27 June 2007
In February 2006, Galiform announced the initial phase of the restructuring of Supply. This involved the outsourcing of the supply of kitchen fascias and appliances, thereby increasing the flexibility and efficiency of the business. As a result, the remaining in-house manufacturing of products was focussed on 'flat pack' and 'rigid' kitchen cabinets and worktops.
As part of the disposal of MFI to MEP Mayflower Limited in October 2006, transitional supply and logistics arrangements were agreed between Supply and MFI. The end date for these arrangements was recently brought forward to 21 December 2007, after which the volume and range of products to be manufactured and sourced by Supply will be significantly reduced.
The ending of these arrangements enables Galiform to undertake the next stage of restructuring the business, decreasing the scale and complexity of Supply's manufacturing, warehousing and transport operations. This will speed the planned alignment of the business with Howden Joinery and is a further step in the transformation of Galiform.
Under the proposals being announced today, Supply's manufacturing operations will focus on the production of 'rigid' kitchen cabinets and worktops at its factories in Runcorn and Howden. It is proposed that the manufacturing operations in Hull, which currently produce kitchen components, will be relocated to Howden and that warehousing facilities will be located at the factory sites and at Supply's national distribution centre in Northampton. These proposals, along with the streamlining of other activities, are expected to result in job reductions of around 560.
The restructuring of Supply was anticipated at the time of the disposal of MFI and the detailed proposals announced today do not alter management's expectations for the Supply business in 2008 and 2009. It is estimated that the costs of the restructuring will total around £35m. Of this, around £25m primarily relates to redundancy costs and associated support, and property 'clean up' and disposal costs, with the remainder relating to asset write-offs. With the ending of the arrangements for product supply and delivery to MFI being brought forward, around £20m of the cash cost of £25m is now expected to be incurred in 2007, with the balance in 2008 to 2010.
Howden Joinery continues to trade well and remains on course to open 60 depots in 2007. A further update on current trading will be given as part of Galiform's 2007 interim results, to be announced on 6 September 2007.
Notes to Editors
At the end of 2006, Galiform had 6,362 employees, of whom over 1,900 were employed by Supply. With 60 new depots planned to be opened in 2007, together with the anticipated growth of existing depots, it is expected that Howden Joinery's employee numbers will increase by over 550 this year. Total employment by the Group is therefore expected to be broadly similar in 2007.
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