In the words of new chief executive Gavin Darby, Premier Foods (PFD) is "a place for people who really like a challenge". And, judging by its year-end results, management certainly has its work cut out.
One of the thorniest issues is the massive pension deficit, which swelled from £212m to £352m in 2012. Debt is another burden. While it fell by £44m to £951m, the figure was higher than expected. Much of the debt reduction was achieved by scrapping four non-core brands, which delivered £370m in disposal proceeds.
Premier is also making huge cost savings. The gains generated are being used to invest in the so-called power brands and introduce fresh products - much of last year's sales growth was achieved by a 60 per cent rise in consumer marketing. Grocery sales were up 5.6 per cent, but at lower margins, so that the divisional contribution fell 5.5 per cent to £196m.
Overall, underlying trading profits rose 11 per cent to £123m, in line with forecasts. The bread division continued to struggle, however, with sales down 0.7 per cent. The loss of a contract with the Co-op won't make this year any easier.
Broker Panmure Gordon has downgraded its 2013 EPS forecast from 29.4p to 25p (from 26.8p in 2012).
| PREMIER FOODS (PFD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 91p | MARKET VALUE: | £218m | |
| TOUCH: | 91-92p | 12-MONTH HIGH: | 185p | LOW: 54p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 17 | |
| NET ASSET VALUE: | 169p* | NET DEBT: | 235% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 2.60 | -405.0 | -413.0 | nil |
| 2009 | 2.53 | 42.0 | 17.0 | nil |
| 2010 | 2.23 | 28.5 | -41.0 | nil |
| 2011 | 2.00 | -259.0 | -95.9 | nil |
| 2012 | 1.76 | 4.4 | 11.0 | nil |
| % change | -12 | - | - | - |
Ex-div: na Payment: na *Includes intangible assets of £1.39bn, or 580p a share **Restated to reflect the 10:1 share consolidation in 2012 | ||||
