Bury St Edmunds/ Mendlesham: Premier Foods slumps to annual loss after Hovis writedown
THE maker of Hovis has slumped to an annual loss following a price war which sliced its bread division’s profits to just �3.4million last year.
Premier Foods, which also owns brands such as Mr Kipling, Bisto and Oxo, was pushed to an overall loss of �259.1m for 2011 after having to write down the value of the Hovis business on its balance sheet.
Bakery sales were down nearly 3% at �500.5m as fierce price activity in a market that also includes Kingsmill continued. Tesco also refused to stock Hovis products for a time, although this price dispute has now been settled.
St Albans-based Premier, which operates from sites across the country including a factory in Bury St Edmunds producing Branston Pickle, Haywards pickled onions and Loyd Grossman cooking sauces and a Hovis distribution depot at Mendlesham, near Stowmarket, said the bread division’s trading profits slumped 90.4% last year, leading it to slash the value of the bread arm by �282m.
But the group, which has been struggling under a near �1billion debt mountain following a spending spree that included Mr Kipling-owner RHM, insisted it is on the mend after recently sealing a “landmark” �1.4billion refinancing deal.
Chief executive Michael Clarke said he was “very positive” about Premier’s future, adding that sales growth should return under plans to double market spend on eight core brands this year, which also include Batchelors and Ambrosia.
The high number of special offers in supermarkets and “a protracted customer dispute” also took their toll on the group’s grocery division, which includes Oxo stocks and Sarson’s vinegar. Trading profits were down 19.1% to �170.3m and sales fell 7.4% to �1.1bn.
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But the group said overall gross margins would grow as it continued to cut costs. It recently announced it would axe 600 jobs – 5% of its workforce – in a bid to reinvest the savings in this year’s marketing push.
Mr Clarke, who joined the business from Kraft last year, said the recently announced refinancing was “great news” for its employees and represents “a strong sign of confidence and support for the business, its strategies and growth plans”.
He added: “We intend to draw a line under the performance of 2011. I’m convinced we have the right team to turn this business around and I am very positive about our future.”
Current trading was in line with expectations, but the group expected more difficult conditions ahead in 2012, as it battled continued cost price increases, albeit at lower levels than in 2011.