Is Premier selling its bread business?

By Rick Pendrous

- Last updated on GMT

Premier reported continued growth in its power brands, such as Hovis
Premier reported continued growth in its power brands, such as Hovis

Related tags Premier foods

Hovis owner Premier Foods hit the headlines again last month as rumours emerged of a possible sale of its troubled bread business.

Premier remained tight-lipped about Financial Times​ reports that Mexican bakery Grupo Bimbo which had previously expressed an interest in the bread division was a possible investor.

Premier has appointed mergers and acquisitions specialist Ondra Partners to investigate options for the future of its bread business following a problematic few years in which it lost business and market share. In 2012, Premier lost an important £75M contract with the Cooperative, to Allied Bakeries.

However, the likelihood of an outright sale of its bread operations has divided City opinion, with Shore Capital repeating its ‘buy’ advice on Premier’s stock, Panmure Gordon maintaining its ‘sell’ advice and Investec recommending ‘hold’.

Food Manufacturing Excellence Awards

But it was not all bad news. Last month Premier’s Ashford dried goods factory scooped three Food Manufacturing Excellence Awards​: Food Manufacturing Company of the Year; Ambient Manufacturing Company of the Year and Training Programme of the Year.

Meanwhile, in an interim management statement for the three months ending September 30 2013, released last month, Premier reported continued growth in its grocery ‘power brands’: Batchelors, Bisto, Ambrosia, Hovis, Lloyd Grossman, Mr Kipling, Oxo and Sharwood’s up 2.0% in the third quarter (Q3) and 3.3% year-to-date. Its strategic priorities were said to be progressing well and its full-year expectations unchanged.

Chief executive officer Gavin Darby said: “Overall, I’m encouraged by the progress we are making in what continues to be a highly competitive market. The intensity of promotional activity in our markets remains high while our categories were significantly impacted by the hotter weather in July and August.

“We continue to make good progress against our strategic priorities supporting our category-based approach. We have grown our grocery power brands for a further quarter, completed a major restructuring of our bread supply chain and our plans to reduce complexity across the business remain on track.

“Against this backdrop, and as the company enters the important Christmas trading period, expectations for the full year remain unchanged.”

Bread sales

Investec analyst Martin Deboo noted that Premier’s Q3 revenue numbers showed a slowdown on its half-year performance as it traded in increasingly competitive markets and bread sales were hit by hot weather in July.

Shore Capital analysts Darren Shirley and Clive Black were upbeat about Q4 prospects, encouraged by Premier’s management reference to a “well planned and solid programme of activity​” in the run up to Christmas and the possible recovery of ‘support brands’ via discount store sales.

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