Premier Foods refinanced its mammoth debt earlier this year at the cost of higher interest rates and the disposal of its non-core brands. That has given management two years to trim costs quickly and boost the sales of its key brands, but Premier Food's long-term prospects still look as stale as some of its two-day-old Hovis.
The turnaround has been given some momentum by additional savings of £40m this year, along with one-off events such as the Diamond Jubilee helping sales of Mr Kipling's exceedingly good cakes. Underlying trading profits, after disposals and the troubled milling business are stripped out, actually rose by 3.2 per cent to £53.2m, with sales of its "power brands" up 2 per cent to £419m. However, that growth came at a tremendous cost in advertising, with consumer marketing costs 40 per cent higher at £24.8m, almost all due to increased television exposure.
The restructured capital structure meant the conversion of higher rate interest swaps into an additional term loan, which helped bring the first-half interest bill down by 28 per cent to £42.3m.
Credit Suisse forecasts 2012 adjusted pre-tax profits of £100m and EPS of 31p (from £72m and 21.9p in 2011).
PREMIER FOODS (PFD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 73.5p | MARKET VALUE: | £176m | |
| TOUCH: | 73-74p | 12-MONTH HIGH: | 185p | LOW: 30p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 209p* | NET DEBT: | 254% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 1.00 | 11.2 | 5.5 | nil |
| 2012 | 0.85 | -27.3 | -11.6 | nil |
| % change | -15 | - | - | - |
*Includes intangible assets of £1.59bn, or 663p a share | ||||
