March 25, 2008 / 7:17 AM / 12 years ago

Uniq cancels dividend and warns of tough 2008

LONDON (Reuters) - Convenience food company Uniq UNUNI.L swung to a small profit in 2007, but said its recovery would be delayed and it would not pay a dividend, sending its shares to a more than two-year low.

Profit before tax was 1.9 million pounds against a 21.9 million pound loss the previous year, as revenue gained 2.9 percent to 736.1 million pounds in the year ended December, the company said on Tuesday.

But shareholders would not get a dividend, as economic conditions got “significantly harsher” last year with conditions in 2008 worsening, the company said.

Uniq, which supplies convenience food and ready meals to supermarkets in Europe and counts Marks and Spencer (MKS.L) (M&S) as its largest customer, said its recovery would take longer than originally envisaged.

Its shares slid 11 percent to 118.5 pence at 9:36 a.m., after earlier dropping to their lowest intraday levels since January 2006.

Analysts at Panmure Gordon, which had been expecting a dividend of 4.5 pence per share, said the lack of a payout would provide “little cheer” for investors.

“Uniq will appeal only to the most die-hard of special recovery value-driven investors,” Panmure analyst Andrew Saunders said in a note.

“The company still trades across too broad a Pan-European market for its size, the management is spread too thinly, operating efficiencies have failed to be realised, there is insufficient cash flow..,” he added

Chief Executive Geoff Eaton said that while the company’s recovery had been delayed by a year, it had no intention of selling its northern European business, dispelling hopes of an asset sale to unlock value.

“Judging recovery is always hard to do and the delay of 12 months is a result of the time taken and the more difficult economic circumstances,” Eaton said in a telephone interview.

“But no, we won’t sell — we’re recovering in all our business and we’re very pleased with where we’re going in Northern Europe.”

Prices of raw materials like wheat, dairy and vegetable oils grew an average 8-10 percent in 2007, he added.

“All we can do is negotiate with our customers; change products, change suppliers or pass on costs,” Eaton said.

A supplier review its largest customer M&S, which represents over a quarter of group sales, could be good news for Uniq, Eaton added.

“It would entail co-investment and co-innovation for M&S’ long-term growth,” he said. But analysts at Numis were not as bullish. “Uniq will be able to gain additional volumes but this may come at a price,” Numis analyst Ian Kellett said.

“We are concerned by the management comment that maintaining UK profits in 2008 at 2007 levels is increasingly challenging.”

The UK accounts for almost half of all Uniq’s sales. Northern Europe accounts for almost a third and France a quarter.

Reporting by Hsu Chuang Khoo; Editing by Erica Billingham and Quentin Bryar

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