Debt dominates any assessment of shares in Premier Foods, the owner of some of the nation’s favourite food brands from Hovis to Mr Kipling. It’s not just the group's £1.36bn net borrowings that has investors in a spin as there’s also a £312m net pension deficit to consider, not to mention the potential liabilities from a portfolio of financial derivatives.
Premier has now set out plans to help it get a handle on its financial situation. At its core, the group wants to reduce its average debt to cash profit ratio from a rather eye-watering 4.54 times to 3.25 times while also varying the sources of its debt and stabilising the pension and derivatives issues. The group is attempting to pay off £100m debt a year and says it is open minded about selling assets to achieve these aims more quickly.
Trading conditions are far from benign though and rising agricultural commodity prices and a worsening consumer outlook means the environment is likely to remain tough. Nevertheless, Premier’s brands are making decent progress in line with its plans set out at the start of the year to boost its trading performance. However, non-branded sales fell 12.7 per cent due to a declining market, price deflation and contract losses.
Panmure Gordon forecasts full-year underlying EPS of 4.99p (2009: 5.83p).
| PREMIER FOODS (PFD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 19p | MARKET VALUE: | £461m | |
| TOUCH: | 19-19.5p | 12-MONTH HIGH: | 47p | LOW: 18p |
| DIVIDEND YIELD: | nil | PE RATIO: | 13 | |
| NET ASSET VALUE*: | 42p | NET DEBT: | 136% | |
| Half-year to 26 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 1.25 | -30.0 | -2.0 | nil |
| 2010 | 1.18 | -54.4 | -1.7 | nil |
| % change | -5 | - | - | - |
Ex-div: na Payment: na *Includes intangibles of £2.4bn, or 102p per share | ||||
