Premier Foods to keep Hovis, eyes overseas partners

Reuters

By Neil Maidment

LONDON (Reuters) - Britain's Premier Foods (PFD.L) is focused on expanding Hovis bread, one of its biggest brands, and has no plan to sell the business for now, the company's chief executive said on Tuesday.

The maker of Mr. Kipling cakes and Bisto gravy has spent years dealing with management changes, refinancing and asset disposals to help cut debt built up before the financial crisis, but its prospects have begun to improve and is now also looking for overseas growth.

Shares in Premier Foods have almost doubled in six months to 152 pence due partly to an improved trading performance led by a greater focus on best selling brands such as Ambrosia and Bisto.

Media reports have suggested the share price rise could also have been helped by speculation that Mexican bakery firm Grupo Bimbo is eyeing Hovis.

Premier's CEO distanced himself from a sale of the brand so soon after a shake-up of the bread business.

"We've done the hard yards on Hovis, we've taken the pain of the restructuring, taking 1,000 jobs out of the business, taking significant restructuring costs," Gavin Darby, who joined the firm in January, told Reuters.

"I tend to come from a background of trying to grow things, so we are working hard on a growth strategy for Hovis."

Cost savings, new products and increased marketing of its best-selling brands helped lift trading profit by 50 percent in its first half and the firm is forecast to reduce year-end net debt to between 840 and 860 million pounds.

Analysts have suggested that, to improve its balance sheet, the company may seek to carry out a 300 million pound rights issue as part of a refinancing that could also include the issue of a corporate bond and new terms with its pension trustees.

Premier Foods, which last week named former Dairy Crest executive Alastair Murray as its chief financial officer after the surprise departure of Mark Moran, would not comment directly on its plans but said it was "keeping its options open".

The company's current bank facilities run to 2016 but the company faces higher pension and financing costs from January next year.

Darby said the firm was focused on expanding its range of key brands in Britain and that it had also begun early talks with similar sized companies overseas about partnerships.

"There are a number of companies like Premier in some big countries that want to co-operate, so there may be opportunities to either sell their brands or them distribute ours. That's the kind of thing we are working on but it's early days," he said, adding that the focus would be on the United States and China.

(Editing by Tom Pfeiffer)

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