Cauldron Foods sale trims Premier Food debt
The sale of its Cauldron Foods meat-free business, based in Teesside, will help Premier Foods reduce its pro forma debt by more than £300m.
In an update to the London Stock Exchange today, the company announced its debt was down £103m to £1,261m – a figure reduced to less than £900m after the proceeds from the sale of its canning and meat-free disposals are taken into consideration.
Premier sold its meat-free and canning businesses earlier this year for a total of £387m - around 7.6 times the combined EBITDA of £51m. After costs and pension contributions of around £17m and, subject to working capital adjustments on completion, the remaining proceeds of around £370m will be used to reduce bank facility borrowings.
The disposals will leave the group's branded sales percentage largely unchanged at 66.4 per cent, but both the gross margin and the trading profit margin will be improved.
A spokesman for the group said that the disposal would make a major contribution to its objective of deleveraging.
He continued: “Once the disposals are complete, the group expects to have recurring cash generation of at least £80m per annum. Initially, the effect of the disposals will be to dilute EPS. However, the group believes this is a temporary effect.”
