Uniq dips on contract losses, restructuring

Exceptional charges relating to a major overhaul of its UK business took their toll on first half sales at Uniq, the chilled foods group - and the firm is now looking increasingly vulnerable to a takeover from stalking horse, Duke Street Capital.

The loss of major contracts to supply ready-made sandwiches to the Costa chain and snack salads for number three supermarket group Sainsbury last year prompted the overhaul of the UK business, which is expected to lead to the loss of 450 jobs.

It also inevitably impacted the group's profit performance in the first half, with operating losses of £1.3 million, down from profits of £7.5 million a year earlier as a result of exceptional items of £25.9 million.

Sales in the UK were also hit by the contract loss, meaning that total revenues dropped from £470.9 million to £424.4 million despite a good performance from the continental European operations, where the group's Ilo and Omega healthy spreads performed particularly well, talking Uniq's share of the French spreads market to 30 per cent.

The southern European business, which covers France, Spain, Portugal and Italy, was the first of the group's units to be restructured, and the fruits are now beginning to be seen. Sales were up 2 per cent to £123.3 million on a constant currency basis, lifting operating profits from the unit by 17 per cent to £10.2 million.

Despite the first half losses, and ongoing pressure on prepared fish sales in the German market, where it has a major share, Uniq remains confident of growth in the remainder of the year.

Buoyed by new UK contracts with Tesco (cottage cheese) and Morrison (trifles and desserts), worth £20 million a year, and by the ongoing cost-cutting measures - not to mention the growth opportunities in a number of its key markets, such as French spreads or Spanish salads, there is indeed room for the optimism.

However, it will have to show a major improvement in the coming six months if it is to continue to fend off the advances of the venture capitalist group.