Chilled and convenience food maker Uniq, which owns Shropshire-based dessert maker Minsterley, reported narrowing first-half losses but warned the poor summer had adversely affected sales during the second half.

The company, which makes ready meals, salads and unbranded 'private-label' sandwiches and desserts for supermarkets including Marks & Spencer, Tesco, Asda, and Morrison's, said its pre-tax loss before significant items for the six months to the end of June was £3.7 million, against a loss of £12.8 million the previous year.

Commenting on first half performance and on the outlook for the group, chief executive Geoff Eaton said the company's recovery programme was making "satisfactory progress" and the results were in line with expectations.

"In the second half of 2007 we expect to deliver further efficiency improvements at Minsterley, the benefits of the restructuring in France, lower costs in Germany and improved margin management during the critical Christmas period," he said.

Total group revenues increased to £360.3 million from £352 million the year before. At constant currency rates, the growth rate was 4.2 per cent.

The company said the bad weather in the UK and Northern Europe had reduced the year-to-date sales growth rate to 3.6 per cent at the end of August.

UK sales were up 5.5 per cent in the first half while Northern Europe sales rose 2.2 per cent and French sales were up 4.1 per cent.

The company said it remained confident of delivering significant margin improvements in the second half, although the performance would depend on the timing of recovery of the cost increases, which will vary in each market.

It warned, however, that there had been dramatic increases in some commodity prices across Europe in recent weeks, particularly in dairy, eggs, and flour, which make up around 20 per cent of its raw material costs.

The company completed the sale of its spreads business in January, realising gross proceeds of £248.4 million. The disposal has transformed Uniq's balance sheet, taken it to a positive cash balance from a position of high debt levels at the end of December.

In addition, Uniq now has sufficient cash set aside in a secure account to more than cover its main UK pension scheme, which had a significant deficit at the end of last year.

"We are encouraged by the group's sales performance, where we have seen a return to growth after a flat year in 2006, the company said in a statement.

"This, in the main, reflects the success of our management initiatives with growth coming through in all three divisions.

"Our strong financial position will fund our improvements and the return to profitability of the continuing businesses. These businesses have annual sales of more than £700 million, are in growing markets and are capable of sustaining satisfactory profit margins."

In the UK, Minsterley reduced its loss for the half year from £7.1 million in 2006 to £3.4 million in 2007 and the second quarter loss from £3.1 million in 2006 to £1.3 million in 2007.

In Germany, the company reduced operating losses in the first half by £1.7 million, while in France, the Marie-branded frozen business reversed its 2006 sales decline of 22 per cent and delivered growth of four per cent.

The company is maintaining its interim dividend at 2.5p per share.