Premier Foods boss announces departure as it tries to sell off Ambrosia custard brand
The boss of Premier Foods is set to step down at the start of 2019.
Chief executive Gavin Darby will leave after facing a huge shareholder revolt over summer that saw 41 per cent of investors vote against his re-election.
The news comes as Premier Foods revealed it may sell off its Ambrosia custard brand to help cut its debt pile.
"Having today announced a new strategic initiative for the business, I have decided to step down as chief executive officer on 31 January 2019, which will mark the sixth anniversary of my joining Premier Foods,” Darby said today as he unveiled Premier Foods’ half-year results.
“The board will now begin a recruitment process for my successor.”
Darby had been under pressure from shareholders after failing to lift shares in the company behind Mr Kipling, Ambrosia and Angel Delight above the 65p per share offer from US rival McCormick two years ago.
Premier Foods’ stock is currently trading at 39.3p per share, up three per cent in early morning trading.
The company’s second largest shareholder, activist investor Oasis, has previously described some of Premier’s brands as “weak cards”.
The figures
Revenue creeped up 1.3 per cent to £358m in the six months to the end of September, compared to the same period the year before, boosted by Mr Kipling and Batchelors brand sales.
However, losses widened from £1.2m in the first half of 2017 to £2.2m this year. Trading profit grew 6.2 per cent to £51m, bolstered by Premier Foods’ 10 per cent growth in grocery produce, which countered a 1.7 per cent decline in its sweet treats division.
The company cut net debt back by five per cent to £509.5m, and boosted earnings per share by almost 14 per cent to 2.9p per share.
Why it’s interesting
Darby is stepping down after six stormy years at Premier Foods, and just months after surviving a shareholder revolt against his re-election, with activist investor Oasis claiming he lacked credibility.
Shares have not recovered since US condiments giant McCormick failed to follow through on its 2016 takeover approach.
Despite a £1.1bn refinancing plan in 2014, Darby is now on his way out, and his departure “will be chalked up as a victory by the activist shareholders who have had him in their sights since the summer”, said Emma-Lou Montgomery, associate director at Fidelity Personal Investing.
“Deepening of the food group’s pre-tax losses meant any of his past attempts to retain his tenure were well and truly thwarted,” she added.
“Whoever fills Mr Darby’s shoes at the company, best known for its Mr Kipling cakes, will have an exceedingly large task on their hands turning the business around, with operational and debt problems refusing to budge and now the potential disposal of the Ambrosia brand to deal with.”
The business plans to cut its debt pile by £25m per year, and believes selling Ambrosia will help kick start this, as well as allowing it to focus on other products with "the best potential for growth through accelerated investment in consumer marketing and high return capital projects".
Premier also revealed it plans to stockpile supplies in case the UK experiences a no-deal Brexit.
"In the absence of certainty over the arrangements for the UK's departure from the EU, the group shortly intends to start a process of building stocks of raw materials to protect the company against the risk of delays at ports," it said.
"Potentially this action will cause an adverse movement of up to £10m in working capital during quarter four, which we would expect to reverse the following financial year as the situation normalises."
What Premier Foods said
Outgoing chief executive 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.
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.