Annual Report and Accounts 2010 Uniq plc Uniq Annual Report and Accounts 2010 No.1 Chalfont Park Gerrards Cross Buckinghamshire SL9 0UN United Kingdom Telephone +44 (0) 1753 276000 Facsimile: +44 (0) 1753 276019 www.uniq.com Uniq Annual Report and Accounts 2010 Uniq Annual Report and Accounts 2010 Freshness £312m Innovation Total revenue 2010 Quality Desserts Uniq produces freshly prepared chilled food for £155m major retailers and has market-leading positions 2010 revenue in Desserts and Food to Go. Our high-quality and We are an innovative, market-leading innovative products aim to delight our customers. manufacturer of premium and everyday freshly prepared pot desserts, a flexible and niche supplier of quality, differentiated yogurt and a state-of-the-art producer of fresh chocolate desserts made exclusively for Cadbury. Food to Go £157m 2010 revenue We are the Number One sandwich and wrap supplier to M&S, the winner of multiple sandwich retailer of the year, and the UK’s second largest producer of dressed salads. Contents Financial highlights 01 Financial statements Designed and produced by Addison www.addison.co.uk Independent Auditors’ report 38 Printed in the UK by Pureprint, Environmental Directors’ report Group income statement 40 Management System ISO 14001 accredited and Forest Stewardship Council (FSC) chain of custody certified. Chairman’s statement 02 Group statement of comprehensive income 41 This report is printed utilising vegetable-based inks Chief Executive’s statement 04 Balance sheets 42 on Revive 50 White Silk which is produced with 50% recycled fibre from both pre- and post-consumer Market overview 06 Group statement of changes in equity 43 sources, together with 50% ECF (Elemental Chlorine Free) fibre from well-managed forests independently Business review 08 Cash flow statements 44 certified according to the rules of the Forest Stewardship Council. Financial review 16 Notes to the financial statements 45 Principal risks 20 Directors’ responsibilities 21 Other information Board of directors 22 Five year record 82 Report of the directors 24 Shareholder information 83 Corporate governance 27 Remuneration report 32 Uniq Annual Report and Accounts 2010 01 Financial highlights Financial highlights for the year ended 31 December 2010 Highlights Financial results • Revenue up 6.8%* 2010 2009 £m £m • Trading profit before central costs up 88% • Business performance recognised thorugh Continuing operations customer awards Revenue 311.9 287.2 • Strong momentum continues in Food to Go Trading operating profit before significant items 8.3 4.4 Group costs before significant items (4.2) (6.3) Operating profit/(loss) before significant items 4.1 (1.9) Post period update Significant items before tax (2.4) (0.7) Finance expense (excluding pension-related) (1.4) (4.6) • Balance sheet transformed on delivery Income tax – (0.4) of innovative pension solution in 2011 Net profit/(loss) before pension-related • Successful admission to AIM finance expense 0.3 (7.6) • Desserts review identifies profitable Pension related finance expense (11.5) (11.3) growth opportunity for defined markets 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 achievements Key performance indicators % % Revenue growth 6.8% 0.2% • M&S best dessert supplier over Christmas Gross margin • M&S NPD range of the year (minis) 15.3% 14.2% • Highest ever single sandwich production Operating margin 1.3% (0.7%) 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 Further information can be found at www.uniq.com 02 Uniq Annual Report and Accounts 2010 Directors’ report Chairman’s statement Foundations for the future I am pleased to report a continued improvement in members and pensioners) in the UK. When Unigate sold its the performance of the business, with an operating ‘flagship’ dairy business in 2000, the remaining business profit before significant items of £4.1m in 2010 compared changed its name to Uniq plc. Under the terms of this to a loss of £1.9m in 2009. Turnover showed good transaction Uniq plc retained the responsibility for members growth, with sales of £312m representing an increase of the dairy business in the Uniq Pension Fund. of nearly 7% on 2009’s sales figure of £292m (adjusted for 53rd week). In May 2001, Uniq demerged its logistics business, Wincanton plc. The Uniq Pension Fund was split roughly Although these figures provide strong evidence that the in half and Uniq was left with a pension scheme (known board’s strategy of transforming the company into a as the Uniq Pension Scheme) of approximately 21,000 high-quality UK-focused private label business has been members but with a much smaller business, in terms successful, it became increasingly clear during 2010 that of assets, with which to support the pension scheme. the speed and scale of our efforts could not meet the growing demands of our pension liabilities. The board Board strategy therefore continued to seek a solution to our pension In 2006, the board recognised that Uniq was not a ‘pan- funding situation and on 9 February 2011, the company European group’ but a number of separate businesses reached agreement with the Trustee of the Uniq Pension with distinct markets and challenges. The board adopted Scheme on the terms of a restructuring of the company. a strategy intended to transform the business and address This released the company from its obligations to the defined the pension deficit. Through the sale of the Belgian salads benefit section of the Pension Scheme in exchange for a business in 2006 and the French St Hubert spreads 90.2% equity stake in the company, with current shareholders business in 2007 (total proceeds £288m), the group retaining a 9.8% stake in the company. was able to set aside £87m in a secure account to offset substantially the deficit at that time in its main While the context for this decision is set out in more detail UK Pension Fund. The remaining cash repaid debt and below, the outcome is that Uniq can now look forward to provided funds to support the recovery of the retained a future in which its management can develop the potential businesses, which were at that time incurring of its businesses without the constraints imposed by our substantial losses. pension situation. Although the board understands that this will have caused shareholders considerable concern, Alignment of the group’s businesses with their customers we are confident that our action is in their best interests and markets was tackled through decentralising the and the best long-term interests of all stakeholders. organisation to allow management to act faster and more effectively. Major milestones were achieved in Uniq has a strong, well-run business delivering the quality, each of the group’s divisions, with recovery evident innovation and consistency that our customers demand, throughout the business. in markets that offer multiple opportunities. As Chief Executive Geoff Eaton outlines in his statement on pages Pension funding 4 and 5, we believe that Uniq is now, finally, in a position However, turbulence in world financial markets during to capitalise on these strengths. 2008 resulted in a sharp increase in the UK pension deficit. The need to strengthen the group’s businesses The context for restructuring became more urgent. Accordingly, the board decided Uniq evolved out of the Unigate Group which, at its peak to modify its recovery plan and, in particular, pursue during the 1980s, was a multinational conglomerate with over consolidation opportunities in France and Northern 30,000 employees in the UK, Europe and North America. Europe – to create value through joint venture or sale Unigate had a very large defined benefit pension plan with of those businesses – and focus its resources on over 40,000 members (including active members, deferred strengthening its businesses in the UK. Uniq Annual Report and Accounts 2010 03 Directors’ report Chairman’s statement 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 the long-term future of the group and on shareholder value. As part of triennial scheme-specific funding discussions, “ We are confident that our which began in March 2009 between the company and the action is in the long-term Trustee, a long-term funding proposal was developed and was described in last year’s annual report and accounts. interests of all stakeholders It was rejected by the Pensions Regulator on 16 July 2010. and will give Uniq the Restructuring solution opportunity to repay On 9 February 2011, the company reached agreement their commitment.” 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 Profitability has been restored, strong customer relationships by the Court on 18 March 2011. In exchange for a 90.2% established and the flexible, innovative processes that equity stake in the company, with current shareholders our markets demand are in place and already beginning retaining a 9.8% stake in the company, and a final to show results.