The profitability of Uniq’s desserts business remains unacceptable, despite a significant turnaround in recent months, bosses have admitted.
Uniq, which returned to the black in 2007, posted a £1.9M profit before tax compared to a £21.9M loss in 2006.
There had been some contract wins with Tesco and Marks & Spencer (M&S). However, the desserts business had lost volume overall and had proved “unable to generate enough new business to be sufficiently confident of building the volumes we need to fill our capacity”, said chief executive Geoff Eaton.
“Consequently, the overall profitability of our desserts businesses remains unacceptable. While we have delivered the efficiency improvements at our desserts factory in Minsterley in line with our plan we remain short of the volume necessary to return this large site to profit. Consequently we have reassessed the carrying value of the site and written down the assets by £31.1M.”
He declined to comment on whether Uniq would revert back to its original plan of shutting its Evercreech desserts plant and consolidating production into the larger site at Minsterley, but said: "Nothing has been ruled out. We are looking at a range of options including acquisition opportunities. There is a lot of interest in the capability of the site to produce a range of products, but new business takes time to come on board and the commercial climate in the meantime is very tough."
He added: “The scale of change required in our businesses has been so extensive that it has taken longer than we would have liked to build the essential foundations for sustained recovery. Progress has been constrained by the time it has taken to build the necessary management capability in all parts of the business.
“Customers understandably take time to be convinced that the future will be different and while a few were not prepared to wait, the majority have recognised real improvements.”
However, Uniq had won a vote of confidence from M&S, which selected the firm as a strategic partner in premium desserts, food to go and fish/deli in its recent supplier review, said Eaton. "We're still discussing the commercial side, but we will have to co-invest and the cost of transitioning the new business will hit us this year, but could obviously bring significant benefits longer term."
Encouragingly, the UK business made a full-year profit of £5.9M, said Eaton. “This is a most encouraging turnaround from a loss of £2.8M in 2006. All of this improvement came through in the second half with much of it coming from the recovery in performance at Minsterley.”
There were also plans afoot to build a presence in the premium cottage cheese category later this year, he revealed.
In Northern Europe, Uniq reduced its losses in Germany by more than 40%, accelerated growth in Poland and “tackled further legacy issues in The Netherlands which caused a material reversal in profitability in the second half”, he added. “In France we reversed the decline in frozen branded sales, achieved growth overall of 5.8% and delivered a small profit.”