Julian Wild, partner and head of the food team at Rollits solicitors, which has a long pedigree of involvement in food industry mergers and acquisitions, told FoodManufacture.co.uk: “Premier has been fire-fighting on a number of different fronts.
“But fundamentally, is the day-to-day running of the business doing better than it was? I think it’s still relatively unexciting. Sooner or later the roundabout’s got to stop and you have got to get some serious growth back.”
However, Wild emphasised the terrific achievement of the management team, including ceo Gavin Darby, to date.
“This has been a pretty significant change to their balance sheet,” he said. “You have got to give Gavin and his team credit for working on that. It’s been a long haul. It has gone from basket case to back on an even keel. Now it needs to show real growth.”
Shore Capital analyst Clive Black predicted that growth was on its way. “Following the creation of the Hovis joint venture with Gores Group earlier in 2014, Premier is a focused and high margin proprietary brand business concentrating on the savoury meals and sweet elements of the UK food market,” he said in a note issued following Premier’s much-anticipated refinancing statement.
He said Premier was expected to improve on business costs and process management and continue to prune food lines to reduce complexity and predicted this would feed into increased marketing spend.
‘Step up in advertising’
“The proceeds from combined productivity programmes are expected to support a step up in advertising, marketing and promotions of its branded portfolio,” he added.
Announcing results for the full-year to December 31 yesterday (March 4), Premier Foods said it had cut its net debt by £120M across the year, which was better than most forecasts.
It reported 17.7% growth in trading profit for its underlying business, from £123.4M in 2012 to £145.2M, in line with expectations.
Sales of its core ‘power brands’ rose by 2%, from £533.1M to £543.5M. However, sales outside of its milling business slid down by 1.1%, from £1.3bn to £1.28bn. Adjusted pre-tax profit came in ahead of expectations at £86.8M, up 61% from £53.9M in 2012.
Its refinancing deal comprised a £353M equity issue, a £475M high yield bond and a £300M revolving credit facility.