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Premier Foods reinstates dividend after 13 years

The reinstatement was made possible by attention to the balance sheet
Premier Foods reinstates dividend after 13 years
  • Proportional net debt at a new low at 1.9 times cash profits
  • Questions remain over demand levels when lockdown eases

Premier Foods (PFD) has reinstated its dividend after a 13-year hiatus. The 1.00p per share payment came on the back of a 23.5 per cent increase in adjusted pre-tax profits in the year to 3 April to £115m, as households loaded up on groceries through the lockdowns.

The resumption of the annual pay-out was made possible by management’s efforts to put the balance sheet in order. Net debt at the beginning of April stood at £333m, a reduction of £96.9m on the prior year. The burden (excluding lease liabilities) is equivalent to 1.9 times cash profits, against a multiple of 2.7 from a year earlier.

The producer of iconic brands such as Bisto and Bird’s Custard exhausted its cash pile through financing activities, but it has a new revolving credit facility in place and has launched a new £300m five-year Senior Secured Fixed Rate Note offering.

The shares trade at an undemanding 11 times forward adjusted earnings, but it’s too early to say if the surge in demand for the group’s products is a temporary effect, so we remain circumspect. Hold.

Last IC View: Hold, 98p, 10 Nov 2020

PREMIER FOODS (PFD)   
ORD PRICE:107pMARKET VALUE:£ 915m
TOUCH:106-107p12-MONTH HIGH:114pLOW: 42p
DIVIDEND YIELD:0.9%PE RATIO:9
NET ASSET VALUE:138p*NET DEBT:28%
Year to 03 AprTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201779012.00.70nil
201881920.90.90nil
2019824-42.7-4.00nil
202084753.65.50nil
202194712312.51.00
% change+12+129+127-
Ex-div:01 Jul   
Payment:30 Jul   
*Includes intangible assets of £963m, or 113p a share