Premier Foods puts Hovis into JV, sees FY profits above hopes

27th Jan 2014 07:31

The maker of a string of iconic British brands such as Hovis bread, Mr Kipling cakes and Ambrosia rice plans to hive off the bread business into a stand-alone joint venture.Premier Foods also said adjusted annual pre-tax profit would be ahead of hopes despite a 1% fall in sales of its key brands in the fourth quarter as a result of tough trading and price-cutting.Premier Foods said it would put Hovis, which is worth about £87.5m, into a joint venture with Los Angeles-based global private equity firm Gores Group, which will pay £30m for a 51% controlling stake in Hovis.It said the deal, in which the bread business will trade under the Hovis Ltd name, would give it short-term cash flow of about £28m that it would invest in its grocery business.Premier said: "The new arrangement will facilitate a significant increase in investment in the business both to improve the efficiency of its operational infrastructure and to reinvigorate the Hovis brand."Premier said the deal would also allow it to focus on its other main brands, which also include Sharwoods and Lloyd Grossman cooking sauces, Oxo, Bisto gravy and Batchelors soup.Premier has been selling non-core businesses such as Haywards pickles, Sarson's vinegar and Hartley's jam to pay off debt built up in a buying spree by previous management, in which it bought Hovis owner Rank Hovis McDougall in 2007.Chief Executive Gavin Darby said: "This is exciting news for the bread business and a great deal for Premier Foods. We can now focus our attention and resources on developing our category-leading grocery brands."Premier said sales growth of its grocery "power brands" slowed to 0.3% in the second half of the year, although the market shares of its ambient desserts, stocks and gravies, and cooking sauces and accompaniments improved in the final quarter and second half.Support brands sales rose 1% in the fourth quarter, driven by Angel Delight, Bird's, and McDougalls. The bread business finished the year strongly with underlying Hovis sales up 5.3% in the final quarter.PW