Panmure’s Graham Jones – who predicted the sale of the Middleton facility in May – said that the Histon facility is the largest and “most obvious” for disposal. It produces most of the UK’s leading jams and jelly under the Hartley brand.
Histon also produces marmalade, sold as Golden Shred, Frank Cooper’s and Rose’s and Gale’s honey and Sun Pat Peanut butter.
The next most likely disposal was Knighton, which makes sweet dehydrated powder. Jones and fellow analyst Damien McNeela said: “These brands tend to dominate their niche categories – such as Bird’s custard, which has a 79% market share, Marvel and Smash, which has a 66% market share.”
Easily be sold
They added: “None of these [three facilities] produce power brands, as far as we are aware, and could easily be sold as stand-alone entities.”
Michael Clarke, Premier’s ceo, has focused the firm’s recovery strategy around eight key brands: Batchelors, Bisto, Ambrosia, Hovis, Loyd Grossman, Mr Kipling, Oxo and Sharwood’s.
Jones and McNeela also identified the potential sale of the Elephant Atta brand as being “a logical move”.
Panmure Gordon and other analysts share the view that disposals were essential if the food giant is to service its net debt, which is likely to remain over £1.2bn this year.
Commenting today (June 18), Shore Capital analyst Darren Shirley, pointed out that last week’s sale in addition to the Middleton site, included the pickled beetroot and piccalilli lines in Premier’s Bury St Edmunds facility. Premier has signed a co-packing agreement, which will see the group continue production on the lines for up to 12 months.
“Total sales in the year to December 2011 for the business to be disposed are reported to be £34M, with EBITDA [earnings before interest, tax, depreciation and amortisation] in the same period ahead £6.2M, implying an 18.2% margin,” said Shirley.
He estimated trading EBIT (earnings before interest and tax) – or trading profit - was about £5.5M, bringing a margin of 16.2%.
The sale represents about 12% of the £330M of disposal proceeds that Premier’s management is obligated to raise by June 2014 as part of the recently agreed refinancing package, said Shirley.
Shore Capital retained its hold recommendation on Premier shares. “While the stock is about 51% below its 2012 highs, it is ahead 51% since the start of the year. That reflects the potential from the new management team and the breathing space from the refinancing,” concluded Shirley.
Clarke said after the Mizkan sale: “This agreement represents another important step in our strategy to focus on our Power Brands. I’m delighted that we have found a buyer such as Mizkan. Our vinegars and sour pickles business and employees will greatly benefit from being part of a global player focused on vinegar and liquid condiments.”
To read how Premier Foods could become an acquisition target for China’s Bright Foods, click here.
For more about Premier’s sale to Mizkan, click here .
To read Panmure Gordon’s predictions in May about which businesses Premier would sell first, click here.