Clarke got them out of a pickle but all could still come unstuck

Marc Sidwell
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MICHAEL Clarke’s sudden departure from Premier Foods put a dent in its share price yesterday. Justifiably so. Clarke extricated Premier Foods from a pickle – not just ownership of Branston’s and other sweet pickles and sauces, which disposal is due for completion at the start of February, but also by overseeing the £1.4bn restructuring of the massive debt pile Premier Foods built up in the 2000s while acquiring its portfolio of well-known brands.

Analysts previously soothed by Clarke’s work to hive off non-core assets and boost sales on power brands like Bisto and Hovis are now unnerved, just when stability was needed. The debt deal that Clarke struck runs until June 2016 and pension deficit contributions have been deferred until January 2014, so it is a case of changing horses mid-stream. Clarke’s decision leaves new incumbent Gavin Darby the hard task of seeing the crossing through.

Darby didn’t serve long himself in his last role as chief executive, moving on after less than a year. That is unfortunate in the context. However, investors may be reassured by the fact his departure from Cable and Wireless Worldwide was the result of his selling the company to former employer Vodafone, rather than a tendency to cut and run. Darby previously spent 15 years at Coca-Cola and another seven years at Vodafone.

If Darby can restore a sense of stability, Premier Foods seems to be making progress. A two per cent lift to power brand sales in the first half of 2012 followed its Jubilee-themed push of Great British Fancies under the Mr Kipling brand. But the food specialist needs more such increases and they are not cheap. Premier committed to doubling its marketing spend in 2012.

There will also be bumps along the way. Premier has decided to make a virtue of its primarily British-based production, with 82 per cent of its ingredients, goods and services sourced in the UK – one reason for the patriotic notes its ads are sounding. But following bad harvests it found itself forced to backtrack this month on a 2010 promise to use only British wheat in Hovis loaves. Union flag designs are to be stripped off bread wrappers (not its premium Farmers Loaf) as a result.

Darby needs to work through the existing strategy but with enough flexibility to adjust when things go wrong. That is plenty to have on his plate. Happily for shareholders, he has already promised to put his money where his mouth is – he will spend a significant personal sum on Premier Foods’ shares that will also be matched by the firm. After Clarke’s shock exit, that is a welcome sign of commitment. With Darby’s own fortunes tied to a Premier outcome, all he has to do now is deliver the goods.