Recipe for success

Premier Foods comes back from the dead

Amazing what you can achieve by kicking out a lame duck chief executive. In the case of Premier Foods however, few expected the departure of Gavin Darby to have such a dramatic effect. The stock market had all but given up on it.

Yet under the deft hand of Darby’s successor Alex Whitehouse, one of the UK’S long standing zombie companies has finally had some life breathed into it. Its revival provides hope to every corporate basket-case in the land, so Aston Martin and Flybe shouldn’t be written off just yet.

In recent years, what was once Premier’s greatest strength has risked becoming its biggest weakness. Its heritage brands could be found in households across the land. Bird’s Custard Powder, for example, is nearly 200 years old and no respectable larder was without one of its distinctive red, yellow and blue tins. But eating habits are changing rapidly and labels such as Bisto and Oxo are no longer staples of the kitchen cupboards, so Premier has had to ramp up marketing to give its brands a new lease of life.

The latest results suggest a decision to double investment in marketing and advertising has really paid off. Sales of Mr Kipling cakes, for example, jumped 10pc after the brand was relaunched with a new television advertising campaign.

But what will please management even more is that growth is accelerating across the board. Total turnover increased 2.6pc in the 13 weeks to Dec 28, an advance on a 2.4pc spike in the first half of its year when it turned a £2.2m loss into £15m of profit. That means Premier Foods has now notched up 10 consecutive quarters of revenue growth.

After rising 2pc in response, the shares have hit the dizzy heights of 44p, not far off an 18-month high. Still, this is Premier Foods after all. Its share price has been stuck somewhere between 30p to 50p for years, and investors won’t need reminding that Darby turned his nose up at a 65p-ashare takeover approach in 2016.

As ever, debt levels cast a large cloud over proceedings. To be fair to Darby, borrowings halved from £1bn on his watch, and although they continue to gradually come down, net debt was still £470m at the end of last year. That’s £100m more than Premier’s market cap.

If Whitehouse can repair the balance sheet, Premier may finally have the recipe it has been missing for so long.

Flybe’s backdoor bailout

Flybe had to come clean eventually. A cacophony of criticism against the airline’s rescue by the Government reached a crescendo with the intervention of Ryanair’s Michael O’leary, a man who would probably fight his own reflection.

O’leary has accused the Government of a “grubby cover-up” and is threatening legal action at home and in Brussels. IAG’S Willie Walsh and easyjet’s Johan Lundgren have also voiced their strong disapproval.

Rather than a reported £100m tax deferral, the airline protests that it was granted a holiday on “a debt of less than £10m”, and the full amount will be paid in “a matter of months”.

Yet that may not be the ace that Flybe thinks it is. The airline’s chief Mark Anderson insists that it is a standard “Time to Pay” arrangement with HMRC, which any business in financial difficulty can get.

That’s true – but only up to a point. Yes, tens of thousands of struggling firms negotiate “Time to Pay” deals with the taxman every year but they don’t usually include air passenger duty or require the involvement of senior Government ministers.

That is special treatment by its very definition, in the same way that a government loan would be. Anderson’s claim that it could get the equivalent of a “commercial loan” from the government “the same as any loan we’d take from any bank”, is even less credible. If it could get a bank loan surely it would? It’s fair to assume then that no commercial enterprise wants to, which is why it has had to turn to the Government. And in doing so, ministers are now free to name their price.

Anderson may hate the word bailout but this is still a rescue via the backdoor.

‘Premier has now notched up 10 consecutive quarters of revenue growth’