Clarke will step down from the board with immediate effect and has agreed to remain available to work with the company until mid 2013 to ensure an orderly handover to his successor. He will be replaced by Gavin Darby as ceo, with effect from February 4.
Shore Capital analysts Clive Black and Darren Shirley said they were both surprised and disappointed to learn of Clarke's resignation. “In addition to our surprise, we cannot hide our disappointment at Mr Clarke’s departure, because we have deemed him to be an effective leader to date, not least because of his commercial capabilities and relationships,” they said in a note.
‘Allow Premier to survive’
Black and Shirley praised the “remedial work” that he had undertaken to “allow Premier to survive”.
He was leaving just as the business needs to press on to a new chapter, which focused on being “more dependent upon organic growth and trading than structural commercial engineering”, they said.
They also predicted only “steady progress” in Premier Foods’ campaign to grow its Power Brands. Progress would be frustrated by the demonstrably weak UK grocery market, where volumes remain negative and competitive intensity high.
Competition would prove particularly tough in the plant bread market, said Black and Shirley. “Hovis is slugging it out against two very proficient competitors − Allied Bakeries and Associated British Foods − and the excellent private family business Warburton’s.”
Shore Capital repeated its ‘Hold’ advice on the company’s stock.
Premier Foods' share price fell by 9% this morning on news of Clarke's departure.
Investec Securities analyst Martin Deboo said: “We see the surprise change of leadership as unhelpful to Premier’s stability and organic growth prospects. We are accordingly placing our Buy recommendation under review and think investors should avoid the shares this morning.”
Deboo added that with Premier Foods’ financial restructuring complete, “consistency and longevity of leadership” was going to be critical to its prosperity.
Critical to its prosperity
Clarke’s departure would inevitably be followed by a further period of uncertainty, he said.
David Beever, chairman of Premier Foods, praised Clarke’s contribution. “Michael Clarke and the team have done a first class job in stabilising the business, strengthening its balance sheet, divesting non-core businesses and generating momentum.”
Beever added that Darby’s strong fast-moving consumer goods background and management track record made him the “ideal candidate” to lead the company. "The Board very much looks forward to working with Gavin to continue driving sustainable profitable growth at Premier."
Darby said: “Although markets remain difficult, I look forward to working with the team to develop and grow the company's Power Brands in the coming years. Premier Foods has great potential and I fully intend to invest a significant personal sum in the shares of the company after the full year results are published in February which the Company will match.”
Premier Foods results will be published on February 21.
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