Thomas Tunnock, the Scottish manufacturer of tea cakes and caramel wafers, enjoyed a strong rebound in profits in its last financial year as it worked with trade unions to control costs and its sales increased.

Accounts which became available yesterday from Companies House reveal that family-owned Tunnock arrested a two-year slide in its earnings with a 44% jump in pre-tax profits to £1.35m in the 12 months to February 23.

Bruce Reidford, company secretary at Tunnock, signalled to The Herald that this improved level of profit had been maintained in the current financial year to February 2009.

Asked how profit in the current financial year would compare with that in the 12 months to last February, he replied: "It is fairly flat. There is no great change We are holding our own on that. It is what we expected and what we forecast - there would be no great change there."

Lanarkshire-based Tunnock, which employs about 570 people and makes all its cakes and biscuits at its Uddingston base, had suffered a slide in pre-tax profits from more than £2m in the 12 months to February 2005 to £1.6m in the subsequent financial year. Profits had then tumbled to £937,035 in the financial year to February 2007.

Reidford said yesterday that management "sat down with the unions" in 2007, after this sharp slide in profits. He highlighted the change in working practices arising from these and subsequent discussions as a key factor which drove the rebound in earnings in the year to February.

His glowing comments about union cooperation yesterday portray a remarkable turnaround in industrial relations from November 2006, when Tunnock's workers took strike action over pay.

Reidford told The Herald yesterday: "We worked hard with the unions controlling our overheads. We have been successful on that. We had a hard 2007, as you can see from the profit. We took that on board."

Reidford noted that the main trade unions within Tunnock were now all part of Unite.

Praising the unions for helping with the changes in working practices which had kept a lid on costs, he added: "They have to be commended. We have always had good relationships with them. Like any organisation, you always have hiccups. They (the unions) have taken that on board (the need to control costs) and they have played their part."

Looking ahead, Reidford highlighted "tough times" ahead for all cake and biscuit manufacturers. "The forecasts on commodity prices and harvests over the next few months are fairly bleak," he said, noting in particular the price of cocoa butter and cocoa liquor.

Reidford added: "Looking forward in the next few months, we will have to see what the commodity prices bring. We are no different from any other biscuit or cake manufacturer."

Commodities, for which Tunnock pays in sterling, are priced in dollars on world markets. The pound has tumbled against the US currency from levels above $2 as recently as July this year to six-and-a-half-year lows below $1.44, making a given dollar price for a commodity much more expensive in sterling terms.

However, highlighting Tunnock's resilience, Reidford declared: "I think what we have is a superb product range (and) iconic brand - that is our strength."

He also flagged a leap in Tunnock's electricity and gas costs.

Noting its electricity costs had doubled in the past year, he declared: "That is a heavy hit to take. It just drops to the bottom line. If it takes so long to cook something, you have got to do it. You can't cut back on the time."

However, he made it plain he had no problem with prices being charged by the company's energy suppliers, in spite of general con- troversy over the speed with which electricity and gas companies are passing on recent falls in wholesale prices.

Reidford said: "We entered into a contract as most companies would Both sides entered (into it) in good faith. I can't complain in that respect."

As the UK economy tumbles into recession, Reidford emphasised the importance of Tunnock's "prudence". He said: "The company is in no danger. You hear a lot of press speculation about various companies Our policy is one of prudence. We just take it slowly but surely. We have not gone in for any huge expansion.

"We have always had a prudent policy in trying to ensure the future of the company. It is family-owned, family-controlled."

Reidford added: "We are prudent. We are risk-averse. We have a good, steady customer base, a well-tried product, a well-established product range that has served us well. We are really not going to deviate from that."

Tunnock, which makes between 10 and 12 million biscuits and cakes each week, is still 100% family-owned. It is led by Boyd Tunnock, who is in his late seventies. The rest of the board comprises Boyd Tunnock's daughters and a son-in-law.

Reidford noted Boyd Tunnock shared his birthday with National Bard Robert Burns but quipped that his boss was "a wee bit younger than Rabbie".

Tunnock's turnover rose from £30.2m to £31.8m in the year to February 23.

Sales in the UK increased from £26.4m to £27.3m. Export sales rose from £3.83m to £4.48m.

Reidford cited supermarket chains Tesco, Asda and Sainsbury as among Tunnock's big customers in the UK, and emphasised it did not manufacture retailers' own-label products.

He said Tunnock had not been hit by the collapse of variety retailer Woolworths.

"They (Woolworths) were not a customer in that sense," added Reidford.

He said Tunnock sold to about 30 countries, high- lighting the Middle East and Taiwan as the company's main export destinations.

Reidford said overall sales of both of the company's flagship products, the tea cake and caramel wafer, had been increasing.

He confessed to being surprised by the speed and extent of the UK economic downturn, but added: "Hopefully, people will take consolation in the credit crunch by enjoying a Tunnock's caramel wafer or a Tunnock's tea cake Sales are holding up."

The company gave £127,336, more than 10% of its £1.24m of after-tax profits, to charity in the year to February 23. It gave £146,002 in the prior financial year.

Underlining the company's commitment to its community, Reidford emphasised the significant amount of time devoted by staff to charitable causes.

Overall boardroom pay rose to £284,943 in the 12 months to February 23, from £268,807 in the prior 12 months. The remuneration of the highest- paid director rose from £96,368 to £137,721, largely because of a £40,000 company pension contribution which did not feature in the prior year.

During the year to February 23, the company paid out dividends totalling £120,020. This was the same amount as that distributed in the prior 12 months.

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