The owner of tinned food giant Princes has kicked off a search for a buyer, as newly filed accounts revealed it suffered a sharp drop in sales and profits as surging Covid demand eased.

Japanese conglomerate Mitsubishi Corporation, which has owned Princes since 1989, has hired investment bank Houlihan Lokey to explore a possible sale of the ambient food group.

The process is understood to be in its early stages, with the group being marketed to global players as a platform to be used as a launchpad into the UK food space.

City sources suggested private equity and institutional fund players were the most likely suitors, while noting the process could end with a partnership rather than an outright sale.

A Princes statement said it did not respond to market speculation, adding: “In the normal course of business, we routinely seek to identify growth and investment strategies. No decisions have been taken.”

One dealmaker noted the sale could prove a “tricky prospect” given its low growth profile. “It is not a growth business or a high-margin one… The company has meaningful relationships with the supermarkets, but its offering is very disparate across many categories.”

Newly filed accounts show the group lost more than £120m of sales in its past financial year as the boost from pandemic shopping patterns faded.

Accounts for the year to 31 March 2022 show sales fell 7.9% to £1.44bn, down from £1.56bn in the previous financial period. That had a knock-on effect on pre-tax profits, which slumped from £45.3m to £28.9m.

Commenting on the accounts, Princes MD Cameron Mackintosh said the performance primarily reflected a return to normality following exceptional volume increases during the height of lockdown.

However, he stressed Princes had undertaken a major investment programme across its UK sites and “made significant advancements in our sustainability and innovation journeys… accelerating progress across all areas of the business”.

“Against a backdrop of unprecedented inflationary pressures and supply chain disruption, we have continued to transform our business – adapting and responding effectively to change,” Mackintosh added.

“We will continue to be purpose-driven, innovative and laser-focused on the needs of our customers and consumers as we strive for future success.”

An investment of over £150m has been made in the group’s Cardiff, Erith and Long Sutton sites to enhance production capacity and capabilities.

Meanwhile, Princes continued to evolve its NPD, enabling entry into new categories for the group, such as frozen food and low & no-alcohol.

One City source suggested the disparate category nature of Princes’ portfolio may lend itself to a break-up of the group, though this is not thought to be a preferred route of exit for Mitsubishi.

“It is in a mixed bag of categories and there is also a huge amount of private label in the business, so the question is whether there is a buyer for the whole group, or would it be more likely that drinks, tinned and sauces may appeal to different purchasers?”

Houlihan Lokey declined to comment.