Sale of Premier Foods bread section 'still a possibility'

A sale of Premier Foods' bread companies is still on the cards, according to a leading analyst.

Martin Deboo, an analyst with Investec, told Bakery Info that he believes Premier would be "happy to sell their Hovis bread business for the right price". However, he questioned who the potential buyer would be.

"The UK regulators would be unlikely to allow consolidation between Hovis, Warburton's and Allied Bakeries. That leaves Private Equity, who would probably be uncomfortable with the margin volatility, or perhaps an overseas buyer like Grupo Bimbo of Mexico."

The news comes as Premier Foods has reported a 50 per cent jump in underlying trading profit for the first half of the year. The company is now predicting cash flow of between £50 million and £70 million for 2013, a notable increase on earlier predictions of between £40 million and £60 million. A £20 million cost-saving programme is thought to be to thank for the improvement.

Chief executive of the group, Gavin Darby, said that the results are "very encouraging", particularly in such a competitive trading environment. He added: "Looking further forward, we will continue to drive profitable top-line growth by focusing on growing our categories supported by ongoing cost savings from reducing complexity. At the right time, we will address our capital structure – from a position of growing strength given the delivery of our turnaround plan and the performance of our Power Brands."

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