Moran’s decision to quit the debt-laden manufacturer followed a request from ceo Gavin Darby to commit to at least three more years at the firm to continue the transition of the company, said Panmure Gordon director of equities Graham Jones.
“He, like the previous ceo, obviously didn’t feel like sticking around that long, and as such steps down next week, on September 30,” said Jones.
He will be replaced on that date by Alastair Murray, the former chief financial officer of Dairy Crest, who was expected to be tasked with putting the balance sheet on a more sustainable footing.
“We have consistently argued that despite significant disposals in recent years, Premier’s balance sheet is not yet on a sustainable footing,” said Jones. Net debt/earnings before interest, tax, depreciation and amortisation was forecast to be 4.8x for December 2013.
Further rights issue
Also the agreement with pension trustees will see most of the company’s cash generation go to pension deficit contributions between 2014–2016. “This means, in our view, that banking covenants tighten more quickly than gearing falls, as such necessitating a further rights issue,” said Jones.
Ideally that should be accompanied by the issuing of a corporate bond to lengthen the group’s debt maturity profile and diversify funding away from the banking syndicate, he added.
Jones described Murray as a “highly capable cfo” and “a safe pair of hands”, backed by experience with highly geared companies with pension fund challenges.
Panmure Gordon retained its ‘sell’ recommendation on Premier’s stock.
‘Lack of continuity unhelpful’
Martin Deboo, analyst with Investec, had mixed feelings about the departure of Moran. “We know and rate Murray and see him as a worthy replacement for Moran,” said Deboo. “But with investor confidence growing on the back of a strong first half, we view the impression of lack of continuity as unhelpful.”
Moran and Darby were forming a highly effective partnership following the unexpected succession from Mike Clarke in February, he added. Deboo also said that Moran was apparently unable to commit to the business beyond any potential refinancing, which he expected to occur in months.
But Moran’s replacement was “straight out of central casting for a cfo of Premier Foods”, said Deboo.
At Dairy Crest Murray was involved in three areas that would benefit his new role at Premier. Those were planning a major business disposal – in the shape of St Hubert – dealing with a significant pension deficit and managing a capital raising plan.
Investec retained its hold advice on Premier’s stock.
A timeline charting Premier Foods’ key milestones is available here.
Premier Foods’ revolving door
- January 2013: Mike Clarke quits as ceo, after 18 months in the role
- January 2013: Gavin Darby appointed ceo
- February 2013: Geoff Eaton quits as chief operating officer
- September 2013: Mark Moran quits as executive director and chief financial officer
- September 2013: Alastair Murray apponted executive director and chief financial officer