Premier Foods PLC (LON:PFD) shares were on the up in lunchtime trading Tuesday after chief executive Gavin Darby announced his intention to step down amid a widened interim loss.
Darby said he would step down as head of the food producer, whose brands include Bisto and Mr Kipling, on 31 January 2019 after six years at the helm.
READ: Premier Foods boss narrowly survives shareholder revolt
The move follows a tense AGM in July when just under 41% of shareholders voted against Darby’s re-election as CEO.
Dissatisfaction has been growing with the 61-year-old ever since Premier rejected a 65p a share offer from US food giant McCormick back in 2016. Since then, the share price has fallen around 35%.
The company reported a half-year pre-tax loss of £2.2mln, 83% wider than the loss reported a year ago, despite revenues climbing 1.3% to £358mln on the back of a Mr Kipling brand relaunch in the UK.
The wider loss was mainly attributed to an increase in finance costs, which jumped to £32.9mln from £26.7mln, and sales & marketing and distribution expenses which rose to £52.8mln from £50mln last year.
International sales drag
Sales of the firm’s Cadbury cakes brand were also impacted in the first half by phasing shipments in Australia, while increased prices for UK wholesalers who export some of its products had also resulted in lower sales.
Excluding these factors, international sales would have risen 9%, instead, they fell by the same percentage.
Premier also said it was in discussions with third parties regarding the disposal of its Ambrosia custard business, although Darby said there was no guarantee of a transaction occurring.
In its outlook, the group left its profit expectations for the full year unchanged, although it warned that it expected its logistics transformation programme to adversely impact Sweet Treats revenues in the third quarter.
Premier added that it was still looking to improve operating performance and said its “primary focus” was achieving an initial leverage target of below three times net debt/EBITDA ratio by March 2020.
Leverage still dominates concerns, says broker
In a note to clients, analysts at City broker Shore Capital said a new CEO “clearly brings scope for a fresh pair of eyes” but added that the leverage of the company was still dominating the investment case and “the recent rate of pay-down is too pedestrian to eat into its indebtedness”.
On the Ambrosia disposal, analysts said that until it could be seen how soon the company could deleverage from the sale, it was “difficult to be too emotional either way”.
Shares were up 1% at 38.5p.