RHM flotation raises little enthusiasm

RHM boss Ian McMahon has promised to pump more cash into product and process development and make further efficiency savings after the group goes public.

Speaking as RHM's owner Doughty Hanson announced plans to float the company on the stock exchange, chief executive McMahon said the company had changed out of all recognition, from being a "collection of substantially independently-operated food companies" to a "centrally co-ordinated and managed" operation. Although the group had saved £20m a year through job cuts and factory closures, there was still plenty of scope for further savings in procurement, logistics and restructuring, he said. Acquisitions were also being explored.

The market value of the company, which makes Mr Kipling cakes, Paxo stuffing, Hovis bread, Robertson's jam and Bisto gravy, is expected to be more than £1bn at flotation, which is anticipated this month.

However, Panmure Gordon analyst Justin Scarborough claimed investors would not be falling over themselves for shares.

He said: "What RHM is doing in terms of procurement savings and divesting non-core brands is all very admirable, but everyone else is doing it, too, so it doesn't give them a competitive advantage. People will ask the question, do I really need to invest in RHM?"

Another analyst said: "Keeping a low-margin milling and baking operation in the portfolio will make it hard to attract a premium price."