Uniq chief executive Geoff Eaton stood by the UK food group plans for expansion and its proposed deal over its GBP436m (US$675.2m) pension deficit as shares in the company slumped today (15 April).
Speaking to just-food, Eaton said Uniq had struck an “innovative, long-term framework” with its pension trustees in a bid to ease the financial pressure on the former dairy group.
Go deeper with GlobalData
Uniq was formerly UK dairy company Unigate and it has around 21,000 former milkmen in its pension scheme.
After discussions with the pension trustees, Uniq has agreed a deal that puts off any company contributions to the scheme for the next three years.
Eaton said the structure of the proposed deal, which remains subject to regulatory clearance, meant Uniq could push ahead with plans to expand a business that is now solely focused on the UK after recent disposals in Europe.
“That agreement means we don’t have to make any payments to the pension fund for the next three years while we deliver our plan. From then on, the contributions will be linked to earnings, which significantly changes the financial risk to the company and gives the pension funds a share in our success,” Eaton said.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData“The framework also enables us to raise new capital so that we can make new acquisitions so we can rescale our business to cope with the pension fund.”
However, Uniq’s shares closed down 19.1% at 21.25p this afternoon amid uncertainty over whether the UK pensions regulator will clear the agreement.
Eaton admitted that a decision from the regulator would take “a number of months”. He said: “The sheer novelty of the proposal will give them quite a lot to think about. We can’t give any indication of how the regulator will react. It’s too early in the process for them to give any guidance.”
Uniq has raised around GBP105m from its European disposals and the company, which supplies retailers like Marks and Spencer and The Co-operative Group, is looking to build its existing business this year, Eaton said.
“We’re spending GBP10m on further investment in our desserts business. That is essentially doing three things,” Eaton said. “One, increasing capacity in our chocolate business so that we can grow our Cadbury chocolate sales through more aggressive, promotional campaigns. Secondly, we are further automating the end of line and thirdly we are investing in new processes to improve quality and efficiency.”
In the second half of 2010, the company will then focus on more “strategic options” and consider adding to the business through acquisitions.
“This year is absolutely about delivering on our existing platform. In the second half, we will start the process of evaluating our strategic options. We don’t expect to be ready to make any moves until 2011.”
Earlier today, Uniq hailed the development of a profitable domestic business in 2009 but saw its losses grow on rising pension costs.
Related Company Profiles
MARKS AND SPENCER
Eaton SRL
Cadbury
The Co-operative Group
Uniq plc