Ambrosia up for sale in Premier Foods shake-up

Mr Kipling maker Premier Foods (Frankfurt: A1JWNB - news) is in talks to sell its Ambrosia custard brand in a strategic shake-up which also includes a £10m Brexit stockpiling plan and the departure of its under-fire boss.

Premier (BSE: 500540.BO - news) revealed plans for the disposal of Ambrosia as the company fell to a widening half-year loss and said chief executive Gavin Darby was to step down - in the wake of a shareholder revolt.

Meanwhile the company revealed a hard Brexit contingency plan which will see it store raw ingredients to guard against the risk of delays at ports.

Devon-based Ambrosia, which began as a dried infant milk brand in 1917, pioneered the manufacture of canned rice puddings in the 1930s before expanding into custard in the 1960s.

Premier Foods - whose stable of household name brands also includes Mr Kipling and Batchelors - bought Ambrosia from consumer goods giant Unilever (NYSE: UL - news) in 2003.

Premier revealed that demand for Ambrosia and some of its other products such as Bisto turned cold during the summer heatwave.

Despite this, the company reported a 1.3% rise in revenues to £358m for the six months to 29 September and a 14.3% in adjusted pre-tax profit to £30.2m.

But its bottom line was weighed down by growing finance costs leaving it nursing a half-year loss of £2.2m, up from £1.2m a year ago.

Mr Darby said the board had "determined that it should focus resources on areas of the business which have the best potential for growth through accelerated investment in consumer marketing and high return capital projects".

"Accordingly, we are pursuing options to fund these plans as well as delivering a meaningful reduction in net debt, through discussions with third parties regarding the potential disposal of our Ambrosia brand," he added.

Mr Darby will step down on 31 January after six years in the role. It follows an AGM revolt in which 41% of investors voted against his re-election.

There had been criticism over his strategy, rejecting a takeover approach from US firm McCormick in 2016 and more recently deciding not to sell its Batchelors brand.

Premier said it had "reflected upon the expressed views of some shareholders at the AGM" and was now "actively looking at strategic options which may accelerate the creation of shareholder value".

The half-year results statement also saw the group set out how it is planning for Brexit "in the absence of certainty over arrangements for the UK's departure from the EU".

It said: "The group shortly intends to start a process of building stocks of raw materials to protect the company against the risk of delays at ports.

"Potentially this action will cause an adverse movement of up to £10m in working capital."