Uniq’s, well, unique way of dealing with its pension deficit promises a brighter future for the UK food group, which, by its own admission has had a challenging few years.
Geoff Eaton, chief executive of the UK desserts-to-salads maker yesterday (15 April) outlined plans to ease the pressure that the company’s GBP436m (US$670m) pension deficit was having on the business.
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By negotiating a three-year break from making contributions, Uniq is more free to invest in growing its business – a business that is now focused on the UK after a series of disposals in Europe.
The proposal would see Uniq’s pension payments linked to earnings, which, Eaton says, “significantly changes the financial risk of the company”.
The plan also allows Uniq to have the cash to grow through acquisitions, with Eaton insisting that the pension trustees stand to benefit from returns from a “stronger, larger company”.
Uniq has made a number of attempts to revitalise its business in recent years; back in 2006, for instance, management announced plans to “unlock the true potential” of the company and move to pay down the steep pension deficit.
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By GlobalDataIn 2007, 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.
However, Uniq’s moves in the last 12 months to offload its European operations, focus on the UK and sort out the pension deficit suggests at last a robust plan to breathe fresh life in the business.
Indeed, yesterday, Uniq hailed the development of a profitable domestic business in 2009. The company said its underlying UK business booked an operating profit of GBP4.4m – against an operating loss of GBP1.3m.
However, Uniq’s shares still slumped yesterday, tumbling by 22%, amid continued concerns over the pension deficit. Despite the novel proposal, and the logical arguments put forward by Eaton to support the plan, the move is still subject to regulatory approval. And, as Eaton admitted, a decision from the pensions regulator could take months.
Moreover, while Uniq’s sales were up more than 4% in the first three months of 2010, there does remain an anxiety over the lack of diversification in the company’s customer base.
The own-label group generates over half its sales from one customer – Marks and Spencer – and a key goal in the months ahead should be to spread its sales among more customers, particularly with M&S facing challenges of its own.
The own-label market in the UK is notoriously competitive and, with the economic recovery giving greater confidence to brand-owners, the next year will be a challenge for the likes of Uniq – and that’s notwithstanding the pension problem.
