CHILLED foods firm Uniq today hailed its transformation to a UK-focused business but its results were overshadowed by pension worries.

Uniq, which supplies Marks & Spencer and The Co-operative, said its UK division had seen profitable growth for the year to December 31.

It posted an overall group pre-tax loss of £18.5 million from continuing operations as £11.3 million of pension expenses weighed.

Chief executive Geoff Eaton said recent trade showed the business was performing strongly and had the capacity for profitable growth.

An "innovative" plan to deal with the firm’s pension woes has been agreed and is subject to regulatory agreement.

"If cleared, this will facilitate our strategy to build a UK focused convenience food business with the quality and scale to generate sustainable growth," Mr Eaton said.

"The outcome of the regulatory process is likely to have a fundamental impact on the future of the pension scheme and shareholder value."

Based in Gerrards Cross, the company employs around 2,200 people and manufactures its products in four sites at Minsterley, Spalding, Evercreech in Somerset and Northampton.

Uniq's pension deficit, which has been valued at #436 million, derives from its previous incarnation as dairy giant Unigate.

Some of the pension scheme’s 21,000 members are retired former milkmen.

Uniq has sold businesses in France, Holland, Germany and Poland to concentrate on desserts and ’foods to go’ such as sandwiches and wraps in its UK business.

The firm said sales for the first three months of 2010 were up 4.2% on the same period last year on an adjusted basis, reflecting new business wins including the M&S contract.

This compares to flat sales across 2009, which were up 0.2% in the year although they picked up strongly by the fourth quarter.

Its desserts business was hit by consumer caution last year, but the division did see a reduction in losses from £8.2 million to £2.9 million and sales began to rise in quarter four as Uniq transferred production from its Paignton site to Minsterley.

In recent trading, the firm said dessert sales were slightly down on last year as the sector becomes more promotional.

Uniq said Valentine’s Day gave it strong promotional opportunities at M&S in the first quarter, but activity is usually weighted to the second half of the year.

M&S’s decision to consolidate its sandwich suppliers from three to two, helped Uniq raise its share to 65%, with an annualised £15 million in new orders.

Products for the retailer included its "Simply" £1 sandwich range aimed at cost-conscious shoppers.

The food to go division grew by 12.5% in the first quarter, with performance described as "encouraging" despite the weather-hit start to the year.

In 2009 Uniq’s Spalding salad factory achieved £12 million of annualised new business with The Co-operative and "secured a clear number two position in the dressed salad market".

But the firm was knocked by British Airways’ decision to cut food services on short haul flights.

Its customer Supplair lost sales as a result of the move, which resulted in an annualised loss of sales of £8.2 million for Uniq.

The firm still supplies the long-haul flights.