The company behind some of Britain’s best-loved grocery brands yesterday said the closure of a Scottish mill had helped it cushion the financial blow from the loss of a £75 million supermarket bread contract.
Hovis maker Premier Foods said it had completed the closure of a Kelvinside mill supplying one of its Glasgow bakeries during the first three months of this year, a move which cost the jobs of around 15 employees.
The shutdown was just part of a major package of restructuring undertaken by Premier as it seeks to reinvigorate its ailing bread division.
In addition, three bakeries and two distribution centres will also close this year, while the group’s delivery and logistics network will also be “significantly reconfigured” as part of a turnaround plan which is expected to ultimately cost 900 jobs.
The firm said the £20m per annum saving it expects to make from the restructure would offset the profits lost from the non-renewal of the low-margin supermarket deal.
“The savings from the restructuring programme are expected to offset the margin lost from the previously announced contract loss, which is expected to take effect by the end of April,” Premier said in its Q1 update.
The firm will also divide its grocery and bread divisions.
Premier had been struggling under a£1.3 billion debt mountain following a spending spree which included the acquisition of Mr Kipling owner RHM.
The firm is now regarded as being on the mend following last year’s “landmark” £1.4bn refinancing deal and a string of multi-million-pound disposals, including much-loved brands like Branston Pickle and Hartley’s jams.
Analysts at Shore Capital believe Premier’s total debt will fall to around £850m by the end of the year, and said Premier’s update demonstrated a “sound performance in a tough enough market”.
Some £40m has been ploughed into a marketing drive, which the company said had pushed branded sales for lines like Ambrosia and Bisto up 2.2% to £275m during the first three months.
That helped offset a 5% fall in non-branded sales to £52m, lifting total sales 1% higher to £327m during the quarter.
Bread sales increased 0.8% in the period, with Hovis maintaining its share in a “highly competitive” market.
Chief executive Gavin Darby, who took over from former boss Michael Clarke following his shock departure earlier this year, said the branded growth showed that the company’s investment was paying off.
“Despite a continued challenging consumer environment, I believe we have the right strategies in place to make further progress this year, with expectations unchanged,” he said.
Premier shares closed the day up 2.25p at 73.75p.
business@thecourier.co.uk