Peter's pies and pastries

Annual accounts for Peter’s Holdings show the company is in the midst of refinancing

Welsh pies and pastries supplier Peter’s is undergoing a ­multimillion refinancing after falling to a pre-tax loss of £2.6m last year.

The company said it was prioritising profitability over top-line sales figures after deciding to move away from “unprofitable” private label contracts, which resulted in 90 job losses in February.

Annual accounts for Peter’s Holdings show the company is in the midst of refinancing, having sold and leased back its main operating site in order to generate about £5m and restructure its debt.

Refinancing meant there was ‘a material uncertainty that may cast significant doubt about the group’s ability to continue as a going concern’ the report stated.

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MD Mike Grimwood told The Grocer the balance sheet restructuring had been completed ahead of necessary deadlines, with all cost-saving measures expected to have been completed by the end of 2018.

The official documentation relating to refinancing plans is set be signed during the week of 21 June.

The refinancing will generate capital to push forward with a change in strategy for the company, moving itself from private label work into other areas including foodservice and food to go.

Grimwood added the company saw diversification into new sectors as the path to recovering growth, following a predicted downturn in sales revenues. Figures for the year to 31 May 2017 show that, despite flat sales, rising costs turned a £1.3m pre-tax profit for 2016 into a £2.6m loss for the 2017 financial year.

“We’ve been doing the refinancing. We hope get it all done by the year’s end. The deal was done in April and the lawyers have been finalising all the documentation,” Grimwood commented.

“It is highlighted a material concern because that is simply how accounts are made, and it brings people’s attention to the fact that there is a little bit of work outstanding. It’s not like the accounts are qualified.

“All the agreements are done and finalising on the repayments alongside it. There is nothing being negotiated it is now just running and inevitably the lawyers complete the documentation. The new refinancing measures are all done and in place within time.”

The managing director said that falling profitability in retail, particularly in private label business, led the company to exit “unprofitable” contracts to look towards growth in new areas.

“In terms of market profitability, we saw an enormous amount of inflation come through following currency devaluation, which probably took around £4m in costs.”

“We decided that while the titans where clashing we would quietly go and find our third way of doing business. We chose to exit some unprofitable own label business. We have been going strongly in our food service and food to go ranges.”

The company has launched a range of healthier pastry product called ‘Better for You’ and is set launch a range of 50% less fat pies in September, which the MD believes could “revolutionise” the sector.

“We’ve started putting out the healthier ranges and they are going out to schools and the NHS. These are areas we have never worked in before,” he said. “We have been gently manoeuvring ourselves into more profitable areas, whether that be food to go or food service. Once we saw our performance and inability to get inflation recovered we decided to accelerate that.

“Fundamentally all our working capital was financed through invoice discounting and once you decide to strategically pull back some of your sale then you are limiting the amount of work you can do with invoice financing so we just had to go about it a different way. We decided to step backward. We have focused on profitability.”