Quorn profit rockets as first bids for business are expected

Quorn has seen pre-tax profit surge almost 50% to £26m as appetite for the meat substitute continues to grow in the UK, Europe and the US.

Accounts for the year to 31 December 2014 showed sales at Quorn parent company Marlow Foods climbed 7% in 2014 to £150.3m - and by 10% to £121.4m in the UK - with pre-tax profits up 47.2% to £25.9m.

Underlying EBITDA is forecast to be over £38m for the 2015 financial year, up from £31m in 2014.

The results come as a £500m auction for the business officially kicked off this week, with a detailed information memorandum sent to prospective buyers.

Bids from the first round of the sale process are expected to land by 12 October, with a private equity-biased auction expected by City sources, despite media reports tipping Birds Eye and Findus owner Nomad Foods or McCain as likely winners.

“This deal has PE splashed all over it, especially given that earlier approaches back in March from trade buyers didn’t result in a pre-emptive sale,” a source said. The shortlist is expected to include “big bulge bracket” PE houses such as Bridgepoint, Cinven, BC Partners, KKR and PAI.

“It is a business with considerable growth ahead of it so it’s a good business for PE in world where they haven’t got many UK-based food assets of this calibre to go after.”

Exponent Private Equity, which has owned Quorn since 2011 after a £205m buyout from Premier Foods, appointed advisors from Houlihan Lokey earlier this year to lead the sale.

Sales at Quorn climbed 7% in 2014 to £150.3m - and by 10% to £121.4m in the UK - with pre-tax profits up 47.2% to £25.9m, according to accounts for trading company Marlow Foods.The 2014 growth was partly down to a deal with Walmart in the US, with products now stocked in more than 2,000 stores, and also attributed to the rising desire for consumers to reduce the amounts of meat in their diets. Revenues this year are expected to rise to £160m, with first half sales in the US up 30%.

CEO Kevin Brennan told The Grocer strong growth had continued in all its 15 markets so far in 2015, with many across Europe in the double-digit range. “Where we are growing the fastest internationally is where we plan to focus, in particular in the US, the Nordics and Germany.”

“There has been a dramatic rebound in the US business since we put our own team on the ground in early 2014. We have got that business back into growth and accelerated it in the second half of 2014 and through into 2015, moving into the mainstream grocers such as Starbucks and Target.”

Quorn aims to triple or quadruple the size of its US business by 2019 to about £30m as it continues the expansion in mainstream channels. It has stated ambitions in the past to become a £1bn brand worldwide.