Premier Foods reinstates dividend after 13 years

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