Geest PLC Annual Report & Accounts 2002reports.investis.com/reports/get_ar_2002/downloads/... · 2003-06-20 · Geest PLC Annual Report & Accounts 2002 2 What we do. We produce and

Geest PLCAnnual Report & Accounts 2002


To become the best fresh prepared foodand produce company wherever we operate.

We shall achieve this by excelling in service,quality,value and innovation to the delightof our customers.

We will grow in any geographical marketwhere customer partnership and consumerdemand can be developed.

£47mcapital expenditure

We launched nearly

600 products

+15%

sales growth

+10%

dividend growth

+10%

earnings per share

Our vision

Our achievementsin 2002

“A fiveminuteintro...

1

Preliminary results 13 March 2003

Annual General Meeting 22 May 2003

Close period 11 July to 10 Sept 2003

(inclusive)

Interim results 11 Sept 2003

Dividend dates

2002 Final record date 30 May 2003

Final payment date 30 June 2003

2003 Interim record date 28 Nov 2003

Interim payment date 31 Dec 2003

Executive Directors

Gareth Voyle (43) Chief Executive Officer

Mark Pullen (52) Group Finance Director

Jane Scriven (43) Managing Director,

Continental Europe

and Foodservice

Independent non-executive Directors

Sir John Banham (62) Chairman

Bob Davies (54)

Raymond Destin (62)

David Wallis (55)

For biographies please turn to page 30.

The Geest Board

Shareholdercalendar 2003

Our businessstreams

Our business activity– the last 15 years

Year Acquisitions/major developments

1988 Katie’s Kitchen, Ready meals factory opened

1989 Bourne Salads

1990 The Pasta Company

1991 Kent Salads

1993 Caledonian Foods, The Bakery opened, New pasta factory opened,

Soups and sauces factory opened, Dips and dressings factory opened

1994 Abbeyvale Foods

1995 Spring Valley Foods opened (South Africa)

1996 Delicatessen factory opened

1997 Vaco Geel (Belgium)

New Bourne Salads factory opened, Saxon Valley Foods opened,

Geest Tilbrook opened

1998 Bourne Stir Fry opened

1999 Vaco Herselt opened, Cinquième Saison, The Fresh Snack Company

opened, Lincs Cuisine (Sutton Bridge) opened, Yorkshire Fresh

Salads opened

2000 Alresford Salads, Isleport Foods, Wingland Foods opened,

Vaco Olen opened

2001 Mariner Foods, Normanby Foods opened, Tilmanstone Salads opened

2002 SBLP (France)

2003 Crudi (France and Spain)

Sales £m Growth %

UK fresh prepared foods 582 +8.5

Continental European fresh prepared foods 48 +26

Whole head produce 128 +51


2

What we do.

We produce and market fresh prepared foods and

market fresh produce.

What we mean by fresh.

Products which have a short shelf-life and need to be

kept refrigerated.

Our products.

We make products,developed specifically for our

customers – food retailers and foodservice providers.

As such,we make and market products for some of

the largest brands in Europe.

The number of products we make.

We are never quite sure.Our portfolio changes constantly

as we innovate and improve our ranges.We have at any

one time around 2,000 products.We launched nearly

600 new products in 2002, for example.

Where we prepare them.

We have around 30 business units and over 30

manufacturing facilities.The majority of sites

are in the UK with overseas sites in Belgium,France,

Spain and South Africa.

Where our main facilities are located.

See the adjacent map,or look on our website

www.geest.co.uk

Leafy salads Ready meals

Prepared fruitPrepared vegetables Stir fry Desserts

Convenien

1 Spalding

2 Bourne

3 Sutton Bridge

4 Holbeach

5 Gosberton

6 Eythorne

7 Barton-on-Humber

8 Scunthorpe

9 Grimsby

10 Harrow

11 Milton Keynes

12 Biggleswade

13 Bo’ness

14 Selby

15 Highbridge

16 Alresford

17 Birmingham

18 Southampton

19 Manchester

20 Bapsfontein (South Africa)

21 Miribel (France)

22 Montauban (France)

23 St.Pol de Léon (France)

24 Geel,Olen,Herselt (Belgium)

25 Perpignan (France)

26 Murcia (Spain)

...to theworld ofGeest.”

26

20

23

21

2225

24

123

4

5

6

78 9

10

11 12

13

14

15

16

17

18

19

3

Dips and dressings Foodservice Flowers Whole head salads

nce salads Pizza Pasta Soups Sauces Bread

Fresh prepared foods market forecast 2002-2006 £ billions

2002

2003

2004

2005

2006

0 2 4 6 8 10

Source: Geest estimates

Product area Business unit/facility Map

no.

Ready meals Lincs. Cuisine (Spalding) 1

Lincs. Cuisine (Sutton Bridge) 3

Saxon Valley 12

Geest Tilbrook 11

Mariner Foods 9

Vaco 24

Caledonian Produce 13

Leafy salads Alresford Salads 16

Bourne Salads 2

Tilmanstone Salads 6

Yorkshire Fresh Salads 14

Wingland Foods 3

Cinquième Saison 21, 22, 23

Crudi 25,26

Convenience salads Spalding Salads 1

Lincolnshire Salads 1

Delicatessen 1

Wingland Foods 3

Pizza Katie’s Kitchen 10

The Fresh Snack Company 5

Vaco Olen 24

Pasta The Pasta Company 7

Normanby Foods 8

Product area Business unit/facility Map

no.

Soups Lincs. Cuisine (Spalding) 1

Saxon Valley 12

Mariner Foods 9

Vaco Olen 24

Sauces Lincs. Cuisine (Spalding) 1

Mariner Foods 9

Bread The Bakery 7

Prepared vegetables Caledonian Produce 13

Prepared fruit Spring Valley Foods 20

Crudi 25

Stir fry Bourne Stir Fry 2

Desserts Isleport Foods 15

Dips and dressings Dips and dressings 1

Vaco Herselt 24

Retail flowers Geest Flowers (Multiples) 1

Foodservice Fresh Menu Solutions @ Geest 1

Whole head English Village Salads 14

produce Geest QV (Joint venture) 4

Geest Flowers (Wholesale) 17, 18, 19

It is predicted that the UK freshprepared foods market will grow by 40% over the next four years.


4

Geest talks

Market report 6

The UK 6

convenience 9

health 12

pleasure 13

The Netherlands 16

France 17

5

“There are few new consumer trends in our markets – the old ones continue. We hope this will reassure rather thanalarm you!”

“Our market...”

Market report

6


In general,we are not increasing the amount of food we

eat,but we are eating differently.Fresh prepared foods

is a beneficiary of these changes in consumption and

the report that follows helps to illustrate why this is the

case. If fresh prepared foods increased to only 15% of

the total food market (and we believe there is no reason

why this could not be much higher) an extra £4 billion

would be spent in this area.

This is the reason why we believe there is still a huge

opportunity for us if we remain focused in this part of

the market.We hope that after reading this report you

will agree with us.For those of you who are familiar with

the consumer trends in our markets,you will discover

that there are few new trends – the old ones continue.

We hope that this will reassure rather than alarm you!

The UK

THE UK FOOD MARKET

The total retail market grew by +4.9% in 2002.Total

food within this market grew at +5.2% and total non-

food at +4.3%.Annual growth by key sector is

illustrated overleaf.

OVERVIEW

At Geest,we operate mainly in a very small part of the food market – fresh prepared

foods.We do not make frozen or long life products. If we take fresh prepared foods –

the area in which most of our businesses operate – we estimate this to represent only

10% of the total value of the food market. In terms of servings (by volume), this probably

accounts for less than 5% of all food eaten.We believe that the potential to increase

this is considerable.

1. People are less likely to cook if they eat on their own.One and two

person households account for 64% of all households and the single

person household will continue to grow.78% of all meals have only

one or two people present and this number is increasing.

Lack of inclination (see page 9).

2. The number of full-time working females is due to continue

to increase over the next five years. The changing role

of women (see page 10).

3. Fresh prepared foods are starting to have a universal appeal and

the next generation are already fans. Fresh prepared foods are

broadening their appeal (see page 8).

4. Less than 1% of all meals served are ready meals – there is huge

potential to increase the number of times people buy and to

encourage eating outside evening mealtimes. How often

do people buy fresh prepared foods? (see page 7).

5. The amount of time spent on food preparation continues to fall.

13 minutes is the average amount of time spent on ‘hands-on’meal

preparation at home. (34% of all meals take less than five minutes

to prepare.) Demand for convenience (see page 11).

6. Using Taylor Nelson Sofrès figures,we predict that consumers will

spend an additional £3.6 billion on fresh prepared foods over the

next five years. Fresh prepared foods (see page 7).

7. There were over 400 convenience stores, run by the large

supermarket chains in 2002.This number is expected to increase.

UK retailing (see page 14).

8. Celebrity chefs raise awareness but not the game.According to

Mintel,“basic culinary skills have been lost among some younger

generations,engendering a ‘can’t cook won’t cook’cycle which

will be very difficult to break.” More discerning,more

demanding (see page 13).

Eight reasons why we believe the fresh prepared foods market will continue to grow

Fresh prepared foods growth outperforms

total food growth

Annual UK retail growth by key sector 2002 v 2001 % growth

1 Fresh prepared foods

2 Frozen prepared foods

3 Total non-food

4 Total food

5 Food and non-food

0 5 10 15

Source:Taylor Nelson Sofrès,fifty two weeks ended 5 January 2003,Geest estimates

FRESH PREPARED FOODS

Within the food market, the growth in fresh prepared

foods at 10% was nearly twice as strong as the growth

for all retail food and frozen prepared foods.

To clarify the definition, fresh prepared foods have had

sufficient preparation,before being bought, for consumers

either to eat the products immediately or for them to

facilitate meal preparation considerably.All products

in this sector are perishable,have a short shelf life and

require refrigeration to keep fresh.Geest estimates that

the total fresh prepared foods market is worth around

£6.9 billion at retail sales value.The sectors in which

Geest operates are worth approximately £3.9 billion,

over half of the fresh prepared foods market.

Using Taylor Nelson Sofrès data,we predict that

£11 billion of cash growth will be generated by the UK

food retailers between 2001 and 2006.Of this,78% will

come from fresh foods and 33% from fresh prepared

foods.This equates to an additional £3.6 billion of

revenue for the UK retailers in fresh prepared foods.

Fresh prepared foods

% market growth

Key sectors of the market in which we operate £m RSV 2002 v 2001

Ready meals (pre-packed and serve-over) 1,326 +13

Chilled desserts and cake 632 +7

Leaf/side salads 431 +11

Pizza (pre-packed and serve-over) 316 +6

Convenience salads 315 +11

Prepared vegetables 155 +9

Pasta 111 +17

Dips 109 +7

Chilled accompaniment bread 95 +18

Soup 83 +14

Sauce 77 +4

Prepared fruit 61 +21

Stir fry 58 +2

Source:Geest estimates/Williams de Broë/Taylor Nelson Sofrès

% market growth

Other sectors of the fresh prepared food market £m RSV 2002 v 2001

Yoghurts and fromage frais 1,010 +7

Sandwiches 588 +8

Hot-eating pastry products 463 +9

Fruit juice 305 +8

Cold-eating pastry products 195 +4

Quiche and flan 166 +12

Party food 69 +14

Source:Geest estimates/Williams de Broë/Taylor Nelson Sofrès

How often do people buy fresh prepared foods?

The number of people buying our products remains

relatively low.Only one household in five bought a chilled

pizza in an average month last year,only one in 14 a fresh

sauce and only one in 33 households a fresh fruit salad.

There is the opportunity to increase the number of

households buying these products.

In other areas – mainly in the larger,more established

market sectors – there is quite a high number of

households buying our types of products.Over 80% of

households bought a ready meal last year, for example

(although only half bought regularly each month).

However, the average household only bought 15 ready

meals throughout the whole year. In this instance there

is the potential to increase the times ready meals are

bought.Overall, ready meals are used in less than 1%

of all meal occasions and mainly for an evening meal.

We believe there is potential for ready meals to be used

more often and at different times of the day.Some ready

meals, for example, can now be found alongside

sandwiches – a hot lunch alternative for those with

microwaves in the office.

If the households currently buying ready meals bought

just one more ready meal once in 2003, the market

would increase by £60 million.The impact of small

changes in buying behaviour on the fresh prepared

foods market is significant and demonstrates further

the potential for growth in these markets.

7

The number of households buying fresh prepared foods

Fresh prepared foods % of households buying these products

Annually Monthly

Ready meals 82 41

Side/convenience salads 73 34

Leafy salads 67 26

Pizza 60 19

Chilled accompaniment bread 49 16

Prepared vegetables 48 14

Dips 43 22

Stir fry 37 6

Pasta 30 7

Sauce 28 7

Soup 20 6

Prepared fruit 16 3

Source:Taylor Nelson Sofrès fifty two weekly and average four weekly penetration,week ended

5 January 2003

Fresh prepared foods are broadening their appeal

At the outset, the main consumers of fresh prepared

foods tended to be more affluent, in their late twenties/

early thirties and based in urban areas.This section of

the population is still a strong consumer of these foods.

However, there are other sectors of the population who

are consuming more and more fresh prepared foods.For

example,many couples whose children have left home

are turning to fresh prepared foods and there is a loyal

following of 45-64 year olds.These couples often pursue

their own hobbies and may not be eating set meals,or,

have decided that they have spent too much of their life

cooking and are looking for simpler options! At the

younger end, the highest growth rate in consumption

of fresh prepared foods is among children,although

this is from a very small base.Fresh prepared foods are

becoming part of the teatime menu,often with children

reheating the meals themselves (seven to eight year

olds are adept at using microwaves and children ten and

above are au fait with reheating in ovens).This is a new

generation of consumer, likely to continue to consume

fresh prepared foods in later life.

Growth amongst the younger generation

Increase in consumption of prepared meals 2002 v 1996 % growth

Children aged 6-10 +204



Males aged 35-44 +139

Females aged 35-44 +130

Source:Taylor Nelson Sofrès,Family Food Panel,2002

THE UK CONSUMER

As we have reported in previous market reports, the

key impetus behind the growth of fresh prepared foods

is consumer demand which reflects changes in,and

influences from,demographic, lifestyle and economic

trends.As consumers become used to the range of

fresh prepared foods on offer so they are increasingly

influenced by three key factors (coined ‘food mega-

trends’by Datamonitor);Convenience,Health and

Pleasure.These trends,demonstrated pictorially

below,continue to be influential in shaping the

fresh prepared foods markets.

8


The time factor (Convenience)• More individual (portion) control

• More control over time and quality of preparation

The hypochondriac factor (Health)• More information

• More evidence for claims

• More control through ‘food plus’,‘food minus’

and ‘natural’alternatives

The sensory experience (Pleasure)• More fun and entertaining

• More ethnic and exotic tastes

• More premium and indulgent

1 Efficient nutritionFast but nutritious and healthy

2 Guilt-free indulgenceLow and light without compromising on

taste and texture

3 Convenience plusConvenience with ‘from scratch’quality

and entertainment valueSource:Datamonitor

The food mega-trends: Convenience, Health and Pleasure

Health Convenience

Pleasure

1

2 3

convenience

9

LACK OF INCLINATION

You are likely to be less inclined to prepare a meal

from scratch if you are cooking for yourself or for only

a small number of people.Not only do you invest a

disproportionately high amount of time per serving but

also you are unlikely to find the ingredients in exactly

the quantities you need – this may make the meal

expensive,especially if some ingredients are wasted.

In the UK, the one person household continues to gain

in importance and the trend is for more and more people

to eat on their own.There is, therefore,a growing section

of the population unwilling to cook for themselves the

whole time.

One person households continue to rise

Number of one person households 1991-2007 millions

1991

1997

1998

1999

2000

2001

2002

2007

0 1 2 3 4 5 6 7 8

Source:British Lifestyles Special Report,Mintel,January 2003

One person households set to grow more quickly

Expected change in type of UK households 2002-2007 %

1 1.Four or more person households

2 2.Three person households

3 3.Two person households

4 4.One person households

5 5.Total households

0 2 4 6 8

Source:British Lifestyles Special Report,Mintel, January 2003

Four out of five meals are with one or two persons

Number of persons present at meals %


1 One person 37

2 Two persons 40

3 Three or more persons 23

3

1

2

Consumers want more convenience.Generally, they wish to spend less time when it

comes to planning, shopping for and preparing meals.This may be due to lack of time,

knowledge or inclination (or sometimes a combination of all three).Often, fresh

prepared foods can provide a full or part solution. In this section,we examine some

factors behind the increasing demand for convenience in our society.

Some facts and figures

• The number of households in the UK continues to increase and the

average size decrease,although at a slower rate.From 1997 to 2007,

the number of households in the UK will have increased by nearly

5% and the total population by just under 3%.

• The average household size, currently estimated at 2.34 persons

per household in 2002, is forecast to decrease further over the

next five years.

• One person households make up 29% of all households with

two person households accounting for around another 35%.

• One person households are forecast to rise the most quickly over the

next five years (2002-2007).This is one of the drivers behind

the government’s £22 billion housing project.

• In areas of London,more than 50% of households are one person

households.

• Families are becoming smaller.The average number of children per

woman of childbearing age is 1.64, the lowest since records began

in 1924.

• 78% of all meals have only one or two people present and meals

with three or more people are in decline.

• The one person meal is increasing and Taylor Nelson Sofrès predicts

that if this level of growth continues,eating alone will be the norm

by the end of 2010 and almost a certainty in 50 years.

• Even when people sit down together for a meal,different recipes

may be served owing to individual dietary requirements or

preferences – a meat-free meal,or a healthier option, for example.

LACK OF TIME

Technology has changed the way we live.Work and

domestic tasks can now be done on the move and at

any time,across any geographical boundary and time

zone.Consequently, there is often less routine in our

lives and an expectation that things should happen

more quickly,often on the move.Women, in particular,

find themselves under increasing time pressure as they

try to fulfil their roles in the workplace and at home.

Across society we are looking for time saving solutions.

Eating habits mirror this and have become more

fragmented,more mobile and there is demand for

more frequent and quicker solutions. In many

instances, fresh prepared foods can play a role in

providing solutions and choice.

Technology

Technology has blurred geographical and time boundaries

and radically changed people’s expectations of what

can be achieved therein.The 24 hour society is already

available to us – grocery shopping can be done physically

and on-line shopping ‘virtually’night or day and there

is an increase in home delivery.Whilst there is still

scepticism about the level of confidence and security

surrounding the use of the Internet, the propensity of

the UK population to adopt this, and other technology,

confirms its inexorable rise.

The effect of these time-saving devices is that people also

desire and expect shorter waiting times and quicker and

flexible solutions in all aspects of their lives. Ironically,

this often leads to further time pressure as people try

to cram more things into their time (see ‘pleasure’on

page 13).

• Nearly 54% of the UK are estimated to own

a home computer.

• 45% of the UK population have access to

the Internet.

• There are over 1 million broadband

connections,which facilitate

high speed Internet access.

• 65% of the population have access to a

mobile phone and nearly 47 million people

in the UK use one. (This is expected to

increase to 50 million).

Demise of the set meal

People are eating fewer main meals and compensating

by snacking more.Moreover, the time when people

decide to eat their main meal of the day is likely to

shift according to the time pressures of the day rather

than stay fixed at a specific time.Working 9 ‘til 5 is a

cliché of the past for many people.Part-time employment

is increasing and jobs are no longer necessarily at one

fixed place of work or at set times.Flexible working

hours, job-sharing schemes,home working and working

on the move (conference calls on a mobile phone, for

example) mean that the working day may start or finish

at different times for different people.People often fit

eating around their work or tasks rather than work

around set eating times.

According to Datamonitor,eating can be a hindrance,

necessity or a special occasion and “people pick the

meal that fits the need”,with people often skipping

meals if need be.There is a demand for smaller,convenient

meals,which can be eaten throughout the day and more

varied nutritional snacks.

On the move

In addition,people are eating in different places.As people

look for value for time as well as value for money,eating,

drinking and grooming on the move are becoming more

common.9% of all journeys made in the UK include

eating on the move and the ability to purchase food

items before or during journeys in packaging fit for

purpose may increase this number further.

The changing role of women

Women continue to become increasingly important

in the workplace.Nonetheless,women still spend on

average twice as long as men shopping for food and

preparing and cooking meals.More women have children

later and are returning to work earlier,often to established

careers,and this means that they are under increasing

time pressure as they try to juggle work and home tasks.

The combination of increasing time pressure at home

and also greater disposable income means that they are

more likely to pay to save time,be it sub-contracting out

domestic tasks (ironing,gardening,housework),buying

time-saving devices or solutions for quicker meals.

• Women represented an estimated 45% of

the working population in 2002.

• The number of women in employment is

expected to grow by 2% between 2002 and

2007,over twice the rate of growth of men

in employment.

• More significantly, the number of women in

full-time employment is expected to increase

by 2.6% whereas the number of men in full-

time employment will remain static.

• Women are having children later – the average

age for females to have their first child is 27.1.

• 69% of mothers returned to full-time or

part-time work in 2001 and over half of them

returned when the child was less than five

years of age.

10


Time-saving devices?

Women are having children later

Number of births in England and Wales by age of mother 1981-2001 thousands

0 50 100 150 200 250 300

Under 20 20-24 25-29

30-34 35-39 40+


LACK OF KNOWLEDGE

The nation’s culinary skills are in decline.The high level

of working women means there is less time to cook

and therefore less time to teach the next generation.

According to Mintel,“basic culinary skills have been

lost among some younger generations,engendering

a ‘can’t cook won’t cook’cycle,which will be very

difficult to break.”

In addition, roles within the household are changing.

The days of the traditional household (male working

full-time and female not working) are long gone.This

type of household now makes up less than 10% of all

households and has been in decline for the last decade.

The rate of divorce has remained stable (estimated at

53% of all marriages in 2002). However, this masks a

decline in the number of marriages of over 20% in the

last ten years.With second and third marriages not

uncommon, the family unit has changed.People may

be setting up homes for a second or third time and the

family unit is likely to be flexible rather than fixed,

possibly with men – maybe for the first time –

being in charge of shopping and food preparation.

Fresh prepared foods offer those who cannot cook,

or choose not to cook,access to a huge choice of

foolproof meals.

DEMAND FOR CONVENIENCE

The effect of demand for convenience on food has

changed the way we eat profoundly.The average

‘hands-on’preparation time for the main meal of the

day has been well documented – the time has reduced

from 60 minutes in the 1980s to 20 minutes just

20 years later.

20 minutes preparation time for the main meal

of the day

Hands-on main meal preparation time 1980-2000 minutes

1980s

1990s

2000

0 20 40 60

Source:Taylor Nelson Sofrès,Family Food Panel

However, if you look at the meal preparation time for

all meals at home (including breakfast,evening meals,

children’s tea etc.) the average time is a mere 13 minutes

per meal.Nearly three-quarters of all meals at home

take less than 20 minutes to prepare.Over one third

take less than five minutes.

One third of meals prepared in five minutes or less

Amount of time spent preparing meals %


Fresh prepared foods have an increasingly important

role to play in society’s wish to spend less time in the

kitchen on a day-to-day basis.However, just because

consumers expect value for time, this does not mean

that they are prepared to compromise on quality.

1 5 minutes and under 34

2 6-10 minutes 22

3 11-20 minutes 18

4 21-30 minutes 14

5 31-40 minutes 4

6 41-50 minutes 4

7 51-60 minutes 0

8 More than 60 minutes 4

3

4

56 8

1

2

11

19

81

19

91

20

01

Demand for convenience Lack of knowledgeLack of inclination

Lack of time

➜ ➜

➜

health

12


Health and leisure activities

Expenditure on health and fitness as a percentage of total expenditure has increased

by over 16% between 2001 and 2002.People are becoming more health conscious and

the increased level of disposable income allows more people to join health clubs.There

are over 2,500 gyms in the country,which have 8.6 million members – an increase of

25% over the past five years.

Health concerns

In a lifestyle survey conducted by Mintel in October

2002,health was the top future concern of the population

followed by financial security worries.People are living

longer,expected to live longer and are taking more

responsibility for their own health including more

exercise and greater awareness of what they eat.

Health – on the national agenda

However,20% of the population is obese (a trebling over

the past twenty years) and nearly two thirds of men and

over half of women are overweight or obese.Given the

cost impact on the economy through absenteeism

and on the National Health service there are likely to be

increased initiatives to help address this issue.One such

initiative is the increased focus on promoting ‘five-a-day’

(five pieces of fruit/vegetables or equivalent) by the

Department of Health.

Taking control and responsibility

There is a more holistic approach to health.Healthy eating

is no longer just about counting calories but eating

balanced meals,which are good for you.Consumers are

demanding a greater amount of and more transparent

information – in particular nutritional information.

Consumers like to be in control whether it means

cooking from scratch or using fresh prepared foods for

all or just part of their meal preparation.Many fresh

prepared foods, for example, fresh pasta,pasta sauces,

stir fries and leafy salads are used as a base by consumers

who may choose to add extra ingredients or be involved

in the cooking process.For some people,especially

among the younger generation, this is tantamount

to cooking.

Fresh prepared foods can deliver the control required

for those who wish to monitor what they eat – it is easy

to track portion size and nutritional requirements,be

it calories, salt or fibre content.The healthy eating

segment of ready meals saw growth of nearly 40% and

there are healthy eating sub-sectors emerging in other

market sectors.Several ranges of ‘cook from raw’meals

have been developed recently.These meals, typically,

contain a high proportion of raw vegetables which when

cooked for the first time retain colour, taste and texture.

More discerning,more demanding

In a recent Mintel survey,over 70% of the sample

claimed to enjoy watching cookery programmes and

it is estimated that 18 million cooking books relating

to recent TV cookery programmes are in kitchens across

the UK.Moreover,21% of the sample felt inspired enough

to try a new recipe having seen a TV chef demonstrate

it,14% have tried a new ingredient and another 8%

have gone out and bought a recommended cooking or

kitchen gadget as a result.As we have reported above,

this does not mean that more time is spent on a day-

to-day basis in the kitchen. In the same survey,18%

of people enjoyed watching the programmes but rarely

cook anything they have seen and 14% are convinced

that the recipes look much easier to do than in reality!

Cooking programmes, for many,are pure entertainment

and for others a specialist interest to be tried out at

weekends as a leisure activity.However regarded, these

programmes serve to whet the appetite of the nation

and heighten the awareness of food and food ingredients.

They certainly inspire people to try more adventurous

foods whether prepared at home, in a restaurant or

when choosing fresh prepared foods.

New tastes

Travel, cookery programmes, the expectation of instant

gratification and hectic lifestyles have increased the

demand for indulgent,experimental food with intense

flavours and variety on tap.The fifty years of food table

below,based on information from The Foods Standards

Agency,exemplifies the nation’s changing taste profile

and influences.Fresh prepared foods already go a long

way to satisfying some of these demands as is reflected

in the development of premium ranges and ethnic and

fusion cuisines in the fresh prepared foods sectors.

pleasure

13

The irony of the up-take of time-saving devices is that society feels increasingly time-

pressured.On the one hand, the speed at which certain tasks can be achieved has freed

up time for other activities, in theory alleviating time pressure.On the other hand,as

people try to maximise this new time to the full,often trying to achieve a healthy work-

life balance, they feel under even more time pressure.People feel deserving of treats to

reward themselves for hard work or to treat others to help alleviate guilt (working

mothers and their children are prime examples). In a recent survey by Datamonitor,

‘premium prepared foods’ featured second,behind wine,on a list of treats likely to be

bought.Treats,however,have to live up to the expectation.

Fifty years of food – a culinary evolution

1950s 1960s 1970s 1980s 1990s 21st Century

Source:Based on information from The Foods Standards Agency website.www.foodstandardsagency.co.uk,Fifty Years of Food

‘Home meal

replacement’

solutions.

Supermarkets

competing with

restaurants and

take away.

Chilled overtakes

frozen.Technology

development in

fresh prepared

leafy salads.

Frozen.Popularity

of microwaves.

Emergence of cook

chill technology

pioneered by Marks

and Spencer.

Development

of frozen

technology.

Popularity

of freezers.

Canned foods.Main convenience

food development

Thai fish cakes with

sweet and sour dip

Thai green curry and

coconut rice

Vegetable samosas

Chicken tikka

masala

Mango sorbet

Chicken liver pâté

Lasagne and salad

Lemon cheesecake

Prawn cocktail

Steak and chips

Black Forest gâteau

Battered fish and

chips and garden

peas

Tinned peaches and

evaporated milk

Roast beef,Yorkshire

pudding, roast

potatoes, carrots,

cabbage

Apple pie and

custard

Typical menu

Home entertaining

Home entertaining is increasing as people opt for more

intimate gatherings at home.These gatherings tend to

be more frequent but with fewer guests.They tend also

to be more informal often with guests helping out by

bringing a starter or a dessert.The impact of the media

and travel increases aspirations for more experimental

and indulgent dishes and there is some evidence that

this engenders stress and anxiety in the kitchen.Whilst

the ultimate aim is normally to impress, there is demand

for prepared ingredients (sometimes even finished

dishes) to help alleviate this stress and this use appears

to be accepted socially.

UK RETAILING

The fresh prepared foods market is a relatively young

market and has developed alongside the investment by

the UK retailers in their own retailer brands.As a direct

consequence of this,one of the peculiarities of the fresh

prepared foods market is the dominance of retailer

brands (estimated to represent around 90% of the value

of the fresh prepared foods markets).

Not only do fresh prepared foods provide higher

cash margins, faster stock rotation and higher growth

opportunities than frozen and ambient equivalents,

but they also allow product differentiation for retail

customers.This has resulted in the fresh prepared

foods area becoming a dynamic part of the store as

retailers have invested heavily in increasing chilled

space and improving layout in this area.

Convenience stores gain momentum

Retailers continue to invest in smaller,more food-

oriented stores in prime city locations, railway stations

and garage forecourts,which attract shoppers buying

for immediate meal needs (pre-work, lunchtime and

evening meals).These stores, typically,have a greater

percentage of space dedicated to fresh prepared foods.

Convenience stores 2002 – key players

Total number of Total number of

convenience garage forecourt

Multiple retailer stores stores

Tesco* 170 96

Somerfield 27 19

Safeway 18 51

J Sainsbury 17 5

Marks and Spencer 8 –

Source:Geest estimates based on IGD Retail Analysis and IGD Stores Database 2002,Tesco

company information.Convenience Retailing,Mintel,March 2002

*Acquisition of T &S Stores in October 2002 increased the number of convenience stores

by 862.450 stores are expected to be converted by 2006

Retailer sub-brands

It is not unusual to come across ten different retailer

sub-brands in some of the larger supermarkets, ranging

from an economy offer, through to a kids’brand,organic

range,cuisine specific brands and healthy eating and

premium.Although these sub-brands are not limited to

fresh prepared foods, these are often central to the

success of the total offer – especially in areas such as

specific cuisines,premium and healthy eating ranges-

given the importance of the appeal of freshness.For

some of the larger retailers, the health and premium

sectors account for 3-5% of total store expenditure

and have more than doubled in the last two years.

In the market sectors in which we operate,healthy and

premium retailer sub-brands grew in 2002 by +40%.

THE UK ECONOMY

Personal disposable income continues to rise

£ billions

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

0 100 200 300 400 500 600 700 800


The success of fresh prepared foods is dictated,to a certain

extent,by the wealth of the nation as consumers are

paying a premium for the time element of the products.

Currently, there is more uncertainty in the economy

than there has been for many years.Continued threats

of depressed consumer expenditure and a fall in house

prices, together with the effects of the war on consumer

spending all contribute to this.Conversely,house prices

are still booming in certain areas, interest rates are low,

personal disposable income has increased and UK

unemployment is at a 27-year low.These factors may have

staved off the long-heralded recession at a consumer level,

which has yet to materialise across all market sectors.

Should we experience a recession, it is difficult to predict

the effect it would have on the fresh prepared foods

market,as the industry has never experienced one.

However, research confirms that quality, innovation

and convenience often play a greater role than price for

existing buyers in our markets.Moreover, fresh prepared

foods are considered by consumers to be on a par with

restaurant and take aways,but are considerably cheaper

than these.

If the past is a guide,there are several items of discretionary

spending which are more likely to be cut before fresh

prepared foods. In a recent study by Datamonitor it is

reported that around 80% of consumers across Europe

would economise first on electronic goods,eating out

and beauty treatments and those products,which have

14


a minimal impact on quality of life.Similarly,a consumer

spending report published by KPMG indicates that 29%

of people in the UK would spend less on going out to

restaurants and bars if they had to cut spending.

Fresh prepared foods play an increasingly important

role in the consumer’s lifestyle.Unless there is a very

deep recession with severe unemployment and where

people have time to start cooking from scratch or

learning how to cook, fresh prepared foods should be

relatively recession robust.

SUMMARY

Social and demographic trends continue to provide

evidence of a society changing in terms of household

composition and roles,working practices,eating patterns

and attitudes towards time.Consumer confidence has

remained quite high,despite the threat of recession and

falling house prices and disposable personal income

continues to increase.For food, there is a marked

demand for convenience,health and pleasure as people

try to juggle their busy lives,obtain a balanced lifestyle

and maximise their time.Retailers continue to see good

returns from fresh prepared foods markets

(a combination of growth, relatively high cash margins

and stock rotation) and are prepared to continue investing

in products and outlets which provide competitive

advantage and differentiation.Given these factors, fresh

prepared foods continue and will continue to play an

increasingly important role in today and tomorrow’s

food consumption.

BIBLIOGRAPHY

British Lifestyles 2003, Mintel, January 2003

Consumer Watch, IGD Business Publications,2002

Food Consumption 2002, IGD,2002

Recessionary Consumers, Datamonitor,March 2002

The Impact of Celebrity Chefs on Cooking Habits,

Mintel, July 2002

Taylor Nelson Sofrès Family Food Panel, 2002

Everyday Treating, Datamonitor,April 2002

Changing Mealtimes, Datamonitor,May 2002

Entertaining at Home, Datamonitor, February 2002

The Guardian, January 16 2003

What’s to be in 2003, EURO RSGG S.T.A.R.View,2002

nVision,the future foundation 2001

The Times,17 May 2002

Society,Jobs about the house. UK 2000 Time Use Survey,

Office for National Statistics,30 January 2003

Financial Times,25 April 2002

Tackling Obesity in England, Report by the Comptroller and

Auditor General,HC220 Sessions 2000-2001,15 February

2001,London,The Stationery Office

Taylor Nelson Sofrès Superpanel,2002

Convenience Retailing,Mintel,March 2002

www.mobilemastinfo.com (Website of the Mobile

Operators Association (MOA))

www.statistics.gov.uk

www.statistics.gov.uk/census 2001, The Big Picture Census

2002 – benchmark of the 21st Century,13 February 2003

www.foodstandardsagency.com, Fifty Years of Food

www.odpm.gov.uk

www.number-10.gov.uk

GfK Netherlands

AC Nielsen France

GfK Minicensus,GfK PanelServices Benelux

Linéaires,February 2003

15

Continental Europe

16


The Netherlands

Geest is present in five market sectors of the Dutch fresh

prepared foods market.

Dutch fresh prepared foods market sectors

Product sector £m at RSV % market growth

Ready meals 68 +21

Pizza 20 +10

Pasta 7 +62

Dips and dressings 7 +24

Soups 5 +60

Source:GfK Netherlands/Geest estimates 2002

With the exception of the more established ready meal

and pizza markets,most of the above market sectors

have existed in the Dutch retail market for less than five

years.This helps to explain the small market sizes and

high growth rates.

Should some of these markets develop further,as seen

in the UK, there must exist the opportunity for good

growth for several years.The UK has three and a half

times the number of households than the Netherlands,

yet, the size of the UK ready meals market dwarfs that of

the Netherlands by 15 times.The number of households

in the Netherlands buying fresh prepared foods on a

monthly basis has increased since last year across all

sectors. It is,however, still considerably lower than

in the UK.

Potential for more Dutch households to buy fresh

prepared foods

Four weekly household penetration UK versus NL % households

Ready meals

Pizza

Pasta

Soups

0 5 10 15 20 25 30 35 40 45

UK NL

Source:Taylor Nelson Sofrès,GfK Netherlands,Geest estimates

THE DUTCH CONSUMER

Declining household size

The number of households in the Netherlands is estimated

to have increased by over 13.5% between 1992 and

2002. In the same period, total population rose by

6.45%.By definition, the average household size

continues to decrease (albeit at a slower rate) and

currently stands at 2.3 persons per household.

One and two person households

In 2002, there were 6.98 million households in the

Netherlands,with one and two person households

accounting for over 68% of these.This proportion is

set to rise further over the next decade.One third of

all households are inhabited by one person only.

One and two person households continue to grow

Number of persons per household 1986 to 2002 %

1986

1996

2002

0 10 20 30 40 50 60 70 80 90 100

Persons: 1 2 3 4 5+

Source:GfK Minicensus,GfK PanelServices Benelux

Rise of dual-income households

There has been a marked rise in the number of one and

two person households whose household members are

in employment.70% of all one and two person households

have at least one person in employment and 50% have

all household members in employment.Families

account for just over 27% of Dutch households.

The above consumer demographics are similar to those,

which have driven the success of fresh prepared foods

in the UK – smaller,more affluent households whose

members are under increasing time pressure.As in the

In this section of the market report we provide a brief overview of our businesses

in Continental Europe.This is written primarily for the UK-based reader,using

comparisons with the UK market in order to illustrate similarities and differences.

UK,Dutch retailers continue to invest in their retailer

brands and stores.The dominant retailer in fresh

prepared foods has been particularly innovative in store

design and the reformulation of its fresh prepared foods

offer and presentation in store.The potential for further

growth opportunities is evident.

France

THE FRENCH PREPARED LEAF MARKET

In France, the only fresh prepared foods market sector in

which Geest operates is prepared leaf.This is one of the

more developed fresh prepared foods market sectors in

France and dates from the early 1980s.The quatrième

gamme market,as defined in France,covers all fresh cut

leaf and vegetables and is estimated to be worth around

£270 million at retail sales value and growing at around

13% (moving annual total 12 months ending October

2002 versus October 2001).Prepared leaf is the largest

part of this market and is valued at around £240 million.

Salads dominate the quatrième gamme market

Share of quatrième gamme market by type of product %

Source: AC Nielsen,October 2002

Market growth

Growth is coming from an increase in the number of

households buying prepared leaf salads as well as a small

increase in the quantity they buy each year.Around 54%

of French households bought a bag of prepared salad at

least once in 2002.

Consumer differences

The French continue to show their preference for soft,

tender salad leaves as shown by the importance of

butterhead lettuce,oak leaf, frisée and baby leaf varieties.

An interesting development has been the introduction

of iceberg to this market which,until recently,was

relatively unknown in France.Other leaves,new to

the French market, include baby spinach and rocket.

The French tend to use salads,quite formally,as a starter

and over half of the prepared leaf market is made up of

bags of single leaf, rather than mixed leaf.Owing to this,

the French are still more likely than the British to buy

whole head salads instead of prepared when the products

are in season and cheaper.However, the convenience

aspect of prepared leaf is becoming a more important

reason to purchase.

1 Salads 88

2 Herbs 3

3 Crudités 6

4 Hot-eating vegetables 2

5 Snack salads 1

34

5

1

2

The trading up of French consumers from whole head

salads to prepared leaf can be illustrated by taking

butterhead lettuce as an example. In 2002, the rate of

growth of whole head butterhead was 13%. Its prepared

equivalent grew by 49% in the same period.

Regionality

As in the UK, it not surprising that people living in urban

areas of the country are the largest consumers of

prepared leaf salads.Parisians (and those in the suburbs)

consume 28% of all prepared leaf salads in France.

Growth in this region is also the fastest across France.

Climate also plays a part in France.People in south and

southwest France eat more leafy salads than inhabitants

of northern France.However,growth in the north is

increasing.

Salad sales strong in the Paris region

Share of the prepared leaf market by region %

Source: AC Nielsen,October 2002

The French retailer

Unlike the UK,where around 94% of prepared leaf

salads are sold under the retailer brand,manufacturer

brands in France still account for over 35% of the

market.There has,however,been a large increase in

the importance of retailer brands over the last decade.

Last year, retailer brands grew by 17% and accounted

for 51% of the market.There has also been some strong

growth in economy brands.

A recent industry estimate indicates that retailer brands

have the potential to account for at least 60% of this

market,especially given that some retailers have yet

to develop their brands in this area. It remains one of

the most dynamic sectors of the French fresh prepared

food markets.

1 Paris 28

2 North 20

3 East 15

4 Central 13

5 South 243

4

51

2

17


18

Geest talks

Food safety 20

Our customers 22

Our consumers 24

Our people 26

Our investment 28

19

“It is vital that management understand,with clarity, the important issues.”

“Our keychallenges...”


20

Our Geest Central Technical team provides an umbrella

service across the Group,giving help and advice and

spreading best practice.As part of its key objectives,

this team develops quality and audit systems as well

as training courses. It also acts as an independent

audit service.

We formulate guidelines and standards – often in

conjunction with our retail customers – which our

business units adopt and against which they are audited.

Our audit systems are vital tools,which help us to

maintain the high standards to which we work.Each site

assesses itself against a formal audit schedule. In addition,

our Central Technical Team undertakes audits,which

reflect the requirements of our customers, the

government and trade associations,as well as our own.

Our audit process follows a ‘plough to plate’approach

covering legal and food safety aspects as well as the

checks and balances required to maintain the highest

possible quality standards of our products.Our

customers complete the loop by auditing us regularly

and often without warning!

The requirements of running modern food facilities

put food safety and sustainable standards at the top

of our agenda.To achieve this we employ qualified and

dedicated scientific and technical people who take great

pride in working with our customers, the regulators and

industry groups.Our aim is to remain at the forefront

of developments in the area of food safety.”

“Food safety is embedded in our culture.Each business unit has a technical team

to ensure that we apply and review our rigorous standards.We appoint a Technical

Manager who sits in each business executive team and who works closely with the

manufacturing, sales, logistics and development teams.Our technical standards

are lived and breathed throughout our operations.

Food safety

“We do not take food safety for granted.Millions of people eat our products every day,often with no further cooking. We have aresponsibility to supply safe products.”

But it’s not just about the finished product.We have

a proactive approach,which covers all stages of the

process.We take samples for microbiological testing

from our raw materials and from the water used at

various points, for example.We analyse how effective

we are at washing our ingredients and also cleaning our

factories.We also assess our effluent levels.All these

tests are done for our own benefit to verify our systems

and controls.

I sit on the Chilled Foods Association (CFA) Technical

Committee and Microbiological and Hygiene Working

Group,which I chaired for two years.We work together

with other fresh prepared foods manufacturers to

share food safety and hygiene best practice across the

industry.This is an area where we are not in competition.

We are often asked to comment on European draft

legislation and other evolving standards.

John GormanGroup Technical Director

Bridgette ClarkeGroup Technical Services Manager

Case study “I’ve been with Geest for 20 years. In that time the scale

of services,which we provide,has changed beyond

recognition.Our first laboratory in Spalding tested

30 samples a day.We now carry out between 13,000

and 14,000 tests a week on over 3,000 samples in our

microbiological and analytical laboratories.Most of the

tests are performed on finished products.A sample of

every product, for example, is tested every single day

it is made.The laboratories run seven days a week and

I am responsible for this and five other laboratories in

the Geest businesses.

1

21

A recent Geest-led initiative for the CFA was to put

together a microbiological guide for produce growers.

We are one of the largest handlers of produce in the

UK and have a huge amount of expertise within the

business,especially given our heritage.By the time we

receive raw materials from our produce suppliers we

are already halfway through the journey from ‘farm

to fork’.Our approach is to understand and improve

the whole process.Our microbiological guidelines

cover areas such as water irrigation,wildlife control

and fertiliser management. It’s an example of our

commitment to food safety from the raw materials

to the food on the plate.”

Our Central Technical team spent 1,000+days training and auditing in 2002.

We employ over 400 people in technicalroles across the Group.

Key facts

We carry out13,600 tests a week in our central laboratory.

Nicola Waite in the central analytical laboratory,at Spalding.


22

We have very few customers – this is a result of the

concentration of the retailers in this market. In the UK,

for example, the top five retailers for fresh prepared

foods account for 80% of this market compared to 66%

for food in general.We trade, to a greater or lesser

extent,with all of them.

The top five retailers of the UK fresh prepared food

market have 80% share%

1 1. All food

2 2. Fresh prepared foods

0 50 100

Source:Taylor Nelson Sofrès Retailer Share Track and Taylor Nelson Sofrès Geest Basket Global

Database fifty two weeks ended 5 January 2003

Over the past decade,our customers have invested

heavily in their own brands (retailer brands).This helps

them to differentiate themselves from their competitors

and attract and retain different consumers.Since fresh

prepared foods is a very young market, retailer brands

dominate this part of the food market.Around 90%

of the fresh prepared foods market is retailer branded

versus 40% for food in general.

Retailer brands account for 90% of the UK fresh

prepared foods market%

1 1. All grocery

2 2. Fresh prepared foods

0 50 100

Source:Taylor Nelson Sofrès Till Roll and Taylor Nelson Sofrès Geest Basket Global Database

fifty two weeks ended 5 January 2003

For Geest, this means that we have to act as ‘brand

guardians’to our customers and this dictates the way

we do business.We cannot make the same product and

sell it to all of our customers, for example,as we would

not be giving them any points of difference. Instead,

we make around 2,000 different products,all tailored

to each of our customer’s requirements.

Although our UK retail customers are much larger than

us,we have an interdependent relationship with them.

We are an extension of their business,and, therefore,

our relationship with our customers is more akin to

partnership.They all have different strategic goals

and we work with them to achieve these.

Each retailer has its own customer profile.This dictates

their strategy and the way in which we work with them.

Some retailers, for example,are more family-oriented,

others have older,more affluent households.

Consequently, for some customers the focus is about

working together more efficiently – understanding

the whole supply chain, sharing best practice to remove

unnecessary cost in the systems and processes and

benefiting from the improved value chain.‘Value’has

become increasingly important in recent years.For other

customers,accelerating the development process,being

at the forefront of innovation or ‘first to market’may be

the current priority.Often it is both!

Juggling these different corporate strategic demands

puts our business under pressure,especially in today’s

increasingly competitive retail environment.However,

our structure helps us to balance these demands.

We run a devolved structure and this allows our

management teams to focus on individual customers,

market sectors,processes and innovation,becoming

specialists in these areas.We have a wealth of experience

and expertise across the Group from a pool of chefs at

the Geest Culinary Academy and in several businesses,

to agronomists specialising in new crop developments;

from master bakers to manufacturing gurus.We are

passionate about food,close to our customers and

products and would like to think that we would spring

to the mind of any customer wanting to develop further

in fresh prepared foods.

One of our values is customer care.Understanding,anticipating and responding to our

customer requirements is vital to the success of our business.

Geest Divisional Managing Directors (left to right)Gordon Pates Brian Walton Stephen DraiseyTim Sutton Keith Foreman Jane Scriven

We make food which carries our customers’brand names.Our Divisional Managing Directors’ responsibilities include the management of our relationship with our customers.

Our customers

“We need to know our customers inside out.”

23

Geest valueCustomer care

We are dedicated to the success and outperformance of our internal

and external customers.

We shall always strive to supply them with products or services of

quality and value which are continuously ahead of our competition.

We shall work to very high standards and build strong and

lasting relationships.

These relationships shall be based upon our thorough understanding

of the needs of the customer and listening to those needs as they evolve.

We shall provide solutions to them every time without fail.

Key words:

• Total customer focus

• Building partnerships

• Continuous improvement

Source: Extract from the Geest values dictionary

Wai Hung Ho,Development Chef at Mariner Foods.

Our approach to using market data to help our decision-

making has changed over the years and so has our

relationship with our key intelligence provider,Taylor

Nelson Sofrès (TNS).Five years ago we used to ask for

‘off the shelf’data packages to look at product sales and

basic consumer buying dynamics.Now we spend time

with TNS drawing on their knowledge of emerging

trends across the whole grocery market.We work with

them to get right under the skin of our business issues

and to make sure we really understand them from a

consumer point of view.

Charlie,our TNS Superpanel consultant spends one day

a week at our offices,working with us in this way. It is

imperative that he understands the way we operate and

our business challenges.He is treated as one of the team

and demonstrates as much enthusiasm for our products

and markets as we do! We set Charlie objectives annually

and we review performance against these, just as we

would do for our own employees.TNS also appraises us.

It is all about understanding each other and making

sure we get the best out of each other.

We share our findings with our customers.Some recent

work illustrates the substantial growth there still is to be

had from the fresh prepared foods market. It is not about

double-guessing the next five years’worth of sales,but

rather understanding why more consumers,more often,

are going to be buying our products.”

“We don’t just look at specific individual markets.We

look at the total fresh prepared foods markets in order to

understand the key dynamics.For example,if somebody buys

a pizza,what other products do they buy to go with it?

How many times do they buy these products per year and

when? If somebody is buying a fresh prepared foods product

for the first time – what is it? What do they buy next?


24

Our aim is that each business at Geest has a good feel

for our consumers and their needs and that this is

incorporated into business decisions.

We do this at two levels.We look at the big picture and

make sure we are up to date with consumer lifestyle

trends – the importance of health,convenience and

pleasure in our markets, for example. (See our ‘Market

report’on pages 6 to 17). At a more detailed level,

we spend time listening to consumers to understand

their shopping habits and decision-making processes.

We might, for example, run an exercise together with our

retail customer,where we watch shoppers buy products and

then interview them to understand exactly what prompted

their choice.Many shopping decisions are made standing

in front of the product in the store.Therefore,it is important

that we translate our learnings directly into improved

products – user-friendly packaging,appropriate pack

sizes,clear product descriptions and eye-catching lay-

outs – to make it easier for our consumers to shop.

For all of our major markets we track what is happening in

each product area.We would not dream of building a new

factory, for example,without having a detailed consumer

rationale in the capital expenditure plan proposed to the

Board of Geest.Our job is to make sure that the consumer

is at the forefront of people’s minds at all times.”

“At Geest,we seek to create an innovative environment.Product development is critical

both to the success of our business and the fresh prepared foods market.However,

we must ensure that the products that we launch are relevant to consumer needs.

The danger of misunderstanding our consumers is the waste of time,effort and money

for us and our customers. In the worst case,putting too many products on the

supermarket shelves for no reason can damage existing sales performance.

Adrian Pickett Head of Marketing

Our consumers

“We strive to have people in the businesswho feel empowered to deliver innovativeproducts that the consumer will love.”

Case study

Stephanie AdamsMarketing Services Manager

Charlie OganGeest ConsultantTaylor Nelson SofrèsSuperpanel

2

25

Our average weekly sales of UK fresh prepared food – key sectors 2002

Value sales

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Source:Geest estimates

Ready meals

Convenience salad

Leaf salads

Pizza

Pasta

Soups

Bread

Dips

Stir fry

Sauce

We launchednearly

600new products in 2002.


26

In 2001,we set the improvement of retention levels for

all employees as a monthly key performance indicator for

all of our business units.This sparked a variety of initiatives

across the Group and for several businesses marked a

significant improvement in employee retention levels.

In 2002,we piloted two key initiatives to help understand

further the requirements of our people across the Group

and tailor these to our business objectives.”

“We now provide 14% more jobs than we did three years ago and employ over 10,000

people.Finding good employees is difficult and we want to ensure that they are valued

and want to stay with Geest.This means we are continuing to improve the way in

which we recruit, train,develop and look after our people.

Mark MartinGroup Human Resources Director

Our people

“At Geest, we celebrateeach other’s differences.”

Karen McNeiceLead Human ResourcesManager,Holbeach

Case study “Design your new job! This was thechallenge we gave to potential employeesat our new site. 400 questionnaires andsix focus groups later and we had a muchbetter understanding of people’sexpectations at work.”

“Unemployment in the area is around 1% and we are

alreadya very large employer – about one in ten of the

local workforce works for Geest.We have to be particularly

creative in how we attract and retain people in such an

environment.We were debating this at our first steering

group meeting for the planning of the new site – how many

employees would we need,how many could we recruit,

what shift patterns should we have in place,what about

terms and conditions?

3

We were about to draw up our recruitment plan with

variations on our standard terms and conditions when we

decided to re-examine our approach.To attract and retain

employees we needed to match our terms and

conditions to the needs of the local labour market.We

started with the idea of setting up a mock open day.

However,as we were talking about ‘real jobs’for ‘real

people’we decided to take it one step further. In

September,we launched two ‘Design your new job’open

days where we provided an informal forum for people to

tell us what they wanted from their jobs.

We had a fantastic response.Over the two days,500

people came to the new site and we managed to capture

the imagination of the local people.We asked those

who were willing to fill out a questionnaire and we

received around 400 replies. Already,this gave us a

good understanding of the key requirements.However,

we wanted to take it one stage further and asked for

volunteers for focus groups,which we ran at the end of

the year.This proved to be a fascinating exercise and we

gained a real insight into people’s expectations from

work.There are a few very simple tangible things which

people value hugely,such as the provision of transport,

car parking spaces,staff shops and terms and conditions

suited to older employees and women returning to work.

We are now at the stage where our findings can be

presented at the outset of the investment proposition

and we can make some of these improvements.

Not everything can be solved overnight,however.There

are many ‘soft’elements which can make the difference

between an ordinary job and a job you want to get up for,

for example,communication and team spirit.We need to

find ways of reinforcing these in the culture at the new

site.Our challenge is to integrate the findings into this

business project as well as in other parts of the Group.”

We are planning to step up the level of operations at the

new site in Holbeach during the course of 2003. If you are

interested in any developments,please contact Karen on

01775 761111 and keep an eye on the local press.

27

“Our leadershipprocess is all aboutgiving support toindividuals andcreating anenvironment toallow change.”

We brought together our thoughts on how to achieve this

in 2002. It was the result of many years of thinking and

building on existing fundamentals in Geest:our company

values, internal appraisal systems and development and

succession planning.However,we wanted specifically to

clarify the roles of our leaders within Geest and create a

programme to develop them further.For years we have

sent people on good external courses,but it proved

impossible to find an off-the-peg solution for our leaders.

We decided to create our own process.

The focal point of the development process is a one and a

half day in-depth psychological assessment,followed by a

three day course,where our leaders are put into Geest-like

scenarios. It’s a bit like starring in a Geest soap opera! This

helps them to understand how they lead in different

situations.However,the real personal development

happens after the course.Each leader is assigned an

executive coach – normally one from the assessment or

course – with whom he/she can meet as many times as

needed thereafter.We are not prescriptive – it’s up to the

individual to decide when this should happen.Then it is

about gaining feedback from the leader’s team through

our ongoing team feedback process.We have also

developed a training matrix,which comprises 15 different

affinity courses ranging from in-depth product knowledge

to customer understanding. The other important part of

the process is meeting informally with Gareth,our Chief

Executive Officer,to understand his leadership vision and

to provide a forum where approaches can be challenged

and issues discussed.

The last thing we want to do is to pigeon-hole people.

There is no such thing as a perfect leader so there is no

point in adopting a one size fits all approach. We need

different leaders for different roles within Geest and

although we can provide people with skills and tools to

do the job better,fundamentally we celebrate people’s

differences.We used to say “He/she is a good leader,

therefore he/she can move to this or that role.”Now we

look at what kind of leaders people are and match their

skills to the job.We also help people to recognise their

own strengths and weaknesses and chose roles which suit

them,rather than ones they think they ought to choose.

Our leadership process is all about giving support to

individuals and creating an environment to allow change.

It’s always difficult to quantify such a process.We need

leaders to maintain profitable growth and vice versa.

The process should make Geest even more of a fun and

rewarding place to work. I cannot wait to see the impact

of this on the business five years down the road.”

“There is a difference between being a good leader and being

a good manager. Managers do things the right way.Leaders

do the right thing and have vision to create and inspire teams.

Our aim at Geest is to develop our leaders to lead our growth.

Case study

Mark MartinGroup Human Resources Director

4Gareth Voyle at the leadership development course.


28

High levels of capital expenditure

Levels of capital expenditure 1995-2002 £ millions

95

96

97

98

99

00

01

02

0 10 20 30 40 50 60 70 80

Source: Geest

In the larger markets,we are also starting to see more

growth from people buying more of the same product

(their ‘favourites’) as well as experimenting with new ideas.

This is characteristic of four of our larger market sectors

– ready meals,leafy salads,convenience salads and pizza.

For some of the core lines,we have enough sales volume

to automate certain points in the process. Automation

brings with it more complexity – we can no longer put

up the shell of a new building and fill it with standard

manufacturing kit.Information systems are now a key

specification in any new business venture and our

machinery is often bespoke with more emphasis on process

control.These types of projects mean that the value of our

capital projects is higher but,over time,this should lead to

a higher sales level per £ of capacity expenditure.

As our projects become more complex so our

implementation curve becomes longer – up to two years in

some cases.Each investment also brings an initial extra boost

in capacity,which we are unlikely to fill overnight.These two

factors help explain the reasons behind our high start up

costs.Our recent protracted projects at Barton demonstrate

that our expectations were higher than they should have

been for an undertaking of this size and complexity.At this

scale,when things go wrong it can take a long time to get

back to target.

Our learnings from this are that,as we continue to increase

in scale,we must be more realistic in our planning

and must continue to increase the abilities of our

manufacturing management.We can achieve this by

building on our experiences and sharing knowledge across

our project teams.Each project is unique but there are

always some similarities – standardising equipment where

possible,reducing individual component costs through

group negotiation and ensuring that people are trained

up in good time.”

“We have grown rapidly over the past six years reflecting strong consumer demand.Our

annual compound growth rate is 14% and relates to the speed of growth of the markets

in which we operate. In some areas, the markets continue to grow strongly even though

they have now reached quite a considerable size.The ready meals market, for example,

is now worth £1.3 billion and continues to grow each year in double digits.As there is

little excess capacity in the industry (generally speaking,manufacturers tend to invest

incrementally in these market sectors),our investments have become fewer but larger

to keep pace with the increasing demand.

Mick VassallBusiness Improvement Director

Our investment

“As a growth company, we need to invest innew capacity. At the end of 2002, we wereoperating five facilities which had not been in existence 24 months before.”

Our minimum target returns:

• Better than 12% Internal Rate of Return (post tax)

for new ventures (e.g.a new build)

• A target of 20% Internal Rate of Return (post-tax)

for incremental projects (e.g.extensions)

• Return On Capital Employed of better than

20% (pre-tax) for ongoing business

Our capital expenditure has been between £40 and

£55 million pounds over the past six years.We expect

this rate to continue.Our expenditure was high in 2001

owing to an opportunistic purchase of assets.We plan

to start using these assets in 2003 and 2004.

29

“Our challenge is tomaintain our openspirit as we expand.If we can continueto recruit peoplewho have a will tomake thingshappen and whohave the right valueswe can achieve this.”

We acquired the business in March 2001.The first thing

I did was to invite everybody to a presentation about

Geest (we also gave out a few Geest products) and

promised the 70 employees two things – firstly, there

would be a lot of change and secondly,we would be

doing things together. It was important to create a new

identity and I organised a competition to name the new

business.We ended up with the nickname of the local

football team and that’s why we are called Mariner Foods.

Our first priority was to focus on the factory.My Project

Manager had worked on a similar,but smaller,building

project at Geest and so had relevant experience and was

ready to take up the bigger challenge.We invested time

in visiting other Geest sites to ensure we worked to best

practice. I’m a great believer in giving people a project

from start to finish – I offered my Project Manager the

chance to run the factory once it was completed. I am

sure that we got a better result because it made us

do things differently.We weren’t just putting in a piece

of kit,but thinking exactly how we were going to use

it afterwards.

We gutted the whole factory, re-laid the floors,

strengthened the steelwork and put in services (even

though we wouldn’t need them all straight away) as

part of our future plan.We installed a state-of-the-art

cookhouse with a computer-controlled system in record

time. At the same time,we created new job roles and

trained people in their new positions. I made sure we had

monthly presentations to the whole company to keep

everybody up to date with the progress and to listen to

their views and ideas.

Whilst the kit is high tech and the control systems ensure

a high level of consistency, it is the people who provide

the quality.All ingredients are variable and those who

handle them need to understand the cooking process.

All of our cooks have been trained at the Geest Culinary

Academy and we have a resident culinary chef. If one of

our cooks thinks the ingredients need to be mixed for an

extra length of time to ensure the right texture and taste

then he or she has the authority to do so.

By 2002,we had doubled the size of the plant, increased

the number of employees from 70 to 210 (including 65

of the original 70), increased sales five times, trebled

the capacity and secured options on land around us for

potential expansion. It has been a hectic time but I

think our achievements are down to clarity of vision

communicated to all employees,working in partnership

with our customer and building on the strength of our

management team.”

“At the outset we had a very small management team –

myself, a Project Manager and a Human Resources

Manager.We challenged ourselves to create a vision

for the business and built a five year plan around three

product categories.At the time the business had sales

worth £3 million.

Gary SharpGeneral ManagerMariner Foods

Case study5

Somjit Stinson,Michelle Chandler,Emma Clayton and Mel Arden at Mariner Foods.


30

Executive Directors

Gareth Voyle (43) Chief Executive Officer

The early part of Gareth’s career was in a technical capacity,

largely with Rank Hovis McDougall PLC (RHM).His belief

in the absolute necessity for product quality and food

safety derives from this early experience.Gareth became

a company General Manager at the age of 27 and was

subsequently appointed Deputy Managing Director for

R F Brooks Ltd., a significant chilled food manufacturing

subsidiary of RHM.He joined Geest in 1991 to run the

Spalding-based prepared foods business.He was appointed

to the Board in July 1995 and,with his team,has been

responsible for developing both the culture and operating

practices that form the basis of our business.Gareth became

Chief Operating Officer in 1998 and Chief Executive

Officer in July 2002.

Mark Pullen (52) Group Finance Director

Mark joined Unilever as a commercial management trainee

after obtaining a business degree.He qualified as an

accountant within a Unilever food company before

moving to Unilever’s Head Office.

Mark worked for Guinness for eleven years from 1984,

which included a significant re-rating of the Guinness stock,

its takeover of Bells and Distillers and the subsequent

investigations.He was initially Financial Controller then

Finance Director of their British Brewing business before

becoming Business Development Director for the worldwide

brewing business.Mark joined the Board of Geest in October

1995 as Group Finance Director.He has concentrated

on improving the understanding of its key performance

characteristics both within and outside the business.

Jane Scriven (43) Managing Director,

Continental Europe and Foodservice

Jane joined Norton Rose,London, in 1984 as a qualified

solicitor.She quickly decided that she preferred corporate

life to advisory work.She joined Elders IXL, the Australian

Agribusiness and Brewing company in 1986,when they were

at the height of their deal making activity.She was based

in Hong Kong and then London carrying out merger and

acquisition work in the Asia-Pacific and European Regions.

Jane joined Geest as Company Secretary in 1991 and the

Geest Board as Legal and Services Director in January 1996.

She relinquished most of these responsibilities in 1998 to

become Corporate Development Director, responsible for

acquisitive and new business development.Having been

responsible for our Continental European developments

for the past year and Foodservice for some three years,

she relinquished her functional roles in January 2003 to

focus on being Managing Director of these businesses.

Independent non-executive Directors

Sir John Banham (62) Chairman

Sir John was appointed to the Board of Geest in August 2002

and to non-executive Chairman of Geest in September 2002.

John is also the non-executive Chairman of Whitbread PLC,

ECI Ventures Ltd and Cyclacel Limited, the senior non-

executive Director of AMVESCAP PLC and a non-executive

Director of Merchants Trust PLC.

Previously,John has held several leading positions in British

industry.He was Director General of the CBI from 1987-

1992,non-executive Chairman of Tarmac PLC (1994-2000)

and Kingfisher PLC (1996-2001),Director of The National

Westminster Bank and National Power (both 1992-1998)

and the founding Chairman of Westcountry Television and

Labatt Breweries of Europe.He has also held important

public sector appointments;as the first Controller of the

Audit Commission (1983-1987),the first Chairman of the

Local Government Commission for England (1992-1995)

and Chairman of the UK Government’s Retail and

Consumer Affairs Foresight Panel (1997-2001).

Bob Davies (54) Senior non-executive Director

Bob Davies joined the Geest Board in July 1998.At that

time he was Chief Executive of East Midlands Electricity.

Following the take-over of East Midlands Electricity

by PowerGen in 1998,Bob moved on to become Chief

Executive of ARRIVA plc, the leading transport

services company.

Board of Directors

Executive Directors (left to right)Length of service on

Name Geest Board (years)

Gareth Voyle 8

Jane Scriven 7

Mark Pullen 8

Company Secretary

Dawn Durrant

31

Bob started his working life at the Ford Motor Company

and undertook a wide range of roles in the UK,USA

and Spain.After two years as a Director of Coopers &

Lybrand’s consulting practice,he returned to the front

line,playing a key role in the turnaround of Waterford

Wedgwood plc.He followed this with two years at

Ferranti International before joining East Midlands

Electricity as Finance Director in 1994.Bob was also

non-executive Director of T & S Stores, the leading

convenience store retailer,until its acquisition by

Tesco in January 2003.

Raymond Destin (62) Non-executive Director

Raymond has enjoyed a long career in the food industry

primarily with American-owned companies in countries

across Europe.He initially entered the industry in marketing

with Colgate Palmolive.He progressed to become General

Manager of its Campbell Soup food division.He then had

a period as Group Director of Borden Europe, followed by

seven years at Conagra Europe as General Manager.He is

now the General Manager of the European Food Federation.

This is the Continent-wide association of European food

manufacturers.Raymond joined the Geest Board as a non-

executive Director in May 1997.In his day-job,Raymond’s

top priority is to ensure that European consumers have a

wide range of safe,enjoyable and nutritious food products.

David Wallis (55) Non-executive Director

David is a lifelong food retailer and entrepreneur.After

graduating in economics he worked in his family food

business for seven years before selling it to Merchant Retail

Group plc where he subsequently became Chief Executive.

Over the following nine years he gained substantial

experience in acquisitions,disposals and re-structuring,as

well as the continual re-inforcement of the truth that “retail

is detail”.David joined the Geest Board in February 2000.

David is now Chairman of Speedy Hire Plc., the market

leader in the tool hire sector,and a non-executive Director

of Robinson Healthcare.He is an active supporter

of entrepreneurship and advises private equity and

development capital groups.

We thought long and hard about creating our balanced team of

independent non-executive Directors. It is not just about looking at CVs

but,as importantly,understanding what each personality brings to our

business and how the team interacts.

Sir John Banham

In our new independent non-executive Chairman we looked for gravitas

and broad experience.We also wanted a good businessman and someone

who shared our values.Our new Chairman has all of these attributes, the

clarity of thought that McKinsey’s fosters and the depth of understanding

brought by two previous FTSE 100 chairmanships.

Bob Davies

We wanted someone with the skills and experience to give us and our

shareholders comfort in our controls, risk management and beyond.

We found a graduate of the excellent Ford Financial Management

Programme and an ex PLC finance director.His experience in consumer

goods, in operating across a number of European countries and as

CEO of another FTSE 250 company brings an added dimension.

Raymond Destin

We knew we were a UK-centric business with ambition to grow abroad.

We found a Belgian who has worked in most European countries in the

consumer food industry and for companies which understand and practise

the Anglo-Saxon equity culture.That his current job involves close contact

with almost every food manufacturer of scale in Europe is a bonus.We

have offered Raymond a third three year term.This is a departure from our

normal policy,but is important for our Continental European development.

David Wallis

We run a devolved business and encourage our managers to be

entrepreneurial in dealing with our retail customers.We looked for,and

found,an experienced retailer who had headed up his own business

and then adapted his management style to run a publicly quoted PLC.

In David we have found a straight talking,‘hands-on’player with strong

attention to detail.

Please contact our Company Secretary,Dawn Durrant, if you wish to

speak to any of our independent non-executive Directors.See page 32

for contact details.

What did we look for in our independent non-executive Directors?

Independent non-executive Directors (left to right)Length of service on

Name Geest Board (years)

Sir John Banham ‹1

Bob Davies 5

David Wallis 3

Raymond Destin 6

Nominations committeeRemuneration committeeAudit committee


32

Corporate information

Company Secretary and registered office:

Dawn Durrant

Geest PLC

Midgate House

Midgate

Peterborough

PE1 1TN

Company Number:2017961

e-mail:[email protected]

Telephone:01775 761111

Registrar and transfer office:

Computershare Investor Services PLC

PO Box 82

The Pavilions

Bridgwater Road

Bristol

BS99 7NH

Auditor:

KPMG Audit Plc

St Nicholas House

Park Row

Nottingham

NG1 6FQ

Principal bankers:

Barclays Bank Plc

PO Box 190

Barclays House

6 East Parade

Leeds,West Yorkshire

LS1 2UX

Financial PR advisor:

Financial Dynamics

Holborn Gate

26 Southampton Buildings

London

WC2A 1PB

Stockbroker:

Cazenove & Co

12 Tokenhouse Yard

London

EC2R 7AN

Investment bankers:

Lazard

21 Moorfields

London

EC2P 2HT

Investor relations contact:

Paula Cooper

Geest PLC

Midgate House

Midgate

Peterborough

PE1 1TN

e-mail:[email protected]

Telephone:01775 761111

Financial calendar 2003

(All future dates may be subject to change).

Preliminary dividend date details

Announcement date 13 March 2003

Ex-dividend date 28 May 2003

Record date 30 May 2003

Payment of dividend 30 June 2003

Interim dividend date details

Announcement date 11 September 2003

Ex-dividend date 26 November 2003

Record date 28 November 2003

Payment of dividend 31 December 2003

Annual General Meeting 22 May 2003

Interim report available September 2003

Please visit our website www.geest.co.uk

Designed by Merchant with navyblue.

Photography by Tara Fisher and Lee Funnell.

Printed by St Ives Westerham Press on paper made

from totally chlorine free and elemental chlorine

free pulps sourced from sustainable forests.

TalkingnumbersGeest PLCAnnual Report & Accounts 2002

Chairman’s letter 2

Management report 3

Business review 3

Financial review 6

Directors’ reports 9

Directors’ report 9

Corporate governance 11

Our responsibilities 14

Directors’ remuneration report 22

Independent auditors’ report 33

Accounts and notes 35

The accounts 35

Statement of accounting policies 39

Notes to the accounts 42

Vital information 63

Notice of Annual General Meeting 63

Special business to be addressed at AGM 63


£ millions 2002 2001† 2000† 1999† 1998†

Profit and loss account

Turnover

Group 762.0 663.8 566.8 522.8 474.4

Share of joint ventures 10.6 11.3 56.0 3.2 –

Discontinued – – – – 47.7

Total 772.6 675.1 622.8 526.0 522.1

Operating profit before exceptional items

Continuing 42.7 42.3 36.4 32.5 26.5

Share of joint ventures 0.6 0.5 0.9 0.1 –

Share of associate 0.2 0.7 – – –

Discontinued – – – – 1.6

Total 43.5 43.5 37.3 32.6 28.1

Profit on disposal of land and buildings 0.8 – – – –

Net interest payable (3.4) (2.8) (0.7) – –

Profit before exceptional items and taxation 40.9 40.7 36.6 32.6 28.1

Exceptional items – – – 6.7 –

Profit before taxation 40.9 40.7 36.6 39.3 28.1

Taxation on profit on ordinary activities (8.7) (11.7) (10.8) (12.1) (8.8)

Profit on ordinary activities after taxation 32.2 29.0 25.8 27.2 19.3

Earnings per share

Basic earnings per share 43.4p 39.6p 35.6p 38.1p 27.3p

Adjusted earnings per share before

exceptional items 43.4p 39.6p 35.6p 28.7p 27.3p

Diluted earnings per share 43.2p 39.2p 35.4p 37.6p 26.9p

Dividend per share 19.0p 17.3p 15.5p 13.8p 12.0p

Balance sheet

Fixed assets 270.6 255.7 216.6 171.4 143.8

Working capital (26.7) (28.8) (40.9) (39.9) (33.4)

Capital employed 243.9 226.9 175.7 131.5 110.4

Net (debt)/funds (47.7) (54.0) (23.8) 1.9 0.1

Provisions for liabilities and charges (22.5) (18.4) (14.9) (11.2) (7.3)

Net assets 173.7 154.5 137.0 122.2 103.2

Equity shareholders’funds 173.2 154.2 136.8 121.8 102.8

Equity minority interests 0.5 0.3 0.2 0.4 0.4

173.7 154.5 137.0 122.2 103.2

†Figures adjusted for prior period adjustment (see note 1,on page 42).

Progress report – our five year summary

1

2002 Financial highlights

Continuing turnover£ millions

1998

1999

2000

2001

2002

0 160 320 480 640 800

EBITDA*£ millions

1998

1999

2000

2001

2002

0 15 30 45 60 75

*Earnings Before Interest,Taxation,Depreciation and Amortisation

Earnings per share before exceptional items (restated)pence

1998

1999

2000

2001

2002

0 10 20 30 40 50

Dividend per sharepence

1998

1999

2000

2001

2002

0 4 8 12 16 20

• Group sales up 15% to £762.0m (2001:£663.8m)

• EBITDA* growth of 10% to £73.9m (2001:£67.0m)

• Profit before interest and tax growth of 2% to £44.3m (2001:£43.5m)

• Earnings per share up 10% to 43.4p (2001:39.6p)

• Capital expenditure of £47m• Total dividend of 19.0p (2001:17.3p),up 10%

We now employ about 10,000 people and the

achievements of Geest are theirs.Ours is a demanding

business and,on behalf of the Board and shareholders,

I would like to thank them all.

I also wish to thank Ian Menzies-Gow,Executive

Chairman of Geest for six years,who retired last

September.He oversaw a period of exceptional growth

and delivery and deserves the thanks of all.We wish him

a long and happy retirement. In Gareth Voyle, the new

Chief Executive Officer,and his management team,

Geest has the mixture of experience,knowledge and

enthusiasm to take your Company forward and develop

its undoubted further potential.

2002 has been a busy year for your Company.We have

grown Group sales by 15% to £762 million, reflecting

strong growth in demand for fresh prepared foods

in both the UK and elsewhere in Europe and also a

step jump increase in our whole head produce business.

Capital expenditure amounted to £47 million,bringing

the total for the last three years to £173 million; today,

30% of Geest’s prepared sales are produced in facilities

that are less than four years old.Profit before interest

and taxation only grew by 2% to £44.3 million,which

was impacted adversely by much slower than anticipated

growth of prepared salads in the summer and also by

higher than expected start up costs of new ventures.

Earnings per share grew by 10% to 43.4p as a result of

profitable asset disposals and effective management

of the Company’s tax charge.

Your Board is upbeat about future growth prospects as

evidenced by our recent acquisition in France; this makes

us now the third largest producer of prepared leaf in

France and gives us opportunities in Spain.Our home

market for fresh prepared foods is growing currently

at about 9% per year and our leading market positions

ensure we are well placed to benefit from this growth.

Fresh prepared foods probably account for 5% or less

of the total retail market for food (by volume) – this

must mean substantial headroom for further growth

and I am confident in your Company’s ability to exploit

this.Our expectation is that we will invest some

£50 million in capital expenditure in 2003.

Given these growth prospects and the strength of our

balance sheet,we recommend a dividend of 19.0p for

the full year,a 10% increase on the prior year.This will

be paid on 30 June 2003 to all shareholders on the

register at the close of business on 30 May 2003.

I look forward to seeing you,and updating you on trading

in the current year,at the forthcoming Annual General

Meeting.At the meeting we are asking shareholders to

give approval so that your Company has the ability to

buy back up to 10% of its issued share capital. I see this

as a piece of good housekeeping and I can confirm that

we continue to see a large number of opportunities to

invest profitably in our growing markets.

The various uncertainties in the world today do not seem

to affect consumers who continue to demand more

of our products.Our markets continue to show good

growth and,although our rate of growth this year will be

affected by the extent of recovery in the prepared salads

market, I am confident that this will lead to further

progress by your Company.

Yours sincerely,

Chairman’s letterDear Shareholder

I was delighted to be asked to join the Board of your Company in August and to

become your Chairman in September.Geest has built a remarkable track record since

1996 of growing sales and earnings,by investing in the core business.The combination

of close working relationships with our customers, strong market positions,modern

facilities largely financed from operating cash flow and the quality of our people and

culture add up to a major opportunity for organic growth in the future.


2

Sir John BanhamChairman Geest PLC

“Geest has the mixture of experience,knowledge and enthusiasm to take your Company forward and develop its undoubted further potential.”

3

Overview

Group sales grew by 15% to £762.0 million

(2001:£663.8 million), supported by a step jump in

demand in our whole head produce business as we

became sole salad supplier to one major customer.Our

total fresh prepared sales grew by 10%,with growth of

26% in Continental Europe and 8.5% in the UK. In this

country,we saw strong growth of around 16% in our

largest market sector, ready meals,and of 14% in pizza,

our third largest market sector.However,as we have

previously reported,we achieved weaker sales growth

than we expected for the year in prepared salads,

amounting to 8%. Inevitably, this brought down our

overall performance as prepared salads account for

over a third of our prepared food sales.

Profit before interest and taxation grew by 2% to

£44.3 million (2001:£43.5 million).Our usual profit

growth was held back both by the impact of the sudden

fall in salad sales growth over the summer and two new

start ups taking longer to achieve their targeted returns

than planned. Interest costs rose by £0.6 million,a

reflection of funding our capital expenditure.Overall,

profit before tax rose marginally to £40.9 million

(2001:£40.7 million).

Earnings per share rose 10% to 43.4p (2001: restated

39.6p) helped by a lower tax charge due to a one off

benefit from settling an outstanding tax computation

from several years ago.

At the year end,net debt was £48 million representing

0.6 times EBITDA and well within our debt borrowing

limit.Our interest cover was 13 times and pension

assets and liabilities were in balance.This balance sheet

strength allows us freedom to take advantage of

opportunities as they present themselves.We had a net

cash inflow of £6.3 million partly due to the sale of assets.

As we grow,so we expect to use our capital more

efficiently which means that we will need to invest less

for any given increase in sales. In 2002,we generated £40

million free cash flow before we invested in additional

capacity, illustrating the intrinsically cash generative

nature of our existing business.

Capital expenditure during the year was £47 million.

Our return on invested capital in 2002 was 13%,well

above our cost of capital.At the forthcoming Annual

General Meeting,we are asking shareholders to give

approval to buy back up to 10% of Geest’s issued capital.

This is purely a piece of good housekeeping as we continue

to see a large number of opportunities to invest profitably

in our growing markets.

Dividend

The Board is recommending a final dividend of 11.75p

(2001:10.7p) giving a total dividend for the year of 19.0p

(2001:17.3p) – an increase of 10%.The final dividend

will be paid on 30 June 2003 to shareholders on the


Market conditions

Despite more uncertainty in the economy than there

has been for many years,we still see strong growth in

our market.Market growth in UK fresh prepared foods

averaged 10% last year and is currently running at 9%.

This slight decline reflects some deflation in the market

place but there is also evidence that many consumers

are trading up into higher value products.Geest is well

positioned to benefit from the increase in the value

growth that this represents.Additionally, further

consumer growth is made more likely by retailers

investing in convenience stores,where sales of fresh

prepared foods are proportionately much higher.

Business review

Gareth VoyleChief Executive Officer

Mark PullenGroup Finance Director

In 2002,the fresh prepared foods market grew by 10% with similar markets in the

Benelux and France growing faster.To exploit this opportunity,we launched nearly

600 new products across all our sectors, invested £47 million in new and existing

facilities and operated five new facilities which we had brought on stream in the last

24 months.We continue to see good opportunities for additional growth in Continental

Europe and we acquired a small French prepared salads business in May 2002 followed

by a second, larger one, in 2003 – which now makes us one of the three largest producers

of leaf salads in that country.We sold our investment property (a distribution centre

in Kent) and an old factory,which generated proceeds of £14 million in aggregate.

Man

agemen

t repo

rt

Our customers are some of the best food retailers in the

world.They are seeking to improve their supply chain

efficiency and give better value for money to their

customers and we continue to work with them to achieve

this.Market research emphasises,however, that fresh

prepared foods consumers consider that the benefits

of time saving and convenience already make these

products excellent value for time and money.

People development

In 2002,we have taken a number of actions to improve

further the way in which we work and to reflect the

growth and changes in our market place.We have

reduced the number of operating divisions from nine

to six to give clarity of customer and market ownership

and to deliver some operational efficiencies.Also,we

strengthened our purchasing activities to deliver

benefits across the Group which resulted in a reduction

in input costs year on year.However,going into 2003,

we will incur higher costs of around £3 million from

increases in our insurance and National Insurance

contribution payments.

We have also started a programme to continue to

develop our manufacturing productivity.Receiving

orders early in the day for despatch later that afternoon

places great demands on manufacturing management

since the product is fresh and cannot be held in stock

awaiting an order.Given the continuing requirement to

improve supply chain efficiency, this programme should

continue to hone our skills in the manufacturing area.

Our Management Board team is clearly focused on our

customers and has the benefit of many years’experience

in our markets.We continue to have development

programmes in place for all senior management to

develop further our expertise.

UK

Sales of UK fresh prepared foods grew by 8.5% to

£582 million (2001:£536 million).Whole head produce

sales rose 51% to £128 million (2001:£85 million).

Ready meals

This is the largest fresh prepared sector in which we

operate and one which has delivered consistently high

growth.Despite this, ready meals still account for less

than 1% of all meals eaten.We saw sales growth of

16%,ahead of the sector’s 13%.We spent £6 million

in capital in this area including the second phase of

expansion at Mariner Foods and an increase in capacity

at Sutton Bridge.

Salads

The market for salads,both whole head and prepared,

was affected by lower than usual demand in the summer

and,consequently,we saw lower than usual rates of sales

growth in prepared salads.We commissioned specific

statistical analysis to enhance our understanding of this

and have found that weather (temperature, rainfall and

sunshine hours) as well as the relative price of prepared

leaf versus whole head salads play a part.This work

should help us to manage our investment in the future

as the analysis suggests a double digit growth rate in

2003,assuming an average weather pattern.

Our sales of prepared leaf and tray salads grew by 8%

in a market which we estimate grew at 11%.We saw

strong growth in tray salads which contain other

ingredients,as well as salad leaves,and which tend

to command a higher price.

Sales of other convenience salads grew by 4%, less than

the market, reflecting some business losses,particularly

of coleslaw where there is some price competition.We

have tended to use the liberated capacity for higher growth

and higher value snack and deli salads.

As expected,all of our prepared salads businesses were

profitable except for Tilmanstone Salads,which was in

its first full year of operation.

Our sales of whole head salads and tomatoes increased

by 57% and reflected the full year benefit of one of our

customers requesting us to be their sole supplier from

October 2001.Our growth rate slowed significantly in

the fourth quarter as we passed the anniversary of this

event.The market growth rate was around 8.5%.

Pizza

We recorded over 14% growth in pizza sales in 2002,

helped by a number of new product launches and an

extension of the PizzaExpress brand into a second

retailer.Despite excellent work improving productivity

at Katie’s Kitchen,we are now running out of capacity.

We are building a new pizza bakery at Holbeach, the

site acquired in 2001.We expect to start production

late in 2003.

Prepared vegetables and stir fry

Our stir fry sales outperformed the market and grew

by around 4%.

We hold a niche position in the prepared vegetable

market and our sales grew in line with the market.

Prepared fruit

The market for prepared fruit grew strongly at over 20%.

Our growth was lower,at 6%, following exceptionally

strong growth in 2001 of over 30%.

Dips

Our dips business had a good year and outperformed the

market with sales growth of 13%.Sales of single dip pots

have been strong and we launched new packaging

formats in March 2002,which have sold well.We are

in the process of building a new dips factory,adjacent

to the existing facility, to produce the larger volume

lines. It accounted for £8 million of capital expenditure

in 2002 and we expect it to come on stream during the

summer of 2003.


4

Pasta and bread

These businesses are both based at Barton-on-Humber

and,at the beginning of 2002,we opened a new pasta

facility at Scunthorpe,a few miles away.The plant was

designed to be a highly automated producer of fresh

unfilled pasta (e.g. spaghetti) and to reduce pressure on

the existing site which was to focus on filled pasta (e.g.

ravioli). In addition, following sales growth averaging

14% over the last five years,we took the decision to

increase capacity for garlic baguettes by building a new

automated bakery alongside the existing facility. It can

take a long time to bring integrated production facilities

up to target efficiency and it is taking us longer than we

expected.The pressure on management to resolve this

meant that they were not as active in driving sales,as

would normally be the case.As a result,our sales growth

in pasta was 1% and in bread 4%,both behind the

market sector growth rates.

The bakery is now profitable again and although the

pasta business is improving, it is still making losses.

Management is addressing our development in these

markets to reinvigorate sales growth.

Pasta sauces

We continue to develop our market position in sauces

and saw sales growth of 10%,with particularly strong

sales towards the end of the year.

Soup

The soup sector grew by 14% this year due to aggressive

discounting by a newly launched manufacturer branded

range.This has held back the growth of retailer branded

ranges and our sales grew by 1%.Retailer brands hold

close to 60% share of this sector (they account for over

90% in most of the sectors in which we operate).

Desserts

We entered the desserts market late in 2000 through

the acquisition of Isleport Foods. In 2002,we reorganised

production processes and focused the portfolio on retail

customers.This entailed stopping the supply of frozen

products to foodservice customers.Sales increased by

29% which represents a 54% increase to retailers with

very successful launches of cake wedges and of high

quality desserts in terracotta dishes.Turnover has yet

to achieve the levels necessary to return a profit,but

further business gains in 2003 seem likely and are

expected to take this business into profit.

OTHER PREPARED FOODS

In addition to the market sectors described above,

we had sales of around £13 million in other areas,

such as sandwich wraps and fresh salad dressings.

Our foodservice business grew by 13%,with good sales

to our largest customer, to whom we started the supply

of prepared vegetables in the second half of the year.

JOINT VENTURE

Our joint venture,with a Lincolnshire grower and packer,

supplies potatoes to one specific customer and sources

potatoes for us to use in prepared products.Sales were

significantly affected by the fluctuating market price

for potatoes and this year we saw a decline of 6%.

Profitability,however,was maintained.

CONTINENTAL EUROPE

Sales of fresh prepared foods in Continental Europe

rose by 26% to £48 million (2001:£38 million).

The Netherlands

Vaco showed excellent growth,21% in constant currency.

This follows on from the relaunch we carried out with

our customer in the autumn of 2001.This brought the

full range of fresh prepared foods to the front of the

store and presented it in a more eye-catching and

attractive way. Inevitably, comparative growth rates

slowed towards the end of the year as we passed the

anniversary of the relaunch.The success of this exercise

has encouraged our customer to ask us to supply more

of their existing range of ready meals and pizza in 2003.

Profitability improved further in 2002 following the

start up losses in earlier years.

France

Cinquième Saison grew 30%, in a market sector which

grew by 11%.This sales growth includes benefits from

the acquisition of SBLP in May of 2002.SBLP,based in

Brittany,was the fifth largest supplier to the multiple

retailers and gave Cinquième Saison better geographic

coverage in France.The acquisition has been integrated

well,with little disruption. In April 2003,we acquired

another prepared salad producer,Crudi. Its principal

customer is McDonald’s to whom Crudi supplies prepared

leaf as an ingredient as well as fruit and snack salads,which

are sold as individual products.Crudi has significant

spare capacity,which gives us opportunities to develop

a broader range of products for existing customers and

to pursue new customers,particularly in Spain where

Crudi has a newly built facility.There will also be further

opportunities to improve the supply chain for leaf to

business units at home as well as on the Continent.

INNOVATION

Alongside quality, service and value, innovation remains

key to Geest.We launched around 600 new products in

2002;either further improving consumer favourites or

bringing completely new ideas to the market. Innovation

comes in various guises from changes in the product on

the supermarket shelf to improved processes behind the

scenes, to finding and developing new raw materials. In

the last six months we have worked with growers and

now have exclusive ingredients, such as tomato varieties

and salad leaves,which can only be found in our products.

We have also developed new packaging concepts and

have listened to our consumers to fine tune some of our

existing products. Innovation is core to our business and

we set management key performance indicators to

make sure that,even in competitive times,we do not

lose focus on this strategic goal.

5

Results for the year

Group sales (excluding our joint venture) for the year

increased to £762 million, representing growth of

15% on 2001.

Total operating profit before goodwill amortisation was

£44.3 million, the same as in 2001.However,depreciation

increased by 27% to £28.8 million in the year as a direct

consequence of the capital investment programme

of 2001 and 2002.Earnings before Interest,Taxation,

Depreciation and Amortisation (EBITDA) therefore rose

to £73.9 million.

During the year we disposed of two properties, realising

a net profit of £0.8 million.One of the properties,an

investment property with a net book value of

£10.5 million,was included as an asset held for resale

at 29 December 2001.The second property disposed

of was held at a net book value of £2.7 million at the

date of disposal.

We have continued our conservative policy of

depreciating the majority of plant and machinery over

eight years.We also take start up costs to the profit and

loss account and apply the capitalisation rules that are

consistent with Financial Reporting Standard (FRS) 15

‘Tangible fixed assets’.

Interest and taxation

Net interest payable for the year was £3.4 million

against £2.8 million in 2001. Interest cover (before

goodwill amortisation) at 13.0 times remains

comfortably above our target level and well within

banking covenants.

Our high levels of capital expenditure allow us to defer a

significant part of our tax liability. In previous years,we

have not recognised this element of tax as our forecast

capital expenditure proved it was unlikely that this tax

would be paid in the foreseeable future.A new accounting

standard,FRS 19 ‘Deferred tax’,now requires this deferred

tax to be recognised in full, irrespective of whether it will

actually be paid.The FRS 19 implementation reduces

profit after taxation by £2.8 million (fifty two weeks

ended 29 December 2001 by £3.6 million) and reduces

net assets by £18.3 million (fifty two weeks ended

29 December 2001 by £15.5 million).

Our effective rate of tax post FRS 19 was 21% (2001:

restated to 29%) compared to standard UK corporation

tax of 30% (2001:30%).Before accounting for deferred

taxation,our effective rate was 11% (2001:17%).

The difference between the pre and post FRS 19

effective tax rates is due to the high levels of capital

expenditure that we continue to undertake.When

compared to the standard rate of tax, the low effective

rate post FRS 19 is the result of the tax efficient

structuring of certain transactions and a one-off

provision release following the settlement of an

outstanding issue with the Inland Revenue.Diligent

tax planning will continue to be an integral part of

our commercial activities and we expect to be able

to maintain a tax charge below the standard rate

in the near term.

Earnings per share and dividend

Earnings per share has increased by 10% to 43.4p.

The higher rate of growth in earnings per share reflects

the benefit of the reduced effective tax rate of 21% and

profitable asset disposals.This was, in part,offset by the

dilutive effect of the issue of shares for our sharesave

scheme and additional Company share options.

Financial review


6

7

The Board is pleased to propose a final dividend of

11.75p.Together with the interim dividend of 7.25p,

the total dividend payable for the year is 19.0p,an

increase of 10%.Dividend cover for the year was

2.3 times (2001: restated 2.3 times).

Cash flow and capital investment

Cash generated from operations during the year totalled

£61.7 million compared to £63.3 million during 2001.

Capital expenditure for the year was £47.1 million,

compared to £73.8 million in 2001,and has mainly been

spent on increasing capacity to support the market

growth and consumer demand for fresh prepared foods.

In the year we received £14.1 million from the sale of

an investment property at Maidstone and a redundant

factory (Kent Salads),which was closed in 2001 when

we moved into a new facility (Tilmanstone Salads).

During the year,we spent £1.0 million on the acquisition

of subsidiary undertakings which comprised the share

capital of Société Bretonne de Légumes Préparés (SBLP)

SA and deferred consideration in respect of the

2001 acquisition of Cherry Valley Farms Limited

(2001:£3.5 million).The acquisition of SBLP SA resulted

in additional goodwill of £0.5 million which has been

capitalised and is being amortised over 20 years.Since

the year end,we have conditionally acquired the share

capital of the Geneviève Langlais group of companies

(‘Crudi’).The acquisition,which cost H19 million plus net

indebtedness,marks the next step in our expansion into

Continental Europe.The acquisition was made out of

existing resources and borrowing facilities.

Working capital outflow was £10.8 million and tax

and dividend payments totalled £19.1 million.The

resulting net funds inflow for 2002 was £6.3 million

(2001:outflow £30.2 million).

Capital structure and finance

Shareholders’ funds at the year end totalled £173.7

million (2001: restated £154.5 million).The increase is

largely due to retained profits of £17.9 million.As noted

above, the effect of implementing FRS 19 has been

to reduce net assets by £18.3 million (by £15.5 million

as at 29 December 2001).

Net borrowings at the year end reduced to £47.7 million

(2001:£54.0 million) mainly as a consequence of

the receipt of £14.1 million noted above.The reduction

has been achieved despite another year of significant

capital investment.Balance sheet gearing (net debt

to shareholders’ funds) reduced to 27% (2001:

restated 35%).

We have undertaken a refinancing exercise that

refinanced and repaid £32.5 million of debt due to

mature in November 2003 and raised committed lines

that give access to a further £27.5 million.The Group

now has access to total borrowings amounting to

£92.5 million.The maturity profile of these new facilities

and our other debt is detailed on page 50.The increased

committed bank facilities and our strong cash inflow

from operating activities ensure that we are in an

excellent position to finance our future investment

plans and take advantage of opportunities that become

available including potential share buy backs.

Pensions

The latest full valuation of the Geest defined benefits

scheme was carried out at 31 March 2001.At that time,

under SSAP 24 ‘Accounting for pension costs’, the

scheme had assets worth £114.8 million and a surplus

of £36.3 million. In accordance with the advice of our

actuaries we credited £4.8 million of the surplus to the

profit and loss account in 2002.

With 77% of the assets being held in equities, the

current fund value has been adversely affected by the

fall in global equity markets in the last 12 months.

Under FRS 17 ‘Retirement benefits’,which is being

implemented in accordance with that standard’s

transitional arrangements, the value of the scheme’s

assets are approximately £90 million,virtually the same

as the fund liabilities,generating a minor deficit of

£0.2 million.Despite the fall in valuation,the fund has

outperformed its investment benchmarks and has

returned 0.9% behind the WM 2000 Median for 2002.

As at 29 December 2002, the fund value represented

27% of our market capitalisation.

Geest’s pension fund,at 52% of shareholders’ funds,

is small relative to most Public Limited Companies and

we have currently 900 active members,1,100 deferred

pensioners and 1,100 pensioners.We use a defined

benefit pension to attract and retain talent, the cost

and affordability of which remains under review.

Under FRS 17 it is estimated that the profit before tax

would have been reduced by £2.1 million and net assets

by £9.2 million when compared to SSAP 24.

Shareholder value

We seek to enhance shareholder value by consistently

delivering capital and dividend growth. In targeting and

delivering shareholder value,we have not compromised

our controlled and measured approach to investments

and therefore utilisation of our funds.The average

invested capital for the year after adjusting for the

pension debtor was £256.2 million (2001:£224.7

million) and the average post tax return on invested

capital including goodwill but excluding the spreading

of the pension surplus in 2002 was 13% (2001:14%)

versus a weighted average cost of capital (WACC) of less

than 10%.We have a target Internal Rate of Return (IRR)

of better than 12% post-tax on our investments.

Accounting standards

Our Accounting Policies fully reflect the requirements

of the Accounting Standards Board. In line with

pronouncements from the Accounting Standards Board,

we are providing the additional disclosures required

under FRS 17 and adopting FRS 19 for the first time in

these accounts.The impact of FRS 19 on the financial

position of the Group is explained under the heading

‘Interest and taxation’on page 7.

Treasury management

Our treasury activities are controlled and monitored

by the Treasurer,under the supervision of the Group

Finance Director,and are carried out in accordance with

policies approved by the Board.The purpose of the

treasury policies is to ensure that adequate cost

effective funding is available to Geest at all times and

that exposure to financial risk is minimised.The risks

managed by the Group Treasury department are funding

risk, interest rate risk and currency risk.

A detailed treasury manual is used across Geest which

clearly defines policies governing the management of

these risks.These policies have remained unchanged

throughout the year.

We use financial instruments such as interest rate swaps

and forward currency contracts to hedge against the

effects of significant movements in both interest and

currency rates on the underlying business activities.

The Treasury department does not operate as a profit

centre and therefore no speculative transactions

are permitted.

Interest rate management

During the year,our core borrowings were around

£45 million.We have a policy of managing our exposure

to interest rate fluctuations.We do this by keeping

between 25% and 75% of our borrowings at fixed rates

of interest.We use interest rate swaps to give protection

from significant movements in short term interest rates.

As at 28 December 2002,49% of our borrowings were

at a fixed rate of interest for three to four years, the

remaining borrowings were at floating rates.Details of

our borrowings are disclosed in note 17 on pages 50 to 52.

Liquidity risk

Our policy is to ensure that we have adequate

medium term funding and committed bank facilities

available to meet forecast peak borrowing

requirements.We have committed facilities of

£92.5 million with a number of banks,maturing between

two and five years.We also have access to uncommitted

facilities and overdraft lines.

Foreign currency risk

We have two major overseas trading operations and

their receipts and payments are largely in their local

currencies and therefore not hedged.We have a Rand/

Sterling exposure from our business in South Africa that

we hedge via short term contracts. In order to protect

our Sterling balance sheet from the effect of currency

fluctuations on our European assets,we utilise Euro

denominated borrowings.This form of hedging accounts

for 24% (2001:26%) of our year end borrowings.

On purchases of goods in foreign currency we eliminate

currency exposure on transactions through the use of

forward exchange contracts.

Risk management

All aspects of risk management are reviewed regularly

by the Board as outlined in the ‘Corporate governance

report’on pages 11 to 13.

We continue to provide the first layer of our insurance

cover through a wholly owned captive insurance

company based in Guernsey.Risk of major loss and

liability is transferred to the insurance markets.

Average operating capital employed£ millions

1998

1999

2000

2001

2002

0 50 100 150 200 250

Cash flow from operations£ millions

1998

1999

2000

2001

2002

0 15 30 45 60 75

Return on invested capital%

1998

1999

2000

2001

2002

0 4 8 12 16 20


8

9

Principal activities and business review

The principal activities of the Group are the preparation

and marketing of fresh prepared foods and the

marketing and distribution of fresh produce.

The operational and financial activity of the Group in

the period is discussed in more detail in the ‘Business

review’on pages 3 to 5 and the ‘Financial review’on

pages 6 to 8.

Results and dividends

The profit on ordinary activities before taxation was

£40.9 million (2001:£40.7 million).

An interim dividend of 7.25p per ordinary share was paid

on 30 December 2002.The Directors recommend a final

dividend of 11.75p per share,making a total for the

period of 19.0p (2001:17.3p). If approved at the

forthcoming Annual General Meeting, the final dividend

will be paid on 30 June 2003 to shareholders on the


Fixed assets

The Directors are of the opinion that there is no

significant difference between the book value and

market value of the fixed assets of the Group.

Directors and their interests

Details of the present Directors are shown on pages

30 and 31 of the ‘Geest talks’section.

During the period Mr David Arculus was appointed

as a non-executive Director on 6 February 2002 and

resigned on 30 April 2002.

Dr John Dutton resigned as a Director on 31 March 2002

and Mr Ian Menzies-Gow resigned on 27 September 2002.

Sir John Banham was appointed as an independent

non-executive Director on 1 August 2002 and became

Chairman on 1 September 2002.

Mr David Wallis was reappointed as an independent

non-executive Director for a second three year

term on 1 February 2003.

Mr Raymond Destin will be reappointed for a third three

year term as an independent non-executive Director on

1 May 2003.The Board has departed from its usual

policy that non-executive Directors should serve

a maximum of two three year terms in view of the

contribution that Mr Destin can make at this time

in the Company’s evolution in Continental Europe.

Details of the Directors’service contracts and the

interests of the Directors in the shares of the Company

and in options over such shares are disclosed in the

‘Directors’ remuneration report’on pages 22 to 32.

Mr Wallis and Mr Destin retire by rotation at the

forthcoming Annual General Meeting and,being eligible,

offer themselves for re-election.Sir John Banham,who

was appointed to the Board on 1 August 2002,also

retires and being eligible,offer himself for election.

No Director had at any time during the period,or has,

a material interest in any contract or arrangement of

significance to which any Group undertaking was,or is,

a party.The Company has effected insurance covering

Directors and officers against liabilities,which they may

incur in their capacity as Directors or officers.

Directors’ report

The Directors submit their report and the audited accounts of the Company and

its subsidiary undertakings (together ‘the Group’) for the fifty two weeks ended

28 December 2002 (comparatives in this Annual Report and Accounts are for the

fifty two week period ended 29 December 2001).

Directo

rs’repo

rts

Substantial shareholdings

The Company has been informed that on 14 March 2003

the following shareholders held substantial holdings of

the issued ordinary shares of the Company:

Holding of Issued

ordinary shares share capital

Shareholder number %

Credit Suisse Asset

Management Ltd 5,154,008 6.87

Fidelity Investment Services Ltd 4,018,447 5.36

Aberforth Partners 2,867,000 3.82

Legal & General Investment

Management 2,850,993 3.80

Deutsche Asset Management Ltd 2,844,806 3.79

Newton Investment

Management Ltd 2,767,121 3.69

ISIS Asset Management 2,613,833 3.48

Going concern

The Directors confirm that they are satisfied that the

Company and the Group have adequate resources to

continue in business for the foreseeable future.For this

reason, they continue to adopt the going concern basis

in preparing the accounts.

Creditor payment policy

The Group’s strategy is to develop mutually beneficial

relationships with our key suppliers.The Group’s policy

in relation to all of its suppliers is to settle the terms of

the transaction and to abide by those terms,provided

that it is satisfied that the supplier has provided the

goods or services in accordance with the agreed terms

and conditions.

The average number of days’purchases outstanding for

payment by the Group was 51 days (2001:58 days).

Share capital

Details of shares issued during the period following

the exercise of options under share option schemes

operated by the Company are set out on page 53.

No other shares were issued during the period.

Additional information regarding various share option

arrangements and options outstanding is given

in the ‘Directors’ remuneration report’on pages 22 to 32.

Auditor

A resolution concerning the re-appointment of KPMG

Audit Plc as auditor and to authorise the Directors to

agree the level of remuneration will be proposed at the

forthcoming Annual General Meeting.

Directors’responsibilities for preparing the accounts

The Directors are obliged under company law to prepare

accounts for each financial period and to present them

annually to the Company’s members at the Annual

General Meeting.

The accounts,of which the form and content is

prescribed by the Companies Act 1985,must give a true

and fair view of the state of affairs of the Company and

the Group at the end of the financial year,and of the

profit or loss of the Group for the period,and must

comply with applicable accounting standards, subject

to any material departures disclosed and explained in

the accounts.

In preparing the accounts, the Directors are responsible

for the adoption of suitable accounting policies (as set

out on pages 39 to 41), consistently applied and

supported by reasonable and prudent judgement

and estimates.

In addition, the Directors are responsible for maintaining

proper accounting records which disclose with reasonable

accuracy the financial position of the Group and which

enable them to ensure that the accounts comply

with the Companies Act 1985.They have general

responsibility for taking reasonable steps to safeguard

the assets of the Group and for the prevention and

detection of fraud and other irregularities.The Directors’

statement on the Group’s internal controls is set out on

pages 11 to 13.The Directors confirm that the above

requirements have been complied with in the accounts.

Special business at the Annual General Meeting

Resolutions will be proposed at the forthcoming Annual

General Meeting for the following purposes:

1 To grant to the Directors limited authority to exercise

the powers of the Company to allot shares.The

Directors have no present intention to exercise this

authority except pursuant to employee share schemes.

2 To confer on the Directors restricted power to allot

shares for cash without complying with statutory

pre-emption rights up to an aggregate nominal amount

of £187,539,which sum represents 3,750,787 ordinary

shares of 5p each,being approximately 5% of the issued

share capital of the Company at 14 March 2003.

3 To approve the ‘Directors’ remuneration report’set

out on pages 22 to 32.

4 To seek approval for the Company to make purchases

of its own shares.The Directors have no present

intention to exercise this authority.The authority

will only be exercised if it is earnings enhancing and

in the best interests of shareholders.

5 To seek approval for the establishment of the Geest

PLC 2002 Executive co-investment plan,as described

in the enclosed Chairman’s letter.

Resolutions 1 and 2 above, if passed,will renew until the

next Annual General Meeting a similar authority granted

to and conferred on the Directors by resolutions passed

at the last Annual General Meeting.

The various resolutions are set out in the ‘Notice of

Annual General Meeting’on pages 63 to 64.

By order of the Board

Dawn E Durrant

Company Secretary

4 April 2003


10

11

Compliance statement

The Board of Directors has complied throughout the

period ending 28 December 2002 with the ‘Principles of

Good Governance’ (‘the Combined Code’) as set out in

the Listing Rules of the Financial Services Authority.

Joint ventures and associates have not been dealt with

as part of the Group for the purposes of applying this

guidance although the Group endeavours to promote

compliance in these entities.

Risk management process

Following publication of guidance for Directors on

internal control:‘Internal Control Guidance for Directors

on the Combined Code’ (‘the Turnbull guidance’), the

Board confirms that (a) there is a continuing process for

identifying,evaluating and managing the significant

risks faced by the Group (b) the process has been in place

for the year under review and up to the date of the

approval of the Annual Report and Accounts and (c) this

process is regularly reviewed by the Board and accords

with the guidelines.

The Board continues to believe that the five areas listed

below are those which are fundamental to the success

of the Company’s business.

Food safety:Millions of people eat our products. It is

paramount that we ensure food safety.

Our customers: We serve a few,very important

customers.We make products which carry their brand

name.Total customer care/service is vital.

Our consumers:Central to the success of our business

is offering a variety of innovative and attractive products,

which are of high quality yet convenient to a consumer

who is increasingly demanding these attributes.

Our people:To grow and deliver in the current

environment requires good people.We need to recruit,

retain and develop our people to support our growth.

We also need to share the same values if we are to work

cohesively and in a common direction.

Our investment: We have grown substantially over the

past few years and plan to do so, sustainably. It is necessary

that all of the key resources are available to allow that

growth to continue and that our investments deliver

targeted returns.

Further details of these risks are set out in the ‘Geest talks’

section on pages 20 to 29.

These five ‘Big’ risks are managed by the Board which

receives regular reports and presentations in these areas.

Once a year the Board formally reviews these risks and

the processes in place to manage them,to consider

whether they are still appropriate and to identify any

significant increase in risk that requires action.

In arriving at the five ‘Big’ risks the Board identified

over thirty subsidiary risks,which all fall into one or more

of the above categories.The management of these

subsidiary risks has been allocated to specific senior

managers.All thirty risks are re-evaluated formally by

the Management Board at least once a year to assess

whether they are still appropriate and to identify any

significant increase in risk that requires action.

The results of the Board and Management Board’s

assessment and any proposed actions are considered

by the Audit Committee.

The internal control framework

Responsibility:The Board is ultimately responsible for

the Group’s system of internal control and for reviewing

its effectiveness.However, such a system is designed to

manage rather than eliminate the risk of failure to achieve

business objectives,and can provide only reasonable and

not absolute assurance against material misstatement

or loss.

Corporate governance

The Board,whilst maintaining its overall responsibility

for managing risk within the Group,has delegated the

detailed design and operation of the system of

internal controls to the Management Board.

Framework:The Group maintains a well established

control framework comprising clear structures and

accountabilities,well understood polices and procedures

and budgeting and review processes.The key elements

within the control structure are as follows:

The Group operates a de-centralised divisional structure.

The Board establishes corporate strategy and the

Group’s business objectives.Divisional management

integrates these objectives into divisional business

strategies with supporting financial objectives.

Each division and its constituent operating units have

formal management structures with clear definition

of responsibility and which operate within well-defined

policies,which cover financial matters, food safety,

health and safety and the environment,human resources,

purchasing and engineering.Policies and control

procedures are documented in manuals which are

distributed to each business unit.

Review: The Management Board meets monthly to

consider Group and divisional financial performance,

business development plans,Group management

issues,financial and operating budgets and forecasts,

capital expenditure proposals and other key

performance indicators.

Reports on Group and divisional performance are

discussed at Board meetings.The Board also regularly

receives reports from key executives and functional

heads covering such areas as human resources, customers,

consumer trends, food safety, IT,health and safety,

environment, taxation and corporate matters.

The Audit Committee receives reports on the system of

internal financial controls from the external and internal

auditors and reviews the process for monitoring the

effectiveness of internal controls.

There is a Group wide policy governing appraisal and

approval of investment expenditure and asset disposals.

Post completion reviews are performed on all material

investment expenditure and reported to the Board.

Audit:A system of self-certification of compliance

with key financial controls and procedures is operated

throughout the Group that provides a documented

and auditable trail of accountability.These documents

are reviewed by the internal auditors for completeness

and any non-compliance is reported to the Board.

The Group has an internal financial audit function,

within Operational Review,which is reviewed by the

Audit Committee annually for the appropriateness of

resources and authority.The Head of Operational

Review reports directly to the Audit Committee on the

results of its work.Operational Review carries out

reviews on operating units on their financial,operational

and compliance controls, and compliance with Group

financial policies.Operational Review reports its

findings to divisional and Group management,and any

material issues are reported to the Audit Committee.

The audit programme,which is based on an annual risk

assessment of the operating units, is approved by the

Audit Committee.

The Group has an internal team which audits production

sites for technical integrity and food safety.This team

is accredited with independent status by the British

Retail Consortium.All sites are audited at least annually

and any issues are reported to the Board.Health and

safety and environmental issues are also monitored

by the Board and there are systems in place to audit

performance.All sites also undergo an annual

assessment in respect of insured risks such as physical

security and fire.

To underpin the effectiveness of controls, it is the

Group’s policy to recruit and develop and manage staff

of high calibre, integrity and appropriate disciplines.

There is an annual appraisal process which assesses

performance against agreed objectives and the Group’s

values,and identifies necessary training to maintain

and enhance standards of performance.

Board processes

The Group remains dedicated to maintenance of high

standards of corporate governance.This report explains

the approach the Company has taken to comply with

the principles set out in Section 1 of the Combined Code.

The statement of the Directors’ responsibilities

in preparing the accounts is set out on page 10 and

the statement from the auditor on its reporting

responsibilities is on pages 33 and 34.The statement

on going concern can be found in the ‘Directors’ report’

on page 10,and on investor relations in ‘Our

responsibilities’on page 21.

Directors

During 2002, the Board comprised between three and

five executive and between three and four independent

non-executive Directors (see ‘Directors’ report’ for details

of appointments/resignations) who had the collective

responsibility for ensuring that the affairs of the Group

were managed competently and with integrity.The

non-executive Directors are not employees of the

Group,and the Board considers that all non-executive

Directors are independent of management and free

from any business or other relationships which could

materially interfere with the exercise of their judgement.


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13

The Board is chaired by an independent non-executive

Director,Sir John Banham,and the Chief Executive

Officer is Gareth Voyle.The senior independent non-

executive Director is Bob Davies.Biographical details

of the Directors are given on pages 30 and 31 of the

‘Geest talks’section.

The full Board meets nine times a year and, in addition,

annually devotes two days for a meeting on longer term

planning,giving consideration both to the opportunities

and risks of future strategy.Senior executives also

attend the meeting.There was full attendance at all

Board meetings during the year.

Board members are given appropriate documentation

in advance of each Board meeting.This normally includes

a detailed report on current trading and full papers on

matters where the Board will be required to make a

decision or give its approval.Annual (or more regular)

formal reports are given to the Board on such matters

as food safety,health and safety,environment,human

resources, IT,pensions, insurance and treasury,and specific

business presentations are given where appropriate.

The Board has a clearly documented schedule of

matters reserved to it including the agreement of

strategy and budgets, the approval of major capital

expenditure,policies covering treasury operations and

authority levels for capital expenditure.The Board

delegates day-to-day and business management

control to the Management Board,which comprises

the executive Directors and other senior managers.

This meets formally every month and its decisions are

communicated throughout the Group as relevant.

All Directors receive necessary training in their duties

and responsibilities on appointment.Site visits and

briefings are also arranged and the majority of the Board

meetings take place at business units to enable the

Board to understand the relevant business,view the

facilities and meet local management and employees.

The Directors are regularly updated on their duties and

responsibilities, and have access to the advice of the

Company Secretary and to independent professional

advice where needed at the Company’s expense.

The Chairman appraises all Board members annually

and reports his collective findings to the Board.

All Directors are required to submit themselves for

re-election every three years,and Directors appointed

during the period are required to seek election at the first

Annual General Meeting following their appointment.

Appointments to the Board are recommended to the

Board by the Nominations Committee,which is chaired

by Sir John Banham,and consists of the independent

non-executive Directors.

Principal Board committees

The Board has established several committees,each

with specific terms of reference,and are as follows:

– Management Board (chaired by Gareth Voyle)

The Management Board is responsible for implementing

Group policy,monitoring business performance,approving

budgets and capital expenditure for recommendation

to the Board and ensuring efficient management of

the Group.The members of the Committee are the

executive Directors and other senior management.

- Remuneration Committee (chaired by David Wallis)

The Remuneration Committee is responsible for reviewing

and recommending all the elements of the policy on

the Board’s and senior executives’ remuneration and for

approving all matters relating to the remuneration of

executive Directors and members of the Management

Board. It meets at least three times per year.All

independent non-executive Directors sit on the

Committee and the Company Secretary attends

all meetings.

- Audit Committee (chaired by Bob Davies)

The Audit Committee assists the Board in fulfilling its

oversight responsibilities,primarily in reviewing and

reporting financial and non-financial information to

shareholders, systems of internal control and risk

management and the audit process. It has the power

to call for information from management and to consult

directly with the external auditor or their advisors

as considered appropriate.The Committee comprises

the independent non-executive Directors and meets

usually three times annually.The external auditor, the

Head of Operational Review and the Company Secretary

attend all meetings.The Group Finance Director,Chief

Executive Officer and Group Financial Controller attend

meetings by invitation.The independent non-executive

Directors will, from 2003,always meet privately with the

external auditor at least once per year.

- Nominations Committee (chaired by Sir John Banham)

The Committee meets as required,but not less than

once a year,and comprises the independent non-

executive Directors.The Company Secretary attends all

meetings. Its responsibilities include reviewing the Board

structure, size and composition,nominating candidates

to the Board when vacancies arise and recommending

Directors who are retiring by rotation to be put forward

for re-election.

After each meeting the Chairman of the committee

reports to the Board.

Following the publication of the Higgs and Smith reports

and the revised Combined Code,we will be reviewing the

terms of reference of all of our committees in 2003.

We seek to operate responsibly in all areas.However,

given our devolved organisation,we have not,

historically,had an all-encompassing formal system in

place with targets and audits to demonstrate that we

operate in such a way.The increasing interest from our

investors, customers and other parties in corporate

social responsibility (CSR) has moved us to review the

way in which we approach this area,with a view to

putting in place more formal structures,where

appropriate and economically sensible.

The Board takes regular account of the impact of CSR

matters on the Company, identifies and considers the

relevant CSR risks and opportunities and takes collective

responsibility for these.

In 2002,with the approval of the Board,we established a

CSR Steering Committee with the objective of reviewing

key policy areas most relevant to our business and

setting parameters for measuring information and

reporting targets. In some areas we have only just

started to collate information and hence there will be

a lapse of time before we can report against targets,

but this is our aim.We believe also that over time our

policies will need to evolve to reflect customer,

shareholder and consumer concerns as well as legislative

changes.Please note that,unless otherwise stated,all

information relates to our UK Group operations.These

account for 93% of our Group turnover and hence

command our most immediate focus.

We continue to respond personally to individual

requests on CSR from customers and shareholders

and have completed the Business in the Community

2002 Corporate Responsibility Index Survey and

several questionnaires for EIRIS (Ethical Investment

Research Service).

The following report reflects our progress in key areas:

BUSINESS ETHICS

We have established a code of business conduct,which

sets standards of conduct to be adopted worldwide.Our

code does not allow bribery or political contributions and

requires employees to seek to avoid conflicts of interest.

FOOD SAFETY

All food suppliers have a responsibility to supply safe

products.

We risk assess the raw materials we use and their

provenance.No new ingredient material may be

introduced into any of our factories without

technical approval.

We operate a HACCP (Hazard Analysis and Critical

Control Point) approach,whereby entire processes

are reviewed and critical control points are established

and monitored.

We train our staff in audit and HACCP techniques and

we evaluate formally our operations against the rigorous

British Retail Consortium inspection standards for safe

production of food products.

We review our performance formally and regularly with

our customers.We trend key performance indicators,

including customer complaints,hygiene,microbiology

and review of internal and external audits. Each business

unit generates reports monthly and summaries are

submitted to the Board.

Stewardship

Our Group Technical Director sits on the executive

board of the Chilled Food Association (CFA) – a body

whose main role is to promote and maintain standards

of excellence in chilled food production and distribution.

Our Group Technical Services Manager is an active

member of the CFA working groups for microbiology

and hygiene.Geest employees also chair the Quality

Management Panel at the Camden & Chorleywood Food

Research Association Group (CCFRA) and the working

group for the British Standards Institute on quality

systems for the food industry.

Our responsibilities

…business ethics,food safety,health and safety,environment,responsible sourcing

and suppliers,customers,employees,community involvement, investors…


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15

For more information on our approach to food safety,

please refer to pages 20 and 21 in the ‘Geest talks’section.

Genetically modified organisms (GMOs)

In this area,we ensure that we conform to legal

requirements and specific requirements set by our

customers.We have agreement with all of our customers

that raw materials are sourced from non-genetically

modified sources.

Animal testing

None of our products are tested on animals.As far as we

can reasonably establish,none of our raw materials are

tested on animals.

HEALTH AND SAFETY

We have a SHE (Safety,Health and Environment)

manual,which integrates and formalises standard

guidelines for all of our UK business units.

Towards the end of 2001,we initiated our first formally

documented internal health and safety audits.By

November 2002,we completed baseline audits at all UK

sites.The purpose of the audit is to check compliance

with the key topics in the SHE manual as well as other

initiatives which we plan to implement shortly.We have

assessed all UK sites, identified improvement measures,

where applicable,and we will monitor these in 2003.

Our aim, in 2003, is to introduce a scoreable audit

system based on the data gathered during this exercise.

Each business unit appoints safety champions.Our

safety champions sit on the executive teams of each

business unit. In addition,each business unit has a safety

advisor. It is our aim for each safety champion to obtain

an IOSH (Institute of Occupational Health and Safety)

certificate as a minimum and for each safety advisor

to obtain a NEBOSH (National Examining Body of

Occupational Health and Safety) certificate as a

minimum.Our progress to date is that 42% of safety

champions and 88% of safety advisors have obtained

their respective certificates.

Production and factory managers at each site have

specific accountabilities for health and safety and are

given health and safety objectives with measurable

targets,against which they are appraised.This allows

each site to concentrate on its own priorities in this area.

Health and safety performance

The following information is based on the Health and

Safety Executive (HSE) guidelines:

Accidents in the workplace

Our absolute number of reportable accidents in 2002

rose to 412 (2001:376).However,within this figure,our

number of major injuries fell.Our reportable accident

incident rate per 1,000 employees (full-time equivalents)

increased from 48 in 2001 to 50 in 2002.

Reportable accident incident rate per

1,000 employees (full-time equivalents) Number

1999

2000

2001

2002

0 10 20 30 40 50

Our accident incident rate exceeds the average for the

food and drink industry and the majority of our injuries

continue to arise from manual handling and slips and

trips.The nature of our processes,often in wet

environments,makes the possibility of these types of

accident higher than for many other food and drink

manufacturers.We continue to work to identify ways of

improving our performance in these key problem areas.

As we mentioned last year,we adopted an improved

flooring material (to help reduce slips and trips) in 2001,

which was set as a standard specification in production

areas for all new builds and replacements. In 2002, the

new flooring material was introduced, to varying

coverage,at ten different sites and initial indications are

that this is having a significant effect on the reduction

of the number of slips incidents.

We started a trial in early 2003 to look at the

effectiveness of a new anti-slip footwear sole.We are

also co-operating with the HSE in its development of a

new slip measurement tool,designed to aid companies

to reduce these type of accidents.We have offered the

HSE the use of our sites when trialling this equipment.

We continue to work with the HSE to investigate ways

of reducing accidents caused by manual handling.We

are halfway through the 18 month survey which we

mentioned last year.This project is specific to the food

and drink industry. In addition,we continue to evaluate

and implement ways of reducing manual handling tasks

in our processes.

Enforcement notices

In 2002, the HSE inspected our factories on 37 occasions.

These visits resulted in one prohibition order for a faulty

manual lift cage,which was discharged immediately

and,at the end of 2002, two improvement notices for

manual handling operations which were both

discharged in early 2003.

Number of Enforcement

inspections by Improvement Prohibition notices

Year HSE notices notices (Total)

1999 22 2 0 2

2000 22 1 0 1

2001 33 1 0 1

2002 37 2 1 3

Health and safety convictions

It is with regret that we report our first conviction for

a health and safety offence.The offence related to

a manual handling incident which we had identified

as high risk and for which we had put in a safe system

of work.We failed,however, to communicate this

effectively enough to all relevant employees and,

consequently,were fined £17,500 for an offence

under Section Two of the Health and Safety Act

on 5 December 2002.The level of fine is currently

under appeal.

Following this offence, the Board has requested that

more health and safety information is reported

throughout the business to ensure that health and

safety issues remain high on the agenda.

Work-related fatalities and illnessesReported

Work-related work-related

Year fatalities ill health

1999 0 0

2000 0 0

2001 0 2

2002 0 3

In 2002,we recorded three work-related illnesses,

which were upper limb disorders (tenosynovitis and

tendonitis).The illnesses in 2001 were also of a similar

nature.This is the first time we have seen these cases

in our business and we are now monitoring this closely.

Stewardship

The HSE has set up a Safety Passport Forum,which

brings together several industries.Our Group Health and

Safety Manager is the Chairman of the Food and Drink

Safety Passport Steering Group and has also engaged

directly with the Health and Safety Inspectorate by

speaking at training courses.

ENVIRONMENT

Our focus on environmental issues is based on

compliance with legal and regulatory requirements and

specific action in areas which are particularly pertinent

to our business.

Environmental performance

Energy

In 1999,we monitored our energy consumption and this

was used by the Department of Environment,Transport

and the Regions and the Food and Drink Federation as a

base from which to set our target for reduction in energy

as part of the ‘Climate Change Levy Agreement’.The

target was set to reduce our kilowatt-hour per tonne

rate by 10% over the next ten years,with five key

milestone targets every two years.Our first milestone

target in September 2002 was 1649 kilowatt-hours per

tonne.Our actual performance was 1492 kilowatt-hours

per tonne.This performance was helped by the disposal

of the Drax Nursery in November 2001.Whilst our

energy consumption was reduced,our level of sales

increased.Our challenge is to maintain this level.

Kilowatt-hour per tonne performance and targets

Kilowatt-hour per tonne

Base

2002

2004

2006

2008

2010

0 300 600 900 1,200 1,500 1,800

Actual performance Target

Solid waste

Ingredient waste generated from our processes is

measured at each site and there is an incentive to reduce

this as part of each site’s profit improvement plan.

Where legally possible, food waste is recycled (e.g. sent

to farmers) or composted.At one of our sites, two

tonnes of salad leaf waste per week is sent to a local

worm farm.


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We do not yet measure waste to go to landfill but aim to

do so in 2003 with the view of reporting against targets

in 2004.

As part of the ‘Producer Responsibility Obligations

(Packaging Waste) Regulations 1997’,Geest’s UK

business units are obliged to recover and recycle a

percentage of packaging which is used to cover or

carry our finished products.We fulfil these obligations

through membership of Valpak and we have consistently

met our obligations since we joined in 1998.

We have considered the use of recycled plastics.

However,our key concern is ensuring that our food is

delivered to the consumer in the safest possible way.

As we cannot guarantee the content of recycled plastic

we are not prepared to use these materials where they

are in direct contact with our food products.However,

we do use recycled packaging in other areas,and work

continues to investigate suitable materials,which are

recycleable.Our challenge is to use the most appropriate

packaging whilst balancing food safety, cost, consumer

acceptability and environmental concerns.

Refrigerants

As a fresh food group we have a high requirement for

refrigeration. In our older manufacturing facilities we

still use the R22 refrigerants in our refrigeration units,

but these are being phased out at two levels. Firstly,

these older refrigeration units are all at least one third

of their way through their foreseeable life.Secondly,

all new factory builds/extensions use refrigerants such

as ammonia and R404A which have zero ODP (ozone

depleting potential) and are more energy efficient.

We still have a large conversion to undertake but we are

confident of meeting the 2015 deadline for completely

phasing out R22 refrigerants.

We aim, in 2003, to evaluate the possibility of measuring

our refrigerants by type,charge and consumption.

Water

In early 2003,we were prosecuted at one site for

breaching consent levels for effluent discharges

in 2002 and fined £34,000.

Number of

environmental

Year prosecutions

2000 1

2001 1

2002 0

2003 1

We work closely with The Environment Agency and

relevant local water authorities and, together with

Anglian Water,have surveyed our water consumption

in order to identify water saving methods.

We aim, in 2003, to measure cubic metres of water

consumed per tonne of product with a view to reporting

against targets in 2004.

Pesticides

“Produce supplied to Geest must be grown with the

minimal amount of pesticide needed to achieve an

economic yield of the required quality standard.This

means firstly making use of non-pesticide measures for

the control of pests,diseases and weeds, including the

selection of resistant varieties where possible, the use of

beneficial insects and other organisms and the adoption

of sound and sustainable rotations and sound cultural

and hygiene practices.”

Source: Pesticides – Code of Practice for Geest Produce

Suppliers,Version April 2002.

We have developed a defined code of practice for all

aspects of pesticide use in conjunction with the Fresh

Produce Consortium and customer guidelines and which

reflects industry best practice.Our code covers

legislative requirements,accuracy of records and

documentation, storage procedures,disposal of waste,

employee training for handling of pesticides and residue

analysis.We audit leaf suppliers annually for compliance

with this code of practice.

We encourage actively the reduction of pesticides by

promoting crop rotation and field hygiene,crop walking

and the use of predictive models,amongst others.At

Geest,we endorse fully integrated crop management

(ICM) systems.

Stewardship

We are a supporter of LEAF (Linking Environment and

Farming),which is an organisation dedicated to the

promotion of integrated crop management techniques.

Our Procurement Development Manager is a member

of the LEAF Marque Management Group.

Our Procurement Development Manager also chairs the

Outdoor Salads Research and Development Group of

the Horticultural Development Council which steers

and manages grower-funded research and development

in the UK.Our Technical Manager for Produce chairs

the Agrifood Panel at Camden & Chorleywood Food

Research Association Group (CCFRA) and has a seat

on its Science and Technology Committee.

RESPONSIBLE SOURCING AND OUR SUPPLIERS

In early 2003,we developed a responsible sourcing

policy which covers three key areas:

Business conduct with suppliers

Supply chain employment policy

Environmental purchasing

We established these guidelines to encourage the

awareness,acceptance and application of high levels

of integrity in dealing with our suppliers.

Business conduct with suppliers

We have developed a declaration of interest statement

which will be measured and assessed annually.We will

also measure the understanding and acceptance of our

code of conduct across all relevant employees.

Supply chain employment policy

We will assess our supply base against Geest’s own

employee welfare and human rights policy,which is

based on the Ethical Trading Initiative (ETI) code.

Given the diverse nature of our supply base,we will risk

assess our suppliers and audit those we identify as high

risk. In 2002,we developed a supplier self appraisal and

circulated this to our key salad leaf suppliers.The

intention is to roll out this appraisal system,again on

a risk assessment basis, to other key suppliers.We will

work towards policy compliance in respect of all

suppliers by the end of 2007.

Where non-compliance is found we will work with

suppliers to improve their performance over an agreed

timescale.

Environmental purchasing

Our aim in 2003 is to develop an environmental

purchasing policy and a risk evaluation model with the

objective of improving the environmental awareness of

our purchasing activities within Geest and throughout

our supply chain.We will start to capture data in 2003

with the aim of reporting in this area in 2004.

CUSTOMERS

We have few,very large, customers with whom we

work closely.Customer care is one of our company

values.Our business is based on our ability to develop

products for our customers’brands and,consequently,

we have continuous interaction (often daily) with our

customers.We are appraised formally by most of our

customers annually.

For more information about our approach to customers,

please refer to ‘Our customers’on page 22 in the ‘Geest

talks’section.

EMPLOYEES

The Geest Group employs around 10,000 people,with

about 9,000 of these based in the UK.Owing to our high

rate of growth we have seen a 14% net increase in the

number of jobs in the last three years. It is recognised by

the Board (see ‘Corporate governance’on page 11 in this

section and ‘Our people’ in the ‘Geest talks’section on

pages 26 to 27) that the availability of appropriately

skilled people is key to our continued success.

We aim to be in a position where all Geest employees

are proud to work for Geest,and our local communities

are proud to have Geest in their community.Our aim is

to become an employer of choice and, to achieve this,

we recognise that we must excel in internal

management of people-care and morale and improve

our links with local communities.This is necessary to

retain and recruit the best people and to maintain and

instil our values whilst growing our business.

In 2002,we initiated a bespoke employee satisfaction

survey.We piloted this with over 1,000 employees

across four business units.We have now revised the

questionnaire and intend to roll this out across all UK

sites.Our aim in 2003 is to talk to at least another 2,000

employees.We are in the process of translating the

questionnaire into Gujarati, French and Dutch for our

sites where these languages are used.

The outcome of the survey is that we have now

established a ‘care index’composed of scores for

management style, communication,flexibility of

working arrangements and facilities and working

environment.We have set a ‘care index’target and once

all sites are on board we aim to review this annually.

Externally,we have invested in understanding the

employment needs in one of our most important labour

markets (see ‘Our people’on page 26 of the ‘Geest talks’

section).

In early 2003,we developed a policy on employee

welfare and human rights.Our policy envelops the

criteria and standards set out by the ETI and provides

guidance on complying with and surpassing the Base

Code of Labour Practice.We aim to start self audits by

the end of 2003 and implement audits at 50% of our

sites by 2004.

Geest values

The Geest values, implicit in the way we work,were

codified in 1999 to ensure they maintain their

importance as the Group expands.The values are

listed below:

– Customer care

– Can-do approach

– Teamwork

– Doing it right

– Innovation friendly


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19

(For a more detailed explanation of the values,please

refer to our website www.geest.co.uk under the our

company/vision values/our values section.)

For management positions,all potential employees

are recruited on the evidence of the Geest values and

current employees are appraised annually on the above.

Equality of opportunity

Geest has an equality of opportunity policy,which

relates to colour,disability,marital status, race and

ethnic or national origin, religion,gender, sexual

orientation and spent convictions.

Employment profile by gender

Number of women in employment %

2001

2002

0 10 20 30 40 50

Managerial All employees

Women account for around 40% of the Group’s

employees and 41% of all managerial positions.

Employment profile by age

Split by age bracket %

>20

20-29

30-39

40-49

50-60

60+

0 10 20 30 40

Ours is a relatively young business and our average

employee age of 37 reflects this.The average age of our

female employees is 38 and of our male employees 36.

Disabled employees

We consider all applications for employment by disabled

persons fully and fairly in regard to the aptitudes and

abilities of the applicant.Training and career

opportunities are available to all employees and, in the

event of employees developing a disability,every effort

is made to ensure that their employment within the

Group continues and they receive suitable retraining.

Appraisals,career development,training,

apprenticeships and graduate recruitment

We have developed many structures at Geest,which

facilitate career development across the Group.These

are based on appraisals,people/career planning and

training.Over 95% of managers and over 50% of shop

floor employees receive training as part of their career

development plans.

We take appraisals very seriously at Geest and have set

a key performance indicator (KPI) to encourage further

all managers to appraise their direct reports annually.

All management employees are appraised against

the Geest values and, for senior managers,we have

introduced a team feedback appraisal process,again,

based on the Geest values.During the assessment we

measure our employees’performance against

accountabilities, key objectives and Geest behavioural

values. (Please refer to the ‘Our Jobs’section of the

website for more details on job family accountabilities

and expected performance.) In 2002,we appraised 91%

of all managerial employees within the key performance

indicator timescale.

At the end of the appraisal, each employee will have

a revised set of key objectives and an agreed personal

development plan with training and coaching

requirements and timescales.

Our development and succession (DAS) process is used

to identify and monitor all of our management employees

across the Group with the aim of ensuring individual

career development within a particular business or

across businesses.

We identify our employees as either being ready to

move on immediately or within a determined timeframe

following specific coaching or training.This identification

is made at formal DAS meetings held quarterly at

business unit,divisional and functional levels and at the

Management Board level.

Reviewing

Planning objectives,

values and personal

development plans

Continuous coaching


20

Our DAS process provides a structured method for

ensuring appropriate development of our employees

and allows a flow of people who understand the Geest

values to move into bigger roles as the Company grows.

We have established conscience groups for all of our

key functions, such as manufacturing,marketing and

commercial.These groups set roles and objectives for

each level of career progression and spread best practice

across the functional teams.

Our approach to training is that,wherever possible, it

should be Geest-specific and delivered by Geest people.

As a result,we have developed over 30 internal training

courses to meet our business needs and to develop our

employees quickly and effectively.These training

courses cover,amongst others, food safety,product

development skills,prioritisation of engineering

maintenance,negotiation skills, innovation training,

culinary skills and strategic manufacturing excellence.

For the past six years,we have been involved in the

Modern Apprenticeship Scheme in Food and Drink

Manufacturing, run in conjunction with the De Montfort

University (Lincoln),aimed at school leavers and shop

floor employees. In 2002,we supported the Advanced

Modern Apprenticeship Scheme in Food and Drink

Manufacturing.We meet the course fees for both

schemes and currently have 33 employees taking part.

We expanded our Accelerated Management Scheme

in 2002,which is open to both graduates and current

employees.We now have specialist courses in finance,

manufacturing,produce,product development and

technical. These have been developed by the relevant

departments,with the support of the human resources

team,and, in some instances,have been recognised

by external organisations.Our historic retention of

graduates remains high.

Employee representation

Each Geest site has a Site Employee Forum (SEF) which

has elected members representing all employees at that

site.The purpose of the SEF is to provide a forum for

employee communication and to be a vehicle for the

discussion and resolution of individual and collective

issues within the business.About half of our workforce

is unionised and the SEFs work proactively with the

unions on the relevant sites.

In November 1999,we introduced the Geest European

Forum (GEF),which is composed of a nominated SEF

member from each of our sites across Geest.The GEF’s

purpose is to provide a forum for two-way communication

and discussion across the whole Geest group.Each SEF

meets 6-12 times a year and the GEF annually.

COMMUNITY INVOLVEMENT

Rather than adopting a Group-wide approach,we

encourage each business unit to support the charities

of its choice.The ‘rule’ is that a local employee at that

site must nominate the chosen charity or event.Often

the representatives of the Site Employee Forum (SEF)

help decide which charities and events are considered

and how money is to be raised.

Below are just a few examples of the many ways in

which our businesses support their causes:

We sponsored several marathon runners this year and

also some charitable overseas expeditions.We supported

local fun runs and our Tax Manager led (together with

two local football stars) 1,200 children in the Grimsthorpe

cross-country race – one of the largest school cross-

country races in the country.

At our site in Selby,managers washed cars for £2 a

vehicle during the annual ‘fun hour’and four members

of the sales team took part in a 100 mile sponsored bike

ride. In both cases,money raised by the staff was

matched by the business unit.

At our Wingland Foods site,money was raised through

a Mad Hatter’s tea party and pledges for various

employees to have their heads shaved.At another event,

one of the Geest chefs demonstrated how to cook

healthily on a budget at a local health awareness day.

Recipe cards were provided with a discounted set of

ingredients so there was no excuse for people not to try

them out at home.

We invited children from the local kids’club in

Gosberton to make pizzas in one of our factories.Their

reward was a cheque to buy new toys and computer

equipment.

We have donated money for equipment for local

hospitals and ambulance services,play equipment for

local and school playing fields,bought kit for the junior

football team,sponsored the upkeep of flower tubs and

a hockey team’s youth development scheme.There are

many examples where product has been donated to

school fêtes,nursing homes and charity barbecues.We

have donated flower arrangements and fruit bowls and

served 11,202 bowls of ravioli (a world record) at the

Great North Run.

21

We entered a float in the 44th Spalding Flower Parade

(and are already designing next year’s – we have not

missed one yet.) The Geest Staff Shop at Spalding also

sponsored the annual Spalding Fun Day and raised

money to support two local schools.Some 150 Geest

employees took part in the It’s a Knockout tournament

and other entertainment was provided by The Geestie

Boys – a boy(ish) band made up of several of our

employees.At Spalding,we have provided work

experience for 25 students and forwarded volunteers to

take part in the local school’s science fair,GCSE business

studies lessons, career development and industry days.

We helped three schools to achieve special status this

year – ‘Business and Enterprise Status’,‘Specialist

Engineering’and ‘Sports College Status’.

At Spring Valley Foods – our site in South Africa – we

continue to help the local primary school.The school

has 1,300 children and this year’s project was to develop

a library for them.Over 1,000 children’s books were

collected across our sites in the UK and sent to the

school.Members of the management team in South

Africa visit the school regularly to help with computer

training.At the Spring Valley site itself,we continue to

provide free Aids testing and an on-site doctor for one

day a week.We employ a nurse who works full time at

the site.

Total cash charity donations amounted to £32,000 in

2002 (£73,000 in 2001).

INVESTOR RELATIONS

We aim to provide as complete a picture as

commercially sensible to investors and potential

investors,whether institutional or private shareholders.

Number of shares by types of holder %

0 20 40 60 80 100 120

Private holders Corporate holders

Source:Computershare Investor Services PLC as at 13 March 2003

Private investors hold around 10% of our shares and

we are aware of the demand for the dissemination of

information to be made without bias across our

shareholder base.We continue to evaluate ways to

improve information content and flow and impartial

shareholder dialogue.

In September 2002,we relaunched our website,

www.geest.co.uk,and improved the layout and content

in order to facilitate access to Company information.

We update the site with the latest press releases and

copies of preliminary and interim results presentations

as made to the City.

We have now introduced an e-mail alert service on the

site.For those who register we can let you know,via an

e-mail address of your choice,when new information is

made available on the site, for example,dividend dates,

press releases and shareholder events.Although we have

only had a small uptake of shareholders opting to

receive the report and accounts electronically,we still

offer this service.

Our Annual Report and Accounts is still seen, internally

and externally,as an important communication tool and

we have been fortunate enough to win the ProShare

award for ‘Best Annual Report for private investors FTSE

500 company’ for the fourth year in a row and, for the

first time,‘Best Website for private investors FTSE 500

company’.We were voted winner of the Accountancy

Age Business Annual Report and Accounts by the

financial community and received several mentions

at the Investor Relations Magazine Awards.We aim

to continue our efforts in investor relations.

Our Annual General Meeting will be held in Peterborough

on Thursday 22 May 2003 and we welcome all shareholders.

The full Board of Directors will be in attendance and

there will be the opportunity for you to ask them

questions in an informal setting.We are happy to

answer queries from current and potential shareholders

at any time – please contact Paula Cooper by phone,

e-mail, fax, letter or via the website. If you wish to speak

to one of our independent non-executive Directors then

please contact our Company Secretary,Dawn Durrant.

The address and full contact details are on page 32

of the ‘Geest talks’section.


Directors’ remuneration report

22

The following report is the Directors’ remuneration report required by Section 234B Companies Act 1985 (as amended).

It also contains additional information required by the Listing Rules of the Financial Services Authority and other

relevant information relating to our Group pay and benefits policy.

Tables 4,6,7,9,10,11,12 and 13 have been audited by KPMG Audit Plc.

1 Pay and benefits policy

The Remuneration Committee (‘the Committee’) makes recommendations to,and determines on the Board’s behalf

the pay and benefits policy within the Group.The Committee has as its members the independent non-executive

Directors and is chaired by David Wallis.The Committee met five times in 2002. All of the Committee’s

recommendations in 2002 were accepted and implemented by the Board.

The Committee is responsible for reviewing and recommending the appropriate policy for rewarding the Company’s

executive Directors and senior executives taking into account the performance of the individuals and the Group

as a whole.

In implementing its policy, the Committee has given full consideration to the Principles of Good Governance of the

Combined Code with regard to Directors’ remuneration. In particular, the following business considerations have

been addressed:

– the attraction, retention and motivation of the highest quality executive Directors and senior executives;

– to reward executive Directors by reference to the overall performance of the Group and so in turn growth

in shareholder value;and

– to align the interests of employees as closely as possible with the interests of shareholders.

The pay and benefits packages of executive Directors are compared against data in relation to other similar

companies on the Hay database. Advice is also sought from The Monks Partnership and Watson Wyatt.

It is the Committee’s policy that performance related elements should make up at least 50% of the total potential

pay and benefits package for executive Directors.

The pay and benefits packages of our executive Directors and other senior executives is set so as to attract the top

25% of the leadership population.To encourage an entrepreneurial spirit and maximise the opportunity for wealth

creation,the policy is for basic salary to be set at the median and for long and short term bonus to give the opportunity

to earn a total package at upper quartile,provided that stretching and demanding performance targets are met.

The Hay database is used for comparison against similar companies.The Board as a whole determines fees and

other benefits for non-executive Directors.

During 2002,Watson Wyatt was appointed by the Company to review the rules of the long term incentive plan

and other share option schemes against best practice and on the creation of the Geest share incentive plan.

Watson Wyatt and The Monks Partnership also provide advice to the Company on senior employee pay and benefits

and pensions.William Mercer has monitored the performance conditions applicable to the Company’s share plans.

New Bridge Street Consultants was appointed by the Remuneration Committee to advise on the design and

implementation of the Geest executive co-investment plan which is being submitted to shareholders for approval

at the Annual General Meeting.For further details,please see the enclosed Chairman’s letter.New Bridge Street

Consultants does not advise the Company.

During 2002 the following senior executives submitted items for consideration by the Committee:Gareth Voyle,

the Chief Executive Officer and Mark Martin, the Group Human Resources Director in relation to executive

pay;and Dawn Durrant, the Company Secretary in relation to share benefit schemes and corporate

governance requirements.

Directors’service contracts

It is the Committee’s policy that the service contracts of all executive Directors should be capable of termination by

the Company by giving no more than 12 months’notice.Should it prove necessary to terminate the service contract

of an executive Director, the contract requires that any compensation payment be subject to mitigation.

The current executive Directors have enhanced rights of compensation if their service contract is terminated

following a change of control of the Company (see page 29 below).These enhanced rights were negotiated in

1996 following the disposal of the Group’s banana business when the Group was considered vulnerable to a hostile

acquisition.The enhanced rights will not be offered to any executive Directors that may be appointed in the future

and the executive Directors have agreed to relinquish these rights in March 2006.

The independent non-executive Directors are not employees of the Company and are appointed for a fixed term of

three years,which may be renewed by mutual agreement for up to two further terms of three years.The policy is for

two terms to be the norm.

2 Policy on executive Director and senior executive pay and benefits

The main components are:

i) Basic salary

It is the Committee’s policy to ensure that the basic salary for each Director and senior executive is appropriate and

competitive for the responsibilities involved and takes into account external market data. A comprehensive review

of the pay and benefits package of executive Directors was conducted in 2002 against the Hay database and with

advice from The Monks Partnership and Watson Wyatt. A review of the pay and benefits of other members of the

Management Board will take place in 2003.

The Committee has discretion to approve on a case-by-case basis whether a Director may accept appointments and

retain payments from outside the Company.

ii) Short term bonus

Executive Directors will in respect of 2003 be eligible to receive a short term bonus of up to 75% of salary.Two thirds

of this is subject to achievement of a performance target based on growth in Group profit in 2003 and one third based

on personal performance. All members of the Management Board other than executive Directors are also eligible for

an annual short term cash bonus of up to 75% of salary, two thirds of which is subject to the achievement of performance

targets,usually their division’s annual profit, and one third based on personal performance.The maximum cash

bonus has been raised in 2003 as part of the pay and benefits review,on advice from benefit consultants.

In 2002 none of the executive Directors received any short term bonus,as the performance target,based on growth

in Group profit before tax,was not met.

23

iii) Long term incentive plan (LTIP)

In 1996 we introduced a LTIP for senior executives and executive Directors.The aim of this plan is to align the efforts

of key executives with the Company’s objective of creating shareholder value in the longer term.LTIP has two

performance criteria:absolute earnings per share growth and growth in comparative total shareholder return (TSR)

based on share price and dividend performance.The Committee believes that these are appropriate measures of the

underlying performance of the Company and comparative increase in long term shareholder value.

Under the LTIP, conditional awards of shares and cash are made to executive Directors and senior executives selected

at the discretion of the Committee.For executive Directors, the maximum award to be made in any one year is based

on 100% of salary.For other executives the maximum award is based on 30% of salary. (The maximum is being

reviewed for Management Board members in 2003).

Awards are made annually and there is a four year performance period.No part of an award will be released unless

the percentage change in earnings per share of the Company,without taking account of any exceptional profits or

losses,equals or exceeds the percentage change in the Retail Price Index plus 2% per annum over the performance

period. If this target is met, the TSR of Geest over the performance period compared to that of a peer group of

companies in the FTSE food producers sector will determine the percentage of the maximum award to be received

by participants.The current peer group is identified in the table below although Albert Fisher and Devro are now

excluded from cycles four onwards.The Committee periodically reviews the composition of the peer group and

considers that it still provides the most meaningful comparator, rather than an index of companies of a similar size

but in a different sector.

If the Geest TSR ranks at the 50th percentile,25% of the maximum award will be received, rising on a straight-line

basis to the maximum award at the 20th percentile or better ranking.No part of the award will be received for lower

than 50th percentile ranking.

The Committee is advised as to whether performance criteria have been met by the Company Secretary with advice

from William M Mercer who calculate the relative TSR performance.

Subject to meeting the above performance criteria,awards are released to participants in the March following the

end of a performance cycle.

(Awards made prior to 2000 were granted every two years rather than annually and released in two tranches,

in March of the year following the end of the performance period and in the following March).

Table 1 below shows the performance applicable to cycle 3 awards under the LTIP,which matured on 31 December 2001,

and the first tranche of which was released to participants in 2002.

Table 1:Geest PLC: TSR monitoring 1 January 1998 to 31 December 2001

Rank Company TSR (%) % Rank Rank Company TSR (%) % Rank

1 Geest 119 100 9 Nichols (JN)(Vimto) -31 43

2 Cadbury Schweppes 77 93 10 Robert Wiseman Dairies -33 36

3 Barr (AG) 35 86 11 Greencore Group -39 29

4 Northern Foods 6 79 12 Uniq -41 21

5 Associated British Foods 6 71 13 Pura -79 14

6 Linton Park 4 64 14 Devro -81 7

7 Rowe Evans INVS -20 57 15 Albert Fisher -85 0

8 Tate & Lyle -28 50

Source: William M Mercer

Directors’ remuneration report (continued)

24


Table 2 below shows a comparison of Geest PLC TSR performance against the median achieved by the FTSE 350 Food

Producers and Processors group and the FTSE 250 companies, considered to be the most appropriate comparator

groups,over the period 1998 to 2002 inclusive.

Table 2:Geest PLC Cumulative TSR performance 1998 to 2002

Third cycle:1998 to 2001 (four years):Now completed

The performance period for the third cycle was January 1998 to December 2001.The performance criteria were

met in full and so the maximum awards were released.28% of the shares along with a cash bonus representing

approximately 30% of the total bonus value were transferred to participants in March 2002 and the remaining 72%

of the shares were transferred in March 2003.Details of the shares and cash released and to be released to executive

Directors are set out in table 9 on page 31.

Fourth cycle:2000 to 2003 (four years);fifth cycle:2001 to 2004 (four years);sixth cycle:2002 to 2005

(four years);seventh cycle:2003 to 2006 (four years)

The total annual value of each award at date of award is 100% of salary for executive Directors and 30% of salary

for senior executives.

The maximum number of shares that could be released to executive Directors under awards were made in 2000,

2001,2002 and 2003 is set out in tables 10,11,12 and 13 on pages 31 and 32.The award consists of shares only for

senior executives although executive Directors continue to receive cash and shares.

Should the maximum award be released all of the shares (and in the case of executive Directors, cash) will be released

in one tranche in the March following the end of the performance period.This is not,however, indicative of the final

award that will be transferred to participants.

iv) Executive co-investment plan

The Company is proposing to implement a new Executive co-investment plan if approved at the Annual General

Meeting.Full details are included in the accompanying Chairman’s letter.

0

25

50

75

100

125

150

Dec 2002Dec 2001Dec 2000Dec 1999Dec 1998Jan 1997

%

GEEST FTSE Mid 250 FTSE 350 Food Producers and ProcessorsSource: William M Mercer

25

v) Other share based incentives

The Company has the following share option arrangements although from December 1996 no further options have

been or will be granted under arrangement a).

None of the Directors have share options or are eligible for any.

Table 3:Share based incentives other than LTIP

28 December 2002

Outstanding

Share Options

a Executive share option scheme (approved by shareholders 6 May 1992)

Executive share option exercisable at a price of 236p before 11 April 2004 1,694

Options granted under scheme (a) may normally be exercised between five and ten years after

the date of grant.

b 1996 savings related share option (sharesave) scheme (approved by shareholders 8 May 1996)

This scheme provides a long term savings and investment opportunity for all employees who have

completed six months’service at the date of grant.The options are exercisable after three years

at a price not less than 80% of the market value of the shares at the time of the grant.

2002 Savings related share options exercisable at a price of 445p in 2005 987,026

2000 Savings related share options exercisable at a price of 419p between December 2003

and May 2004 555,233

c 1996 Company share option scheme (approved by shareholders 8 May 1996)

This scheme operates for both UK and overseas executives.No executive Directors or senior executives

who receive LTIP awards are eligible.Options granted under the scheme may be exercised between three

and ten years after the date of grant subject to a performance criterion being satisfied.This requires the

Group to achieve above average comparative total shareholder return measured against the same

comparator group as the LTIP (as described on page 24) over the three-year performance period.

The ordinary shares allotted under the scheme are issued under the same terms as existing ordinary

shares at the market price at the date the option was granted.

1996 Company share option exercisable at the price of 236p between 1999 and 2006 22,340

1998 Company share option exercisable at the price of 512.5p between 2001 and 2008 22,634






26


Geest PLC complies with the anti-dilution guidelines set by the Association of British Insurers,which regulate the

number of shares which may be made available to employees under the LTIP and other share schemes. Accordingly

the number of shares over which options are granted pursuant to the company share option scheme and the savings

related share option scheme is limited, so as to ensure that in any rolling ten year period no more than 10% of the

Company’s share capital is used,and of this that no more than 5% is allocated to the executive share option scheme

and the company share option scheme.No more than 5% of the Company’s share capital is held under the trusts

described below.Shares for the LTIP are purchased by the Geest 1996 Employee Benefit Trust.

vi) Employee Trusts

Employee Trust (established on 10 September 1990)

This is a discretionary trust which was used primarily to purchase shares in Geest PLC up to an amount representing

part of the executive Directors’and certain executives’performance linked bonus.The original scheme for which this

trust was established has ended. It is not intended that this trust will purchase further shares or grant further options.

On 2 October 2002 5,437 shares were transferred to the 1996 Employee Benefit Trust as they were allocated in

an LTIP award to Executive Directors.On 28 December 2002 7,736 shares were held by the trust.These shares were

released in March 2003 and so the trust will be wound up in 2003.

The awards in favour of executive Directors mentioned above are included on table 9 detailing Directors’ interests.

1996 Employee Benefit Trust (established on 26 June 1996)

This is a discretionary trust established in Jersey used primarily to purchase shares in Geest PLC to satisfy conditional

awards to executive Directors and certain executives under the LTIP as described on pages 24 and 25.The Trustees

purchase the shares in the market which are conditionally awarded to participants subject to the performance criteria

described on pages 24 and 25.The shares are then released to participants following the end of a performance cycle.

On 28 December 2002 1,032,350 shares were held by the trust over which conditional awards had been made

including 384,179 to executive Directors,details of which are shown on pages 31 and 32.

At the period end the shares held by both trusts were subject to a general waiver of all but 0.01p per share

of the dividend.

Qualifying Employee Share Trust (‘QUEST’)

The QUEST is a discretionary trust which acquires shares in Geest PLC for subsequent transfer to employees

on exercise of options granted under the 1996 savings related share option scheme.

The trust was not active during the period.

27

3 Directors’pay and benefits in the period

i) Pay and benefits in kindDirectors’pay and benefits in kind for the fifty two weeks ended 28 December 2002 are analysed below:

Table 4:Directors’pay and benefits in kind

£’000

Taxable

Benefits in expense Total Total

Salary kind allowance Compensation 2002 2001

Executive Directors

J E Dutton 38 4 – 38 80 162

R I Menzies-Gow 246 13 – – 259 337

J M Pullen 206 18 – – 224 189

J K Scriven 167 17 – – 184 162

G J Voyle 272 20 – – 292 218

Total executive Directors’

pay and benefits in kind 929 72 – 38 1,039 1,068

Non-executive Directors

J Banham 33 –

R Davies 25 24

R Destin 25 24

D Wallis 25 24

D Arculus – –

Total non-executive

Directors’fees 108 72

Directors’salaries/fees also include,where appropriate, the cash supplement for the part of their salary whichexceeds the pensions salary cap.

Benefits in kind are: company car, fuel,health insurance for the Director and his spouse/children under 21,mobiletelephone and fully expensed home telephone.

No amount was received by any Director in respect of the 2002 short term cash bonus as performance targets werenot met.The amounts of cash and shares received pursuant to the LTIP are shown in Table 9 on page 31.

J E Dutton left the Company on 31 March 2002.On departure he received compensation for termination of hisservice contract of £38,480 (including benefits in kind).He also received 30,540 shares in March 2003 under an LTIP award made under cycle 3 (performance period 1998-2001), in return for compliance with post-terminationcovenants for a period expiring on 31 March 2003.The market value of these shares on date of release was £100,782.

R I Menzies-Gow retired from the Company on 27 September 2002.Following his retirement and in accordance withthe LTIP rules and exercise of Remuneration Committee discretion,63,750 shares were released under cycle 3 of LTIPand a further 16,993 shares will be released under cycle 4 in March 2004, subject to performance criteria being met.The market value of the shares released on 7 October 2002 was £345,206.

Fees were paid to the following companies in respect of the services of the non-executive Directors:

J Banham Westcountry ManagementR Destin Polaris Management S.P.R.L.R Davies Arriva PLCD W Wallis Rosedene Investments Ltd


28


ii) Service contracts

Executive Directors

All executive Directors have service contracts which expire when the executive attains the age of 60,or may be

terminated by the Company earlier for breach by the executive or otherwise by the Company by giving 12 months’

notice. Any compensation payment made on termination is subject to mitigation.

If termination of the service contract is within two years after a change of control of the Company, the current

executive Directors are entitled to a payment equal to two years’salary and benefits calculated at rates applicable

on date of termination, including two years’short term bonus based on the short term bonus (if any) paid in respect

of the last accounting year.No mitigation applies to this payment.Expressly excluded is any payment in respect of

awards under the Long Term Incentive Plan as all subsisting awards would have been paid out immediately on change

of control in accordance with the rules (the LTIP rules provide for immediate release of all awards that have vested

following the end of a performance period,and a percentage of all other current awards calculated as follows:50%

times percentage of performance period that has elapsed at date of change of control times maximum number

of shares comprised in award.Performance criteria will be deemed to have been satisfied in full).

The enhanced compensation payable in respect of termination following a change of control will not be offered

to executive Directors appointed in future and the executive Directors have agreed to relinquish these rights in

March 2006.

Non-executive Directors

All non-executive Directors are appointed on fixed term contracts for up to three years without provision for

termination other than for cause.They are not employees of the Company.

The date and unexpired term of all Directors’contracts at the date of this report is set out in the table below:

Table 5:Directors’contracts

Name Date of contract Unexpired term (at 1 April 2003)

J M Pullen 1 October 1995† Age 60 or 12 months’notice

J K Scriven 4 July 1991† Age 60 or 12 months’notice

G J Voyle 8 April 1991† Age 60 or 12 months‘ notice

J Banham 1 August 2002 2 years 4 months

R Davies 20 July 1998 15 months

R Destin 1 May 1997 1 month#

D W Wallis 1 February 2000 2 years 10 months*

†The executive Directors entered into updated service contracts on 12 December 2002, the date of commencement of continuous service is set out above. The new contracts broadly replicated the

rights and benefits of the previous contracts but contained updated post-termination covenants.

*A second three year contract was entered into with David Wallis with effect from 1 February 2003.

#A third three year contract will be entered into with Raymond Destin on 1 May 2003.

iii) Pension entitlement for executive Directors

Executive Directors are entitled to join the Geest Final Pay scheme or the Executive Personal Pension scheme.

The Final Pay scheme has a members’contribution rate of 6.25% of pensionable salary.For executive Directors it

provides a pension of up to two-thirds of final pensionable salary on retirement at age 60, subject to completion of

at least 20 years’pensionable service.For less than 20 years’pensionable service,pension rights are accrued at the

rate of one thirtieth of basic salary per annum. In both cases Inland Revenue limits are applied.The scheme also

29

provides life assurance,and pensions for dependants of members on their death in service or following retirement.

Directors who joined the scheme after May 1989 are subject to the earnings cap, so the Company provides these

members with a cash supplement for the part of their salary which exceeds the cap.

Only basic salary is pensionable.

Details of executive Directors’pensions who are members of the Geest Final Pay Scheme are set out below:

Table 6:Pensions – Listing Rules disclosureAccumulated Transfer value of

The increase in increase in total earned

accrued pension accrued pension pension at the end

in the period in the period of the period

Name £ £ £

R I Menzies-Gow 1,100 9,720 15,800

J M Pullen 120 18,550 –

J K Scriven 3,300 37,260 14,500

G J Voyle 3,300 37,800 14,500

Table 7:Pensions – Directors’remuneration report regulations 2002 disclosure

Increase in transfer

Increase in Transfer value of Transfer value of Director’s value over the year,

Accrued pension accrued pension accrued pension accrued pension contributions net of director’s

at 31.12.01 during the year at 31.12.02 at 31.12.01 during the year contributions

Name £ pa £ pa £ £ £ £ pa

R I Menzies-Gow 9,720 1,240 180,210 143,530 4,530 32,150

J M Pullen 18,550 430 191,610 225,480 6,050 –

J K Scriven 37,260 3,870 232,170 290,560 6,050 –

G J Voyle 37,800 3,880 235,570 283,330 6,050 –

The transfer values disclosed above do not represent a sum paid and payable to the individual Director. Instead they

represent a potential liability of the pension scheme.

J E Dutton was a member of the Executive Personal Pension scheme during the year.This is a defined contribution

scheme,and his and the Company’s contributions to this scheme in 2002 were £1,130 and £4,580 (2001:£3,401

and £18,150) respectively.

iv) Share interests

The beneficial interests of the Directors in the ordinary shares of the Company as at 28 December 2002 were:

Table 8:Directors’beneficial interests in Geest PLC shares

28 December 2002 29 December 2001

Director

J M Pullen 106,178 98,538

J K Scriven 73,787 67,667

G J Voyle 108,870 101,069

Note that the above figures do not include shares received under LTIP awards in March 2003.

There has been no change in the number of shares held between the end of the financial period and 14 March 2003.

James Hay Pension Trustees Limited on behalf of Sir John Banham purchased 15,000 shares at 447p on 7 January 2003.

The mid-market price of shares at 28 December 2002 was 436.5p (28 December 2001:739p) and the price rangeduring the period was 435p to 830p.


30


v) LTIP – Directors’awardsThe tables below show the maximum possible entitlement of Directors under LTIP awards at 29 December 2001,28 December 2002 or date of termination of employment as appropriate.The performance conditions are describedon pages 24 and 25 above.

Table 9:LTIP third cycle:vested award

Performance period 1998-2001:release 2002/2003Award date:16 January 1998.Mid-market price of Geest PLC shares at date of award:400p.Mid-market price of Geest PLC shares at date of release in March 2002:721p.

Interest at Shares Interest at

29 December 2001 entitlement Cash 28 December 2002

Released Cash paid

2002 2002

£

J E Dutton 42,756 12,216 85,200 30,540

R I Menzies-Gow 89,250 89,250 174,000 –

J M Pullen 44,625 12,750 105,000 31,875

J K Scriven 35,700 10,200 87,000 25,500

G J Voyle 45,509 13,003 120,000 32,506

Fourth cycle:shares and cash awarded conditional on performance

Table 10:LTIP performance period 2000-2003:release 2004Award date:7 January 2000.Mid-market price of Geest PLC shares at date of award:414p.

Interest at 29 December 2001 Interest at 28 December 2002

Shares Cash Shares Cash

J E Dutton 22,826 30% salary – –*

R I Menzies-Gow 45,314 30% salary 16,993 £32,625†

J M Pullen 23,671 30% salary 23,671 30% salary

J K Scriven 20,628 30% salary 20,628 30% salary

G J Voyle 26,208 30% salary 26,208 30% salary

*J Dutton’s awards lapsed following his departure from the Company.

†R I Menzies-Gow retains an interest in the shares and cash indicated following his retirement. The remainder of the award lapsed.

Fifth cycle:shares and cash awarded conditional on performance

Table 11:LTIP performance period 2001-2004:release 2005Award date:12 January 2001.Mid-market price of Geest PLC shares at date of award:486p.



J E Dutton 20,452 30% salary – –*

R I Menzies-Gow 40,329 30% salary – –†



G J Voyle 24,197 30% salary 24,197 30% salary

*†J Dutton and R I Menzies-Gow’s awards lapsed following their departures from the Company.

31

Table 12:LTIP sixth cycle:shares and cash awarded conditional on performance

Performance period 2002-2005:release 2006

Award date:18 March 2002.

Mid-market price of Geest PLC shares at date of award:745p.



J E Dutton – – – –#

R I Menzies-Gow 27,248 30% salary – –†



G J Voyle 18,792 30% salary 26,778* 30% salary

*On 27 September 2002 G J Voyle was awarded an additional 7,986 shares under cycle 6 commensurate with his promotion to Chief Executive Officer on 1 July 2002.

†R I Menzies-Gow’s award lapsed following his departure from the Company.

# J E Dutton did not receive an award in 2002.

Table 13:LTIP seventh cycle:shares and cash awarded conditional on performance

Performance period 2003-2006:release 2007

Award date:8 January 2003.

Mid-market price of Geest PLC shares at date of award:443p.



J M Pullen – – 31,603 30% of salary

J K Scriven – – 26,072 30% of salary

G J Voyle – – 45,034 30% of salary

The costs of the LTIP are accrued over the performance and employment period.The amount charged in the profit

and loss account for the fifty two weeks ended 28 December 2002 was £0.9 million (2001:£2.1 million).The market

price of Geest PLC shares at the date of transfer of shares released to participants in March 2003 pursuant to the

third cycle was 330p.

Executive Directors and senior executives who are members of the LTIP are not eligible to participate in the 1996

Company Share Option Scheme.

iv) Share option schemes – Directors’options

The Directors who held office at 28 December 2002 were not interested in any options to acquire ordinary shares

in the Company.

No Director made a gain in respect of the exercise of options during the period.

D W Wallis

4 April 2003


32


Independent auditors’report to the members of Geest PLC

We have audited the accounts on pages 35 to 62.We have also audited the information in the ‘Directors’ remuneration

report’ that is described as having been audited.

This report is made solely to the Company’s members,as a body, in accordance with section 235 of the Companies

Act 1985.Our audit work has been undertaken so that we might state to the Company’s members those matters we

are required to state to them in an auditors’ report and for no other purpose.To the fullest extent permitted by law,

we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a

body, for our audit work, for this report,or for the opinions we have formed.

Respective responsibilities of Directors and auditors

The Directors are responsible for preparing the Annual Report and the ‘Directors’ remuneration report’. As described

on page 10, this includes responsibility for preparing the accounts in accordance with applicable United Kingdom

law and accounting standards.Our responsibilities,as independent auditors,are established in the United Kingdom

by statute, the Auditing Practices Board, the Listing Rules of the Financial Services Authority and by our profession’s

ethical guidance.

We report to you our opinion as to whether the accounts give a true and fair view and whether the accounts and

the part of the ‘Directors’ remuneration report’ to be audited have been properly prepared in accordance with the

Companies Act 1985.We also report to you if, in our opinion, the Directors’ report is not consistent with the accounts,

if the Company has not kept proper accounting records, if we have not received all the information and explanations

we require for our audit,or if information specified by law or the Listing Rules regarding Directors’ remuneration and

transactions with the Group is not disclosed.

We review whether the statements on pages 11 to 13 reflect the Company’s compliance with the seven provisions of

the Combined Code specified for our review by the Listing Rules,and we report if they do not.We are not required to

consider whether the Board’s statements on internal control cover all risks and controls,or form an opinion on the

effectiveness of the Group’s corporate governance procedures or its risk and control procedures.

We read the other information contained in the Annual Report, including the Corporate Governance statement and

the unaudited part of the ‘Directors’ remuneration report’, and consider whether it is consistent with the audited

accounts.We consider the implications for our report if we become aware of any apparent misstatements or material

inconsistencies with the accounts.

Independent auditors’ report

33

Basis of audit opinion

We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit

includes examination,on a test basis,of evidence relevant to the amounts and disclosures in the accounts and the

part of the ‘Directors’ remuneration report’ to be audited. It also includes an assessment of the significant estimates

and judgements made by the Directors in the preparation of the accounts,and of whether the accounting policies

are appropriate to the Group’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered

necessary in order to provide us with sufficient evidence to give reasonable assurance that the accounts and the part

of the ‘Directors’ remuneration report’ to be audited are free from material misstatement,whether caused by fraud

or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of

information in the accounts and the part of the ‘Directors’ remuneration report’ to be audited.

Opinion

In our opinion:

– the accounts give a true and fair view of the state of affairs of the Company and the Group as at 28 December 2002

and of the profit of the Group for the fifty two week period then ended;and

– the accounts and the part of the ‘Directors’ remuneration report’ to be audited have been properly prepared in

accordance with the Companies Act 1985.

KPMG Audit Plc

Chartered Accountants Nottingham

Registered Auditor 4 April 2003

Notes

1. The maintenance and integrity of the Geest website is the responsibility of the Directors; the work carried out by

the auditors does not involve consideration of these matters and accordingly, the auditors accept no responsibility

for any changes that may have occurred to the accounts or audit report since they were initially presented on the

website.

2. Legislation in the United Kingdom governing the preparation and dissemination of accounts may differ from

legislation in other jurisdictions.

Independent auditors’ report (continued)

34


52 weeks ended 52 weeks ended

28 December 29 December

2002 2001

Note £ millions Restated (note 1)

2 Turnover:

Group and share of joint venture 772.6 675.1

Less: share of joint venture’s turnover (10.6) (11.3)

3 Group turnover 762.0 663.8

Group operating profit before goodwill amortisation 43.5 43.1

Goodwill amortisation (0.8) (0.8)

3 Group operating profit 42.7 42.3

Share of joint venture’s operating profit 0.6 0.5

Share of associate’s operating profit 0.2 0.7

Total operating profit 43.5 43.5

4 Profit on disposal of land and buildings 0.8 –

5 Net interest payable (3.4) (2.8)

6 Profit on ordinary activities before taxation 40.9 40.7

7 Taxation on profit on ordinary activities (8.7) (11.7)

Profit on ordinary activities after taxation 32.2 29.0

Equity minority interests (0.2) (0.1)

Profit for the financial period 32.0 28.9

8 Dividends paid and proposed (14.1) (12.7)

21 Retained profit for the period 17.9 16.2

9 Basic earnings per share 43.4p 39.6p

9 Basic earnings per share pre profit on disposal of land and buildings 42.4p 39.6p

9 Diluted earnings per share 43.2p 39.2p

8 Dividend per share 19.0p 17.3p

In both the current and preceding periods, the Group made no material acquisitions and had no discontinued

operations.

Consolidated profit and loss accountFor the fifty two weeks ended 28 December 2002

35

The accounts

Acco

un

ts and

no

tes



2002 2001

£ millions Restated (note 1)

Group profit for the financial period 31.5 28.1

Share of joint venture’s profit for the period 0.4 0.3

Share of associate’s profit for the period 0.1 0.5

Profit for the financial period 32.0 28.9

Exchange differences on translation of foreign currency assets and liabilities (0.1) (0.6)

Total recognised gains and losses for the period 31.9 28.3

Note on prior period adjustment

Total recognised gains and losses for the period as above 31.9

Prior period adjustment (15.5)

Total gains and losses since the last annual report 16.4

Group Company

52 weeks ended 52 weeks ended 52 weeks ended 52 weeks ended

28 December 29 December 28 December 29 December

2002 2001 2002 2001

£ millions Restated (note 1) Restated (note 1)

Total recognised gains and losses for the financial period 31.9 28.3 65.6 36.1

Dividends to ordinary shareholders (14.1) (12.7) (14.1) (12.7)

New share capital subscribed 1.2 1.8 1.2 1.8

Net increase in equity shareholders’funds 19.0 17.4 52.7 25.2

Opening equity shareholders’ funds* 154.2 136.8 93.7 68.5

Closing equity shareholders’ funds 173.2 154.2 146.4 93.7

*Opening equity shareholders’ funds were originally £169.7 million in the Group and £94.1 million in the Company before the prior period adjustment of £15.5 million and £0.4 million respectively.

Reconciliation of movements in equity shareholders’ fundsFor the fifty two weeks ended 28 December 2002

Consolidated statement of total recognisedgains and lossesFor the fifty two weeks ended 28 December 2002

36


Group Company


2002 2001 2002 2001

Note £ millions Restated (note 1) Restated (note 1)

Fixed assets

11 Intangible assets 13.6 13.9 – –

12 Tangible assets 250.9 234.8 4.2 4.0

13 Investments – other 4.8 5.2 171.4 171.8

13 Investment in associate 0.9 1.2 – –

13 Investment in joint venture: share of gross assets 2.5 2.8 – –

share of gross liabilities (2.1) (2.2) – –

270.6 255.7 175.6 175.8

Current assets

14 Stocks 17.1 17.1 – –

15 Asset held for resale – 10.5 – –

16 Debtors:due within one year 91.5 80.7 207.1 170.0

due after more than one year 14.1 10.7 13.1 9.3

Total debtors 105.6 91.4 220.2 179.3

Cash at bank and short term deposits 29.8 11.2 19.8 3.3

152.5 130.2 240.0 182.6

Creditors:due within one year

17 Borrowings (11.3) (32.3) (20.9) (69.1)

18 Other creditors (149.4) (147.9) (195.5) (192.5)

(160.7) (180.2) (216.4) (261.6)

Net current (liabilities)/assets (8.2) (50.0) 23.6 (79.0)

Total assets less current liabilities 262.4 205.7 199.2 96.8

Creditors:due after one year

17 Borrowings (66.2) (32.7) (48.0) –

18 Other creditors – (0.1) – –

(66.2) (32.8) (48.0) –

19 Provisions for liabilities and charges (22.5) (18.4) (4.8) (3.1)

Net assets 173.7 154.5 146.4 93.7

Capital and reserves

20 Called up share capital 3.7 3.7 3.7 3.7

21 Share premium account 21.9 20.7 21.9 20.7

21 Revaluation reserve 0.1 0.1 – –

21 Merger reserve – – 14.5 14.5

21 Profit and loss account 147.5 129.7 106.3 54.8

Equity shareholders’funds 173.2 154.2 146.4 93.7

Equity minority interests 0.5 0.3 – –

173.7 154.5 146.4 93.7

These accounts were approved by the Board of Directors on 4 April 2003 and were signed on its behalf by:

JM Pullen

Director

Balance sheetsAs at 28 December 2002

37



Note £ millions 2002 2001

27 Net cash inflow from operating activities 61.7 63.3

Dividends from associate and joint venture 1.2 –

27 Returns on investments and servicing of finance (3.0) (2.7)

Taxation paid (5.8) (7.9)

27 Capital expenditure and financial investment (33.6) (70.3)

27 Acquisitions and disposals (1.0) (3.5)

Equity dividends paid (13.3) (11.4)

Net cash inflow/(outflow) before use of liquid resources and financing 6.2 (32.5)

27 Management of liquid resources (19.7) –

27 Financing 21.6 19.7

Increase/(decrease) in cash in the period 8.1 (12.8)

27 Reconciliation of net cash flow to movement in net debt

Increase/(decrease) in cash in the period 8.1 (12.8)

Cash inflow/(outflow) from increase/(decrease) in debt 2.8 (17.9)

Cash inflow from decrease in lease financing 2.1 0.5

Cash inflow from increase in liquid resources 19.7 –

Change in net debt resulting from cash flows 32.7 (30.2)

Loans and finance leases acquired with subsidiary undertaking (0.3) –

New finance leases (25.3) –

Translation difference (0.8) –

Movement in net debt in the period 6.3 (30.2)

Net debt at the beginning of the period (54.0) (23.8)

Net debt at the end of the period (47.7) (54.0)

Consolidated cash flow statementFor the fifty two weeks ended 28 December 2002

38


1 Basis of accounting

The following principal accounting policies have been applied consistently in dealing with items which are considered

material in relation to the Group’s accounts.

The accounts have been prepared under the historical cost convention and in accordance with applicable accounting

standards and the Companies Act 1985.

Details of new standards in the period are provided on page 7.The accounts have been prepared on a going concern

basis as outlined on page 10.

2 Basis of consolidation

The Group accounts include the accounts of the Company and all its subsidiary undertakings drawn up for the

fifty two weeks ended 28 December 2002 and comparatives for the fifty two weeks ended 29 December 2001.

The accounts include the appropriate share of the results and net assets of its joint venture and associate.

The results of subsidiary undertakings, joint ventures and associates acquired or disposed of in the period are

included in the consolidated profit and loss account from the date of acquisition or up to the date of disposal.

Where the Group has an investment which is sufficient to give the Group a participating interest,and over which

it exercises significant influence, the entity is treated as an associate and is accounted for using the equity method.

Entities in which the Group holds an interest on a long term basis and are jointly controlled by the Group with one

or more other parties under a contractual agreement,are treated as joint ventures and are accounted for using the

gross equity method.

No profit and loss account is presented for the Company as permitted by Section 230(4) of the Companies Act 1985.

3 Goodwill

Goodwill (representing the excess of the fair value of the consideration and associated costs given over the fair value

of the separable net assets acquired) arising on consolidation in respect of acquisitions before 4 January 1998,

(the date from which FRS 10 ‘Goodwill and intangible assets’was adopted),was written off to reserves in the year

of acquisition.When a subsequent disposal occurs,any related goodwill previously written off to reserves is

included in the profit and loss account as part of the profit or loss on disposal.

Goodwill arising on consolidation in respect of acquisitions since 4 January 1998 is capitalised and amortised to nil

by equal annual instalments over the shorter of 20 years or its estimated useful life.

Goodwill is reviewed for impairment at the end of the first full year following acquisition and in other periods if events

or changes in circumstances indicate that the carrying value may not be recoverable.

Statement of accounting policies

39

4 Foreign currency

The profit and loss accounts of overseas subsidiary undertakings are translated at the average rate of exchange ruling

for the period. Assets and liabilities are translated at the rates of exchange ruling at the balance sheet date. Any exchange

differences arising on the retranslation of opening net assets are dealt with through reserves.

Where considered appropriate, foreign currency instruments are used to provide a hedge against Group investments

in foreign enterprises. In such cases,exchange differences on those instruments are taken directly to reserves together

with the exchange differences on the carrying amounts of the related investments.

Transactions in foreign currency are recorded at the rate of exchange ruling at the date of transaction,or at the

contracted rate if the transaction is covered by a forward exchange contract.Profits and losses on exchange arising

in the normal course of trading are dealt with in the profit and loss account.

5 Tangible fixed assets and depreciation

Tangible fixed assets are initially recorded at cost.Depreciation is provided on tangible fixed assets other than freehold

land and investment properties so as to write off the cost or valuation, less estimated residual value of each asset,

over its expected useful life as follows:

Freehold buildings 2 to 5%

Leasehold land and buildings Remaining term of lease

Plant and equipment 5 to 33%

Up and until 1994, the cost of fixed assets includes interest incurred on borrowings to finance specific developments

up to the date when the relevant development is brought into use.Since 1994,no interest has been capitalised in fixed

assets.Most plant and equipment is written off over eight years (12.5%) to recognise the risk of market obsolescence.

6 Leasing

Assets held under finance leases are capitalised and depreciated over their useful lives.The capital element of future

rentals is treated as a liability and the interest element is charged to the profit and loss account in proportion to the

capital outstanding.

Rentals paid under operating leases are charged to the profit and loss account on a straight-line basis over the term

of the lease.

7 Stocks

Stocks are valued at the lower of cost and net realisable value.Costs include direct materials and direct labour plus

attributable overheads.

Statement of accounting policies (continued)

40


8 Taxation

The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing

differences between the treatment of certain items for taxation and accounting purposes.

Provision is made for deferred taxation in accordance with FRS 19 ‘Deferred tax’.This represents a change in

accounting policy and the effect of this is detailed in note 1 to the accounts.

Deferred tax is recognised in respect of all timing differences that have originated,but not reversed,at the balance

sheet date where transactions or events have occurred at that date that will result in an obligation to pay more,or

a right to receive more, tax.

Deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that

there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

Deferred tax is measured on a discounted basis to reflect the time value of money over the period between the

balance sheet date and the dates on which it is estimated that the underlying timing differences will reverse.

9 Turnover

Turnover represents the net invoiced value of goods and services to external customers excluding value added and

sales taxes.

10 Pensions

Contributions to Group pension schemes are based on the advice of actuaries.Contributions are charged to the profit

and loss account on a basis that spreads the expected cost of providing pensions over the service lives of members.

Additional details are given in note 26.

11 Government grants

Grants in respect of capital expenditure are credited to the profit and loss account over the anticipated life of the

related fixed asset.Total grants received, less the amounts credited to the profit and loss account at the balance sheet

date,are included in the balance sheet as deferred income.

12 Related party transactions

FRS 8 ‘Related party disclosures’permits groups to be exempt from disclosing transactions or balances with entities

which form part of the Group.Where applicable, the Company takes advantage of this exemption.

13 Financial instruments

Off balance sheet financial instruments are used to hedge the Group’s exposure to interest rate and exchange rate risk.

Gains and losses arising in relation to such instruments are accounted for on an accruals basis.

41

1 Prior period adjustment

FRS 19 ‘Deferred tax’has been adopted for the first time in the fifty two weeks ended 28 December 2002.FRS 19

requires full provision to be made for deferred tax arising from timing differences between the recognition of gains

and losses in the accounts and their recognition in the tax computations. In adopting FRS 19, the Group has chosen

to discount deferred tax liabilities.

The effect for the Group of implementing FRS 19 has been to reduce profit after taxation by £2.8 million in the current

period (2001:£3.6 million) and to reduce net assets by £18.3 million (2001:£15.5 million).The effect for the Company

has been to reduce profit after taxation by £0.3 million (2001:£0.4 million) and to reduce net assets by £0.7 million

(2001:£0.4 million).

The results of the prior fifty two week period have been restated accordingly.

2 Segmental analysis

An analysis of turnover, including UK sales of the joint venture of £10.6 million (2001:£11.3 million),by geographical

destination is set out below:



£ millions 2002 2001

UK 716.5 629.7

Rest of Europe 50.6 40.9

Other 5.5 4.5

772.6 675.1

No further segmental analysis has been presented as the Group has only one class of business.

3 An analysis of results from continuing operations

An analysis of results from continuing operations,excluding the joint venture and associated undertaking, is set

out below:




Group turnover 762.0 663.8

Cost of sales (640.6) (551.0)

Gross profit 121.4 112.8

Administrative expenses (77.9) (69.7)

Goodwill amortisation (0.8) (0.8)

Group operating profit 42.7 42.3

4 Profit on disposal of land and buildings

Profit before taxation is arrived at after crediting £0.8 million (2001:£nil),being the net profit arising on the disposal

of two properties,one of which was the investment property with a net book value of £10.5 million included as

an asset held for resale at 29 December 2001.The second property disposed of was held at a net book value of

£2.7 million at the date of disposal.

Notes to the accountsFor the fifty two weeks ended 28 December 2002

42


5 Net interest payable




Interest payable on bank loans and overdrafts (5.9) (5.4)

Interest payable on finance leases (1.2) –

Interest receivable on bank balances and short term deposits 3.7 2.6

Net interest payable (3.4) (2.8)

6 Profit on ordinary activities before taxation




After charging:

Depreciation and other amounts written off fixed assets 28.8 22.7

Loss on sale of fixed assets 0.3 –

Operating lease rentals – plant and machinery 2.2 0.3

– other 3.6 2.9

Goodwill amortisation 0.8 0.8

Fees paid to the auditor and its associates – statutory audit services 0.2 0.2

– further assurance services – –

– tax advisory services 0.2 0.1

– other non-audit services – 0.1

After crediting:

Amortisation of government grants 0.1 0.2

Profit on sale of fixed assets 0.8 0.1

The Group’s policy is that professional services from major firms of accountants should be sought from the most

appropriate source, taking into account the value and nature of the work.Where quality advice is available from KPMG

Audit Plc and no conflict of interest exists,KPMG Audit Plc may be appointed. In 2003, the Audit Committee will

review this policy.

Fees for non-audit services during the period were allocated as follows:

Tax advice on a group restructuring of £94,000 (2001:£nil) and raising of finance of £49,000 (2001:£nil).These relate

primarily to preparing instructions with,and meetings with, counsel.One of the schemes was proprietary to KPMG

Audit Plc and so an alternative advisor could not be used.These figures include fees of £30,000 (2001:£nil) paid to

the legal advisors associated with KPMG Audit Plc.

Other tax services of £41,000 (2001:£75,000) and IT-related consultancy of £nil (2001:£80,000).

The fees paid to the auditor in respect of audit services for the Company were £46,000 (2001:£48,000).

43

7 Taxation on profit on ordinary activities

a) Analysis of charge in period



2002 2001

£ millions Restated

Current taxation:

UK corporation tax at 30% (2001:30%) on parent and subsidiaries 6.0 5.9

Adjustment in respect of prior periods (3.6) (1.1)

Overseas taxation on subsidiaries 1.7 1.0

Adjustment to overseas taxation in respect of prior periods 0.1 0.7

Share of joint venture 0.2 0.2

Share of associate 0.1 0.2

Total current taxation 4.5 6.9

Deferred taxation:

Origination and reversal of timing differences 4.6 5.5

Changes in the amount of discount deducted (0.4) (0.7)

Total deferred taxation 4.2 4.8

Taxation on profit on ordinary activities 8.7 11.7

The corporation tax charge for 2002 is 21% (2001:29%) compared with a standard corporation tax rate of 30%

(2001:30%).

b) Factors affecting the current tax charge for the period



2002 2001


Profit on ordinary activities before taxation 40.9 40.7

Profit on ordinary activities before taxation at the standard rate

of UK corporation tax of 30% (2001:30%) 12.3 12.2

Factors affecting charge for periods:

Capital allowances for period in excess of depreciation plus other timing differences (2.8) (3.6)

Timing differences in respect of pension funding (1.4) (1.2)

Adjustments to tax charge in respect of prior period (3.6) (1.1)

Expenses not deductible for tax purposes 0.3 1.0

Utilisation of tax losses brought forward – (0.2)

Foreign tax charged at different rates than UK standard rates (0.3) (0.2)

Total current tax charge 4.5 6.9

The effect of implementing FRS 19 ‘Deferred tax’has been to increase the tax charge by £2.8 million.The impact

on the prior period has been to increase the tax charge by £3.6 million.

c) Factors that may affect future tax charges

For the foreseeable future, it is expected that the current tax charge will be lower than the standard rate of UK

corporation tax.This is due to the use of tax efficient structuring of major transactions and capital allowances

exceeding depreciation.

Notes to the accounts (continued)For the fifty two weeks ended 28 December 2002

44


8 Dividends




Interim ordinary dividend of 7.25p (2001:6.60p) 5.4 4.9

Proposed final dividend of 11.75p (2001:10.70p) 8.7 7.8

Total dividend of 19.00p (2001:17.30p) 14.1 12.7

9 Earnings per share



2002 2001

Pence Restated

Basic earnings per share 43.4 39.6

Basic earnings per share pre profit on disposal of land and buildings 42.4 39.6

Diluted earnings per share 43.2 39.2

Basic earnings per share is calculated based upon the profit for the financial period of £32,062,000 (2001 restated:

£28,917,000) and the weighted average number of shares in issue, (stated after the deduction of own shares held)

during the period,of 73,793,740 (2001:72,989,358).

Basic earnings per share pre profit on disposal of land and buildings is calculated based upon the profit for the financial

period of £31,259,000 (2001 restated:£28,917,000) and the weighted average number of shares in issue, (stated after

the deduction of own shares held) during the period,of 73,793,740 (2001:72,989,358).

The diluted earnings per share is calculated using the profit for the financial period of £32,062,000 (2001 restated:

£28,917,000) and the diluted weighted average number of shares as follows:



Number of shares 2002 2001

Weighted average number of ordinary shares in issue 73,793,740 72,989,358

Add:maximum dilution re share options 433,703 700,141

Diluted weighted average number of ordinary shares in issue 74,227,443 73,689,499

45

10 Employees

The average number of persons employed by the Group (including Directors) during the period was as follows:



2002 2001

Number 10,065 8,679

The aggregate remuneration and associated costs of Group employees (including Directors) were as follows:




Wages and salaries 163.4 149.4

Social security costs 16.4 13.6

Other pension costs (1.4) (1.3)

178.4 161.7

Disclosures on Directors’emoluments, share options, long term incentive plans,pension contributions and pension

entitlements required by the Companies Act 1985 and those specified for audit by the Financial Services Authority

are on pages 22 to 32 within the ‘Directors’ remuneration report’and form part of the audited accounts.

11 Intangible assets

£ millions Goodwill

Cost

At 29 December 2001 15.3

Additions (note 24) 0.5


Amortisation

At 29 December 2001 (1.4)

Charge for the period (0.8)

At 28 December 2002 (2.2)

Net book value


Net book value



46


12 Tangible fixed assets

Group Company

Land and buildings

Plant and Plant and

£ millions Freehold Leasehold equipment Total equipment

Cost or valuation:

At 29 December 2001 69.1 7.1 268.4 344.6 7.0

Currency variations 0.6 – 1.0 1.6 –

Additions 6.5 1.8 37.7 46.0 2.6

Acquisition of business – 0.4 0.6 1.0 –

Disposals – (1.1) (8.7) (9.8) (2.0)

Asset reclassification (8.4) 7.6 0.8 – –

At 28 December 2002 67.8 15.8 299.8 383.4 7.6

Depreciation:

At 29 December 2001 (6.8) (1.7) (101.3) (109.8) (3.0)

Currency variations (0.1) (0.1) (0.6) (0.8) –

Charge for the period (2.0) (0.5) (26.3) (28.8) (0.4)

Disposals – 0.8 6.1 6.9 –

Asset reclassification (0.4) – 0.4 – –

At 28 December 2002 (9.3) (1.5) (121.7) (132.5) (3.4)

Net book value:

At 29 December 2001 62.3 5.4 167.1 234.8 4.0

Net book value:

At 28 December 2002 58.5 14.3 178.1 250.9 4.2

The cost of tangible fixed assets includes capitalised borrowing costs of £nil (2001:£0.4 million).

Included within the above is Group plant and equipment held under finance lease with a net book value of

£24.3 million (2001:£0.3 million).The depreciation charged to these assets was £3.7 million (2001:£0.2 million).

The following disclosures are made in respect of land and buildings,which are included within the tangible fixed

assets table above:



Land and buildings:

Valuation 0.1 0.1

Cost 83.5 76.1

Total 83.6 76.2

Non-depreciable land 3.5 3.5

Historical cost of land and buildings at valuation 0.1 0.1

Leasehold land and buildings:

Short leasehold net book value 3.4 2.4

Long leasehold net book value 10.9 3.0

14.3 5.4

47

12 Tangible fixed assets (continued)

FRS 15 ‘Tangible fixed assets’was implemented for the first time in 2001 and it was decided that,as permitted under the

transitional provisions of the standard,other properties held at valuation were frozen at the value as at 1 January 2000,

this being the last valuation date.

The Directors do not consider the difference between depreciation charged on properties at valuation and depreciation

chargeable on the historical cost of properties to be material.

13 Investments

Group

Investment in

associated Investment in

£ millions Own shares undertaking joint venture Total

At 29 December 2001 5.2 1.2 0.6 7.0

Share of results in the period – 0.2 0.6 0.8

Taxation – (0.1) (0.2) (0.3)

Dividends received – (0.4) (0.6) (1.0)

Additions 0.6 – – 0.6

Transferred to employees (1.0) – – (1.0)

At 28 December 2002 4.8 0.9 0.4 6.1

Company

Shares in

subsidiary

£ millions Own shares undertakings Total

At 29 December 2001 5.2 166.6 171.8

Additions 0.6 – 0.6

Transferred to employees (1.0) – (1.0)

At 28 December 2002 4.8 166.6 171.4

The Group and Company investment in its own shares relates to shares held by the Employee Trusts. At 28 December

2002 there were 1,040,086 shares (2001:1,197,323 shares) as detailed on page 27, for subsequent transfer to employees

under the LTIP.The market value of these investments at 28 December 2002 was £4,539,975 (2001:£8,848,217) and

their total nominal value amounted to £51,695 (2001:£59,215).

The principal operating subsidiary undertakings of the Company and Group are shown on page 62.

Investment in associate

The principal associate in which the Group participates is shown on page 62.

Investment in joint venture

The principal joint venture in which the Group participates is shown on page 62.


48


14 Stocks

Group Company


£ millions 2002 2001 2002 2001

Produce and raw materials 12.7 13.3 – –

Work in progress 0.7 0.9 – –

Finished goods 2.4 1.6 – –

Engineering spares 1.0 – – –

Miscellaneous 0.3 1.3 – –

17.1 17.1 – –

15 Asset held for resale

An investment property was reclassified within current assets during the fifty two weeks ended 29 December 2001

as a result of the Board’s intention to sell the property.The property was sold during the fifty two weeks ended

28 December 2002.

16 Debtors

Group Company


£ millions 2002 2001 2002 2001

Amounts falling due within one year:

Trade debtors 71.6 63.1 0.2 0.1

Amounts owing from subsidiary undertakings – – 201.8 162.5

Other debtors 11.8 10.0 0.6 0.4

Prepayments and accrued income 8.1 7.1 1.1 1.3

Taxation recoverable – 0.5 3.4 2.4

Advance corporation tax recoverable – – – 3.3

91.5 80.7 207.1 170.0

Amounts falling due after more than one year:

Other debtors 1.0 1.4 – –

Pension prepayment 13.1 9.3 13.1 9.3

14.1 10.7 13.1 9.3

49

17 Borrowings,derivatives and other financial instruments

The Group’s policies on derivatives and other financial instruments are disclosed in the ‘Financial review’on pages 6 to 8.

Short term debtors and creditors have been omitted from all disclosures other than the currency profile.

Maturity profile of financial liabilities

Group 28 December 2002 29 December 2001

Bank Bank

£ millions borrowings Other Total borrowings Other Total

Within one year or less or on demand 5.8 5.5 11.3 32.3 0.1 32.4

More than one year but not more than

two years 0.1 3.5 3.6 32.7 0.1 32.8

More than two years but not more than

five years 15.2 14.4 29.6 – – –

More than five years 33.0 – 33.0 – – –

48.3 17.9 66.2 32.7 0.1 32.8

54.1 23.4 77.5 65.0 0.2 65.2

‘Other’ financial instruments above relate to finance leases and hire purchase contracts and are included in

borrowings on the balance sheet in 2002 (2001:other creditors).

Included within the bank borrowings of the Group due within one year are bank overdrafts and overnight borrowings

of £5.7 million (2001:£15.2 million) and short term unsecured loans of £0.1 million (2001:£17.1 million).

The remaining bank borrowings include £48.1 million of unsecured loans (2001:£32.7 million) and £0.2 million

of secured loans (2001:£nil).

The bank borrowings due in more than five years are due in full in March 2008 and the associated interest rate

is 51 basis points above LIBOR.

The Company borrowings consist of £nil short term unsecured loans (2001:£49.5 million) and £20.9 million bank

overdrafts (2001:£19.6 million),all of which are due within one year.Borrowings due in more than one year comprise

£15.0 million (2001:£nil) of short term unsecured loans due in more than two years but not more than five years and

£33.0 million (2001:£nil) of unsecured loans due in more than five years.

Borrowing facilities

The Group had the following undrawn committed borrowing facilities:



Expiring in more than two years but not more than five years 37.5 –

Expiring in more than five years 7.0 –

44.5 –


50


17 Borrowings,derivatives and other financial instruments (continued)

Financial assets

On 28 December 2002 the Group’s financial assets consisted of short term debtors and £29.8 million of cash and

short term deposits (2001:£11.2 million),which are all invested at floating rates.These cash and short term deposits

are split as follows:


£ million 2002 2001

Cash held in Sterling accounts 26.5 9.4

Cash held in Euro accounts 2.9 1.6

Cash held in US $ accounts – 0.2

Cash held in other currency accounts 0.4 –

29.8 11.2

Interest on the floating rate assets is based on the relevant money market or deposit rate.

Financial liabilities

The following interest rate and currency profiles of the Group’s financial liabilities are after taking into account the

interest rate swap entered into by the Group:

28 December 2002

Weighted

Floating rate Fixed rate Weighted average period

financial financial average fixed for which the

Total liabilities liabilities interest rate rate is fixed

Currency £ millions £ millions £ millions % years

Sterling 59.0 39.2 19.8 6.31 4

Euros 18.5 – 18.5 5.38 3

77.5 39.2 38.3

29 December 2001

Weighted

Floating rate Fixed rate Weighted average period

financial financial average fixed for which the

Total liabilities liabilities interest rate rate is fixed

Currency £ millions £ millions £ millions % years

Sterling 48.2 40.5 7.7 4.67 4

Euros 17.0 – 17.0 5.38 4

65.2 40.5 24.7

Interest on the floating rate liabilities is based on the relevant LIBOR rates.

Fair values of financial assets and liabilities

With the exception of the interest rate swap, the historical cost of the entire Group’s financial assets and liabilities

is not materially different from its fair value.The interest rate swap was entered into in November 2000.The interest

rate swap has no historical cost within the books and its fair value,as derived by reference to prices available from the

market on which it could be traded, is a cost of £2.7 million (2001:£1.6 million).

51

17 Borrowings,derivatives and other financial instruments (continued)

Hedging

As explained in the ‘Financial review’on page 8, the Group’s policy is to hedge interest rate risk and currency exposure

using interest swaps and forward foreign currency contracts.Gains and losses on instruments used for hedging are

not recognised until the exposure that is being hedged is itself recognised.Unrecognised gains on forward foreign

currency contracts arising in the period that were not recognised in the period amounted to £1.0 million

(2001:unrecognised loss of £0.6 million).

18 Other creditors

Group Company


£ millions 2002 2001 2002 2001

Amounts falling due within one year:

Obligations under finance leases – 0.1 – –

Trade creditors 65.3 68.2 0.2 1.0

Amounts owing to subsidiary undertakings – – 174.3 169.5

Corporation tax 15.0 16.3 – –

Other creditors including taxation and social security 15.3 15.6 6.1 6.6

Accruals and deferred income 45.1 39.9 6.2 7.6

Proposed dividends 8.7 7.8 8.7 7.8

149.4 147.9 195.5 192.5

Amounts falling due after one year but within five years:

Obligations under finance leases – 0.1 – –

19 Provisions for liabilities and chargesGroup Company

Potential

insurance Deferred Deferred

£ millions Restructuring claims taxation Total taxation

At 29 December 2001 – as previously reported 0.2 0.1 2.6 2.9 2.7

Prior period adjustment – – 15.5 15.5 0.4

At 29 December 2001 – as restated 0.2 0.1 18.1 18.4 3.1

Charge in profit and loss account – – 4.2 4.2 1.7

Utilised in the period – (0.1) – (0.1) –

At 28 December 2002 0.2 – 22.3 22.5 4.8

The restructuring provision relates to rentals and dilapidation costs payable until the year 2008 on two depots

at Rochester and Bournemouth.These liabilities arose on the disposal of Geest Wholesale Services in 1995.

The potential insurance claims related to provisions held within our captive insurance company,made in respect

of open insurance years,were calculated upon previous claims’experience.


52


19 Provisions for liabilities and charges (continued)

Deferred taxation is analysed as follows:

Group Provided in the accounts


2002 2001


Accelerated capital allowances 22.9 20.6

Discount (4.6) (4.2)

Pension prepayment 4.0 2.6

Other timing differences – (0.9)

22.3 18.1

No provision is required for deferred taxation in respect of earnings which are retained overseas.

Company Provided in the accounts


2002 2001


Accelerated capital allowances 0.8 0.4

Pension prepayment 4.0 2.7

4.8 3.1

20 Share capital



Authorised:

85,000,000 ordinary shares of 5p each 4.3 4.3

Allotted,called up and fully paid:

75,015,293 (2001:74,747,147) ordinary shares of 5p each 3.7 3.7

Shares allotted during the period:Number Nominal value

of shares £

Issued for a total consideration of £1.2 million pursuant to the exercise

of options granted under:

Company sharesave scheme 268,146 13,407

In issue at 29 December 2001 74,747,147 3,737,357

In issue at 28 December 2002 75,015,293 3,750,764

The particulars of contingent rights to the allotment of shares are disclosed in the ‘Directors’ remuneration report’

on page 26.

53

21 Reserves

Group

Profit and

Share premium Revaluation loss account

£ millions account reserve Restated (note 1)

At 29 December 2001 – as previously reported 20.7 0.1 145.2

Prior period adjustment – – (15.5)

At 29 December 2001 – as restated 20.7 0.1 129.7

Exchange differences on translation of foreign currency assets and liabilities – – (0.1)

Retained profit for the period – – 17.9

Premium on shares issued in the period 1.2 – –

At 28 December 2002 21.9 0.1 147.5

The cumulative total of goodwill written off to reserves in respect of acquisitions prior to 4 January 1998,when

FRS 10 ‘Goodwill and intangible fixed assets’was adopted,amounts to £28.7 million (2001:£28.7 million).

Company

Profit and

Share premium Merger loss account

£ millions account reserve Restated (note 1)

At 29 December 2001 – as previously reported 20.7 14.5 55.2

Prior period adjustment – – (0.4)

At 29 December 2001 – as restated 20.7 14.5 54.8

Exchange differences on translation of foreign currency assets and liabilities – – (1.1)

Retained profit for the period – – 52.6

Premium on shares issued in the period 1.2 – –

At 28 December 2002 21.9 14.5 106.3

The Company’s profit after taxation for the fifty two weeks ended 28 December 2002 is £66.7 million (2001 restated:

£36.0 million).

22 Capital commitments

Group capital expenditure contracted for but not provided for in these accounts amounted to £4.9 million

(2001:£1.0 million).

23 Leasing commitments

Group Land and buildings Other


£ millions 2002 2001 2002 2001

Annual payments under non-cancellable operating leases

which expire as follows are:

Within one year – – 2.2 0.7

In the second to fifth years inclusive – – 2.3 2.5

Over five years 2.2 1.7 – –

2.2 1.7 4.5 3.2

Annual payments under ‘other’non-cancellable operating leases for the Company,which expire within one year,

amount to £1.8 million (2001:£0.1 million) and those which expire in the second to fifth years inclusive amount

to £0.6 million (2001:£1.4 million).


54


24 Acquisitions

On 10 April 2002, the Group purchased the entire issued share capital of the French company Société Bretonne

de Légumes Préparés (SBLP) SA for consideration of £1.7 million of which £0.5 million is deferred until 12 months

after completion.The purchase consideration generated goodwill of £0.5 million.

The acquisition in the fifty two weeks ended 28 December 2002 was accounted for by the acquisition method

of accounting.

After the year end, the Group conditionally agreed to acquire the Geneviève Langlais (GLSA) group of companies

(‘Crudi’) as detailed in note 28.

25 Contingent liabilities

The Company has a contingent liability in respect of a guarantee over the bank overdrafts of certain subsidiaries,

which at the period end amounted to £5.0 million (2001:£15.2 million).The Company (together with certain other

subsidiaries) is guarantor of a £92.5 million multi-currency revolving credit facility in favour of Geest PLC.

26 Pensions

The Group operates a number of pension schemes in the UK and overseas.These schemes have been set up by formal

Trusts and are administered by Trustees or Trustee Companies.The assets of each scheme are held in separate Trustee

Administered funds or fully insured with an insurance company.

In the UK, the two main schemes,one a defined contribution scheme and the other a funded defined benefit scheme,

are open to employees joining Geest on a permanent contract (full time or part time). Approximately 25% of eligible

UK employees belong to a Group pension scheme.

Contributions are assessed on the basis of the advice of qualified actuaries using either the attained age method

or the projected unit credit method.

Pension costs charged/(credited) in arriving at profit on ordinary activities before taxation were:




UK defined benefit scheme:

Regular pension costs 2.6 2.6

Spreading of surplus (4.8) (4.7)

UK defined benefit scheme net credit (2.2) (2.1)

UK defined contribution scheme net charge 0.6 0.6

Overseas net charge 0.2 0.2

Total credit (1.4) (1.3)

The surplus disclosed by the valuation is being recognised over the average remaining service lives of the members.

55

26 Pensions (continued)

The latest full valuation of the main UK defined benefit scheme was completed as at 31 March 2001.The results and

assumptions,which have the most significant effect on the funding position of the defined benefit scheme,are:

Method used Projected unit credit

Investment returns to exceed salary growth by (%) 2.5

Investment returns to exceed pensions growth by (%) 3.0

Market value of scheme assets (£m) 114.8

Level of funding* (%) 146

Actuarially calculated surplus (£m) 36.3

*The actuarial value of assets as a percentage of the benefits accrued to members is after allowing for future salary

and pension increases.

An amount of £13.1 million (2001:£9.3 million) is included in debtors falling due after more than one year

representing the excess of amounts contributed over the accumulated pension cost.

No improvements were made to benefits and the Group paid contributions in the period of £1.6 million (2001:

£1.5 million), representing 6.25% of aggregate pensionable salaries. It has been agreed with the Trustees that, subject

to review at future actuarial valuations, the Company’s rate of contributions will remain at that level.The actuarial

value of the liability includes allowance for discretionary increases to pensions earned prior to April 1997.

Whilst the Company continues to account for pension costs in accordance with SSAP 24 ‘Accounting for pension

costs’,under FRS 17 the following transitional disclosures are required:

Additional FRS 17 disclosures

The valuation used for FRS 17 disclosures has been based upon the latest full actuarial valuation at 31 March 2001

and updated by the actuaries to take account of the requirements of FRS 17 in order to assess the assets and

liabilities of the scheme at 28 December 2002.


56



The financial assumptions used to calculate scheme liabilities under FRS 17 are:


2002 2001

% %

Rate of increase in salaries 3.75 4.0

Rate of increase for pensions in payment 2.25 2.5

Discount rate 5.60 5.9

Inflation assumption 2.25 2.5

The assets in the scheme and the expected rates of return for FRS 17 purposes were:

28 December 2002 29 December 2001

Expected rate Fair value Expected rate Fair value

of return % p.a. £ millions of return % p.a. £ millions

Equities 7.75 69.4 7.75 91.4

Bonds 5.4 20.6 5.4 19.3

Total market value of assets 90.0 110.7

Present value of scheme liabilities (90.2) (84.6)

(Deficit)/surplus in scheme (0.2) 26.1

Related deferred tax asset/(liability) 0.1 (7.8)

Net pension (liability)/asset (0.1) 18.3

Under FRS 17, the net assets and reserves would be adjusted as follows:

Net assets28 December 29 December

2002 2001


Net assets 173.7 154.5

Pension asset per SSAP 24 (13.1) (9.3)

Deferred tax liability 4.0 –

Net assets excluding net pension asset 164.6 145.2

Net pension (liability)/asset per FRS 17 (0.1) 18.3

Net assets including pension asset 164.5 163.5

57


Reserves28 December 29 December

2002 2001


Profit and loss account 147.5 129.7

Pension asset per SSAP 24 (13.1) (9.3)

Deferred tax liability 4.0 –

Profit and loss account excluding net pension asset 138.4 120.4

Net pension (liability)/asset per FRS 17 (0.1) 18.3

Profit and loss account 138.3 138.7

The amount that would have been charged to operating profit for the period for FRS 17 purposes is £3.0 million and

relates to current service costs.

The amounts that would have been included in the profit and loss account under interest payable, classified as other

finance costs for FRS 17 purposes,are:52 weeks ended

28 December

£ millions 2002

Interest on pension plan liabilities 5.0

Expected return on assets in the pension plan (8.1)

Net credit to other finance income (3.1)

The amounts that would have been recognised in the statement of total recognised gains and losses for FRS 17

purposes are:52 weeks ended

28 December

£ millions 2002

Actual return less expected return on assets 28.7

Experience loss on liabilities 0.8

Actuarial loss 29.5


58



The movements in the scheme surplus/(deficit) during the period for FRS 17 purposes are:

52 weeks ended

28 December

£ millions 2002

Surplus in the scheme brought forward 26.1

Contributions paid 3.1

Current service cost (3.0)

Net financial return 3.1

Actuarial loss (29.5)

Deficit in the scheme carried forward (0.2)

Movement in FRS 17 surplus/(deficit)

The increase in the net pension liability calculated under FRS 17 is principally attributable to a reduction in the

market value of assets and a reduction in long term AA bond yields used to discount future liabilities.

The Scheme’s assets are invested in a mixture of UK and Overseas Equities plus UK Bonds. A variety of indices have

been selected by the Trustee against which the Investment Managers must perform.Overall, for the fifty two weeks

ended 28 December 2002, the combined fund return was (17.4)% against the combined index return of (19.5)%.

This return compares with the WM 2000 Median figure of (16.5)% for 2002.

FRS 17 – History of experience gains and losses

The following disclosures will be built up over time as a five year history:

52 weeks ended

28 December

£ millions 2002

Shortfall between actual and expected return on Scheme assets 28.7

% of Scheme assets at end of period 31.9

Experience loss on Scheme liabilities 0.8

% of Scheme liabilities at end of period 0.9

Actuarial loss recognised in statement of total recognised gains and losses 29.5

% of Scheme liabilities at end of period 32.8

59

27 Notes to the consolidated cash flow statement

a) Reconciliation of operating profit to operating cash flows:52 weeks ended 52 weeks ended



Group operating profit 42.7 42.3

Depreciation and other amounts written off fixed assets 28.8 22.7

Loss/(profit) on sale of fixed assets 0.3 (0.1)

Amortisation of goodwill 0.8 0.8

Amortisation of government grants (0.1) (0.2)

Decrease/(increase) in stocks 0.1 (2.1)

Increase in debtors (13.5) (19.4)

Decrease in creditors and provisions 2.6 19.3

Net cash inflow from operating activities 61.7 63.3

b) Analysis of cash flows for headings netted in the cash flow statement:52 weeks ended 52 weeks ended



Returns on investments and servicing of finance

Interest received 4.0 2.2

Interest paid (7.0) (4.9)

Net cash outflow from returns on investments and servicing of finance (3.0) (2.7)

Capital expenditure and financial investment

Payments to acquire tangible fixed assets (47.1) (73.8)

Receipts from sales of tangible fixed assets 14.1 3.5

Payments to acquire own shares (0.6) –

Net cash outflow from capital expenditure and financial investment (33.6) (70.3)

Acquisitions and disposals

Purchase of subsidiary undertakings (1.5) (3.5)

Net cash acquired 0.5 –

Net cash outflow from acquisitions and disposals (1.0) (3.5)

Management of liquid resources*

Increase in short term deposits (19.7) –

Net cash outflow from management of liquid resources (19.7) –

Financing

Issue of ordinary share capital 1.2 1.8

Increase in borrowings 20.4 17.9

Net cash inflow from financing 21.6 19.7

*The Group includes as liquid resources deposits of less than one year.


60


27 Notes to the consolidated cash flow statement (continued)

c) Analysis of net funds/(debt):

At 29 December Acquisition Non-cash Exchange At 28 December

£ millions 2001 Cash flow of debt changes movement 2002

Cash in hand and at bank 11.2 (1.4) – (1.5) 0.3 8.6

Overdrafts (15.2) 9.5 – – – (5.7)

(4.0) 8.1 – (1.5) 0.3 2.9

Debt due within one year (17.1) 1.0 – 17.1 (1.1) (0.1)

Debt due after one year (32.7) 1.8 (0.3) (17.1) – (48.3)

Finance leases (0.2) 2.1 (25.3) – – (23.4)

(50.0) 4.9 (25.6) – (1.1) (71.8)

Short term deposits – 19.7 – 1.5 – 21.2

Total (54.0) 32.7 (25.6) – (0.8) (47.7)

‘Acquisition of debt’comprises £25.3 million of new finance leases and £0.3 million of debt acquired with the purchase

of a subsidiary undertaking.

28 Post balance sheet events

On 25 February 2003, the Group conditionally agreed to acquire the Geneviève Langlais (GLSA) group of

companies (‘Crudi’).

The net assets of GLSA were conditionally acquired for a consideration of 319 million. In 2002,GLSA had a turnover

of 352 million and made a small loss.

29 Related party transactions

Group

The joint venture,Geest QV in which the Group has a 55% interest,purchased goods and services from the Group

amounting to £1.3 million (2001:£1.0 million).Sales were also made to the Group amounting to £2.7 million

(2001:£2.9 million).

The associate during the period,ENZAFRUIT Worldwide Limited,purchased goods and services from the Group

amounting to £1.0 million (2001:£0.8 million).Sales were also made to the Group amounting to £0.2 million

(2001:£0.8 million).

Included in debtors is £0.1 million owed to Geest QV Limited and £0.1 million owed to ENZAFRUIT Worldwide

Limited. Included in creditors is £0.4 million owed from Geest QV Limited and £0.1 million owed from ENZAFRUIT

Worldwide Limited.

Company

Sales from Geest QV Limited to Geest PLC amounted to £nil (2001:£0.1 million) and purchases of goods and services

amounted to £0.5 million (2001:£nil). Sales from ENZAFRUIT Worldwide Limited to Geest PLC amounted to £nil

(2001:£0.1 million) and purchases of goods and services amounted to £0.1 million (2001:£0.6 million).

61

30 Subsidiary undertakings, joint venture and associate

Principal operating subsidiary undertakings

The subsidiary undertakings operating in the United Kingdom are all incorporated in Great Britain except for BV Negecos,

which is incorporated in the Netherlands.Other subsidiary undertakings are incorporated in the country of operation.

The shares of the subsidiary undertakings marked * are held directly by Geest PLC. In all cases the holdings are in

ordinary shares.

The following are wholly owned subsidiary undertakings except where indicated.Only details of undertakings whose

results or financial position affect the figures in the Company and Group accounts are given:

Operating in Guernsey

*Geest (Guernsey) Limited

Insurance and re-insurance

Operating in South Africa

Geest (SA) (Pty) Limited

Preparation of fresh produce

Operating in France

Cinquième Saison SA Group,

Centrale Salades France SA


Société Bretonne de Légumes Préparés SA

Preparation and marketing of fresh produce

Operating in the Netherlands

*Geest European Marketing BV

Investment company

Operating in Belgium

Vaco BV

Preparation and marketing

of fresh prepared foods

(incorporated in the Netherlands)

Associate

ENZAFRUIT Worldwide Limited (50% held)

Whole fruit produce marketing

Operating in the United Kingdom

*Geest Foods Limited

Preparation and marketing of fresh

prepared foods

English Village Salads Limited (95% held)

Marketing of fresh produce

Caledonian Produce Limited


*Geest Overseas Limited

Exporter of machinery and equipment

*Geest Properties Limited

Property management

*BV Negecos

Investment company

(incorporated in the Netherlands)

Joint venture and associate

Joint venture

Geest QV Limited (55% held)

Marketing of fresh produce


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NOTICE IS HEREBY GIVEN that the seventeenth Annual General Meeting of Geest PLC will be held at The GreatNorthern Hotel,Peterborough on 22 May 2003 at 11am for the following purposes:

1. To receive and adopt the accounts of the Group for the period ended 28 December 2002 and the reports of theDirectors and auditor.

2. To declare a final dividend.3. To re-elect Mr D W Wallis as an independent non-executive Director.4. To re-elect Mr R Destin as an independent non-executive Director.5. To elect Sir John Banham as an independent non-executive Director.6. To consider and, if thought fit,pass the following resolution as an ordinary resolution:

That KPMG Audit Plc be and they are hereby re-appointed auditor of the Company for the period specified in Section385 (2) of the Companies Act 1985 at such remuneration as may be agreed by the Directors.

Special business

7. To consider and, if thought fit,pass the following resolution as an ordinary resolution:

That the Directors be and are hereby generally and unconditionally authorised for the purposes of Section 80 of theCompanies Act 1985 to exercise all the powers of the Company to allot relevant securities (within the meaning ofthat Section) up to a maximum aggregate nominal amount of £499,213,which sum represents 9,984,259 ordinaryshares of 5p each,being approximately 13.3% of the issued share capital at 14 March 2003 provided that thisauthority shall expire at the conclusion of the Annual General Meeting of the Company in 2004,but so that it shallallow the Company to make offers or agreements before its expiry which would or might require relevant securitiesto be allotted after its expiry and the Directors may allot relevant securities in pursuance of such offer or agreementnotwithstanding that the authority conferred hereby has expired.

8. To consider,and if thought fit,pass the following resolution as a special resolution:

That subject to the passing of resolution 7 above, the Directors be and they are hereby generally and unconditionallyauthorised pursuant to Section 95 of the Companies Act 1985 to allot equity securities (within the meaning ofsection 94 of the Act as time to time amended) for cash pursuant to the authority conferred by that resolution asif Section 89 (1) of the Companies Act 1985 did not apply to any such allotment provided that this power shall belimited to the allotment of equity securities:

i) where the equity securities have been offered (whether by way of rights issue,open offer or otherwise) to holdersof ordinary shares on the register on a fixed record date in proportion (as nearly as may be practicable) to theirthen respective holdings of such shares,but subject to such exclusions or other arrangements as the Directorsdeem necessary or expedient in relation to fractional entitlements or any legal or practical requirements underthe laws of any territory,or the requirements of any regulatory body , stock or investment exchange, in anyterritory;and

ii) (Otherwise than pursuant to sub-paragraph (i) above) up to an aggregate nominal amount of £187,539 and shallexpire (unless previously renewed,varied or revoked by the Company in General Meeting) at the conclusion of the Annual General Meeting of the Company in 2004 but so that it shall allow the Company to make offers oragreements before its expiry which would or might require equity securities to be allotted after its expiry and the Directors may allot equity securities in pursuance of such offer or agreement in pursuance of such offer oragreement notwithstanding that the authority hereby conferred has expired.

9. To consider,and if thought fit,pass the following resolution as an ordinary resolution:

That the ‘Directors’ remuneration report’be approved.

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Vital in

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ation

10. To consider,and if thought fit,pass the following resolution as a special resolution:

That the Company be generally and unconditionally authorised to make one or more market purchases (within themeaning of section 163(3) of the Companies Act 1985) on the London Stock Exchange of ordinary shares of 5p eachin the capital of the Company (‘ordinary shares’) provided that:

i) the maximum number of ordinary shares hereby authorised to be purchased is 7,501,574 representing 10% of the Company’s issued ordinary share capital at 14 March 2003;

ii) the minimum price,exclusive of any expenses,which may be paid for an ordinary share is 5p;iii) the maximum price,exclusive of any expenses,which may be paid for any share is an amount equal to 105%

of the average of the middle market quotations for an ordinary share taken from the London Stock Exchange Daily Official List for the five business days immediately preceding the date on which the share is contracted to be purchased;

iv) the total number of options to subscribe for ordinary shares outstanding at 14 March 2003 is 2,932,319,whichconstitutes 3.9% of the issued share capital at that date; if the full authority were used outstanding optionswould constitute 4.3% of the issued share capital;

v) the authority hereby conferred shall expire on the earlier of 21 November 2004 or the close of the next AnnualGeneral Meeting of the Company;

vi) the Company may make a contract for the purchase of ordinary shares under this authority before its expirywhich would or might be executed wholly or partly after the expiry of this authority,and may make purchasesof ordinary shares in pursuance of this contract as if the authority had not expired.

11. To consider and, if thought fit,pass the following resolution as an ordinary resolution:

That i) the proposed new Geest PLC Executive co-investment plan (‘the co-investment plan’) the main featuresof which are summarised in the circular to shareholders dated 4 April 2003 and a copy of the rules of which is produced to the meeting and initialled by the Chairman for the purpose of identification be and the sameis hereby approved;

ii) the Board of Directors be and is hereby authorised to do all such acts and things as they may considernecessary or expedient to carry the co-investment plan into effect;

iii) the Board of Directors be and is hereby authorised to establish schedules to the co-investment and/orother plans based on the co-investment plan but modified to take account of local tax,exchange control orsecurities laws outside the UK,provided that any shares made available under such schedules or other plansmust be treated as counting against the relevant individual or overall dilution limits of the co-investment plan.

By order of the Board

Dawn E Durrant4 April 2003

Notes1. Any member of the Company entitled to attend and vote at the meeting is entitled to appoint one or more

proxies to attend and,on a poll, vote in his stead. A proxy need not be a member of the Company.The completionand return of a proxy form will not preclude the member from attending and voting in person.

2. The register of Directors’ interests in the shares of the Company and copies of the Directors’service agreementsare available for inspection by members at the registered office on any week day,except Saturdays and publicholidays,during normal business hours until the date of the Annual General Meeting,and will also be availablefor inspection at the Annual General Meeting and for at least fifteen minutes before it commences.

3. Members should note that to attend or vote, their shareholding must be registered on the register of the Companyas at close of business on 19 May 2003.This applies to shares held in uncertified form in CREST and also to sharesheld in certified form.

4. Copies of the draft rules of the Geest PLC Executive co-investment plan will be available at the Company’s registeredoffice and at the office of New Bridge Street Consultants,20 Little Britain, London EC1A 7DH during normal workinghours on any weekday (except Saturdays and public holidays) up to and including the date of the Annual GeneralMeeting and on that date at the place of the meeting from 15 minutes prior to the meeting until its conclusion.

Notice of Annual General Meeting (continued)

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Documents

Geest PLC Annual Report & Accounts 2002reports.investis.com/reports/get_ar_2002/downloads/... · 2003-06-20 · Geest PLC Annual Report & Accounts 2002 2 What we do. We produce and