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February 1, 2007

Inter Link happy to go it alone – INTERVIEW

British baker Inter Link Foods had a turbulent year in 2006, ending potential takeover talks and appointing a new CEO. Joe Ayling interviewed the UK bakery’s new chief, Chris Thompson, to find out his plans for the company’s future.

British baker Inter Link Foods had a turbulent year in 2006, ending potential takeover talks and appointing a new CEO. Joe Ayling interviewed the UK bakery’s new chief, Chris Thompson, to find out his plans for the company’s future.

When buyout talks for Inter Link Foods surfaced last October and the company’s chief executive, Paul Griffiths, announced his resignation, Chris Thompson stepped into the breach. Speaking from the Blackburn-based bakery, the former group finance director says that the appointment has proved a comfortable step up.

“I am very much enjoying it; there is a great deal to do. I have been with the company since September 2004, so it’s not a new company to me. The role of chief executive is not new to me either because I was running a number of businesses within the Co-Op movement before I joined Inter Link. It’s a very dynamic firm that’s had a busy year – and I’ve been busy since I took over,” he says.

Before joining Inter Link, Thompson managed businesses within the United Cooperatives umbrella and previously held senior roles at Woolworths and Asda following his earlier career at accounting firm KPMG.

Inter Link, a manufacturer of branded, licensed and private label cake and pastry products, certainly had all the ingredients for a hectic year in 2006. Most notably, the company doubled its capacity for Soreen Malt Loaf and implemented central distribution.

However, talks over a possible GBP47m (US$89.42m) private equity offer for the company, possibly from 3i, Hg Capital and LDC, came to nothing. Thompson played down the issue, telling just-food: “We put out a couple of announcements. One was to say that we’d been in talks and the second to say that the talks had gone away. That’s really the position. All that ever happened was that there were a couple of preliminary meetings and we felt that within our business we had an awful lot happening so it was the wrong time for us to focus on anything like that.”

Future investment talks are unlikely, Thompson adds: “We were approached and we responded. But as far as I know there are no plans to ressurect any talks.”

Interest in the company was most likely sparked by a 32.5% jump in turnover during Inter Link’s 2006 financial year. In addition, Inter Link can boast of being the largest producer of small fairy cakes and other iced topped and decorated buns in the UK. It is also the largest producer of mince pies in the UK – manufacturing well in excess of 100m each year.

However, Inter Link’s 2007 interim sales for the 2007 financial year were lower than expected, in part due to “unprecedented” high temperatures from July to October. Turnover in the half-year period was down 6.8% to GBP62.55m, despite an increase in gross margins from 36.6% last year to 37.2% this year.

The company’s new boss remains optimistic for the remainder of the year, saying: “We have started the second half well, with 15% sales growth in the first two months. We are optimistic we will see very good sales growth over the balance of the year, and come in with a good positive figure in line with market expectations.”

Inter Link was established in 1994 and has since grown through acquisitions, including the purchase of iconic malt loaf brand Soreen in February 2003. Thompson is well aware of Soreen’s value, contributing as it does some 10-15% of Inter Link’s revenue, and described the doubling of capacity as a necessary move. He says: “We think it will be around for many years to come. We doubled the capacity as we were unable to satisfy demand. We can now do this and we are seeing some good growth, very much in line with our expectations. It is a very healthy product, low fat and high energy.”

The company operates from 12 bakery sites in the UK, and a further bakery located in Szczecin, Poland. At its bakeries in Greater Manchester and Poland, Inter Link produces a wide range of swiss rolls and mini rolls, and produces a range of small fruit and other sweet pies, including bakewell tarts at its facilities in Kent and Blackburn. It also has a celebration cakes business in Salisbury.

Thompson seems enthused by the Polish project, telling just-food: “It’s proving to be a great investment; when we bought it at the end of 2004 the turnover was around GBP5m, and in the current year it has a turnover of about GBP13.5m so it has grown significantly. We’ve got an excellent management team and workforce there and we have invested quite heavily in the new plant. It is working well, the product is good and it’s a major part of our operation.”

Next month Inter Link will complete the closure of its Hoppers Bakery in Herne Bay, and the transfer of the business to its sites in Blackburn, resulting in exceptional costs and asset write-offs in the region of GBP1.175m. “Everything is moving in accordance with our plans. We have started winding down production in the past few months, and will finally close it before the end of next month,” Thompson tells just-food.

Inter Link has plenty of competition in the UK, including RHM, Park Cakes, Finsbury Foods and Greencore. This notwithstanding, Thompson emphasises the company is focusing on organic growth rather than the acquisition trail, in the short term at least. “There are some fantastic opportunities for acquisitions within our sector but our share price has been low over the last eight months and there is a perception that our borrowings are ultimately higher than we would want them to be so we would look at improving our balance sheet before embarking on any significant acquisitions in the future.”


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