TIDMPFD
RNS Number : 8927J
Premier Foods plc
18 June 2014
18 June 2014
Premier Foods plc
("Premier Foods" or "the Company")
PREMIER FOODS ANNOUNCES INNOVATIVE JOINT VENTURE AS PART OF
ONGOING STRATEGY TO MAXIMISE VALUE FROM GROCERY INFRASTRUCTURE
-- Stand-alone joint venture with Specialty Powders Holdings
Limited to manufacture powdered beverages and desserts
-- Improved efficiency of manufacturing infrastructure through
greater utilisation of Knighton and Ashford sites
-- Separately, consolidation of grocery logistics network
confirmed, reducing around 750,000 road miles by the end of
2014
-- Power Brands sales for the second quarter forecast to be
negative and below the Company's expectations due to subdued
grocery markets
-- Full year profit expectations unchanged
Premier Foods today announces that, in line with its strategy to
maximise value and efficiencies from its Grocery infrastructure, it
has reached a conditional agreement with Specialty Powders Holding
Limited ("Specialty Powders") on a stand-alone joint venture to
process and pack powdered beverages and desserts at Premier Foods'
Knighton facility in Staffordshire.
The new joint venture, to be named Knighton Foods, will combine
dry powders manufacturing capabilities and assets from both parties
at the Knighton site enabling cost synergies and scale efficiencies
from greater utilisation of the facility. The agreement will also
enable the transfer of two production lines from Knighton to
Premier Foods' manufacturing plant in Ashford, Kent, resulting in
significant further efficiencies in Premier Foods' broader Grocery
manufacturing infrastructure.
Commenting on the agreement, Gavin Darby, Chief Executive
Officer of Premier Foods said:
"This innovative agreement will help to improve the efficiency
of Premier's Grocery infrastructure and, at the same time, allows
us to benefit from a dedicated team with expertise that can support
our powdered beverages and desserts business. I'm delighted that,
in Specialty Powders, we've found a highly successful,
entrepreneurial partner who is committed to growing the combined
business. This is a very positive development both for Premier
Foods and for our employees at Knighton."
Mike Kirby, Majority Shareholder and Group Managing Director of
Specialty Powders, said:
"This is a fantastic opportunity for both parties. Knighton
Foods will have a strong focus on dry powder products with the
ability to invest in new processes, products and packaging formats.
Our combined technical expertise and manufacturing capabilities
will ensure that we continue to deliver high quality products for
our customers and consumers, and enable us to develop a successful,
broad-based powder processing and packing business for the
future."
Under the terms of the agreement, Specialty Powders will
contribute its wholly-owned businesses, Phoenix Foods and
Agglomeration Technology, to the joint venture, in consideration
for a 51% controlling stake and a loan from the joint venture to
repay its existing debt. Premier Foods will contribute the Knighton
site and assets (other than the two production lines that will be
transferred to Premier Foods' site in Ashford) to the joint
venture, together with its private label and business-to-business
sales of powdered beverages and desserts, in consideration for a
49% stake in the joint venture and a promissory note of a principal
amount equal to the loan to Specialty Powders. Premier Foods will
retain the substantial majority of its branded sales currently made
at Knighton, including under the Bird's, Angel Delight and Marvel
brands, which will be manufactured either at its Ashford site or at
Knighton by the joint venture under a co-packing arrangement.
Transaction details
-- The proposed transaction includes the transfer of approximately GBP16m of private label and business-to-business sales of powdered beverages and desserts from Premier Foods to the joint venture. In addition, the Brown & Polson brand of home-baking ingredients will be licensed to the joint venture for a period of five years, which also includes a call option for the joint venture to purchase Brown & Polson for GBP2.75m(2) . Premier Foods will retain all of its other brands currently manufactured at the Knighton site.
-- The 2013 EBITDA impact of Premier Foods' private label and
business-to-business sales being contributed to the joint venture
was broadly neutral. The business being contributed to the joint
venture by Premier Foods made a Trading loss of GBP0.7m for the
year ended 31 December 2013.
-- The gross assets, as of 31 December 2013, contributed by
Premier Foods to the joint venture are expected to be approximately
GBP15m.
-- All 200 employees at the Knighton site are expected to
transfer to the joint venture following an appropriate consultation
process.
-- The joint venture will be led by Mike Kirby, current Majority
Shareholder and Group Managing Director of Specialty Powders, who
will become Chairman of the joint venture upon completion. Premier
Foods and Specialty Powders will each nominate three Directors to
the Board of the joint venture.
-- To provide a degree of certainty for the new venture, Premier
Foods and Specialty Powders have committed not to sell their
respective shares in the joint venture prior to 31 December
2017.
-- Specialty Powders has approximately GBP3m of existing debt
which will be repaid on completion using the proceeds from a loan
from the joint venture. Premier Foods will receive a promissory
note to match this principal amount which will bear a rate of
interest of 8% per annum.
-- Completion of the transaction is conditional upon the
repayment in full of Specialty Powders' existing debt and the joint
venture's entry into new specified financing arrangements. The
joint venture is expected to benefit from a credit line of up to
GBP10 million, the details of which will be finalised prior to
completion.
-- The transaction will result in cash restructuring costs for
Premier Foods of approximately GBP4m in 2014. A further GBP1m of
capital expenditure will also be required, although this will be
accommodated within current capital plans.
-- Premier Foods will enter into an agreement with the joint
venture for the co-packing of branded powdered products for a
minimum term of four and a half years.
-- Premier Foods will enter into transitional services
arrangements with the joint venture for a period not exceeding 24
months.
-- The transaction is currently expected to complete by the end of June.
Completion of Logistics Consolidation
Premier Foods also announces today that it has completed the
previously announced consolidation of its third party operated
grocery logistics sites from three National Distribution Centres to
two Regional Distribution Centres based in Skelmersdale, Lancashire
and Corby, Northamptonshire. Both Regional Distribution Centres now
stock the full range of ambient grocery products (excluding cake),
helping to reduce the number of customer order points leading to
faster order fulfilment and improved customer service. In addition,
the simplified network, together with improved logistics
management, will reduce the number of road journeys needed which is
expected to remove around 750,000 road miles by the end of 2014.
The resulting significant reduction in logistics and distribution
costs is expected to offset the impact of excess warehouse capacity
arising from Premier Foods' previous disposal programme.
Investor Relations Events & Trading Update
Premier Foods is hosting an analyst visit to its Worksop site on
Thursday 19 June 2014 as part of its investor relations programme
and will present its Half Year results for the six months to 30
June 2014 on Tuesday 22 July 2014. While Power Brands sales for the
second quarter are anticipated to be negative and below the
Company's expectations due to subdued grocery markets, profit
expectations for the twelve months to 31 December 2014 remain
unchanged, reflecting the Company's ongoing focus on managing its
costs. As a result the Company no longer expects Power Brands sales
to grow by 2-3% for the year to 31 December 2014, as previously
indicated. The analyst visit will include presentations covering
the Company's approach to innovation and supply chain initiatives
and these will be posted on the Premier Foods' website later the
same day. No other material information will be disclosed as part
of the visit.
<ends>
For further information please contact:
Premier Foods plc +44 (0) 1727 815 850
Richard Johnson, Group Corporate Affairs
Director
Richard Godden, Head of Investor Relations
Maitland +44 (0) 20 7379 5151
Liz Morley
Tom Eckersley
Notes to editors:
1. Specialty Powders Holdings Limited is a privately owned
processor and packer of dry powder food products and ingredients
for retailer own label, out of home and major branded customers.
The Company has operations in Knaresborough, Corby and the
Netherlands. Phoenix Foods was acquired by Specialty Powders in
2012 and specializes in the production of dry powdered and granular
beverages and food products includinghot chocolate, frappe blends,
milkshakes, custard, instant desserts, iced tea, stuffing mix,
gravy powder and cornflour. Agglomeration Technology has been part
of Specialty Powders since 2005 and is a leading independent
provider of powder processing technologies including agglomeration,
granulation and spray crystallisation. Specialty Powders has been
reported as one of the fastest growing companies in the UK (Source:
The Sunday Times Fast Track 100, 2011, 2012, 2013).
2. The Brown & Polson call option can be exercised by the
joint venture at any point during the five year license period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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