Straight vows to make a return to profit

RECYCLING group Straight is confident of a return to profit this year after what it described as a “tough” 2011.

The Leeds-based company faced a number of hurdles last year including rocketing plastics prices, integration costs and a lack of council spending.

These led to a pre-tax loss of £800,000 for the year to December 31, down from a £1.5m profit the year before.

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Straight’s chief executive Jonathan Straight said the group made a loss after tax of £243,000 and analysts have pencilled in a £900,000 post-tax profit in 2012.

The group said this was partly due to a more cautious approach to contracts involving a high degree of risk and the timing of some high value municipal projects.

Mr Straight said council spending fell in the second half of 2011.

Straight, which makes recycling containers such as wheelie bins, kerbside boxes and food waste caddies for councils, said revenues fell nine per cent to £28m in 2011.

“It is fair to say that 2011 has been a tough year for us with a number of key issues to deal with,” said Mr Straight.

He said that despite the problems the group’s market share has remained intact.

“We are now some way into 2012 and we are beginning to see the results of the actions we have taken. We are optimistic for the rest of the year and beyond. 2011 was a turnaround year. 2012 will begin to show results of that work. It’s tough but we’re winning,” he added.

Last year Straight consolidated its three main distribution sites into one and introduced a blow moulding capability which it said will be of key importance for the future.

It has also outsourced production of DIY products.

“These products were very labour intensive and complex to produce. The outsourcing will reduce energy consumption and labour.”

Direct labour costs will fall by 40 per cent following a change in the shift pattern at the group’s Hull factory next month.

This will involve the loss of 18 out of 100 jobs at the site.

In municipal markets sales fell to £17.5m from £22.0m although market share was maintained. This was partially offset by an increase in non-municipal business from £6.5m to £7.8m.

Non-municipal sales make up around 30 per cent of overall turnover and Mr Straight said he would ideally like this figure to be 40 per cent in order to insulate the group against any downturn in public spending.

Straight said the retail business continued its strong growth with revenue rising 23 per cent to £2.7m.

The company said the business has benefited from a new management team.

Two thirds of group sales were from products manufactured in-house in 2011 and this figure is expected to rise in 2012.

The Hull site now serves as the main distribution centre for the group, saving on distribution costs.

Straight said the changes made at the site, whilst challenging and taking longer than anticipated, have put the group on a stable footing for the future.

UK garden and hardware sales grew by 96 per cent to £5.5m, driven by the benefits of the Dyro Holdings acquisition and increased consumer spending on these product groups. The recent drought has boosted sales of water butts.

Overseas sales grew by 30 per cent to £1.3m and the group’s products are now available in 37 countries.

“We believe that there is considerable potential in overseas markets and we will continue to pursue opportunities outside of the UK,” said Mr Straight.

In view of the challenges faced over the past year and the substantial cash investments made, Straight said it is not recommending the payment of a dividend. This position will be kept under review.

The company said both sales and order intake for the first four months of 2012 are higher than in 2011.

While the group is interested in both organic growth and strategic acquisitions, it said there were no suitable targets in 2011.