City analyst Investec has criticised the “revolving door” at Premier Foods, after another key member of its management team left the firm this week.
Investec analyst Martin Deboo downgraded advice on Premier Foods’ stock from ‘buy’ to ‘hold’ after news, announced on Monday February 4, that chief operating officer Geoff Eaton had left the company.
Eaton’s surprise departure – on the day new ceo Gavin Darby joined the firm – followed the shock resignation of former ceo Michael Clarke.
Deboo described both exits as “a leadership drama”. He said in a note: “We think the board was appropriately decisive in the circumstances in bidding adieu to Mike Clarke and remain open-minded on his successor, Gavin Darby.
“But, time is emphatically not on this company’s side and a fresh leadership drama was the last thing it needed.”
On the positive side, Deboo noted that the “heavy lifting around refinancing and disposals”, had now been completed. This meant Premier Foods was positioned to start delivering on its organic growth aspirations, so it was a “singularly bad moment for a change of ceo”.
Deboo added that Clarke had been compensated for the loss of his Kraft benefits.
Also even “the most cursory diligence” prior to his joining the firm would surely have indicated that “any turnaround was going to take years, not months”, he added.
If Premier Foods is to remain public, it must achieve an eventual equity raise and that depends on an established leadership team with a consistent record, said Deboo.
“With fresh upheaval and with some potential bumps in the road coming as soon as financial year 2014, we revert to the sidelines. But, with no little frustration that this most valuable of opportunities is proving to be so cursed.”
Eaton exited from what was Britain’s biggest food manufacturer after only four months with the firm.
Premier Foods said it wanted to introduce “a flatter executive management structure”. The new structure – which does not include the role of chief operating officer – will enable commercial and functional management to report directly to the ceo.
Shares in the debt-laden food manufacturer fell by 9% on the news of Eaton’s departure.
Their value has tumbled 25% since Clarke announced his resignation.
The new ceo Darby is a former boss of Cable & Wireless Worldwide (C&W). While noting his lack of experience in the fast-moving-consumer-goods sector, Deboo wondered whether he “might deliver Premier into the arms of a suitor, as he did at C&W”.
Although such an outcome was unlikely, Darby’s long absence from the sector might bring a useful perspective, concluded Deboo.