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Annual Report and Accounts 2010
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Freshness
InnovationQuality
Uniq produces freshly prepared chilled food for
major retailers and has market-leading positions
in Desserts and Food to Go. Our high-quality and
innovative products aim to delight our customers.
Desserts
312mTotal revenue 2010
Food to Go
Financial statements
Independent Auditors report 38
Group income statement 40
Group statement of comprehensive income 41
Balance sheets 42
Group statement of changes in equity 43
Cash flow statements 44
Notes to the financial statements 45
Other informationFive year record 82
Shareholder information 83
ContentsFinancial highlights 01
Directors report
Chairmans statement 02
Chief Executives statement 04
Market overview 06
Business review 08
Financial review 16
Principal risks 20
Directors responsibilities 21Board of directors 22
Report of the directors 24
Corporate governance 27
Remuneration report 32
155m2010 revenue
We are an innovative, market-leading
manufacturer of premium and everyday
freshly prepared pot desserts, a flexible
and niche supplier of quality, differentiated
yogurt and a state-of-the-art producerof fresh chocolate desserts made
exclusively for Cadbury.
157m2010 revenue
We are the Number One sandwich and
wrap supplier to M&S, the winner ofmultiple sandwich retailer of the year,
and the UKs second largest producer
of dressed salads.
Uniq Annual Report and Accounts 2010
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01
Financial highlights
Revenue up 6.8%*
Trading profit before central costs up 88%
Business performance recognised thorugh
customer awards
Strong momentum continues in Food to Go
Balance sheet transformed on deliveryof innovative pension solution in 2011
Successful admission to AIM
Desserts review identifies profitable
growth opportunity for defined markets
M&S best dessert supplier over Christmas
M&S NPD range of the year (minis)
Highest ever single sandwich production
at Northampton 6.5m units
24% increase in sales at Spalding
58 NPD products launched during the year
99.97% service level in Spalding during the
World Cup
*adjusted for 53rd week in 2010
2010m
2009m
Continuing operations
Revenue 311.9 287.2
Trading operating profit before significant items 8.3 4.4
Group costs before significant items (4.2) (6.3)
Operating profit/(loss) beforesignificant items 4.1 (1.9)
Significant items before tax (2.4) (0.7)
Finance expense (excluding pension-related) (1.4) (4.6)
Income tax (0.4)Net profit/(loss) before pension-relatedfinance expense 0.3 (7.6)
Pension related finance expense (11.5) (11.3)
Loss after tax (11.2) (18.9)
Profit/(loss) from discontinued operations 35.4 (2.0)
Profit/(loss) for the year 24.2 (20.9)
Key performance indicators % %
Revenue growth 6.8% 0.2%
Gross margin 15.3% 14.2%
Operating margin 1.3% (0.7%)
Financial highlights for the year
ended 31 December 2010
Highlights
Key achievements
Financial results
Further information can be found at www.uniq.com
Post period update
Uniq Annual Report and Accounts 2010
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Uniq Annual Report and Accounts 201002
Directors report
I am pleased to report a continued improvement in
the performance of the business, with an operating
profit before significant items of 4.1m in 2010 compared
to a loss of 1.9m in 2009. Turnover showed good
growth, with sales of 312m representing an increase
of nearly 7% on 2009s sales figure of 292m (adjusted
for 53rd week).
Although these figures provide strong evidence that theboards strategy of transforming the company into a
high-quality UK-focused private label business has been
successful, it became increasingly clear during 2010 that
the speed and scale of our efforts could not meet the
growing demands of our pension liabilities. The board
therefore continued to seek a solution to our pension
funding situation and on 9 February 2011, the company
reached agreement with the Trustee of the Uniq Pension
Scheme on the terms of a restructuring of the company.
This released the company from its obligations to the defined
benefit section of the Pension Scheme in exchange for a
90.2% equity stake in the company, with current shareholders
retaining a 9.8% stake in the company.
While the context for this decision is set out in more detail
below, the outcome is that Uniq can now look forward to
a future in which its management can develop the potential
of its businesses without the constraints imposed by our
pension situation. Although the board understands that
this will have caused shareholders considerable concern,
we are confident that our action is in their best interestsand the best long-term interests of all stakeholders.
Uniq has a strong, well-run business delivering the quality,
innovation and consistency that our customers demand,
in markets that offer multiple opportunities. As Chief
Executive Geoff Eaton outlines in his statement on pages
4 and 5, we believe that Uniq is now, finally, in a position
to capitalise on these strengths.
The context for restructuring
Uniq evolved out of the Unigate Group which, at its peak
during the 1980s, was a multinational conglomerate with over
30,000 employees in the UK, Europe and North America.
Unigate had a very large defined benefit pension plan with
over 40,000 members (including active members, deferred
members and pensioners) in the UK. When Unigate sold its
flagship dairy business in 2000, the remaining business
changed its name to Uniq plc. Under the terms of this
transaction Uniq plc retained the responsibility for members
of the dairy business in the Uniq Pension Fund.
In May 2001, Uniq demerged its logistics business,
Wincanton plc. The Uniq Pension Fund was split roughly
in half and Uniq was left with a pension scheme (knownas the Uniq Pension Scheme) of approximately 21,000
members but with a much smaller business, in terms
of assets, with which to support the pension scheme.
Board strategy
In 2006, the board recognised that Uniq was not a pan-
European group but a number of separate businesses
with distinct markets and challenges. The board adopted
a strategy intended to transform the business and address
the pension deficit. Through the sale of the Belgian salads
business in 2006 and the French St Hubert spreads
business in 2007 (total proceeds 288m), the group
was able to set aside 87m in a secure account
to offset substantially the deficit at that time in its main
UK Pension Fund. The remaining cash repaid debt and
provided funds to support the recovery of the retained
businesses, which were at that time incurring
substantial losses.
Alignment of the groups businesses with their customers
and markets was tackled through decentralising theorganisation to allow management to act faster and
more effectively. Major milestones were achieved in
each of the groups divisions, with recovery evident
throughout the business.
Pension funding
However, turbulence in world financial markets during
2008 resulted in a sharp increase in the UK pension
deficit. The need to strengthen the groups businesses
became more urgent. Accordingly, the board decided
to modify its recovery plan and, in particular, pursue
consolidation opportunities in France and Northern
Europe to create value through joint venture or sale
of those businesses and focus its resources on
strengthening its businesses in the UK.
Chairmans statementFoundations for the future
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03
Directors report
Chairmans statement
Uniq Annual Report and Accounts 2010
The businesses were sold in early 2010 and the proceeds
from their sale were used to support the growth of the
UK business and to assist the group in its triennial
funding discussions with the Pension Scheme Trustee.
Pension liabilities
On an IAS 19 accounting valuation basis, the pension deficit
as at 31 December 2010 was 142.1m. On a buy-out basis
(which assumes the liabilities have been bought out by an
insurance company), the net deficit was 430m.
The scale of this deficit negatively impacted the market
value of the company. The board therefore considered all
possible funding options for the Pension Scheme, all of
which would have involved a fundamental impact on thelong-term future of the group and on shareholder value.
As part of triennial scheme-specific funding discussions,
which began in March 2009 between the company and the
Trustee, a long-term funding proposal was developed and
was described in last years annual report and accounts.
It was rejected by the Pensions Regulator on 16 July 2010.
Restructuring solution
On 9 February 2011, the company reached agreement
with the Trustee, the Pensions Regulator and the Pension
Protection Fund on the terms of a restructuring of the
company. This Scheme of Arrangement was approved
by the shareholders on 25 February 2011 and sanctioned
by the Court on 18 March 2011. In exchange for a 90.2%
equity stake in the company, with current shareholders
retaining a 9.8% stake in the company, and a final
payment of 14m to the Pension Fund, the restructuring
released the company from its obligations to the defined
benefit section of the Uniq Pension Fund. Following this
restructuring the company successfully applied for theshares to be relisted on AIM as from 1 April 2011.
Dividend
The board has decided that it is not appropriate to pay
a dividend to shareholders for 2010 (2009: nil). However,
following the pension restructuring the Directors intend
to pay dividends when it is appropriate to do so.
Outlook
It is a great credit to Chief Executive Geoff Eaton and
his management team that, despite a period of such
uncertainty and the challenge of creating and implementing
the pension solution, they have continued to focus on,
and achieve, the transformation of the business.
Profitability has been restored, strong customer relationships
established and the flexible, innovative processes that
our markets demand are in place and already beginning
to show results. In spite of this, the new year has thrown
up further challenges with further raw material price
inflation, increasingly intense competition and loss of
business in Desserts being notified before the implementation
of the pension solution. I would like to congratulate allmanagement and staff at Uniq for their unstinting efforts,
which we fully expect to maintain the improved performance
of your company despite the challenging environment.
Furthermore, the comprehensive review of our Desserts
business, announced in January, has been completed
and a plan has been approved that is expected to deliver
sustainable improvement in profitability.
John Warren
Chairman
26 April 2011
We are confident that ouraction is in the long-terminterests of all stakeholdersand will give Uniq theopportunity to repay
their commitment.
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Uniq Annual Report and Accounts 201004
Directors report
Chief Executives statementDelivering the full potential of your business
Having addressed our legacy issues and completed
our transformation into a UK-focused, high-quality
Desserts and Food to Go producer, I believe we are
now able to deliver the full potential of the business.
Our investment in people, processes and products over
the last two years means we are in a strong position to
meet the challenges and opportunities our chosen markets
present. This has been demonstrated by our improvingperformance this year, which was driven by our strong
management teams and their ability to efficiently translate
their market insights into attractive and innovative products
that meet the demands of both customers and consumers.
With the right foundations now in place, I believe we can
consolidate our growth, optimise our return on investments
and raise profitability towards industry standard margins.
As befits a business that is, in many ways, starting afresh,
I would like to take this opportunity to lay out to investors
and all stakeholders our vision for the future: the market
opportunities we face; the strategy that will enable us to
address these opportunities; and the targets by which we
will measure how successful we are in doing so.
Vision
Our aim is to be the most respected fresh prepared
food company in the UK for innovation, service and
quality as judged by our customers, suppliers,
employees and shareholders.
Our opportunities and strengths
We serve large and growing markets, within which there
are multiple opportunities and drivers of demand: for example,
convenience, eating out of home and on the move, healthy
eating, and caf culture. By investing in understanding
consumers and innovating to create a regular pipeline
of new products we are able to benefit from this growth.
Strong market positions give us the scale to ensure we can
attract and retain highly capable teams and make efficient
use of assets. We supply over 65% of the sandwiches for
our largest customer, we are a market-leading supplier of
premium desserts, we are the exclusive producer of fresh
Cadbury chocolate desserts and we are the number two
supplier in prepared salads.
We service customers who are investing in growth
and we have the potential to increase our share of
their business we are highly focused and we derive
competitive advantage from understanding and
consistently meeting our customers needs.
We have an efficient capital structure that will support
investment. Our return on investment will be enhanced
by significant tax assets we will not pay tax on ourprofit for the foreseeable future.
We have an experienced and capable management
team that has come together during five years of
restructuring, turnaround and uncertainty and, having
already delivered some success, is appropriately
incentivised and committed to drive growth further,
unfettered by the legacies of the past.
Our product ranges include both premium and value
products and are appropriately tiered. Our flexibility
and ability to innovate mean that we can quickly
adapt our product ranges to reflect the economic
circumstances of consumers.
Performance review
Desserts
Our Desserts strategy began to show real results
this year. New and refreshed product ranges at both
our Minsterley and Evercreech sites, allied with the
investments we have made in the business over thelast two years, drove a stronger performance and
established Uniq as the place to go for innovative
high-quality private label products.
Immediately following this success we were forced to
push through a price increase following the increase
in cream costs which have risen by 80% over the last
two years. This not only had an adverse impact on
some customer relationships but also led to a change
in consumer behaviour as higher price points resulted
in switching to other products. Following the year end
we were notified of the loss of 10m of Desserts sales
partly as a result of these factors and partly reflecting
the uncertainties caused by the pension position.
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Uniq Annual Report and Accounts 2010 05
Directors report
Chief Executives statement
Desserts review
On the back of the disturbance caused by the price
increase and as a result of the decision to discontinue
cottage cheese production at Evercreech we conducted
a comprehensive review of our Desserts business.
Our Desserts business supplies four distinct sub-sectors
of the desserts market; premium desserts, Cadbury
chocolate desserts, yoghurt and everyday desserts.
Three of these sub-sectors are either profitable or
on track to achieve profitability, while the losses are
concentrated in everyday desserts. As a result of
the Desserts review we have approved the following
profit improvement plans:
To use the space freed up at Evercreech by the
discontinuance of cottage cheese production toinvest in further growing our premium desserts
business which grew by 21% in 2010.
To implement ambitious growth plans for Cadbury
desserts for which we have identified considerable
potential. We need to secure support for these
plans from our partners.
To continue to build our capability and customer
base for our premium, differentiated yoghurt business
at Minsterley, with support from M&S.
To implement a plan to significantly reduce the overheads
and costs in everyday desserts and work with our
customers to address the market needs while ensuring
that we stop the losses in this sub-sector.
Food to Go
At Northampton, we extended our ten-year growth record
in 2010, successfully implementing the increased sandwich
volumes won from M&S supplier consolidation. New and
relaunched product ranges helped us to not only take
advantage of growing niche markets such as healthy eating
and caf culture, but to win prestigious awards and furtherstrengthen our relationship with our principal customer,
M&S. Northampton continues to set the standard for lean,
flexible and creative processes, supported by both strong
management and a fully engaged workforce. In Salads,
our Spalding site increased volumes as we took on last
years new business wins, helping to drive efficiencies while
successfully maintaining exceptionally high quality and
service levels. Although oversupply in the market continued
to squeeze margin, the Salads business remains well positioned
to benefit strongly from any supplier consolidation.
Geoff Eaton
Chief Executive
26 April 2011
Our strategyWe will achieve growth by:
Empoweringour businesses so that they have the speed
and flexibility to meet the needs of our customers in a
fast-moving and competitive market-place. At the same
time, we will leverage our combined scale to support our
businesses and enhance our growth opportunities
Creating new opportunities by delivering outstanding
servicewith the highest standards of qualityand
efficiency day in day out
Meeting the needs of our customers and consumers
through innovationthat satisfies the demands of
growing and ever-changing markets
Investingin our people, processes, equipment andfacilities and continuously improving everything we do
Working in partnershipwith our key suppliers and
customers to achieve the most effective supply chain
capable of delivering added value to our shared consumers
Our targets and key performance indicators:
We aim to deliver organic growth of over 5% a year
Our trading profit margin should deliver an overall
return on sales of over 5%
Our return on investment should deliver double-digit
returns and exceed our weighted average cost of capital
We will adopt a progressive dividend policy with a
long-term target dividend cover of three times
We will maintain an appropriate capital structure
with total net debt no more than three times EBITDA
Our key actions to deliver our strategy:
We will continue to drive growth in our Sandwich business
We will consolidate our recovery in Salads and then
build our capabilities for long-term growth
We will build on our successful innovation in premium
desserts and yoghurt, seek to implement an ambitious
growth strategy for Cadbury chocolate desserts and
significantly reduce costs and improve efficiency to
stop the losses in everyday desserts
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Uniq Annual Report and Accounts 201006
Directors report
Market overviewAs the economy recovered in 2010, consumerstraded up but continued to demand value.
One reason for chilled convenience food sales outperforming
the wider marketplace is treating. While households
faced with constrained income growth and higher taxation
have cut back on spending, they are still attracted by
non-essential treats while carrying out their routine
food shopping.
Health was also a key trend. The 2010 Datamonitor
Consumer Survey showed the extent to which consumers
believe that taste should not come at the expense of
nutrition. Indeed, 62% of consumers attached more
importance to finding products that combined these
attributes than they did two years ago.
Premium v Value
Consumer appetite appears not to have been fundamentally
changed by the recession, and the demand for premium
ranges re-asserted itself, particularly in the second half
of the year. Cost-conscious consumers have, however,
been helped toward these ranges by promotional activity.
As the graph illustrates, demand for premium tiers
returned to growth in the final quarter of 2010, while
demand for value products continued to slow across
the marketplace.
Input prices
A wide variety of factors, ranging from adverse weatherconditions and rising global demand to higher energy
prices and market speculation, led to increased input
prices in 2010. This was particularly noticeable in the
second half of the year as the world economic recovery
accelerated, pushing up demand.
Uniqs input prices rose 3.8% in the year to December
2010, while in the broader UK economy the Consumer
Prices Index (CPI) rose by 3.7%* and the Retail Prices
Index (RPI) was up 4.8%* in the same period.
Our market
The broad market in which Uniq operates is the UK fresh
and chilled foods sector. This had a total value of 37bn
in 2010, representing an increase of 3.1% on 2009.
The majority of Uniqs output falls, however, within one
segment of this market: chilled convenience foods.
This grew more strongly, with sales up 5% in 2010 at7.5bn. As this segment is dominated by the major
retailers own brands and Uniq is primarily a producer
of private label/own brand products for the major
retailers, the outperformance of chilled convenience
foods is highly encouraging.
For more specific information about the market sub-sectors
in which we operate, see below.
Trends
One of the key trends in 2010 was consumers shopping
around to find good-quality products that also met their
value requirements. This proved a positive influence for
private label, which can often offer consumers significant
savings when compared to branded products. A comparison
of the 2009 and 2010 Datamonitor Consumer Surveys
shows that there was a significant increase in the proportion
of consumers saying that private label was of equal, if not
better, quality than branded products. This ability of private
label products to meet both the value and quality demands
of consumers drove growth in 2010. Indeed, researchpublished by Nielsen in 2010 shows that private labels
now account for 47% of all volume sold in the UK
retail channel.
Another trend was the growth of meal deal bundles, where
shoppers buy a menu of products for a discounted price.
This lends itself well to the mix and match versatility of
chilled convenience food, including desserts and salads.
It has particular resonance in the current economic climate,
where shoppers can save money by eating at home rather
than going out to a restaurant.
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Total Grocers Year-on-Year
% changes
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Feb2010
Jun Oct Feb2011
Nov2009
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40
30
20
10
0
-10
-20
Economy
Premium
Top 5 raw materialsPrice movement for 2010
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i
l
i
%
01 02 03 04 05 06 07 08 09 10 11 12
15
10
5
0
-5
-10
-15
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Dairy
Ingredients
Fruit and Conserves
VegetablesConfectionery
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Uniq Annual Report and Accounts 2010 07
Directors report
Market overview
Although the inflationary trend, driven largely by major
global factors, was evident across almost all Uniqs
purchasing categories, individual input prices also
behaved according to their own specific drivers.
Cream prices, for example, rose far more sharply than
average input prices as a number of factors fundamentally
altered the balance of demand and supply in the market.
High butter prices led to more cream being bought by
butter producers, reducing the availability to those,
like Uniq, who use it for other dairy-based products.
*Source: Office for National Statistics
Desserts market
The total chilled desserts market (which includes yogurts)grew by 3.0% to 2.4bn during 2010, with volumes
remaining flat. However, yoghurts represent less than
10% of Uniqs total desserts production. In chilled pot
desserts, which represent the vast majority of Uniqs
sales, the market grew more strongly, rising 4.8% by
value in 2010. Within the desserts market, trifle sales
remained unchanged in 2010, yoghurt sales edged
up by 2.4% and cheesecake grew strongly by 13.2%.
About 75% of Uniqs desserts output is private label
and the majority of this is for M&S, which strengthened
its position as a destination store for desserts,
registering increased sales by both value and volume.
Source: Kantar World panel w/e 26/12/10
Food to Go market
The Food to Go market is worth 16.8bn and grew by
12.4% in 2010. Of this, approximately 20% is sold by
the major retailers, for whom Uniq provide private label
products. The year saw overall Food to Go sales revenue
growing ahead of volume, as retailers changed their
ranges to include more premium lines and consumerstraded up, buying fewer lower value products.
Convenience is key in the on the go market, and
increasing numbers of outlet openings have contributed
to the acceleration in sales growth. Sandwiches represent
approximately 22.3% of the entire Food to Go market and
total sandwich sales grew by 6.6%, with volume up 3.2%.
In Salads, which represents approximately 1.5% of the
Food to Go market, sales increased by 9.3% of value,
on volumes up 5.0%.
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Uniq Annual Report and Accounts 201008
Directors report
Investment programme impacted bymarket volatility
Highly successful new product launches
Desserts review establishes clear path
to profitability
As the market leader in chilled pot desserts, Uniq
operates from two sites. Minsterley produces Cadbury
chocolate desserts, premium differentiated yoghurt
and private label premium and everyday desserts; and
Evercreech produces premium desserts and is exiting
cottage cheese. Both sites have a long heritage of
supplying dairy-based products into a market that
has been challenging for a number of years.
Our customers, the major retailers, and the end
consumer, demand freshly prepared high-quality,
great-tasting products that are attractive and innovative.
Investment during the year in areas such as new concept
development, new production lines, packing equipment
and more convenient pack formats has enabled us to
launch more than 58 new products in 2010. These wereextremely well received by our customers and by
consumers, in some cases the initial demand being
more than double our expectation. Our consumer insight
and technical expertise enabled us to develop exciting
new products for fast-growing niche markets, including
breakfast yoghurts for Costa Coffee and mini desserts
for M&S Caf and Food on the Move. This was recognised
during the year when we received the M&S Innovator of
the Year award.
Sales up 1.5%* to 155mLosses reduced by 6.9%to 2.7m
Our success has been achieved despite a strong
headwind from raw material inflation, driven in particular
by wholesale cream costs which have risen by around
80% over the last two years as a result of shortage of
supply and high demand from the Continent. While we
were able to successfully negotiate price increases with
our customers to reflect our growing costs, this inevitably
had an impact on volumes as customers and consumers
remain highly sensitive to price.
During the year Arla invested in new cottage cheese capacity
at its new dairy and a number of our customers were able to
secure lower prices and switched their supply. Consequently,
we decided to downscale cottage cheese production and
plan to exit this market in 2011. The growth delivered in ourpremium desserts business in 2010 allowed us to transfer
many of the employees from cottage cheese to desserts and
we intend to use the vacated space to facilitate further
growth in premium desserts.
Performance
The restructuring of our Desserts business in 2009
through consolidation from three sites to two, the creation
of a new consumer and innovation-led strategy and the
reinforcement of our management capability through a
number of experienced hires to key positions started to
show results in 2010. Despite the impact of cold weather in
the busy Christmas trading period, sales held up well in the
fourth quarter and we posted an overall sales increase of
1.5%* in 2010, achieving revenue of 155m. Although rising
raw material costs and a loss of share in the cottage cheese
market had an adverse effect on overall performance,
we were able to reduce losses over the year by 6.9%.
Site review Minsterley
At our Minsterley site our focus was on restimulatinggrowth in our everyday desserts categories such as trifle,
where we hold a market-leading position. To achieve this
we redeveloped all our recipes and packaging formats in
accordance with our consumer research. As a result, we
invested in new technology to give us greater flexibility
in the number of pots per pack and the speed at which
they could be packed. This process was successful, but
growth was held back by price increases as a result of
higher raw material costs.
Business review:Desserts
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Uniq Annual Report and Accounts 2010 09
Directors report
Business review | Desserts
Our co-pack agreement with Mller to produce
Cadbury branded desserts saw considerable investment
to build capacity, resulting in a state-of-the-art, highly
efficient facility. Although the anticipated volumes did
not materialise during 2010 we are well positioned to
work with our partners on future opportunities.
In yoghurts we successfully developed a new range
of products for M&S and won new business to provide
Costa with an exciting range of yoghurt products.
Site review Evercreech
Our Evercreech site produces around 70% of its output
for M&S (increasing to 100% following the planned
withdrawal from cottage cheese supply), and hasbenefited both from M&Ss strong performance in
desserts and from investing to further match the retailers
commitment to quality and innovation. As a result,
a range of new products was developed during 2010
that included minis (small-sized desserts designed
to be eaten on the move or as excusable indulgence),
confectionery (desserts based on popular sweets) and the
extra special chocolate jingle bell Christmas dessert,
delivering growth of 19% in premium desserts.
Successful innovation was achieved through a
combination of market insight, high-quality in-house
chefs, smart and flexible production techniques and
a highly engaged and committed workforce. This was
demonstrated by our winning both an innovation and
a collaboration award from M&S during the year.
As detailed above, our strong performance was offset
by rising input prices and falling demand for cottage
cheese as a new entrant came into the market.
By working closely with our customers we were ableto negotiate price increases to reflect rising costs.
*All compa risons to sales growth from pr ior year are ad justed to reflect the additional53rd week in 2010.
New product development
How minis made their mark
In 2010 Uniq helped to develop a totally new concept in desserts
the mini: a bite-sized dessert that looked and tasted great, but
was small enough to eat on the move and guilt free.
Market insight team identifies a gap in the market
Uniq work with customer to develop the concept
A cross-functional team is brought together to
deliver the concept
Equipment designed to deliver small shots
of dessert
Production starts
Operators apply lean techniques to achieve
required efficiencies
Products reach stores, demand rises rapidly
Increase capacity to meet demand
Sales reach 5m
Technical excellence
Meeting demand at Christmas
When our Minsterley site was asked to take over the production
of M&Ss highly successful inside-out trifle, it meant quickly
rising to the challenge of a complex and technically demanding
process. A product development team was rapidly assembled,
a new production line was designed and laid out, and trials
were carried out to determine the labour team required. As a
result, all 14,000 units of inside-out trifle were delivered in timefor Christmas.
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Uniq Annual Report and Accounts 201010
Directors report
Business review:Food to Go
Over 100m sandwiches produced during 2010
Share of M&S sandwich market rose to over 65% Strong cost management
As the leading supplier of sandwiches to M&S and
the UKs number two supplier of prepared dressed
salads, Uniqs Food to Go operations are located at
Northampton (sandwiches) and Spalding (dressed
salads). Each is run by its own management team
but they share many ingredients and processes.
Food to Go is a fast-moving business in which customers
and consumers expect fresh, enticing products that are
available whenever they want them. Volumes go up or
down on a daily basis according to the weather, time
of year or occasion. In order to service this market
successfully Uniq works with its customers, the major
retailers, to fully understand what consumers want
and to develop products that meet and exceed their
expectations. To deliver these, the finest and freshest
ingredients must be sourced, prepared, packaged and
despatched both quickly and to the highest possible
standard. This challenge requires highly disciplinedmanagement, a creative flair for food, technical
excellence and a fully engaged workforce with the
flexibility to deal with differing levels of demand.
Performance
Driven by both organic growth and the assimilation of
new business wins, sales grew by 13%* to 157m in
2010. Profits rose by 51% to 11m, supported by the
economies of scale achieved through higher volumes,
process efficiencies and the success of new product
launches into growing markets.
Sales up 13%* at 157mProfits up 51% at 11m
Site review Northampton
Following M&Ss decision last year to reduce the number
of its sandwich suppliers from three to two, Uniqs
Northampton site was able to secure significant new
business. During the year, transfer of the remaining new
lines and volumes was successfully completed without
interruption to production or any negative impact on
quality. This helped us to achieve our highest ever M&S
sandwich share during the year.
Our dedication to service, quality and taste was further
recognised by a number of awards. We assisted M&S
to win Sandwich Multiple Retailer of the year 2010,
The Lunch! Multiple Retailer of the Year Award 2010
and won the 2010 Best Low Fat Range. These awardsalso demonstrated the strength of our relationship
with M&S, which stretches back over 30 years.
Highlights of our work with M&S this year include:
The relaunch of the Food on the Move sandwich offer
to make both the individual products and the range
more attractive and easier for customers to navigate
The development of a new softer fresher bread for
all our sandwiches
The continuing success of the new Simply Fuller
Longer range
Successfully launching new products for the
fast-growing M&S Caf range
Relaunch of the premium Gastropub sandwich
in a bag range.
We have continued to align our activities with the
M&S Plan A agenda by developing, for example, an
innovative scheme to use cold air from outside to
cool our production facilities.
Of the 15m new business won from M&S, 10m
was taken on last year and the remaining 15m was
transferred this year. In addition, we achieved 6m of
organic growth, driven by new products and relaunches
into growing markets. The loss of the Supplair short-haul
flights business, as reported in last years annual report,
had a negative sales impact during 2010 of 5m. Headline
growth from the new business wins was supported by a
strong underlying performance, particularly in the second
half of the year as consumer confidence and new
product launches boosted sales. Like many food
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Business review | Food to Go
producers we experienced raw materials price inflation
during the year. We were able to meet these increased
costs by finding efficiencies in our business and, where
possible, agreeing price increases with our customers.
Site review Spalding
Uniqs Spalding site produces private label prepared
dressed salads for major retailers and food service
companies. The main product areas are potato salad,
coleslaw and pasta and variety salads. Its location in
Lincolnshire means it can source over half its fresh salad
ingredients from within a 70-mile radius. Its commitment
to its customers, long heritage in the region and highly
efficient management processes have made it the UKs
second largest supplier in the market.
The Co-operative business win reported in last years
annual report was successfully serviced during the year.
We invested in increased mayonnaise production and
storage capacity at Spalding to cope with the increased
volume and peak demand. Our reputation for service,
quality and innovation helped us to grow our sales with
all the major retailers we serve, and post an overall sales
increase of 24%* by value for 2010. Successful product
innovation, particularly in growing niche markets such
as entertaining at home, were achieved through careful
market research, consumer insight and close working
with our customers.
However, the market continued to suffer from oversupply
in 2010, making it difficult to grow margin alongside
sales. This also made it more challenging to pass on
inflationary costs to our customers. Although these were
relatively low during the first part of the year, final quarter
inflation grew more sharply and we expect this trend
to continue into 2011.
The significant progress we have made during the year in
further improving efficiency has helped us to maintain our
competitive position and achieve profitability in challenging
markets. Actions taken such as smarter buying, increased
labour efficiencies, reduced waste and energy use, and
more agile supply chains have all contributed to strongly
positioning our business in a highly competitive market.
*All compa risons to sales growth from pr ior year are ad justed to reflect the additional53rd week in 2010.
Growing markets
Caf culture
UK Caf sales are worth 5bn, with M&S Caf the sixth largest
operator in the market. The three largest coffee shops (Costa,
Starbucks and Caffe Nero) come from the branded coffee shop
sector. The branded coffee shop market grew by 12.9% last year to
1.9bn. M&S operates in the non-specialist sector which is showing
the fastest outlet growth. As the supplier of more than 90% of M&S
Caf chilled savoury products, we are well positioned to benefit.
It is a very discerning and fast-moving market that requires
attractive, great tasting products with high-quality, fresh ingredients.
Working closely with M&S, we carried out carefully tailored
consumer research, and developed new lines in 2010. As aresult, Uniqs sales in this category grew by 12% during 2010.
Flexible production
winning the World Cup
Success in Food to Go means being able to adapt quickly and
efficiently to rapidly changing demand. Summer is always the
busiest time for dressed salads, but the World Cup added
further demand for our large sharing packs of pasta salads and
coleslaw, with customer orders spiking by 50%. Not only was
our Spalding site able to fully meet this demand, they did so
without any negative impact on their average 99.97% service
quality rate.
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CSR Vision
We are committed to the sustainedwell-being of our Business, our People,
our Partners and our Environment. Our honestintent is to be socially, ethically and environmentallyresponsible in everything we do. We will always seekto understand and comply with the appropriate legaland regulatory requirements and go beyond this todrive sustainability through 5 key pillars delivered
through engaged site teams
Our people
and culture
Vision
Engagement
FareShare
Values
Training/
Development
Employee/
WellbeingCharity
Local Health and Safety Water Customers
Waste Suppliers
Energy NGOs
Packaging Regulatory
Refrigeration Experts
Transport
Food Safety
Healthy
Our
community
Our health,
safety and
wellbeing
Our
environment
Our
business
partners
Uniq Annual Report and Accounts 201012
Directors report
Corporate Social Responsibility
Our aim
We seek to actively engage all
employees in our vision and wish
to create a culture where everyone
brings all their talent and commitment
to drive our success every day.
Summary of what we are doing:
A clear vision and set of values
which we live every day
Investment in capability and
growth through training and
development
Cultural surveys to measure
engagement and drive action
to improve
A fair deal and a stake in success
Progress
3 of the 4 sites haveundertaken baselinecultural surveys witha high engagementof 83%.
Continued roll out
of the Uniq Learning
System.
Employee absence
reduction across
the group.
Long-term promises
Continuedimprovement andengagement inthe process, withincreasing scores,making Uniq a greatplace to work.
Talent identification
and succession
planning.
Sustained low
employee absence.
Our governance
Uniq is a devolved organisation andthe principal accountability for CSR
rests with the Managing Directors
of each of our operating sites. As an
ethical food producer we recognise
that the management of social,
ethical and environmental issues
requires everyones engagement.
Our Peopleand Culture
Guidance is provided by recognised
advisers, endorsed by the CSR forum,who report annually to the Uniq Board.
We aim to follow the standards of the
Global Reporting Initiative (GRI) in
our key activities and in future reporting.
The group, and all the associated sites,
work within four guiding principles:
Shared responsibility
Honesty and accountability
Sustainable progress
Demonstrable compliance
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Progress
In 2010 the group wasinvolved in 44 charity/community givingprojects (Financial andin-kind). This includedsending products toFareShare to feed
the homeless.
Numbers of localresident complaintswere down onprevious years.
Long-term promises
The promise isto increase ourinvolvement for thegood of charitieswe support.
The group aims tobe good neighbours,reducing our negativeimpact on thelocal community.
Our aim
Our commitment is to make positive
contributions to our local community
through employment, education,
good neighbourliness and support
of local causes.
Summary of what we are doing:
Principle areas of activity are; community
engagement and charitable giving
to both local and national charities.
We attempt to mitigate our noise and
transport environmental impacts at
all times.
Case Study:Employee
cultural surveys
During 2009 and 2010, the group
rolled out a detailed employee cultural
survey, covering topics such as
engagement, great place to work,
fairness, etc. The aim was to provide
objective data, from which we can
improve and make Uniq a great place
to work and a workplace of choice.
Case Study: Uniq Learning
System (ULS)
In order to enhance the skills
and knowledge of our employees,Uniq embarked on a learning
journey. This involved undertaking
a skills need analysis, writing
and rolling out competence based
learning units. These are verified,
by the departmental and
site-based assessors.
A member of Nor thampto ns staff said: It has helpedme develop myself, reduce waste and do a better jobit makes us feel we do worthwhile work.
The group has also supported FareShare in helping feedthe vulnerable in our community. Two sites support theirlocal air ambulances.
Case Study: Minimising noise
impact at Minsterley
The site has in the past received a
significant number of noise complaints
relating to steam valve pressure relief
systems. On investigation, it was found
that they were venting and creating a
noise issue. Most of the offending valves
have been replaced, thereby reducing
complaints by 50% since 2008.
Case Study: Local community
support at Evercreech
Evercreech have engaged with their
local community; running fun-days,sponsoring school crossing patrols
and being present at farm shop
open days. The site has also been
involved at the local Bath & West
Agricultural Show.
Our Community
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Uniq Annual Report and Accounts 201014
Directors report
Business review | CSR
Our aim
We believe good environmental
practice is good business practice.
We are committed to environmental
sustainability in setting ambitious
goals in six key impact areas: waste,
water, energy, packaging, refrigeration
and transport. We will engage our
employees in lean manufacturing
systems to deliver our and our
customers environmental goals.
Our Environment
Summary of what we are doing:
Examples include: Water: We use less and investigate
ways of using recycled water
and using less water in our
cooling systems.
Waste: Implementing lean
manufacturing across the group
and diversion of waste away
from landfill.
Energy: Reduction in consumption
using schemes such as; low energy
lighting, free winter cooling, bio-diesel
extraction from effluent, leak
reduction and lagging campaigns.
Packaging: We are working towards
the use of recycled packaging in our
packaging, target lower weights
and reduce excessive packaging.
Transport: Implementing green
car travel policies.
Case Study: Reduction of waste tolandfill at Spalding and Minsterley
Spalding have already reached
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Business review | CSR
Our aim
Is to engage and collaborate with allour internal and external stakeholders
to ensure we continually optimise
our ethical performance.
Summary of what we are doing:
We are working with suppliers
and using auditable databases
(SEDEX) to ensure our critical
suppliers are working to
recognised ethical standards.
Our sites are SEDEX compliant
We are working with key customers,
to understand their needs, in order
to build improving internal standards.
We are working with key external
advisers, and regulators to ensure
improvement and understanding.
Our BusinessPartners
Our aim
We are committed to ensuring that
we provide and maintain a safe place
of work and help our people make
informed health choices. We will
continue to innovate healthy options
and market leading safe products
for our customers.
Summary of what we are doing:
Uniq are improving workplace safetyby decreasing the number and severity
of incidents. We have improved the
provision of healthier meals and
nutritional advice and have promoted
active lifestyles at home and work.
Food safety is embedded in the way
we work and we continue to achieve
a year on year improvement.
Uniq is actively supporting our
customers health agendas by
increasing the range of healthy and
wholesome options available to
the retailers and end consumer.
The aim is to increase the healthier
food options.
Our Health, Safetyand Wellbeing
Progress
Critical suppliersSEDEX registered75%.
Progress
Reportable Accidentrate down to713/100,000employees from 849(2009), both are muchbelow the food industryaverage (1,350).
All sites scoredgrade A in theBritish RetailerConsortium Audit.
Long-term promises
100% of criticalsuppliers by end2011.
Long-term promises
Strive to zero Health& Safety Executivereportable accidents.
Enhanced externalCSR communications(e.g. website, CSRannual report).
Year on yearimprovementin food safety.
Case Study: The benefits of
health surveillance at Spalding
To raise awareness on National
Diabetes day occupational health at
Spalding ran a screening programme
for staff and employees. As a result,
a number of individuals were
identified to be possibly suffering
from the condition and were advised
to seek further medical advice.
Case Study:ROSPA Gold Awards
All sites in the group have undergone
a fantastic transformation in safety
performance in recent years.Northampton have been awarded
a ROSPA Gold Award for the past
6 years. This places them amongst
the best safety performers within
the food industry.
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Uniq Annual Report and Accounts 201016
Directors report
Financial review 2010
This financial review covers the activities of the group
for the 12 months ended 31 December 2010. The group
completed the disposals of its overseas businesses
realising funds to settle its outstanding borrowings which
were paid off in full at the end of the year. In March 2011
the group completed a debtfor equity swap with its
pension fund, releasing the group from its onerous
liabilities to the pension fund. As this was not completed
until 2011, the results for 2010 are not affected by thisrestructuring. However, we have included a proforma
balance sheet and restatedprofit before tax statement
at the end of this section to illustratethe significant
impact of the deal.
Revenue for continuing operations was up 6.8% on the
prior year (adjusted for 53rd week). The operating result
before significant items for the group moved from 1.9m
loss to 4.1m profit.
Group costs
Group costs represent the cost of running the parent
company and the head office at Gerrards Cross. As a
result of the downsizing of the group, we have reduced
the size of the head office reducing costs to 4.2m in
the year, a saving of 2.1m over last year.
Finance costs
This is split into three types of costs: operational, pension
related and accounting.
Operational finance charges include bank interest and
amortisation of bank fees and are related to the ongoing
operations of the business. Operations finance charges
for 2010 were 1.7m which was 1.7m lower than the
previous year due to the reduction of borrowings on the
realisation of overseas operations. During the year, as
part of our agreement with the pension fund, we were
required to hold surplus funds in a separate Disposal
Reinvestment account rather than pay down our outstanding
debt with the bank. This caused finance charges to be
higher than they would otherwise have been.
Pension finance charges cover two items: net pension
interest that is charged as part of IAS19 and interest
earned on the secure account. IAS19 pension interest
is a reflection of the balance of pension assets and liabilities
and is set at the beginning of the year. The net charge for
2010 was increased over the prior year due to the pension
fund de-risking its asset base to gilts. The pension interest
charge for 2011 will be significantly smaller due to the removal
of the main pension fund from the group in March 2011.Interest earned relates to the income on the secure account
balance of 97m which was lower year-on-year due to
lower interest rates. This balance, with accrued interest,
was paid over to the pension fund in October 2010.
Accounting finance charges are other finance items and
are generally non-cash. In 2010, this was a net income of
0.3m compared to a charge of 1.2m in 2009 and relates
to foreign exchange differences on cash balances across
the group.
Significant items
Significant items are those items of financial performance
which because of size or incidence, require separate
disclosure. The net significant item for continuing operations
in 2010 was a charge of 2.4m. This included 1.9m of
costs in relation to the closure of our cottage cheese site
at Evercreech (1.5m of asset impairment and 0.4m of
redundancy costs); 0.3m of redundancy costs and 0.1m
of asset impairment incurred due to the downsizing of
the group head office; 2.7m of costs in relation to thepension solution and a credit of 2.6m in relation to
the Wincanton settlement.
We have incurred a significant level of costs in exploring
and implementing an acceptable solution for our pension
fund liability. Some of these costs have been incurred in
2010 but we expected to incur further costs of approximately
3.1m in 2011 as the solution is completed. We reached a
full and final settlement of our litigation with Wincanton in
February 2011 which resulted in us making a final payment
of 2.3m. The provision we were holding for this litigation
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Financial review
at 4.9m was in excess of the final payment and therefore
the balance of the provision has been released.
Carrying Value of Minsterley
At the year end we assessed the balance sheet carrying
value of Minsterley (48.4m) by carrying out an impairment
review. This review indicated, on the basis of the expected
cashflows in the groups budgets and strategy plans, that
assets were adequately supported by the future cash flows
and no impairment was required. Since the year end, the
group has carried out a detailed review of the Desserts
operations in the light of recent profit performance and
announced sales losses. The revised plans for Minsterley
are dependent upon securing support from our customers.
Should this support not be forthcoming, the carryingvalue may not be supportable.
Taxation
There is no tax charge in the year for continuing operations
although the group made a profit after discontinued items,
as brought forward losses have been used where possible
to mitigate any tax exposures. The group has substantial
tax losses (83m), unclaimed capital allowances (214m)
and future tax relief for pension contributions (73m)
brought forward. These tax attributes exclude the losses
that have been created through additional contributions
as part of the debt for equity swap with the pension fund
in 2011. The growth and strategy of the business will
accelerate the use of these losses.
Discontinued operations
Discontinued operations include businesses which were
disposed of during the year. The disposal of the Northern
European operations was completed in the first half of
2010: the Netherlands businesses on 9 January and the
German/Poland businesses on 21 April. The results ofthese businesses have been included in the group up to
the date of disposal.
Profit after tax and before significant items for the discontinued
businesses was 3.2m. Total significant items were a credit of
32.2m which includes a charge of 0.7m for onerous leases
on group properties offset by 32.9m of profit on disposal of
the businesses. The profit on disposal includes a credit of
30.3m relating to foreign exchange gains previously credited
to reserves which have been recycled to the profit and loss
account on disposal.
Summary results2010
m2009
m
UK trading operating profit 8.3 4.4
Group costs (4.2) (6.3)
Operating profit/(loss) beforesignificant items 4.1 (1.9)
Finance costs (excluding pension related) (1.4) (4.6)
Profit/(loss) before significant items 2.7 (6.5)
Significant items (2.4) (0.7)
Pension finance costs (11.5) (11.3)
Loss before tax (11.2) (18.5)
Tax charge (0.4)
Loss from continuing operations (11.2) (18.9)
Discontinued items net of tax 35.4 (2.0)
Profit/(loss) attributable to shareholders 24.2 (20.9)
Basic profit/(loss) per share 21.3p (18.4)p
Funds flow2010
m
Operating profit 4.1
Depreciation and amortisation 9.9
EBITDA 14.0
Net capital expenditure (15.0)
Increase in working capital (4.0)
Continuingoperating cash flow (5.0)
Provisions and significant items (3.1)
Tax (1.1)
Discontinued operations 26.8
Pension contributions (0.9)
Other (1.9)
Total funds flow 14.8
Opening net debt (4.0)
Closing net cash 10.8
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Uniq Annual Report and Accounts 201018
Directors report
Funds flow
During the year the continuing group had a 5.0m operating
cash outflow. This includes 15.0m spend on capital
expenditure of which 10.6m related to the completion of
the Desserts project at the Minsterley site. Working capital
outflow for continuing operations in the year was 4.0m
which reflects the increased pressure from suppliers. During
the year the continuing group spent 3.1m on provisions and
significant items: 1.3m related to restructuring costs in
Desserts and 1.8m related to group head office restructuring
and pension legacy costs. The provision balance at the
year end of 5.8m includes 2.3m which was paid in final
settlement to Wincanton in February 2011, 1.3m in relation
to overseas disposals, 1.2m for onerous leases on
properties, 0.3m relating to Desserts restructuring costsand 0.7m of pension legacy fees. Tax payments of 1.1m in
the year relate to tax assessed on the disposal of St Hubert
which was completed in 2008. Net cash received from
discontinued operations of 26.8m represents the total cash
flow of the discontinued businesses to the date of disposal
plus the proceeds from disposals after payment of disposal
costs. Pension contributions relate to payments made to the
Pension Trustee to fund transfers out and pension costs
and interest costs of 1.5m reflect the level of borrowings
maintained through the year. Total funds flow for the year
was 14.8m.
Working capital and credit insurance
As noted in previous years, the group has experienced
significant pressure from suppliers on payment terms
and rates due to the withdrawal of credit insurance on
the company and the impact of the pension deficit on
the groups balance sheet. This has resulted in a further
worsening of the groups working capital position and
a cash outflow. Having completed the pension deal,
the group expects to be able to improve the availabilityof credit insurance through discussions with relevant
insurers and therefore return to more normal trading
terms with its suppliers.
Funding
Opening net debt at the beginning of the year was 4.0m
including 6.1m of net cash in the discontinued businesses.
The disposal of these businesses gave rise to cash proceeds
which, in accordance with a previous agreement with
the pension fund, were placed in a separate Disposal
Reinvestment account during the period of negotiation
with the pension fund to find a final solution. We maintained
our borrowings and the net cash in Disposal Reinvestment
account until 31 December 2010 when our bank facility
expired and all borrowings were repaid in full. Net cash
at the year end after payment of borrowings was 10.8m.
We have negotiated a new bank facility with Lloyds
TSB which was conditional on completing the debt for
equity swap with the pension fund. This process was
completed on 22 March 2011 and the new bank facility
became available. This new facility provides for a 15m
term loan, amortising at 3m each year for three years
with a lump sum repayment at the end of the facility,
and a 10m revolving credit facility to fund working
capital requirements.
PensionsThe group operates a main UK scheme and a number
of other small pension funds including an unfunded
overcap scheme, medical benefits provision and small
legacy scheme.
The IAS19 deficit on the main UK scheme at the beginning
of the year was 227.8m which was reduced significantly
during the year by the payment of the monies in the secure
account of 97.6m. Other movements on the deficit include
29.4m return on assets and 40.5m relating to the unwinding
of the liabilities. There was no service charge as the
scheme was closed to further accrual in 2009. The closing
deficit was 142.1m (excluding a provision of 3.4m for
scheme expenses).
Post balance events
Pensions update for 2011
In March 2011, the group completed a deal to swap the
debt owed to its pension fund for equity in the company.
This deal has removed the main UK pension deficit from
the balance sheet of the group but as this deal wascompleted in 2011, this is not reflected in these financial
statements. To illustrate the significant impact that this
deal will have on the group, a proforma Balance Sheet is
shown in the table opposite.The profit before tax (shown
opposite) has been restated as if the pension fund had
not existedthroughout the financial year.
Significant VAT recovery
In March 2011, the group recovered 2.6m from HMRC
in relation to various claims under the Fleming ruling.
This repayment consisted of 1.0m of VAT recovery and
1.6m of interest on the claim. The group is continuing
to claim further amounts under the Fleming ruling.
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Financial review
Proforma Balance Sheet Effect of the Pension Deal
m 2010Adj
(note 1)Pro
forma
Assets
Non-current assetsProperty, plant and equipment 80.4 80.4Intangible assets 30.5 30.5Deferred tax assets 13.9 13.9
124.8 124.8Current assets
Inventories 13.8 13.8Trade and other receivables 33.2 33.2Cash and cash equivalents 10.8 (3.3) 7.5
57.8 54.5Total assets 182.6 179.3Liabilities
Non-current liabilities
Borrowings 11.0 11.0Retirement benefit obligations 149.4 (145.6) 3.8Provisions 0.8 0.8
150.2 15.6
Current liabilities
Borrowings 3.0 3.0Trade and other payables 41.6 41.6Provisions 5.0 5.0Income tax liabilities 7.7 7.7
54.3 57.3
Total liabilities 204.5 72.9Total assets less liabilities (21.9) 106.4Equity
Shareholders equity
Total called up share capital 11.5 (10.3) 1.2Share premium 0.1 64.5 64.6Other reserves (330.2) (330.2)Retained earnings 296.7 74.1 370.8Total equity (21.9) 106.4
Note 1 The adjustments reflect the issue of shares by the parent company at the closing
price on 16 March 2011 to the pension fund in exchange for the cancellation of the IAS19pension deficit and the payment of 14m as a final contribution to the pension fund, fundedby the new bank facility.
RestatedProfit beforetax Effect of the Pension Deal
m 2010Adj
(note 2) Restated
Continuing operations
Revenue 311.9 311.9Cost of sales (264.3) (264.3)
Gross profit 47.6 47.6Distribution expenses (18.3) (18.3)
Administrative expenses (25.2) (25.2)
Operating profit beforesignificant items 4.1 4.1Significant items (2.4) 2.7 0.3
Operating profit aftersignificant items 1.7 2.7 4.4Net pension interest (12.1) 12.1 Finance income 1.2 (0.6) 0.6Finance expenses (2.0) (2.0)Net finance changes
(12.9) 11.5 (1.4)(Loss)/profit before tax (11.2) 14.2 3.0
Note 2 The adjustments reflect the removal of the significant cost in relation to themanagement of the groups pension fund, the pension interest charge and the financeincome related to the monies previously held in the secure account for the benefit ofthe pension fund from 1 January 2010.
Business performance measurement
The group measures its performance using a series of
KPIs, both financial and non-financial. The financial KPIs
are: sales growth; gross margin percentage; operating
profit percentage and return on capital. The non-financial
KPIs vary according to business unit.
Senior management are remunerated by bonuses
based on group and divisional financial performance
and in 2010, by delivery of the pension solution
and by share incentives, more details of which
are included in the remuneration report.
Financial risk
The group is subject to financial risks, but hasprocedures and controls in place to mitigate
these risks. The groups major financial risks
can be split as follows:
Market risk Market risk can be broken down into
currency risk and interest rate risk. The group
has formal procedures and policies to mitigate
these risks.
Credit risk The majority of the groups customers
are large, established retail organisations with a good
credit record. As a result the group does not have
significant concentrations of credit risk.
Liquidity risk During 2010 the group operated
within its banking facility which expired at the end
of December 2010. A new bank facility of 25m has
been negotiated and was available for use by the
group from March 2011. Liquidity risk remains low
due for the group due to formal procedures and
policies to manage cash resources.
Martin Beer
Finance Director
26 April 2011
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Directors report
Principal risks
This section updates what the board believes are
the most significant risks and uncertainties which
are specific to Uniqs businesses.
Minsterley profitability
Minsterley has a history of losses and has not generated a
profit in any reporting period since the site was acquired in
2005. In 2009, the Paignton site was closed and volume was
successfully consolidated into the Minsterley site. In the lastfive years, there have been investments in the infrastructure,
service and quality at the Minsterley site and financial results
have improved significantly.
Management recognises the recovery of profitability
of the Minsterley site has taken longer than expected.
The site serves four sub-sectors of the market: Cadbury
chocolate desserts, premium differentiated yoghurt,
premium and everyday desserts. The Cadbury, yoghurt
and premium dessert sub-sectors are either profitable or
on track to achieve profitability, while the site losses are
all concentrated in the everyday desserts sub-sector.
The Desserts review has approved a series of steps
to address and stop the losses in everyday desserts.
Minsterley produces Cadbury desserts under a co-packing
agreement. Additional capacity has been successfully installed
and the Cadbury manufacturing facility at Minsterley is highly
efficient. However, the anticipated growth has not yet
materialised and there are ongoing discussions with the
customer regarding the terms of the co-packing agreement.There is a risk that Cadbury volumes could continue to decline,
or that the co-packing agreement could be amended or
terminated. Any of these outcomes could have an adverse
impact on the groups operations and its financial condition.
Customers
The group is heavily dependent on a limited number of
significant grocery retailers in the UK and one major retailer,
M&S, represents over half of the groups sales. In line with
industry practice, the majority of Uniqs UK sales are made by
means of short-term standard purchase orders rather than
long-term contracts. In recent years, the major multiple
retailers have increased their share of the UK grocery market
and price competition between those retailers has intensified.
This price competition has led the major multiple retailers
to seek lower prices from their suppliers. Uniq has created
a decentralised, entrepreneurial business structure to
enable it to get closer to its customers and to mitigate
this risk. However, there can be no assurance that Uniqs
customers will continue to purchase its products at
current volumes, at current pricing or on current terms.
The credit insurance market and the creditworthiness
of the group and its customers
As is common in the food industry, many suppliers use
credit insurance to reduce the risk of exposure to the group.
The credit extended by suppliers is an important part of
the groups funding. Over the last few years, the level of
insurance available to the groups suppliers has significantlyreduced, owing to a general tightening of credit insurance
and the perceived extent of the groups UK pension deficit.
The removal of the pension deficit will create the necessary
conditions for credit insurance cover to be reinstated and
therefore, in time, this risk will reduce.
Weather and seasonality
Sales of some products, such as salad products, are
materially affected by unseasonable weather and seasonality.
Sales can be materially increased or reduced as a result
of weather fluctuations and seasonality.
Innovation
The group operates in competitive markets and in fast moving
sectors of the food industry. Its success is dependent on
anticipating changes in consumer preferences, including
dietary and nutritional concerns and on successful new
product development and product relaunches in response
to such changes in consumer behaviour. The groups future
results will depend on its ability successfully to identify,
develop, manufacture, market and sell new or improvedproducts in these changing markets.
Changes in the cost and availability of raw materials
The group purchases its raw materials, many of which
are commodities, from numerous suppliers. There are
a number of factors affecting the price of these raw
materials, such as quality, availability, demand, weather
conditions, currency fluctuations, agricultural policies
and political instability. Many of these raw materials are
subject to potentially significant price fluctuations.
The group will generally not be a sufficiently large buyer
to have any control over these prices and may be unable
to pass on such price increases to its customers in
whole or part or without a period of delay.
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21Uniq Annual Report and Accounts 2010
Directors report
Directorsresponsibilities
The directors are responsible for preparing the
Annual Report and the group and parent company
financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare group and
parent company financial statements for each financial
year. Under that law they are required to prepare the
group financial statements in accordance with IFRSs asadopted by the EU and applicable law and have elected
to prepare the parent company financial statements on
the same basis.
Under company law the directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the group and
parent company and of their profit or loss for that period.
In preparing each of the group and parent company
financial statements, the directors are required to:
select suitable accounting policies and then apply
them consistently;
make judgements and estimates that are reasonable
and prudent;
state whether they have been prepared in accordance
with IFRSs as adopted by the EU; and
prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the group and the parent company will
continue in business.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the parent companys transactions and disclose
with reasonable accuracy at any time the financial
position of the parent company and enable them to
ensure that its financial statements comply with the
Companies Act 2006. They have general responsibility
for taking such steps as are reasonably open to them
to safeguard the assets of the group and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the directors
are also responsible for preparing a Directors Report
and a Directors Remuneration Report that complies
with that law and those regulations.
The directors have also decided to prepare voluntarily
a Corporate Governance Statement as if the company
were required to comply with the Listing Rules and the
Disclosure Rules and Transparency Rules of the Financial
Services Authority in relation to those matters.
The directors are responsible for the maintenance
and integrity of the corporate and financial information
included on the companys website. Legislation in the
UK governing the preparation and dissemination offinancial statements may differ from legislation in
other jurisdictions.
We confirm that to the best of our knowledge:
the financial statements, prepared in accordance
with the applicable set of accounting standards,
give a true and fair view of the assets, liabilities,
financial position and profit or loss of the company
and the undertakings included in the consolidation
taken as a whole; and
the directors report includes a fair review of the
development and performance of the business
and the position of the issuer and the undertakings
included in the consolidation taken as a whole,
together with a description of the principal risks
and uncertainties that they face.
Geoff Eaton
Chief Executive
Martin BeerFinance Director
26 April 2011
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Martin Beer
Finance director
John Warren
Chairman
Geoff Eaton
Chief executive
Uniq Annual Report and Accounts 201022
Directors report
John Warren
Chairman * //
Joined the board in 2007,
served as Interim Chairman
from 25 June 2009 and
appointed Chairman on
14 April 2010. He is also
chairman of the audit
committee and the pension
committee. He was formerly
finance director of United
Biscuits plc and WH Smith plc.
He is a fellow of the Institute
of Chartered Accountants in
England and Wales and is a
non-executive director of The
Rank Group plc, Bovis Homes
Group plc and Spectris plc.
Geoff Eaton
Chief executive //
Joined the board as chief
executive in 2005. He was
formerly chief executive of
ISIS Research from 2001
to 2004. Prior to that he
spent 13 years with Tomkins
plc where he held a number
of senior executive roles
including executive director
at RHM in the UK, executive
vice-president at Gates
Corporation in the US and
head of corporate development
for the Tomkins Group. He is
a chartered accountant, having
qualified with Arthur Andersen.
Martin Beer
Finance director //
Appointed to the board in
2002 as finance director.
He is a chartered accountant,
having qualified with Price
Waterhouse. He has been
with the group since 1990
in various financial roles,
including finance director of
Unigate Dairies for five years.
Belinda Gooding
Non-executive director *
Joined the board in 2006.
She is chief executive of
Roots & Wings, a trustee of
Chelsea Physic Garden and
a non-executive director
of Strutt & Parker. She was
formerly chief executive of
2 Save Energy Ltd, a non-
executive director of Biloxi
Southern Foods, Sir Hans
Sloane chocolates and Pets
Kitchen and chief executive
of Duchy Originals Ltd from
2000 to 2007. Prior to that she
spent ten years in marketing
roles with Mars (Masterfoods)
and was group marketing
director of Dairy Crest
Group plc.
Board of directors
and seniormanagement
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Dr Matthew Litobarski
Non-executive director
Belinda Gooding
Non-executive director
Stephen Draisey
Managing director
Andrew McDonald
General counsel and
company secretary
23Uniq Annual Report and Accounts 2010
Directors report
Board of directors
Dr Matthew Litobarski
Non-executive director *
Appointed to the board in 2005,
served as interim senior
non-executive director from
25 June 2009 and appointed
senior non-executive director
on 14 April 2010. He is chairman
of the remuneration committee
and, since 25 June 2009, the
interim senior non-executive
director. He is chairman of
Devin AD (Bulgarian mineral
water company), and chair of
the council of Nacro (a leading
UK crime reduction charity).
He was previously president,
global supply chain, with
Cadbury Schweppes plc, having
spent 19 years with them in
various senior management
roles. He has a doctorate
in physical chemistry from
Nottingham University.
Stephen Draisey
Managing director
Appointed in 2008. He has
a wealth of experience in the
UK food industry having held
a number of senior positions
during a 17 year career with
Geest/Bakkavor, ultimately
as managing director of its
desserts, ready meals, soups,
sauces, pasta and chilled
bread division. Prior to that he
was with Northern Foods plc
and J Marr Seafoods Ltd.
Andrew McDonald
General counsel and
company secretary
Joined Uniq in 2005 as general
counsel and appointed company
secretary in February 2009.
He is secretary to the board
and each of the four board
committees and has
responsibility for corporate
affairs, insurance and all
legal matters affecting the
group. He qualified as a
solicitor in 1998 and worked
as a corporate lawyer for
Freshfields Bruckhaus
Deringer before moving
into industry.
* Member of the remuneration committee Memb er of the audit committee Member of the nomination committee
// Member of the pension commi ttee* Not a member of the Uniq Plc board
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Uniq Annual Report and Accounts 201024
Directors report
Report of the directors
Principal activity
Uniq is a convenience food group that is now focused on
the UK and operates and manages two divisions: Food to
Go and Desserts. During the year the group disposed of
all its remaining European operations in Northern Europe
(Germany, the Netherlands and Poland). In the view of
the Directors, the groups likely future development will
continue to centre on the main product categories in
which it now operates.
Business review, KPIs and risk review
A review of activities of the group and divisions, key
performance indicators (KPIs), an outline of the principal
risks and uncertainties which management believes
are specific to the group and an indication of future
developments are set out throughout the directors
report, but in particular in the Chairmans statement on
pages 2 and 3, the Chief Executives review on pages
4 and 5, the market overview on pages 6 and 7, the
business review on pages 8 to 15, the financial review
on pages 16 to 19 and in the principal risks on page 20.
Dividends
No dividends were paid during 2010 (nor in 2009)
and the directors have decided not to recommend
the payment of a final dividend for the year.
Acquisitions and disposals
During the year the following transactions occurred:
On 9 January 2010 the sale of the Netherlands business
(Uniq Convenience Foods Nederland BV) to Gilde Equity
Management Benelux for 16.6m was completed.
On 21 April 2010 the sale of the businesses in Germany
(Uniq Deutschland GmbH) and Poland (Uniq Lisner sp
zoo) for 24.7m to IFR Capital plc was completed.
Share capital and reserves
Details of the authorised and issued share capital
and changes in reserves of the company are shown
in notes 28 and 29 to the financial statements.
In March 2011, the company completed a capital
restructuring of its share capital to facilitate a debt for
equity swap with its pension scheme. This resulted in the
reduction of shareholders interests to 9.8% of the equity
and the issue of 105,704,563 shares to the pension
scheme, giving the pension scheme a 90.2% equity holding
in the company. This restructuring was sanctioned by
the High Court and on 24 March 2011 and the company
and its subsidiaries were discharged from their obligationsin relation to the defined benefit section of the companys
pension scheme.
Following this restructuring the company successfully
applied for the shares to be relisted on the Alternative
Investment Market (AIM) as from 1 April 2011.
Annual general meeting
The companys annual general meeting will be held at
10 am on 17 June 2011 at the offices of Investec Bank
plc, 2 Gresham Street, London EC2V 7QP. Details of
the business to be considered at the meeting are
contained in the notice of annual general meeting
sent to shareholders.
In accordance with the Shareholder Rights Directive
(the Directive) which came into force in August 2009,
the company obtained shareholder approval at the 2010
AGM to the calling of meetings, other than the AGM, on
14 days clear notice. Prior to the implementation of the
Directive, the company was able to call meetings otherthan the AGM on 14 clear days notice without obtaining
shareholder approval and, to preserve this ability,
shareholders will be asked to renew their approval by
passing Resolution 6 at the AGM.
Substantial interests
As at 26 April 2011, the company has received the
following notice of substantial interests (3% or more)
of the tota
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