Uniq, the food supplier that is one of the biggest suppliers of sandwiches to Marks & Spencer, last night denied its future was in doubt after the UK pension regulator rejected a proposal to cut its £436m pension deficit.
The chilled-food supplier's shares tumbled by almost a third, to 11p yesterday, after the watchdog warned the company's pension plan did not meet "all of its criteria for clearance".
Asked about the possibility of Uniq's collapsing into administration, Geoff Eaton, the chief executive of Uniq, said such an outcome was "extremely unlikely" with the company "doing well" ahead of results to be published on Thursday. Uniq said it had net cash on its balance sheet, boosted by a series of recent disposals, and had presented an innovative plan in April to raise an unspecified amount of capital so that it can grow the business through acquisitions. This would enable Uniq to raise its earnings so that its pension obligations would be a lower percentage of profits.
Mr Eaton said: "We have enough cash to invest to improve the business in the UK. We have put ourselves into a strong position. What we have got to do is to solve the pension situation."
Uniq supplies 65 per cent of Marks & Spencer's own-label sandwiches, including the Simply £1 range, and premium salads to The Co-operative Group. In its preliminary results report in April, the supplier said that if its proposals to cut its pension deficit were not accepted, the trustees might wind up the scheme. This raised "significant doubt" about Uniq's ability to continue trading as a going concern. Uniq made a loss of £18.5m for the year to 31 December after taking a £11.8m hit from a pension-related finance expense.
Uniq is not alone in its pension woes, as many UK companies are labouring under the weight of huge deficits. The UK arm of the magazine Reader's Digest collapsed into administration under a large pension burden earlier this year. The telecoms company BT and the airline British Airways are taking steps to address their gaping pension black holes, and have also been seeking deals with the Pensions Regulator.
Mr Eaton said it was "working hard" with its pension trustees and the regulator to resolve the situation but warned it would take "some time". Uniq added: "As previously stated, the outcome of this process will have a fundamental impact, either positive or negative, on the pension scheme and on shareholder value."
While Uniq has about 2,200 employees, the company's pension scheme has 21,000 members, which is a hangover from its previous structure as dairy giant Unigate back in 2000. It closed its final-salary pension to new members in 2005 and to existing savers last autumn.
In April, Uniq said its pension trustees were "highly supportive" of the company's strategy and that it had reached an agreement in principle with them. A key element of this was to link future pension-fund contributions to the company's ability to pay through an agreement to pay the higher rate of 33 per cent of underlying earnings or £10m a year from 2013.
At its annual general meeting last month, Uniq said: "Trading performance in 2010 is in line with expectations, with the trend in sales continuing to improve."Reuse content