“It’s a very challenging role but he’s ticked all the boxes so far. He did the most critical thing on time, which was to get the refinancing sorted for the first quarter. But there is question mark are over whether he can deliver [the recovery plan].It will certainly take time”
Shirley also questioned the strength of the power brands.
Since taking over on August 16 last year, Clarke has sought to reduce the firm’s net debts of £1.27bn by selling off its non-core businesses to focus on eight key power brands. Those brands are Batchelor's, Bisto, Ambrosia, Hovis, Loyd Grossman, Mr Kipling, Oxo and Sharwood's.
Julian Wild, food director at legal firm Rollits, said some of the power brands could be viewed as “yesterday’s news”.
Debt mountain
Wild said: “Clarke has done a pretty decent job bearing in mind the hand he was dealt. He inherited a business with a huge debt mountain and the only way to reduce that was to sell off businesses.”
But that posed a fundamental problem: “Selling off profitable businesses will dilute the profits. Clarke is keeping the banks happy but the profits are heading south.”
Wild warned Premier may even be forced to sell a power brand. “It looks as though Premier is on the slow road to break up. I’d question whether Premier can exist in its current form.”
He agreed that Clarke disposals this year were all “at sensible prices” but the firm “gave up a lot of profit” with the flour business.
The next sale was likely to be Premier’s spreads business, he said. “The deal was working towards [a deal priced at] £200M but it does not seem to have happened - yet.”
Wild concluded: “In this tough climate, Clarke is doing everything he can do.”
Convinced the banks
Damian McNeela, analyst with Panmure Gordon said: “He done a reasonably good job in a very difficult market. He has sorted out the refinancing and convinced the banks that if he sells off some of the assets, the business will be in a much better shape. And he’s appointed a quality management team.
But after all the disposals, it is difficult to have a decent business going forward.”
Earlier this month Clarke told FoodManufacture.co.uk he believed he had“cleared the big hurdles”. After agreeing a refinancing deal with the banks, Premier had a “four-and-a-half-year window to turn the business around”, he said.
Clarke predicted Premier would finish “well ahead” of the two-and-a-half-year deadline it had been given to make £330M disposals. The deadline was a condition of the £1.4bn refinancing package agreed with its financial backers in March.
Clarke is one of six candidates short-listed for the Food ManufacturePersonality of the Year Award.
Premier disposals
· Elephant Atta ethnic flour business, sold to Westmill Foods for £34M cash, July 2012
· Sarson’s vinegars and pickles business, sold to Mizkan for £41M, June 2012
· Four Irish Brands comprising Chivers, Gateaux, McDonnells and the Erin licence, sold December 2011
· Brookes Avana business sold to 2 Sisters Food Group for £30M, December 2012.
