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Premier Foods still has battle on hands, say analysts

By Dan Colombini , 01-Nov-2011
Last updated on 02-Nov-2011 at 13:16 GMT

Troubled food giant Premier Foods still has a mountain to climb despite ceo Michael Clarke’s decision to restructure the business and appoint two new managing director (mds), according to city analysts.

The beleaguered firm announced yesterday (October 31) that the reshuffle will see a split between the grocery business and the newly configured bakery business, under the stewardship of new mds, Iwan Williams, 53, and Graham Hunter, 47.

The new look structure will replace the old role of executive director and chief operating officer, currently held by Tim Kelly, who will leave the firm after a short handover period.

Crippling debt

However analysts feel that the firm is still facing an uphill struggle in its attempt to battle crippling debt and renegotiate covenant agreements with its banks at the end of the year.

Shore Capital analyst Clive Black told Food Manufacture.co.uk: “It is not uncommon for a new ceo to make organisational and structural changes. Especially when considering the dire performance of the business over the past few months. It was clear fundamental changes were needed both organisationally and structurally.”

“The decision shows clarity of thought, but what the firm needs is refinancing and to get the millstone of debt of its back. This is just another game plan and not delivery, that’s for sure.

His thoughts were echoed by Julian Wild, corporate finance partner and food group director at Rollits, who also agreed changes were required.

He told Food Manufacture.co.uk: “I think they have a big task on their hands as fundamentally Premier is in a lot of debt due to its previously-held aggressive acquisition strategy.

“Focus is always a good idea though and I think the new appointments are a positive step to restructure the business. However, when you have an enormous amount of debt, you either have to trade your way out or sell things and it would seem Premier are preparing to do this with Brookes-Avana already in the exit lounge.

Exit lounge

Williams will lead the new bakery section that includes Power Brands, Hovis and Mr Kipling as well as own-label chilled foods business Brookes-Avana, which has been widely touted as a likely option for the firm to off-load.

The remainder of the firm’s Power Brands fall under the grocery section of the business that will be run by Hunter, who will join the firm early next year from 2 Sisters Food Group.

Hunter’s experience lies in his role as md for a number of Northern’s Food’s branded businesses, which were taken over by 2 Sisters earlier this year.

A spokesman for Premier Foods told Food Manufacture: “Both men are high calibre candidates who bring a lot of experience to the roles. Michael Clarke is working to ensure more focus on key areas of the business and these appointments will help provide this.”

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