and innovations should boost its profitability as the year goes on.

Net debt has also fallen to £3.2m from £4.1m at the end of December.

Straight has endured a rocky year on the stock market, including two profits warnings last year. In December, 20 per cent was wiped from its share price when it revealed weak sales and problems at its factory. Last July the group was also forced to warn over profits because of soaring plastics prices and the performance of its factory.

Shares in the company fell 2.5p to close at 31.5p, valuing it at about £4m.