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March 11, 2009

Uniq hoping for home comforts

Uniq, the UK-based sandwich-to-desserts maker, serves some of the biggest retailers in Europe. The company, however, has had a rocky few years and today (11 March) its management outlined its latest attempt to turn the business around – and the recovery plan will focus on the UK. Dean Best reports.

By Dean Best

Uniq, the UK-based sandwich-to-desserts maker, serves some of the biggest retailers in Europe. The company, however, has had a rocky few years and today (11 March) its management outlined its latest attempt to turn the business around – and the recovery plan will focus on the UK. Dean Best reports.

In a recession, we all have to cut our cloth accordingly and the same applies, it appears, to some of the biggest names in the food business in the UK.

In the last six months, Dairy Crest, ready meals manufacturer Bakkavor, meat processor Vion and Marks and Spencer have all announced plans to cut jobs.

And Premier Foods, the UK’s largest food group, has offloaded assets, lined up plans for a share issue and secured a cash injection from private equity in a bid to reduce mounting debts.

In that period, convenience food firm Uniq has issued a profit warning and sold off a chilled fish business. Today (11 March), Uniq, which makes a range of food for Europe’s largest retailers, signalled it needs to further trim back its business – and its operations on the continent look most likely for the chop.

On the same day that Uniq posted deeper annual losses, the company said it had appointed advisers to consider the future of its businesses in France and northern Europe. Uniq’s pre-tax and operating losses widened, while sales were down as the company’s premium ranges suffered with cash-strapped consumer trading down.

Uniq is looking at the potential sale of assets in markets ranging from France to Poland, or it could look to develop a series of joint ventures for its operations on the continent. Whatever the structure of the deals, the rationale is clear – to focus squarely on the UK.

“In all the markets we serve in Continental Europe we can see opportunities for realising value through consolidation which is particularly pertinent in the current downturn,” Uniq chairman Ross Warburton said today. “We can make significant progress over the next twelve months as we concentrate our resources on fewer, stronger businesses and build them for a profitable future.”

Today’s admission that the business would need to be further streamlined is the latest attempt from Uniq to revitalise its operations. In 2006, Uniq’s management announced plans to “unlock the true potential” of the company and move to pay down a steep pension deficit. A year later, the company sold off its St Hubert spreads and Belgian salads businesses to pay off debt and shore up a number of loss-making operations elsewhere in the group. Uniq also put a pile of cash to one side to service the pension deficit.

Last July, Uniq announced plans to shut down its Riviera Desserts operation in the UK and last week the company confirmed the sale of another domestic business with the disposal of chilled fish business Pinneys.

All told, Uniq insists its has made progress in fulfilling some of the goals it set out in 2006. Management says a new team in France has turned the business from a loss-making one to a profitable operations. Losses in northern Europe have “significantly” reduced, while its Polish fish, salads and spreads business has “potential”, the company insists.

Some industry watchers agree. Nicola Mallard, an analyst with Investec in London, believes Uniq’s management have had to deal with a number of issues it acquired from the company’s recent past, including its pension fund deficit.

“The word legacy is often used for the company,” Mallard tells just-food. “Management has inherited a lot of this and it has actually achieved a lot of the things it set out to do.”

That said, Uniq admits it is facing “deteriorating” market conditions in the UK, a trading environment that it says demands greater focus from the company. “As market conditions worsen so the need to strengthen our businesses within a narrower geography becomes more appropriate,” Uniq said as it outlined its plans this morning. “Producing high volumes of foods within tight margins is management intensive: reducing management stretch by focusing on fewer businesses will improve our control of the business and generate more value.”

Among the tasks on Uniq’s to-do list are continuing to consolidate its desserts business, building its operations that are in “strong market positions” and pursue disposals or joint ventures in northern Europe and France.

“Where businesses cannot be rapidly returned to profit we will consider sale or closure, as we have done through the sale of Pinneys,” Uniq insists.

The company, however, is facing a challenging economic environment in the UK. Cash-strapped consumers are trading down, while Marks and Spencer , the company’s key retail customer has faced its own well-documented problems in the food sector.

Some commentators acknowledge Uniq has had to endure some tough trading conditions but insist the company’s management should take some of the blame for the company’s recent performance.

Nicolas Ceron, an analyst at Numis Securities, points to losses at Uniq’s Evercreech site in the UK, which , he says, has suffered from “poor new product development and huge inefficiencies in terms of waste”.

“There has been some mis-management in the UK,” Ceron says. “There have been some issues like M&S and consumers trading down but you cannot blame all of the performance of the UK business on M&S and on consumers trading down.”

Ceron, however, admits that Uniq’s strategy of scaling back in Europe is a correct one in order to breathe fresh life into its UK business.

“I’ve been saying that for the last two or three years. Uniq has a UK management team and with businesses everywhere it is hard to get a good grip on all those businesses at the same time,” Ceron says.

Uniq’s shareholders, who saw the company’s shares tumble by more than 13% by the close of trading today, will no doubt be hoping management is able to get a firm grip on its domestic business at least.

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