Own-label woe puts Premier jobs at risk

By Ben Bouckley, Graham Holter and Anne Bruce

- Last updated on GMT

Related tags: Rank hovis mcdougall, Robert schofield

Robert Schofield
Robert Schofield
Premier Foods plans to close its distribution centre in Chandler’s Ford, Hampshire as it rationalises its south coast operations, while the firm has also rebuffed rumours of a management change.

A spokesman told FoodManufacture.co.uk that a consultation with driving staff would take place over the next few weeks; despite Hovis sales growth in 2010, reduced sales of own-label and other bakery products meant that the firm had reviewed its distribution plans.

“During 2010 we continued to grow sales of Hovis, however, we saw a decline in these other areas. The overall impact of this has been a reduction in volume,”​ he said.

With the consultation in its early stages the spokesman said he could not be specific about potential job losses. The Chandler’s Ford site employs around 61 staff, and is situated close by Hovis’s Eastleigh distribution centre, which has 433 employees.

Reshuffle rumours denied

Premier Foods has also emphatically denied a rumour currently circulating that it is hunting for a replacement for chief executive Robert Schofield.

A company spokesman dismissed as “completely unfounded and untrue” ​a recent Daily Mail story, which quoted ‘sources’ saying that chief operating officer Tim Kelly was favourite to takeover Schofield’s role.

Asked about the likelihood of Schofield moving on, one City analyst (who asked not to be named) told FoodManufacture.co.uk that chairman David Kappler (who stepped down in January 2010 and was replaced by Ronnie Bell in October) and Schofield were seen as central to Premier’s much criticised acquisition and leverage strategy during the noughties.

“So it wouldn’t surprise us if Schofield moved on, because he’s seen as one of the architects of decline,”​ he said.

He added that shareholders were principally upset by Premier’s acquisition of RHM (Rank Hovis McDougall) for £1.2bn in March 2007, after the former missed out on United Biscuits, which was sold to a private equity buyer.

Recent divestments good news

However, the analyst said that chief financial officer Jim Smart was seen as a safe pair of hands, while Premier was “nowhere near the distress of the past”​, following its recent meat-free and canned grocery divestments, with underlying debt now 2.5-3x EBITDA (Earnings before interest, tax, depreciation and amortisation).

“That said, there is a £3bn pension liability that hangs over the business, and while the disposals have removed financial pressure, the pressure is on Premier now to deliver operationally,”​ he added.

“Unfortunately, this comes against the backdrop of consumer constraint, and increased cost pressures, so that’s our main concern looking forward three, six, nine months.”

Investors might appreciate change

Another City analyst, who wished to remain anonymous, said of Schofield: “I think in a sense he’s lost a lot of confidence in the investor side of the business.

“A new face would change perceptions of investors but they have already changed quite a lot in recent months on the back of the two disposals and the renegotiation of the interest swap agreement. But a change in leadership would be appreciated.”

Asked if Schofield was now winning over critics, he said: “It’s difficult to say. Close to half of Premier’s equity is held by three shareholders ​[Warburg Pincus, Paulson and Franklin Templeton] What they think of Robert Schofield I wouldn’t know.”

Premier had dealt with its balance sheet, he added: “I don’t think this company will go into receivership or breach its banking covenants, but equally I don’t think it will be taken by a buyer at 28p a share if they didn’t make their move when it was 18p.”

Premier had no need to make further divestments, he said, but should exit own-label at a good price: this comment reflects recent analyst opinion​ that Premier should consider selling own-label businesses RF Brookes and Avana Bakeries.

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