Cider firm Bulmers sells off land in bid to stave off collapse

HP Bulmer, the cider maker that has issued a string of profit warnings in the past 12 months, chipped away at its debt pile yesterday with the sale of an unused plot of land for £6.1m but failed to quell industry doubts about its future.

The group, which discovered a black hole in its accounts and ousted a number of board directors last year, is on the verge of breaching its banking covenants following a deterioration in trading revealed in January. The company, led by chief executive Miles Templeman, must meet a July deadline to refinance £130m of debt in order to be declared a going concern.

Meanwhile, the family controlled group is talking to potential buyers after it put its head on the block in January as part of a strategic review of the overall business. Richard Pennycook, who joined as finance director last month, said the group was still working on a plan to reduce debt. Although the sale last month of its Australian operations to Foster's raised £22.5m, Bulmer's net debt still towers above its market capitalisation of about £70m.

Mr Pennycook said talks were continuing with a number of parties about the sale of its drinks distribution arm, Beer Seller. Among those tipped to be interested are Heineken, the Dutch beer group that is keen to recruit a field sales force, Scottish & Newcastle, the UK brewer, and the division's existing management. An emergency rights issue is also under consideration.

Some industry insiders have questioned whether Bulmer will manage to pull itself back from the brink. One drinks executive said potential buyers were circling, but were "holding back" until Bulmer had revealed the extent of the deterioration in trading it flagged just two months ago.

As market leader, with a share of around two-thirds of the UK cider market, Bulmer has been responsible for driving margins down across the industry thanks to its strategy of deep discounting to boost volumes.

Simon Russell, of the National Association of Cider Makers, said: "Cider needs its value restored. You don't build brands by discounting."

The group, which makes Strongbow, Woodpecker and Scrumpy Jack ciders, has attempted to drive through price rises with the pubs and restaurants its supplies, although it is not thought to have had much success. Cazenove, the house broker, is forecasting pre-tax profits of £1.4m for the year to end-April, although Nigel Popham, at Teather & Greenwood, expects the group to struggle to break even.

Ultimately, the group's fate will rest with the 144 various members of the founding Bulmer family who collectively control 51 per cent of its shares.