Burton's Biscuit Company's 2012 results have failed to impress industry expert Julian Wild, partner and food industry merger and acquisitions expert at law firm Rollits.
Jammie Dodgers is one of Burton's Biscuits' power brands
Wild acknowledged the firm had reported virtually doubling standard pre-tax profit and increasing earnings before taxes, depreciation and amortisation (EBITDA), which many regard as a better assessment of pre-tax profit, by 24% to £34.6M.
However, he told FoodManufacture.co.uk the picture was mixed, with sales having fallen 3% from £342M in 2011 to £333M. "Sales have gone backwards and profit has gone up, but that's not a good rate of return on £333M."
Meanwhile, commenting on press reports that Burton's Biscuits ceo Ben Clarke was preparing a management buyout of Burton's for £350M after its sale was announced last week, Wild said: "That looks probably like the favourite at the moment.
'Pretty keen'
"Ben Clarke's management team would be pretty keen to do a buyout. They are probably in the best position to try to put a deal together."
The only sticking point was the price, with some reports being unrealistic, said Wild. "Some figures I have seen banded around are extremely far-fetched … but I would have thought Clarke was bright enough not to overpay."
But he said with the improvement in business performance, Burton's Biscuits owners Apollo Global Management and Canadian Imperial Bank of Commerce probably thought now was as good a time as any to sell. "There's enough private equity money out there that somebody would think it was worth a punt."
In terms of industry buyers, Wild said Mondelēz International, owner of Cadbury, which had farmed out the manufacturing licence for Cadbury Fingers to Burton's Biscuits, would be the likeliest candidate.
'First refusal'
"I would have thought Mondelēz would have first refusal. Their licensing agreement with Cadbury would suggest to me if they did want to do it they could damn sure nobody else could buy it."
Burton's Biscuits yesterday announced results for 2012, reporting EBITDA up 24%, from £27.8M to £34.6M and pre-tax profit up £4.8M to £10M on group revenue down 3%, from £342M in 2011 to £333M. The firm attributed the sales decline to a strategic exit from a low margin contract business.
Revenue from the company's power brands -– Cadbury, Maryland, Wagon Wheels and Jammie Dodgers, grew 5% to £178.9M. Its share of the sweet biscuit market increased, maintaining its lead in the sector with a 25% market share, it claimed.
"While we expect the economic outlook to remain challenging in 2013, with little sign of the squeeze on consumers' disposable incomes easing, we have shown since 2009 that with the team and the business plan we have in place, Burton's can prosper in challenging condition," said Clarke.
