Premier Foods mulling Ambrosia sale, CEO Gavin Darby to leave
By Michele Maatouk
Date: Tuesday 13 Nov 2018
(Sharecast News) - Bisto, Oxo and Mr Kipling owner Premier Foods said on Tuesday that it was mulling the sale of its Ambrosia brand as it announced the departure of chief executive Gavin Darby alongside its half-year results.
The company said it was in "active discussions with third parties" regarding the potential disposal of Ambrosia - a custard and rice pudding brand - as it looks to fund the acceleration of its turnaround and focus on areas of the business that have the best potential for growth.
Premier also said that Gavin Darby will be stepping down as CEO with effect from 31 January 2019 following six years at the company.
In the 26 weeks to 29 September, adjusted pre-tax profit rose 14.3% to £30.2m on revenue of £358m, up 1.3%. Largest brand Mr Kipling was key to the performance as the relaunch in the UK delivered revenue growth of 13%, while Batchelors, the third largest brand, saw revenue growth of 6.8%.
The group also said in the statement that in "in the absence of certainty over the arrangements for the UK's departure from the EU" it plans to start a process of building stocks of raw materials to protect it against the risk of delays at ports.
The action, which it plans to take shortly, will dent working capital in the fourth quarter by up to £10m, but Premier said it expects this to reverse the following financial year as the situation normalises.
Darby said: "We saw improved resilience displayed by the business during the hot summer experienced in the first half of the financial year; however we are presently experiencing some operational challenges with the implementation of the final Sweet Treats phase of our logistics transformation programme.
"While we are committed to our strategy of improving operating performance and targeting a net debt to EBITDA ratio below 3.0x by March 2020, we are also working in parallel to identify other strategic opportunities to accelerate the company's turnaround. The board has determined that it should focus resources on areas of the business which have the best potential for growth through accelerated investment in consumer marketing and high return capital projects.
"Accordingly, we are pursuing options to fund these plans as well as delivering a meaningful reduction in net debt, through discussions with third parties regarding the potential disposal of our Ambrosia brand. Although there is no certainty that any transaction will complete, we will update shareholders in due course."
At 1250 GMT, the shares were up 2% to 38.86p.
Jefferies said it gets the logic of an Ambrosia sale as the business is highly separable (a single factory in Devon) with associated minimal stranded cost. "However the exit multiple will need to be high single digit EBITDA to drive meaningful de-leverage. One to watch," it added.
As as Darby's departure is concerned, it said: "We expect this to be taken positively by the shareholder base, given the strong negative vote against his re-election at the AGM in July. But we think his contribution has been under-estimated: he leaves behind in our view a more sustainably-growing, less leveraged and more harmonious PFD."
Shore Capital said the sale of Ambrosia should accelerate deleveraging but also provide resource to support its more core brands like Batchelors and Kipling.
"Until we can gain a feel for how much and how soon Premier can deleverage through the Ambrosia disposal, this business has sub-10% of group revenues, it is difficult to be too emotional either way.
"Hence, a resilient H1 with one or two things to think about but we retain our hold stance on the group's shares for now."
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN