Pensions crisis sends shares in Uniq plunging a chilly 19%

CONCERNS over plans to tackle its £436 million pension deficit saw shares in chilled foods firm Uniq fall by 19 per cent yesterday.

The firm, which supplies Marks & Spencer and the Co-operative, hopes to renegotiate its liabilities to grow its business so it is better placed to deal with the deficit.

Uniq is saddled with the pension as a hangover from its previous incarnation as dairy giant Unigate, with ex-milkmen among the 21,000-member scheme.

Chief executive Geoff Eaton said an "innovative" plan to deal with the pension woes had been agreed and is subject to regulatory agreement.

"If cleared, this will facilitate our strategy to build a UK-focused convenience food business with the quality and scale to generate sustainable growth," Eaton said. "The outcome of the regulatory process is likely to have a fundamental impact on the future of the pension scheme and shareholder value."

Analyst Nicola Mallard, of Investec Securities, said progress on the plan was good news but getting the go-ahead from the regulator was "no mere formality".

She said the company, whose 25m market capitalisation is dwarfed by its liabilities, was difficult for shareholders to assess because of the uncertainties about the pension scheme.

"Uniq is no longer being valued as something that makes sandwiches and desserts, it is some sort of pension play," she said.

The proposals involve the firm limiting liability payments to 5m a year until 2013. It will then resume direct contributions to the scheme on the basis of its ability to pay, at either a third of earnings before interest, tax, depreciation and amortisation, or 10m a year, whichever is higher.

Mallard said the new plan "aims to break the link between annual pension top-up payments and the size of the deficit", instead focusing on what the company can "sensibly pay without inhibiting its future".

She added that the group's annual results, also released today, were "slightly ahead" of expectations for continuing operations.

Uniq said its UK division had seen profitable growth for the year to 31 December, with trading operating profit of 4.4m compared with a loss of 1.3m the previous year. Overall group pre-tax losses widened to 18.5m from continuing operations as 11.3m of pension expenses weighed.

Based in Gerrards Cross, the company employs about 2,200 people and manufactures products at Minsterley, Spalding, Evercreech and Northampton.

Eaton said recent trading showed the business was performing strongly and had the capacity for profitable growth.

Uniq has sold firms in France, Holland, Germany and Poland to concentrate on desserts and "foods to go" such as sandwiches and wraps in its UK business.

Sales for the first three months of 2010 were up 4.2 per cent on the same period last year. Its desserts side was hit by consumer caution last year, but did see a reduction in losses from 8.2m to 2.9m.