the article in FT15 Nov 2018 12:47
Premier: turn off Delight
Premier Foods boasts centuries of innovation in cakes and sweet meats, writes Kate Burgess. There has not been much of late. Half-year revenues were up a stodgy 1.3 per cent and the maker of Ambrosia custard and Angel Delight made a £2m pre-tax loss.
Now chairman Keith Hamill has handed well-rewarded chief executive Gavin Darby his cards, after six years in charge. During that time, Premier’s debt has halved — largely on the back of a rights issue — but earnings per share are down 70 per cent, the share price has fallen a third and investors have not had a dividend in aeons. Most of the company’s cash flows have been spent on servicing liabilities, and paying generous salaries. There has been little left to spend consistently on innovation to freshen stale brands.
This summer, shareholders, egged on by Hong-Kong activist Oasis, made it clear that Mr Darby had delighted them long enough. Forty per cent voted for him to go. Now the bronzed Mr Hamill — who had said it would be pointlessly disruptive to change CEO and dispose of brands — is munching humble pie and custard. He has put Ambrosia on the block and is dipping into the coffers to see Mr Darby off the premises. This may not be innovative enough, though. Selling Ambrosia for about £150m will dilute earnings and will not do much to leaven £4.4bn of pension liabilities. Even if debt falls from £509m to £350m, it will be nearly three times forecast earnings. Premier’s shares remain as devoid of nutritional value as a pot of Angel Delight.
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